Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
(1)Description of Business
Bowlero Corp., a Delaware corporation, and its subsidiaries (Bowlero Corp. and subsidiaries are referred to collectively as “we,” “our,” the “Company,” “Bowlero Corp.” or “Bowlero”) are the world’s largest operator of bowling entertainment centers.
The Company operates bowling centers under different brand names. The AMF branded centers are traditional bowling centers and the Bowlmor and Bowlero 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. The following summarizes the Company’s centers by country and major brand as of March 27, 2022 and June 27, 2021:
| | | | | | | | | | | |
| March 27, 2022 | | June 27, 2021 |
AMF & other | 147 | | | 136 | |
Bowlmor | 2 | | | 14 | |
Bowlero | 160 | | | 133 | |
Total centers in the United States | 309 | | | 283 | |
Mexico (AMF) | 6 | | | 6 | |
Canada (AMF and Bowlero) | 2 | | | 2 | |
Total | 317 | | | 291 | |
Impact of COVID-19
In mid-March of 2020, the Company temporarily suspended all operations in compliance with local, state, and federal governmental restrictions to prevent the spread of the novel coronavirus and variants collectively known as COVID-19. Starting in April 2020, the Company began reopening centers and restoring operations. During the nine months ended March 27, 2022, all of our centers were open and remain open except two of our centers re-opened on September 13, 2021 and have remained open, and two centers in Canada closed on January 5, 2022 and reopened on January 31, 2022. Some centers have not operated at full capacity due to, among other factors, social distancing requirements, limited hours of operation, limitations on available offerings, and other operational restrictions. The temporary suspension of our operations and subsequent operational restrictions have had an adverse impact on the Company’s profitability and cash flows, for which the Company has taken and continues to take actions to address.
Basis of Presentation
Reverse Recapitalization: On December 15, 2021, (the “Closing Date”), the Company consummated the previously announced business combination (the “Business Combination”) pursuant to the business combination agreement (the “BCA”) dated as of July 1, 2021, by and among the Old Bowlero and Isos Acquisition Corporation (“Isos”). Old Bowlero refers to Bowlero Corp. prior to the Closing Date.
Notwithstanding the legal form of the Business Combination pursuant to the BCA, the Business Combination is accounted for as a reverse recapitalization. Under this method of accounting, Isos is treated as the acquired company and Old Bowlero is treated as the acquirer for accounting and financial statement reporting purposes.
Old Bowlero has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
•Old Bowlero’s existing stockholders have the greatest voting interest in the Company;
•Old Bowlero’s existing stockholders have the ability to control decisions regarding election and removal of directors and officers of the Company;
•Old Bowlero comprises the ongoing operations of the Company;
•Old Bowlero’s relevant measures, such as assets, revenues, cash flows and earnings, are higher than Isos’; and
•Old Bowlero’s existing senior management is the senior management of the Company.
As a result of Old Bowlero being the accounting acquirer, the financial reports filed with the Securities and Exchange Commission (“SEC”) by the Company subsequent to the Business Combination are prepared as if Old Bowlero is the predecessor and legal successor to the Company. The historical operations of Old Bowlero are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of Old Bowlero prior to the Business Combination, (ii) the combined results of the Old Bowlero and Isos following the Business Combination on December 15, 2021, (iii) the assets and liabilities of Old Bowlero at their historical cost and (iv) the Company’s post-merger equity structure for all periods presented. The recapitalization of the number of shares of common stock and preferred stock attributable to the purchase of Bowlero Corp. in connection with the Business Combination is reflected retroactively to the earliest period presented and is utilized for calculating earnings per share in all prior periods presented. No step-up basis of intangible assets or goodwill was recorded in the Business Combination transaction consistent with the treatment of the transaction as a reverse recapitalization of Isos.
In connection with the Business Combination, Isos changed its name to Bowlero Corp. The Company’s Class A common stock is now listed on the New York Stock Exchange ("NYSE") under the symbol BOWL and warrants to purchase the Class A common stock are listed on the NYSE under the symbol BOWL.WS in lieu of the Isos ordinary shares and Isos’s warrants, respectively. Isos’ units automatically separated into the Isos ordinary shares and Isos’ warrants and ceased trading separately on the NYSE following the Closing Date. Prior to the Business Combination, Isos neither engaged in any operations nor generated any revenue. Until the Business Combination, based on Isos’ business activities, it was a shell company as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
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.
Unaudited Interim Financial Statements: The accompanying interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and applicable rules and regulations of the SEC regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements have been condensed or omitted pursuant to such rules and regulations. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes of Bowlero Corp. as of June 27, 2021 and June 28, 2020 included in the Company’s final prospectus filed pursuant to Rule 424(b)(2) under the Securities Act of 1933, as amended (the "Securities Act"), with the SEC, on February 1, 2022.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, and in management’s opinion, include all adjustments, which consist of only normal recurring adjustments necessary for the fair statement of the Company’s condensed consolidated balance sheet as of March 27, 2022 and the related condensed statements of operations, comprehensive income (loss), temporary equity and stockholders' equity (deficit), and cash flows for the three and nine months ended March 27, 2022 and March 28, 2021. The results for the three and nine months ended March 27, 2022 are not necessarily indicative of the results expected for the current fiscal year or any other future periods.
The accompanying unaudited condensed consolidated financial statements include the accounts and operations of the Company. All intercompany accounts and transactions have been eliminated.
Fiscal Year: The Company reports on a fiscal year ending on the Sunday closest to June 30th with each quarter generally comprising thirteen weeks. Fiscal year 2022 is fifty-three weeks ending on July 3, 2022, and the 53rd week falls within the fourth quarter. Fiscal year 2021 contained fifty-two weeks and ended on June 27, 2021.
(2)Significant Accounting Policies
For a detailed discussion about the Company’s significant accounting policies and for further information on accounting updates adopted in the prior fiscal year, see Note 2 to the audited consolidated financial statements. During the nine months ended March 27, 2022, there were no significant revisions to the Company’s significant accounting policies, other than those indicated herein.
Use of Estimates: The COVID-19 pandemic continues disrupting, among other things, supply chains and impacting production and sales across a wide range of industries. The full economic impact of this pandemic has not been determined, including the impact on the Company’s employees, suppliers, customers and credit markets. Due to the evolving and uncertain nature of COVID-19 pandemic, it is reasonably possible that it could materially impact the Company’s estimates, particularly those that require consideration of forecasted financial information, in the near to medium term. The ultimate impact will depend on numerous evolving factors that the Company may not be able to accurately predict, including the duration and extent of the pandemic, the impact of federal, state, local and foreign governmental actions, and consumer behavior in response to the pandemic and other economic and operational conditions.
Stock-Based Compensation: Stock based compensation is recorded based on the grant-date fair value. Bowlero Corp. recognizes stock-based compensation on a straight-line basis or based on a graded vesting schedule over the requisite service period for time-based awards and recognizes the cost for performance-based awards upon meeting performance targets. The Company does not recognize the effect of forfeitures until they occur. All compensation expense for an award is recognized by the time it becomes fully vested. Stock based compensation is recorded in cost of revenues and selling, general and administrative expenses in the condensed consolidated statement of operations based on the employees’ respective functions. The Company records deferred tax assets for awards that result in deductions on the Company’s income tax returns, based on the amount of compensation cost recognized and the Company’s statutory tax rate in the jurisdiction in which it will receive a deduction.
We use the Black-Scholes-Merton option pricing model to calculate the fair value of stock options. This option valuation model requires the use of subjective assumptions, including the estimated fair value of the underlying common stock, the expected stock price volatility, and the expected term of the option.
•Fair value of common stock - During the periods in which the Company was privately held, there was no public market for our stock. The fair value of the Company’s equity was approved by the Company’s Board of Directors using a third-party valuation specialist and factors it believed were material to the valuation process, including but not limited to, the price at which recent equity was issued by the Company to independent third parties, actual and projected financial results, risks, prospects, economic and market conditions, and estimates of weighted average cost of capital. The Company believed the combination of these factors provided an appropriate estimate of the expected fair value of the Company and reflects the best estimate of the fair value of the Company’s common stock at each grant date. As a publicly held company, we now determine the fair value of the Company’s common stock based on the closing market price on the date of grant.
•Expected Term - We estimate the expected term of our time-based awards to be the weighted average mid-point between the vesting date and the end of the contractual term. We use this method to estimate the expected term since we do not have sufficient historical exercise data.
•Expected volatility – Given the limited market trading history as a publicly held company, and no public market for the Company’s shares prior to the Closing Date, the expected volatility rate is based on an average historical stock price volatility of comparable publicly-traded companies in the industry group.
•Risk-free interest rate — The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the option.
•Expected dividend yield — The Company has not paid and does not expect to pay dividends. Consequently, the Company uses an expected dividend yield of zero.
Redeemable Convertible Preferred Stock: As part of the Reverse Recapitalization, the Company issued redeemable convertible preferred stock (“Preferred Stock”) that is classified in temporary equity as certain redemption provisions are not solely within the control of the Company. The pre-merger preferred stock was classified as temporary equity and settled at the merger date. Please refer to Note 17 - Common Stock. Preferred Stock and Stockholders’ Equity for more details.
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 preferred stock that have a non-forfeitable right to dividends in the event that a dividend is paid on common stock. Since the Company has reported net losses for all periods presented, all potentially dilutive securities have been 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 is the same for all periods presented. Dilutive securities include convertible preferred stock, warrants, earnouts, stock options, and restricted stock units ("RSUs"). See Note 20 - Net Loss Per Share. Earnouts: Following the Closing Date, Isos and Bowlero equity holders at the effective time of the Business Combination have the contingent right to receive, in the aggregate, up to 22,361,278 shares of Class A common stock if, from the Closing Date until the fifth anniversary thereof, the reported closing trading price of the Class A common stock exceeds certain thresholds. As of the Closing Date, since earnouts are subject to change in control provisions, all but 152,370 of the earnout shares are reported as a liability in the condensed consolidated balance sheets. Changes in the value of earnouts are recorded as a non-operating item in the condensed consolidated statements of operations. Those earnout shares not classified as a liability are classified as equity compensation to employees. The fair value of the earnout shares was estimated by utilizing a Monte-Carlo simulation model. Inputs that have a significant effect on the earnout shares valuation include the expected volatility, stock price, expected term, risk-free interest rate and the earnout hurdles. The Company evaluated its earnouts under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded that they do not meet the criteria to be classified in stockholders’ equity. Since these earnouts meet the definition of a derivative under ASC 815, the Company recorded these earnouts as long-term liabilities on the balance sheet at fair value upon the Closing Date, with subsequent changes in their respective fair values recognized in the condensed consolidated statements of operations and comprehensive income (loss) at each reporting date. See Note 14 - Earnouts and Note 16 - Fair Value of Financial Instruments for further information. Warrants: Warrants outstanding consist of public warrants and private warrants, including warrants issued by Isos which continue to exist following the Closing Date and warrants issued by the Company on the Closing Date. The outstanding warrants are accounted for as freestanding financial instruments, and are classified as liabilities on the Company’s condensed consolidated balance sheets. The estimated fair value of the warrants is described in Note 16 - Fair Value of Financial Instruments. Changes in the value of the warrants are recorded as a non-operating item in the condensed statements of operations. The Company evaluated its warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded that they do not meet the criteria to be classified in stockholders’ equity. Since these warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as long-term liabilities on the balance sheet at fair value upon the Closing Date, with subsequent changes in their respective fair values recognized in the condensed consolidated statements of operations and comprehensive loss at each reporting date. Emerging Growth Company Status: The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the "JOBS 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 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 the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which 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:
In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-02, Leases ("Topic 842"). Following ASU 2016-02, the FASB issued subsequent guidance and amendments including ASU 2017-13, 2018-01, 2018-11, 2018-20, 2019-01, and 2020-05 (collectively, including ASU 2016-02, “Topic 842”). Topic 842 will replace the
guidance in Topic 840. The main objectives are to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The right-of-use asset reflects the lessee’s right to direct the use of and obtain substantially all the economic benefits from that asset over the lease term, and it will be based on the lease liability subject to certain adjustments such as accrued rent, lease incentives, lease intangibles, initial direct costs and prepaid rent. The lease liability reflects the obligation to make payments for the right to use that asset. Operating leases will retain a straight-line lease expense, and finance leases will retain their front-loaded expense pattern, similar to current capital leases.
As a result of ASU 2020-05, Topic 842 will be effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early application continues to be permitted, which means that an entity may choose to implement Topic 842 before the deferred effective date. The Company has not adopted Topic 842, which is effective for the Company in fiscal year 2023. We are currently evaluating our lease population, current processes, internal controls, and timeline required for adoption. Additionally, we are still evaluating the practical expedients and the methods of adoption that we will use when adopting the new standard. The Company estimates that this standard will result in a material impact to our balance sheet from the recognition of right of use assets and liabilities, but not to our statement of operations or cash flows.
(3)Revenue
The following table presents the Company’s revenue disaggregated by major revenue categories:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| March 27, 2022 | | % | | March 28, 2021 | | % | | March 27, 2022 | | % | | March 28, 2021 | | % |
Major revenue categories: | | | | | | | | | | | | | | | |
Bowling | $ | 130,394 | | | 51 | % | | $ | 56,826 | | | 51 | % | | $ | 326,536 | | | 51 | % | | $ | 124,351 | | | 53 | % |
Food and beverage | 88,187 | | | 34 | % | | 36,866 | | | 33 | % | | 221,206 | | | 34 | % | | 75,653 | | | 32 | % |
Amusement | 33,781 | | | 13 | % | | 14,146 | | | 13 | % | | 83,967 | | | 13 | % | | 25,699 | | | 11 | % |
Media | 5,458 | | | 2 | % | | 4,374 | | | 4 | % | | 12,279 | | | 2 | % | | 10,428 | | | 4 | % |
Total revenues | $ | 257,820 | | | 100 | % | | $ | 112,212 | | | 100 | % | | $ | 643,988 | | | 100 | % | | $ | 236,131 | | | 100 | % |
Bowling revenue — The Company recognizes revenue for providing bowling services to customers in exchange for consideration that is recognized as revenue on the day that the services are performed. Any prepayments for bowling revenue are recognized as deferred revenue and recognized when earned.
Food and beverage revenue — Sales of food and beverages at our bowling centers are recognized at a point-in-time.
Amusement revenue — Amusement revenue includes amounts earned through arcades and other games. Similar to bowling, food and beverage revenue, almost all of our revenue is earned at a point-in-time. We record deferred revenue for events where we collect cash in advance of the Company’s satisfaction of its performance obligation, which would occur on the date of the event. These deferred amounts are not material to our financial statements and the amounts are typically all earned in the subsequent period. The Company provides customers game-play tokens and game cards, which are subject to breakage and redemptions.
Media revenue — The Company earns media revenue from sanctioning official Professional Bowlers Association ("PBA") tournaments and licensing media content to our customers, which include television networks and multi-year contracts. The Company considers each tournament a separate performance obligation because each tournament’s pricing is negotiated separately and represents stand-alone selling price based on the terms of the contract and the relative nature of the services provided. Media revenue is generated through producing and licensing distribution rights to customers, which is recognized at the point-in-time the Company produces and delivers programming for a respective tournament. Tournament revenue includes sponsorships, entry and host fees. Fees received for sponsorships and tournaments are recognized as deferred revenue until the respective tournament occurs, at which point, the Company recognizes those fees as revenue.
(4)Leases
The Company leases various assets under non-cancellable operating and capital leases. These assets include bowling centers, office space, vehicles, and equipment.
Operating leases: For our operating leases, we recognize rent expense straight-line over the lease term, including rent-free periods. We recorded accrued rent of $26,200 and $26,853 within other long-term liabilities on the consolidated balance sheets as of March 27, 2022 and June 27, 2021, respectively.
In addition to previously received rent concessions in response to the economic effects of the COVID-19 pandemic, in March 2022, the Company received a rent concession related to an operating lease in the form of a rent abatement retroactive to April 1, 2020 for amounts which had been previously recognized as rent expense. We elected to not account for this concession as a modification in accordance with the relief provided by the FASB staff. As a result, we recognized rent abatements of $7,470 ($5,603 allocated to cost of revenues and $1,867 allocated to selling, general and administrative expenses) as a reduction of rent expense during the three and nine months ended March 27, 2022.
Capital leases: For our capital leases, we record interest expense on the obligation and amortize the asset over the lease term. We record a capital lease liability equal to the present value of the minimum lease payments over the lease term discounted using the incremental borrowing rate for that lease. We calculate the current portion of our capital lease obligation as the total payments that are due in the next 12 months that are attributed to principal payments in the capital lease obligation amortization schedule. We had $43,922 in accumulated amortization on property and equipment under capital leases as of March 27, 2022, and $34,609 as of June 27, 2021.
The following table summarizes the Company’s costs for operating and capital leases:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| March 27, 2022 | | March 28, 2021 | | March 27, 2022 | | March 28, 2021 |
Operating Leases | | | | | | | |
Rent expense | $ | 8,041 | | | $ | 13,969 | | | $ | 39,979 | | | $ | 42,669 | |
| | | | | | | |
Capital Leases | | | | | | | |
Interest expense | 9,255 | | | 8,722 | | | 28,080 | | | 26,050 | |
Amortization expense | 3,003 | | | 3,049 | | | 9,313 | | | 9,300 | |
Total Capital Lease Cost | $ | 12,258 | | | $ | 11,771 | | | $ | 37,393 | | | $ | 35,350 | |
The future minimum rent payments under our operating and capital leases as of March 27, 2022 are as follows:
| | | | | | | | | | | |
| Operating Leases | | Capital Leases |
| | | |
Remainder of 2022 | $ | 16,003 | | | $ | 11,159 | |
2023 | 46,450 | | | 40,879 | |
2024 | 45,559 | | | 41,954 | |
2025 | 47,031 | | | 42,146 | |
2026 | 45,090 | | | 37,353 | |
Thereafter | 566,291 | | | 1,030,886 | |
Total Rental Payments: | $ | 766,424 | | | $ | 1,204,377 | |
| | | |
Less imputed interest expense for capital leases: | | | 809,526 | |
Present value: | | | $ | 394,851 | |
(5)Merger and Acquisitions
Merger: For accounting purposes, the Business Combination was treated as the equivalent of Bowlero Corp. issuing stock for the net assets of Isos, accompanied by a recapitalization. The following summarizes the elements of the Business Combination to the consolidated statement of cash flows, including the transaction funding, sources and uses of cash, and merger-related earnouts and warrants:
| | | | | |
| Recapitalization |
Cash-Isos Acquisition Corporation Trust | $ | 254,851 | |
Less: Isos transaction costs paid from Trust | (23,869) | |
Less: Redemptions of existing shareholders of Isos | (136,569) | |
Net proceeds from SPAC shareholders | 94,413 | |
| |
Cash-PIPE | 150,604 | |
Cash-PIPE preferred | 95,000 | |
Cash-Forward | 100,000 | |
Total Cash received | 440,017 | |
Less: Bowlero transaction costs | (20,670) | |
Total Cash received, net of Bowlero transaction costs | 419,347 | |
| |
Earnout liability | (181,113) | |
Warrant liability | (22,426) | |
New equity, net | 215,808 | |
| |
Less: Consideration payment to Bowlero shareholders | (226,000) | |
Less: Payoff of preferred stock and accumulated dividends | (145,298) | |
Less: Payments for stock options | (15,467) | |
Net distributions to existing shareholders | (386,765) | |
Net contribution from Business Combination and preferred financing | $ | (170,957) | |
After making adjustments to the issuance of the Business Combination consideration shares, the redemption of the Isos ordinary shares, the consummation of the PIPE Offerings and the Forward Purchase Contract, the roll-over of vested options and the withholding of 1,068,884 shares for tax obligations from certain current and former employees and the conversion of common shares to preferred shares, there were 165,378,145 shares of the Common Stock issued and outstanding as of the Closing Date, of which 107,066,302 shares were Class A common stock and 58,311,203 shares were Class B common stock. There were 17,225,692 warrants outstanding as of the Closing Date.
The Company expensed $2,956 in transaction costs for amounts allocated to that portion of the earnouts related to Bowlero rather than as an offset to equity.
Acquisitions: The Company made a number of acquisitions of bowling centers during the nine months ended March 27, 2022 in order to expand our market share in key geographic areas, and to improve our ability to leverage our fixed costs.
The Company estimates the fair value of the tangible and intangible assets acquired and liabilities assumed as of the acquisition date for business combinations. For business combinations, we will continue to evaluate and refine the estimates used to record the fair value of the assets acquired and liabilities assumed throughout the permitted measurement period, which may result in corresponding offsets to goodwill in future periods. We expect to finalize the valuations as soon as possible, but no later than one year from the acquisition dates. The remaining fair value estimates to finalize include intangibles, and property and equipment.
The goodwill acquired in the business combinations during fiscal year 2022 represents:
•the value of an assembled workforce
•future earnings and cash flow potential of these businesses, and
•the complementary strategic fit and resulting synergies these businesses bring to existing operations
The goodwill recognized is deductible for tax purposes.
Business combinations: The Company’s preliminary accounting for the allocations of the purchase price for five business combinations at the dates of the respective acquisitions is based upon its understanding of the fair value of the acquired assets and assumed liabilities. The Company obtains this information during due diligence and through other sources. The following table summarizes the purchase price allocation for the fair values of the identifiable assets acquired, components of consideration transferred and the transactional related expenses. | | | | | | | | |
Identifiable assets acquired and liabilities assumed | | Business Combination Totals |
Current assets | | $ | 2,510 | |
Property and equipment | | 29,027 | |
Identifiable intangible assets | | 3,080 | |
Goodwill | | 12,763 | |
Total assets acquired | | $ | 47,380 | |
| | |
Current liabilities | | (415) | |
Total assumed liabilities | | (415) | |
Total consideration transferred, net of cash acquired of $25 | | $ | 46,965 | |
| | |
Components of consideration transferred | | |
Cash | | $ | 44,027 | |
Holdback | | 1,468 | |
Contingent consideration | | 1,470 | |
Total | | $ | 46,965 | |
Transaction expenses included in “other operating expense” in the condensed consolidated statement of operations for the nine months ended March 27, 2022 | | $ | 759 | |
Asset acquisition: For asset acquisitions, we apply the cost accumulation model in accordance with the applicable accounting standards. The cost accumulation model requires us to measure all the acquired assets and assumed liabilities at their fair value and then adjust them based on the total consideration transferred. The following table summarizes the allocation of the fair value amounts under a cost accumulation approach:
| | | | | | | | | | | | | | | | | | | | |
Identifiable assets acquired and liabilities assumed | | Bowl America | | Other Asset Acquisition | | Total |
Current assets | | $ | 2,949 | | | $ | 5 | | | $ | 2,954 | |
Property and equipment | | 40,121 | | | 8,564 | | | 48,685 | |
Identifiable intangible assets | | 1,099 | | | 1,136 | | | 2,235 | |
Assets held for sale | | 10,985 | | | — | | | 10,985 | |
Current liabilities | | (1,426) | | | (81) | | | (1,507) | |
Deferred tax liability | | (9,107) | | | — | | | (9,107) | |
Total consideration transferred | | $ | 44,621 | | | $ | 9,624 | | | $ | 54,245 | |
The following summarizes the key valuation approaches and assumptions utilized in calculating fair values for Business Combinations and Asset Acquisitions:
Property and equipment — Buildings and site improvements are valued using the cost approach and land is valued using the sales comparison approach. The fair value of tangible personal property was determined primarily using the cost approach. The current use of certain nonfinancial assets acquired differed from their highest and best use, due to
local market conditions, the value of the land exceeding the combined fair values of the land and building, and zoning and commercial viability of the surrounding area. The valuation inputs used to determine the fair value of the land and building are based on level 3 inputs, including discount rates, sales projections, and future cash flows.
Assets held for sale — We utilize a valuation specialist to determine the assets held for sale estimated fair value less costs to sell. These inputs are classified as level 2 fair value measurements.
Intangible assets — We acquired intangible assets including trade names, non-competition agreements, customer relationships and liquor licenses.
•Trade names: Trade names are recognized during Business Combinations and Asset Acquisitions using the relief-from-royalty method, which is considered a Level 3 fair value measurement due to the use of unobservable inputs. Significant assumptions used in the calculation include: revenue projections, a royalty rate based on qualitative factors and the market-derived royalty rates, discount rate based on the Company’s weighted average cost of capital ("WACC") adjusted for risks commonly inherent in trade names.
•Non-Competition: Non-compete agreements are recognized during Business Combinations and Asset Acquisitions. The Company records the fair value of non-competition agreements using the differential discounted cash flow method income approach, a Level 3 fair value measurement due to the use of unobservable inputs. Significant assumptions used in the fair value calculations for non-competition agreements include: potential competitor impact on revenue and expense projections, discount rate based on the Company’s WACC adjusted for risks commonly inherent in intangible assets, specifically non-compete agreements.
•Customer relationships: The Company records customer relationships for Business Combinations and Asset Acquisitions based on the fair value of contractual customer relationships with bowling leagues using the excess earnings income approach and discounted cash flow method, which are considered Level 3 fair value measurements due to the use of unobservable inputs. Significant assumptions used in the fair value calculations for relationships include: revenue and expense projections, customer retention rate for leagues, discount rate based on the Company’s WACC adjusted for risks inherent in intangible assets, specifically customer relationships and the remaining useful life.
•Liquor licenses: The Company records the fair value of brokered liquor licenses acquired in Business Combinations and Asset Acquisitions using the market approach. Significant assumptions used in the calculation include approximation based on recent sales of liquor licenses in the respective jurisdictions and assignment of an indefinite useful life as licenses do not expire and can be sold to third parties.
Contingent Consideration — A business combination during fiscal year 2022 included $1,470 of non-cash contingent consideration. The contingency depends on approvals by the local township that requires us to transfer real property in the event of certain decisions being made. The range of contingent consideration is $0 - $1,470. We recorded the amount based on:
(i)The probability of the contingency being met
(ii)A comparable sales approach to determine the value of the non-cash consideration.
These inputs are classified as level 3 on the fair value hierarchy.
Deferred Tax Liability – Since the Bowl America acquisition was a non-taxable stock acquisition, the Company recorded deferred tax liabilities for the difference between the tax carryover basis and the book value of the opening balances, which were recorded and allocated based on fair values to the respective assets acquired.
(6)Goodwill and Other Intangible Assets
Goodwill:
The changes in the carrying amount of goodwill for the nine months ended March 27, 2022:
| | | | | |
Balance as of June 27, 2021 | $ | 726,156 | |
Goodwill resulting from acquisitions | 12,631 | |
Balance as of March 27, 2022 | $ | 738,787 | |
Intangible Assets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 27, 2022 | | June 27, 2021 |
| Weighted average life (in years) | | Gross carrying amount | | Accumulated amortization | | Net carrying amount | | Weighted average life (in years) | | Gross carrying amount | | Accumulated amortization | | Net carrying amount |
Finite-lived intangible assets: | | | | | | | | | | | | | | | |
AMF trade name | 2 | | $ | 9,900 | | | $ | (8,415) | | | $ | 1,485 | | | 1 | | $ | 9,900 | | | $ | (7,920) | | | $ | 1,980 | |
Bowlmor trade name | 0 | | 6,500 | | | (6,500) | | | — | | | 6 | | 6,500 | | | (2,600) | | | 3,900 | |
Other acquisition trade names | 5 | | 1,610 | | | (507) | | | 1,103 | | | 7 | | 1,010 | | | (173) | | | 837 | |
Customer relationships | 2 | | 20,652 | | | (13,017) | | | 7,635 | | | 3 | | 18,370 | | | (10,471) | | | 7,899 | |
Management contracts | 2 | | 1,800 | | | (1,366) | | | 434 | | | 2 | | 1,800 | | | (1,150) | | | 650 | |
Non-compete agreements | 4 | | 1,921 | | | (769) | | | 1,152 | | | 4 | | 1,200 | | | (514) | | | 686 | |
PBA member, sponsor & media relationships | 8 | | 1,400 | | | (456) | | | 944 | | | 8 | | 1,400 | | | (322) | | | 1,078 | |
Other intangible assets | 4 | | 921 | | | (217) | | | 704 | | | | | — | | | — | | | — | |
| | | $ | 44,704 | | | $ | (31,247) | | | $ | 13,457 | | | | | $ | 40,180 | | | $ | (23,150) | | | $ | 17,030 | |
Indefinite-lived intangible assets: | | | | | | | | | | | | | | | |
Liquor licenses | | | 9,735 | | | — | | | 9,735 | | | | | 9,027 | | | — | | | 9,027 | |
PBA trade name | | | 3,100 | | | — | | | 3,100 | | | | | 3,100 | | | — | | | 3,100 | |
Bowlero trade name | | | 66,900 | | | — | | | 66,900 | | | | | 66,900 | | | — | | | 66,900 | |
| | | 79,735 | | | — | | | 79,735 | | | | | 79,027 | | | — | | | 79,027 | |
| | | $ | 124,439 | | | $ | (31,247) | | | $ | 93,192 | | | | | $ | 119,207 | | | $ | (23,150) | | | $ | 96,057 | |
The Company reviewed the estimated useful life of its Bowlmor tradename as part of the Company’s plans to rebrand its Bowlmor centers to Bowlero centers. Based on that review, the Company determined that the intangible asset associated with the Company’s Bowlmor tradename has a useful life shorter than initially estimated. During the fiscal quarter ended December 26, 2021, the Company adjusted the remaining useful life of the Bowlmor tradename from 5.75 years to 6 months. The change in useful life was made as a prospective adjustment and resulted in an increase in amortization expense of $1,706 and $3,412 for the three and nine months ended March 27, 2022, respectively.
(7)Property and Equipment
As of March 27, 2022 and June 27, 2021, property and equipment consists of:
| | | | | | | | | | | |
| March 27, 2022 | | June 27, 2021 |
Land | $ | 71,723 | | | $ | 19,879 | |
Buildings and improvements | 53,974 | | | 16,155 | |
Leasehold improvements | 342,524 | | | 313,441 | |
Equipment, furniture, and fixtures | 359,782 | | | 315,719 | |
Construction in progress | 15,707 | | | 27,028 | |
| $ | 843,710 | | | $ | 692,222 | |
Accumulated depreciation | (331,367) | | | (276,561) | |
Property and equipment, net of accumulated depreciation | $ | 512,343 | | | $ | 415,661 | |
The following table shows depreciation expense related to property and equipment for the three and nine months ended March 27, 2022, and March 28, 2021, respectively:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| March 27, 2022 | | March 28, 2021 | | March 27, 2022 | | March 28, 2021 |
Depreciation expense | $ | 20,578 | | | $ | 17,036 | | | $ | 55,525 | | | $ | 50,408 | |
Assets held for sale:
Total assets held for sale at March 27, 2022 and June 27, 2021 of $14,506 and $686, includes liquor licenses of $315 and $175, respectively. During the nine months ended March 27, 2022, we acquired approximately $13,455 in real property, which we plan to sell within the next 12 months.
(8)Internal Use Software
The following table presents a roll-forward of capitalized internal use software for the nine months ended March 27, 2022:
| | | | | | | | | | | | | | | | | | | | |
Capitalized internal use software | | Balance at June 27, 2021 | | Additions | | Balance at March 27, 2022 |
Internal use software, gross | | $ | 20,420 | | | $ | 3,534 | | | $ | 23,954 | |
Accumulated amortization | | (11,358) | | | (2,345) | | | (13,703) | |
Internal use software, net | | $ | 9,062 | | | $ | 1,189 | | | $ | 10,251 | |
The following table presents amortization expense for the three and nine months ended March 27, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| March 27, 2022 | | March 28, 2021 | | March 27, 2022 | | March 28, 2021 |
Amortization expense | $ | 1,016 | | | $ | 625 | | | $ | 2,345 | | | $ | 1,712 | |
(9)Accrued Expenses
As of March 27, 2022 and June 27, 2021, accrued expenses consist of:
| | | | | | | | | | | |
| March 27, 2022 | | June 27, 2021 |
Customer deposits | $ | 24,258 | | | $ | 7,114 | |
Compensation | 12,347 | | | 13,577 | |
Taxes and licenses | 10,465 | | | 9,646 | |
Insurance | 6,238 | | | 8,285 | |
Deferred revenue | 4,814 | | | 5,885 | |
Deferred rent | 3,950 | | | 4,384 | |
Utilities | 3,844 | | | 3,399 | |
Interest | 3,839 | | | 4,693 | |
Professional fees | 1,752 | | | 4,473 | |
Other | 8,606 | | | 2,194 | |
Total accrued expenses | $ | 80,113 | | | $ | 63,650 | |
(10)Debt
The following table summarizes the Company’s debt structure as of March 27, 2022 and June 27, 2021:
| | | | | | | | | | | |
| March 27, 2022 | | June 27, 2021 |
First Lien Credit Facility Revolver | $ | — | | | $ | 39,853 | |
First Lien Credit Facility Term Loan (Maturing July 3, 2024 and bearing variable rate interest; 4.50%nd 4.55% at March 27, 2022 and June 27, 2021, respectively, excluding impact of hedging) | 794,376 | | | 800,534 | |
Incremental Liquidity Facility | — | | | 45,000 | |
New Revolver (Maturing April 4, 2024) | 86,434 | | | — | |
| $ | 880,810 | | | $ | 885,387 | |
Less: | | | |
Unamortized financing costs | (7,496) | | | (9,800) | |
Current portion of unamortized financing costs | 3,267 | | | 3,152 | |
Current maturities of long-term debt | (8,211) | | | (8,211) | |
Total long-term debt | $ | 868,370 | | | $ | 870,528 | |
New Revolver: On December 15, 2021, the Company entered into a Sixth Amendment ("Sixth Amendment") to the First Lien Credit Agreement, by and among Bowlero, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders.
Pursuant to the Sixth Amendment, the revolving credit facility under the First Lien Credit Agreement was refinanced and replaced by a $140,000 senior secured revolving credit facility (“New Revolver”), which has a maturity date of the earlier of December 15, 2026 or the date that is 90 days prior to the scheduled maturity date of any term loans outstanding under the First Lien Credit Agreement in an aggregate principal amount exceeding $175,000. Since the term loan under the First Lien Credit Agreement matures on July 3, 2024, the maturity date for the New Revolver is currently April 4, 2024. Interest on borrowings under the New Revolver is initially based on either the Adjusted Term Secured Overnight Financing Rate (“SOFR”) or the Alternate Base Rate, as further described in the First Lien Credit Agreement.
In addition, on December 17, 2021, Bowlero entered into a Seventh Amendment (“Seventh Amendment”) to the First Lien Credit Agreement pursuant to which the total revolving commitments under the New Revolver were increased by $25,000 to an aggregate amount of $165,000. No changes, other than increasing the aggregate principal amount of revolving commitments thereunder, were made to the terms of the New Revolver in connection with the Seventh Amendment.
The New Revolver is subject to, among other provisions, covenants regarding indebtedness, liens, negative pledges, restricted payments, certain prepayments of indebtedness, cross-default with other agreements relating to indebtedness, investments, fundamental changes, disposition of assets, sale and lease-back transactions, transactions with affiliates, amendments of or waivers with respect to restricted debt and permitted activities of Bowlero. In addition, the New Revolver 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 the New Revolver is at least 35% utilized (subject to certain exclusions) at the end of such fiscal quarter. The financial covenant requirement for the Company is in effect for the March 27, 2022 reporting period since the Company terminated the previous financial covenant waiver on March 3, 2022.
The New Revolver is also subject to customary events of defaults. Payment of borrowings under the New Revolver may be accelerated if there is an event of default, and Bowlero would no longer be permitted to borrow additional funds under the New Revolver while a default or event of default were outstanding. No changes were made to the terms of the term loan under the First Lien Credit Agreement in connection with the Sixth Amendment or the Seventh Amendment.
First Lien Credit Facility Term Loan: The term loan under the First Lien Credit Agreement is repaid on a quarterly basis on the last business day of the last month of each calendar quarter in principal payments of $2,053 with the remaining balance maturing and fully payable on July 3, 2024.
Incremental Liquidity Facility: On December 15, 2021, the principal, accrued and unpaid interest and fees outstanding under the Incremental Liquidity Facility were repaid in full and all commitments to extend credit thereunder were terminated and any security interests and guarantees in connection therewith were terminated and/or released.
First Lien Credit Facility Revolver: On December 15, 2021, the principal, accrued and unpaid interest and fees outstanding under the First Lien Credit Agreement revolver were repaid in full and all commitments to extend credit thereunder were terminated and any security interests and guarantees in connection therewith were terminated and/or released.
Letters of Credit: Outstanding standby letters of credit as of March 27, 2022 total $9,136 and are guaranteed by JP Morgan Chase Bank, N.A. The available amount of the New Revolver is reduced by the outstanding standby letters of credit.
The Company was in compliance with all debt covenants as of March 27, 2022.
(11)Income Taxes
The Company’s effective tax rate for the nine months ended March 27, 2022 is 14%. The difference between the US federal statutory rate of 21% and the year-to-date effective tax rate is mainly due to the current year changes in the valuation allowance partially offset by state income taxes. The effective tax rate for the nine months ended March 28, 2021 is 0% and differs from the US federal statutory rate of 21% primarily due to income tax expense being offset by changes in the valuation allowance.
(12)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.
In management’s opinion, there are no claims or actions either individually or in the aggregate that are expected to have a material adverse impact on the Company’s financial position or results of operations.
(13)Warrants
The following table summarizes the warrants outstanding as of March 27, 2022:
| | | | | | | | |
Class of Warrants | | Number Outstanding |
Public warrants | | 9,137,627 |
Private placement warrants | | 3,778,445 |
Unvested private placement warrants | | 1,619,348 |
| | 14,535,420 |
Public Warrants: As of March 27, 2022, there were 14,535,420 warrants outstanding of which 9,137,627 were public warrants. The warrants entitle the holders to acquire Class A common stock.
Each whole warrant entitles the registered holder to purchase one share of Class A common stock at a price of $11.50 per share. Pursuant to the warrant agreement, a holder may exercise its warrants only for a whole number of shares of Class A common stock. This means only a whole warrant may be exercised at a given time by a warrant holder. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. The warrants will expire five years after the Closing Date or earlier upon redemption or liquidation.
Redemption of Warrants
Once the warrants become exercisable, Bowlero may call the public warrants for redemption for cash:
•in whole and not in part;
•at a price of $0.01 per warrant;
•upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and
•if, and only if, the reported closing price of Class A common stock equals or exceeds $18.00 per share (as adjusted for stock sub-divisions, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before Bowlero sends the notice of redemption to the warrant holders.
Once the warrants become exercisable, Bowlero may redeem the outstanding public and private placement warrants for Class A common stock:
•in whole and not in part;
• at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined based on the redemption date and the “fair market value” (as defined below) of the Class A common stock;
• if, and only if, the closing price of the Class A common stock equals or exceeds $10.00 per public share (as adjusted per share subdivisions, share dividends, reorganizations, recapitalizations and the like) on the trading day before the Company sends the notice of redemption to the warrant holders; and
•if the Reference Value is less than $18.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like), the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.
The “fair market value” of the Class A common stock shall mean the volume-weighted average price of the Class A common stock for the ten trading days immediately following on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
Private Placement Warrants: The 3,778,445 private placement warrants (including the Class A common stock issuable upon exercise of the private warrants) are not redeemable by Bowlero for cash (other than pursuant to the $0.10 per warrant redemption provision described above) so long as they are held by Isos Acquisition Sponsor LLC (“Sponsor”), members of the Sponsor, LionTree Partners LLC (“LionTree”) or their permitted transferees except as part of a redemption of all outstanding warrants that permits holders of warrants to exercise such warrants at a make-whole price. The initial purchasers of these warrants, or their permitted transferees, have the option to exercise the warrants on a cashless basis.
Unvested Private Placement Warrants. On the Closing Date, 1,189,037 warrants held by the Sponsor and 430,311 warrants held by LionTree became unvested. 50% of the unvested warrants will revest only to the extent the closing price of Class A common stock exceeds $15.00 per share and 50% will revest if the price exceeds $17.50 per share, and as further provided in the Sponsor Support Agreement prior to the fifth anniversary of the Closing Date (with any warrants unvested as of such date being forfeited and cancelled).
Except as described in this section, the private placement warrants have terms and provisions that are identical to those of the public warrants, including that they may be redeemed for shares of Class A common stock. If the private placement warrants are held by holders other than the Sponsor, LionTree or their permitted transferees, the private placement warrants will be redeemable by Bowlero and exercisable by the holders on the same basis as the public warrants.
Share and Warrant Repurchase Plan: As of 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. Please refer to Note 19-Share and Warrant Repurchase Program for more details.
Redemption of Public and Private Placement Warrants: On April 14, 2022, the Company announced the redemption of all of its outstanding publicly traded and privately held warrants to purchase shares of its Class A common stock. The Company will redeem all of the outstanding warrants as of 5:00 pm New York City time on May 16, 2022 (the "Redemption Date") for a redemption price of $0.10 per warrant (the "Redemption Price"). The rights of the warrant holders to exercise their warrants will terminate immediately prior to 5:00 p.m. New York City time on the Redemption Date.
During the redemption period, holders of the warrants may elect to exercise their warrants on a “cashless basis” by receiving a number of shares of Class A common stock based on the volume weighted average price of the Class A common stock for the ten trading days immediately following on the third trading day prior to the date on which notice of redemption was delivered to holders (the "Redemption Fair Market Value"). On April 27, 2022, the Company announced the Redemption Fair Market Value in connection with the upcoming redemption. The Redemption Fair Market Value is $12.0985. As a result, holders who exercise their warrants on a “cashless” basis before 5:00 p.m. New York City time on the Redemption Date will be entitled to receive 0.2936 shares of Class A common stock per warrant exercised.
(14)Earnouts
Old Bowlero’s stockholders and option holders received additional shares of Bowlero common stock (the "Earnout Shares"). Earnout Shares 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 and
(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, 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 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.
Prior to the contingency being met, all but 152,370 Earnout Shares are classified as a liability and changes in the fair value of the Earnout Shares in future periods will be recognized in the statement of operations. Those 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.
As part of the Sponsor Support Agreement, the Sponsor and LionTree were issued 1,611,278 Earnout Shares which vest during the period from and after the Closing Date until the fifth anniversary of the Closing Date: (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 10 trading days within any consecutive 20-trading day period that occurs after the Closing Date 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.
(15)Derivatives
The Company uses interest rate swaps and cap agreements to convert a portion of its variable interest rate exposure to fixed rates to protect the Company from future interest rate increases. The Company’s interest rate swap and cap agreements consist of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 27, 2022 | | June 27, 2021 |
| Notional Amounts | | Expiration | | Notional Amounts | | Expiration |
Interest rate swaps | $ | 552,500 | | | June 30, 2022 | | $ | 552,500 | | | June 30, 2022 |
Interest rate caps | 97,500 | | | March 31, 2022 | | 97,500 | | | March 31, 2022 |
Total notional amounts | $ | 650,000 | | | | | $ | 650,000 | | | |
Under the swap agreements, the Company pays a fixed rate of interest of 2.561% and receives an average variable rate of the one-month LIBOR adjusted monthly. Under the interest rate cap agreements, the Company pays a fixed rate fee of 0.179% on the notional amount and has a strike rate of 3.00%.
The fair values of the swap and cap agreements as of March 27, 2022 and June 27, 2021 were liabilities of $2,141 and $8,869, respectively, and are included in other current liabilities in the consolidated balance sheets.
The reclassifications from accumulated other comprehensive income ("AOCI") into income during the three and nine months ended March 27, 2022 and March 28, 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| March 27, 2022 | | March 28, 2021 | | March 27, 2022 | | March 28, 2021 |
Interest expense reclassified from AOCI into net loss | $ | 2,205 | | | $ | 2,266 | | | $ | 6,610 | | | $ | 6,798 | |
The fair value of the Swap and Cap Agreements excludes accrued interest and takes into consideration current 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.
(16)Fair Value of Financial Instruments
Debt
The fair value and carrying value of our debt as of March 27, 2022 and June 27, 2021 are as follows:
| | | | | | | | | | | |
| March 27, 2022 | | June 27, 2021 |
Carrying value | $ | 880,810 | | | $ | 885,387 | |
Fair value | 874,034 | | | 887,102 | |
The fair value of our debt is estimated based on information provided by JP Morgan Chase Bank, N.A. and is based on trading levels of lenders buying and selling their participation levels of funding (Level 2).
Items Measured at Fair Value on a Recurring Basis
As of March 27, 2022 and June 27, 2021, the Company held certain liabilities that were required to be measured at fair value on a recurring basis. The following tables are summaries of fair value measurements and hierarchy level as of:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 27, 2022 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Public warrants | $ | 24,123 | | | $ | — | | | $ | — | | | $ | 24,123 | |
Private placement warrants | — | | | — | | | 9,975 | | | 9,975 | |
Unvested warrants | — | | | — | | | 3,854 | | | 3,854 | |
Earnout shares | — | | | — | | | 204,416 | | | 204,416 | |
Contingent consideration | — | | | — | | | 1,470 | | | 1,470 | |
Derivatives | — | | | 2,141 | | | — | | | 2,141 | |
Total liabilities | $ | 24,123 | | | $ | 2,141 | | | $ | 219,715 | | | $ | 245,979 | |
The fair value of the warrant liability is classified as Level 1 and Level 3, depending on the class of warrant. The fair values of private warrants, unvested warrants, and earn-out shares were established using a Monte Carlo simulation Model (level 3 inputs). The key inputs into the Monte Carlo simulation as of March 27, 2022 were as follows:
| | | | | | | | | | | | | | |
Input | | Warrant Liability | | Earnout |
Expected term in years | | 4.72 | | 4.72 |
Expected volatility | | 28 | % | | 55 | % |
Risk-free interest rate | | 2.54 | % | | 2.54 | % |
Stock price | | $ | 10.86 | | $ | 10.86 |
Dividend yield | | — | | — |
The following table sets forth a summary of changes in the estimated fair value of the Company’s Level 3 Earnout liability and Warrant Liability for the nine months ended March 27, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 27, 2021 | | Issuances | | Settlements | | Changes in fair value | | March 27, 2022 |
Earnouts | $ | — | | | $ | 181,180 | | | $ | — | | | $ | 23,236 | | | $ | 204,416 | |
Warrant liability | — | | | 22,426 | | | 5,222 | | | 20,748 | | | 37,952 | |
Totals: | $ | — | | | $ | 203,606 | | | $ | 5,222 | | | $ | 43,984 | | | $ | 242,368 | |
There were no transfers in or out of any of the levels of the valuation hierarchy during the fiscal year ended June 27, 2021 or through the period ended March 27, 2022.
Derivatives - The Company’s interest rate swap and cap agreements are valued using observable inputs; therefore, the resulting obligation is classified within Level 2 of the fair value hierarchy at March 27, 2022 and June 27, 2021.
Redeemable Common Stock – Old Bowlero
The redeemable common stock of Old Bowlero was not listed on an established public trading market, therefore, market prices were not available. The Company utilized an independent valuation specialist to determine the fair market value of our redeemable common stock based upon our estimated enterprise value using the income approach, which includes the use Level 3 inputs. As a result, the redeemable common stock is classified within Level 3 of the fair value hierarchy. Key assumptions used in estimating the fair value of our redeemable common stock included projected revenue growth and costs and expenses, which were based on internal projections, historical performance, and the business environment, as well as the selection of an appropriate discount rate based on weighted-average cost of capital and company-specific risk premium. See Note 17 - Common Stock. Preferred Stock and Stockholders’ Equity, for further information. 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 broker estimate of value amounts 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.
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.
(17)Common Stock, Preferred Stock and Stockholders’ Equity
Common Stock
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 Preferred Stock. The total number of shares of capital stock which the Corporation shall have authority to issue is 2,400,000,000, divided into the following:
Class A:
•Authorized: 2,000,000,000, with a par value of $0.0001 per share
•Issued and Outstanding: 107,025,528 (inclusive of 2,746,748 shares contingent on certain stock price thresholds but excluding 109,754 shares held in treasury) as of March 27, 2022
Class B:
•Authorized: 200,000,000, with a par value of $0.0001 per share
•Issued and Outstanding: 58,311,203 as of March 27, 2022
Preferred Stock:
•Authorized: 200,000,000, with a par value of $0.0001 per share
•Issued and Outstanding: 200,000 of Series A Preferred Stock as of March 27, 2022
The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to conversion and voting. Shares of Class B common stock are convertible into an equivalent number of shares (one-for-one) of Class A common stock automatically upon transfer, or upon the earliest to occur of (i) the 15th anniversary of the Closing Date, with respect to Thomas F. Shannon’s (ii) the death or disability, (iii) ceasing to beneficially own at least 10% of the outstanding shares of Class A common stock and Class B common stock or (iv) his employment as our CEO, being terminated for cause. Holders of Class B common stock may convert their shares into shares of Class A common stock at any time at their option. Holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to ten votes per share. Any dividends paid to the holders of Class A common stock and Class B common stock will be paid on a pro rata basis. On a liquidation event, any distribution to common stockholders is made on a pro rata basis to the holders of the Class A common stock and Class B common stock.
Redeemable Common Stock - Old Bowlero
Old Bowlero had issued 51,397,025 shares (“Old Bowlero Redeemable Common Stock”) to its Chairman and CEO on July 3, 2017. These shares were subject to a repurchase option in the event of the Chairman’s death or disability. The amount presented in temporary equity as of June 27, 2021 represents the estimated fair value of those shares. Old Bowlero’s obligation to repurchase these shares would terminate upon the occurrence of a Change of Control or upon the consummation of a Public Offering. The increase in the repurchase obligation was recorded via adjustments to additional paid-in capital.
As of the Closing Date, we exchanged 51,397,025 shares of Old Bowlero Redeemable Common Stock for 51,397,025 shares of Class B Common stock of the Company. As of March 27, 2022, there was no Old Bowlero Redeemable Common Stock remaining.
Series A Preferred Stock – Old Bowlero
Old Bowlero had authorized 200,000 shares of Old Bowlero Series A Preferred Stock (“Old Bowlero Preferred Stock”) at a $0.0001 par value per share of which 106,378 shares were issued and outstanding as of June 27, 2021. There were no voting rights associated with the Old Bowlero Preferred Stock. Dividends accumulated on a daily basis commencing from the July 3, 2017 issue date. The dividend rate was 8% for the first 3 years. Effective November 15, 2019, the rate following the first three years was amended from 10% to 6%. The Old Bowlero Preferred Stock was redeemable at the option of Old Bowlero at any time on or after July 3, 2020. The Old Bowlero Preferred Stock was classified as temporary equity because the shares had certain redemption features that were not solely in the control of the reporting entity.
As of the Closing Date, we redeemed the Old Bowlero Preferred Stock with a cash payment of $145,298. As of March 27, 2022, there was no Old Bowlero Preferred Stock outstanding.
Series A Preferred Stock
As of March 27, 2022, the Company had issued and outstanding 200,000 shares of Preferred Stock. Holders of Preferred Stock have voting rights in certain matters that require vote or consent of holders representing a majority of the outstanding shares of the Preferred Stock. There are no other voting rights associated with the Preferred Stock as long as management holds over 50% of the equity voting power.
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 March 27, 2022, there have been no dividends declared or paid in cash. On December 31, 2021, accumulated dividends in the amount of $489 were added to the liquidation preference and deemed to be declared and paid in-kind. For the nine months ended March 27, 2022, dividends in the amount of $3,154 have accumulated on the Preferred Stock.
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 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 Preferred Stock has conversion options providing (1) the holder the right to submit all, or any whole number of shares that is less than all, of their shares of Preferred Stock pursuant to an Option Conversion and (2) the Company has the right to exercise at its election a Mandatory Conversion settled in Common Stock with the exception of the payment of cash in lieu of any fractional shares following the second anniversary of the initial issue date, if the closing price of the stock exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period. Additionally, the Company may, from time to time, repurchase Preferred Stock in the open market purchases or in negotiated transactions without delivering prior notice to holders of Preferred Stock.
The Company has classified the Preferred Stock as temporary equity as the shares have certain redemption features that are not solely in the control 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.
(18)Stock Based Compensation
The Company has three stock incentive 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 to attract and retain key personnel by providing them the opportunity to acquire equity interest in the Company and align the interest of key personnel with those of the Company’s stockholders. There has been no activity or costs incurred for the ESPP.
2017 Plan: The 2017 Plan was approved on September 29, 2017 and is a broad-based plan that provides for the grant of non-qualified stock options to our executives and certain other employees for up to a maximum of 16,316,506 shares (retroactively stated for application of the recapitalization). The 2017 Plan was subsequently amended on January 7, 2020 to 50,581,181 shares (retroactively stated for application of the recapitalization). As of December 15, 2021, no additional options are available to be granted under the 2017 Plan. The 2017 Plan was administered by the Board of Directors, which approved grants to individuals, number of options, terms, conditions, performance measures, and other provisions of the award. Awards were generally granted based on the individual’s performance. Stock options granted under the 2017 Plan had a maximum contractual term of twelve years from the date of grant, an exercise price not less than the fair value of the stock on the grant date and generally vested over four years in equal quarterly installments for the time-based options and upon occurrence of a liquidity event for the performance-based options.
The Company recorded compensation cost for all performance-based and unvested time-based options of $24,516 and $138, respectively, due to the Business Combination on December 15, 2021, since the terms of these options were such that the options vested upon the occurrence of a liquidity event. The Business Combination was a liquidity event that triggered the vesting of these options. For the nine months ended March 28, 2021, we recorded compensation cost of $2,351 in selling, general and administrative expenses and $20 in cost of revenues within the condensed consolidated statements of operations.
A summary of stock options outstanding under the 2017 Plan at March 27, 2022, and changes during the nine months then ended is presented below. The aggregate intrinsic value, which is the amount by which the market value of the underlying stock exceeded the exercise price of outstanding options, is before applicable income taxes and represents the amount option holders realized (in the case of exercised options) or would realize if all in-the-money options had been exercised on the last business day of the period. The total intrinsic value of options exercised during the three and nine months ended March 27, 2022 was $69,985, and the total intrinsic value of options repurchased during the three and nine months ended March 27, 2022 was $4,362.
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Options | | Weighted Average Exercise Price Per Share | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value |
Outstanding at June 27, 2021 | 49,331,480 | | $ | 8.60 | | | 9.13 | | $ | — | |
Granted | — | | — | | | — | | | — | |
Exercised - stock | 10,360,078 | | 3.25 | | | — | | | — | |
Repurchased - cash | 639,122 | | — | | | — | | | — | |
Forfeited and cancelled | 17,962,453 | | 13.53 | | | — | | | — | |
Outstanding at March 27, 2022 | 20,369,827 | | $ | 7.14 | | | 9.74 | | $ | 75,696 | |
Vested as of March 27, 2022 | 20,369,827 | | 7.14 | | | 9.74 | | 75,696 | |
Exercisable as of March 27, 2022 | 20,369,827 | | 7.14 | | | 9.74 | | 75,696 | |
2021 Plan: The 2021 Plan was effective December 14, 2021 and provides for the grant of equity awards to an individual employed by the Company or Subsidiary, a director or officer of the Company or Subsidiary, a consultant or advisor to the Company or an Affiliate or to a prospective employee, director, officer, consultant or director who has accepted an offer of employment or service from the Company. Equity awards include incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, RSUs and other stock based awards granted under the 2021 Plan. Shares to be granted under the 2021 Plan shall be not more than 26,446,033 shares of common stock, subject to an annual increase on the first day of each calendar year beginning January 1, 2022. The Compensation Committee of the Board of Directors or subcommittee thereof, administers the 2021 Plan. The Compensation Committee may delegate all or any portion of its responsibilities and powers to any person(s) selected by it, except for grants of Awards to persons who are non-employee members of the Board or are otherwise subject to Section 16 of the Exchange Act. Any such delegation may be revoked by the Committee at any time. The Board may at any time and from time to time grant awards and administer the 2021 Plan with respect to such awards. In any such case, the Board shall have all the authority granted to the Compensation Committee under the 2021 Plan. The Compensation Committee approves grants to individuals, number of options, terms, conditions, performance measures, and other provisions of the award. Stock options granted under the 2021 Plan have a maximum contractual term of ten years from the date of grant, unless trading is prohibited by the Company’s insider-trading policy or a Company-imposed blackout period, in which case the terms shall be extended automatically, and an exercise price not less than the fair value of the stock on the grant date. The manner and timing of vesting and expiration are determined by the Compensation Committee.
During the nine-months ended March 27, 2022, the Company recorded $3,323 in compensation cost recognized for 665,912 fully vested options reallocated and $14,228 in compensation cost for 1,422,813 shares for a share-based bonus.
As a result of the Business Combination, the Company issued fully vested and unvested stock options to certain employees. The unvested stock options vest based on a service condition. The stock options are measured based on a Black-Scholes-Merton model, and are expensed evenly over the service period. The expected volatility is based on historical volatility of companies considered comparable to the Company. The risk-free interest rates are based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The average expected life represents the weighted average period of time that options granted are expected to be outstanding. The following table presents the significant assumptions used in the Black-Scholes model with the following range of weighted average assumptions for options granted in fiscal 2022:
| | | | | |
Expected term in years | 6.68 |
Interest rate | 1.39 | % |
Volatility | 55.6 | % |
Dividend yield | — |
A summary of stock options outstanding under the 2021 Plan at March 27, 2022, and changes during the period then ended is presented below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Options | | Weighted Average Exercise Price Per Share | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value |
Outstanding at December 14, 2021 | — | | $ | — | | | $ | — | | | $ | — | |
Granted | 9,415,912 | | 13.72 | | | 10.00 | | — | |
Exercised | — | | — | | | — | | | — | |
Forfeited and cancelled | — | | — | | | — | | | — | |
Repurchased or settled | — | | — | | | — | | | — | |
Outstanding at March 27, 2022 | 9,415,912 | | $ | 13.72 | | | 9.75 | | $ | 573 | |
Vested as of March 27, 2022 | 665,912 | | 13.72 | | | 9.75 | | 573 | |
Exercisable as of March 27, 2022 | 665,912 | | 13.72 | | | 9.75 | | 573 | |
The Company issued RSUs to employees and board members that vest based on service conditions (Service based RSUs). The Company measures the grant-date fair value based on the price of the Company's shares on the grant date. The following table presents a summary of RSUs subject to time-based service conditions and changes during the period then ended is presented below as of March 27, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Units | | Weighted Average Grant Date Fair Value Per Share | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value |
Outstanding at December 14, 2021 | — | | $ | — | | | $ | — | | | $ | — | |
Granted | 933,600 | | 9.72 | | | 2.51 | | — | |
Vested | — | | — | | | — | | | — | |
Forfeited | — | | — | | | — | | | — | |
Outstanding at March 27, 2022 | 933,600 | | $ | 9.72 | | | 2.41 | | $ | 10,139 | |
As a result of the Business Combination, the Company issued earnout RSUs to employees that vest upon the achievement of market conditions with a 5-year expiration date (Earnout RSUs). The fair value of the earnout RSUs was determined based on a Monte-Carlo simulation method reflecting those market conditions, and the Company recognizes compensation expense evenly over the 5-year service period. The following table presents a summary of the earnout RSUs subject to market conditions and changes during the period then ended as of March 27, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Units | | Weighted Average Grant Date Fair Value Per Share | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value |
Outstanding at December 14, 2021 | — | | $ | — | | | — | | | $ | — | |
Granted | 152,370 | | 8.16 | | | 5.00 | | — | |
Vested | — | | — | | | — | | | — | |
Forfeited | 10,198 | | 8.16 | | | — | | | — | |
Outstanding at March 27, 2022 | 142,172 | | $ | 8.16 | | | 4.72 | | $ | 1,544 | |
The Company issued RSUs to employees and board members that vest based upon the achievement of market and service conditions (Market and service based RSUs). The fair value of those RSUs was determined using a Monte-Carlo simulation method reflecting those market conditions. The following table presents a summary those RSUs subject to market and service conditions, and changes during the period then ended as of March 27, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Units | | Weighted Average Grant Date Fair Value Per Share | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value |
Outstanding at December 14, 2021 | — | | $ | — | | | — | | $ | — | |
Granted | 262,200 | | 6.64 | | | 2.79 | | — | |
Vested | — | | — | | | — | | — | |
Forfeited | — | | — | | | — | | — | |
Outstanding at March, 27, 2022 | 262,200 | | $ | 6.64 | | | 2.72 | | $ | 2,847 | |
As of March 27, 2022, the total compensation cost not yet recognized is as follows:
| | | | | | | | | | | | | | |
| Award Plan | Unrecognized Compensation Cost | | Weighted Average Period over which its expected to be recognized |
Stock options | 2021 Plan | $ | 39,812 | | | 6.73 |
Service based RSUs | 2021 Plan | 8,472 | | | 2.41 |
Market and service based RSUs | 2021 Plan | 1,697 | | | 2.72 |
Earnout RSUs | 2021 Plan | 1,095 | | | 4.72 |
Total unrecognized compensation cost | | $ | 51,076 | | | 5.84 |
Stock-based compensation recognized in the condensed consolidated statement of operations for the nine months ended March 27, 2022 is as follows:
| | | | | | | | | | | | | | | | | | | | |
| Award Plan | Selling, general and administrative expenses | | Cost of revenues | | Total |
Performance-based options | 2017 Plan | $ | 24,468 | | | $ | 48 | | | $ | 24,516 | |
Time-based options | 2017 Plan | 916 | | | 36 | | | 952 | |
Stock options | 2021 Plan | 5,966 | | | — | | | 5,966 | |
Service based RSUs | 2021 Plan | 592 | | | 13 | | | 605 | |
Market and service based RSUs | 2021 Plan | 41 | | | 3 | | | 44 | |
Earnout RSUs | 2021 Plan | 65 | | | — | | | 65 | |
Share-based bonus | — | 14,228 | | | — | | | 14,228 | |
Total stock based compensation expense | | $ | 46,276 | | | $ | 100 | | | $ | 46,376 | |
(19)Share and Warrant 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. 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. As of March 27, 2022, the remaining balance of the repurchase plan was $193,592. The following table below sets forth the selected share and warrant repurchase plan information (in thousands, except shares and warrants repurchased) for the periods indicated:
| | | | | | | | | | | | | | |
| | | | Three and Nine Months Ended March 27, 2022 |
Class A common stock repurchased | 109,754 |
Total cost of Class A common stock repurchased | $ | 1,026 | |
Warrants repurchased | 2,690,272 |
Total cost of warrants repurchased | $ | 5,382 | |
(20)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 Class A and B common share is as follows:
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| Three Months Ended |
| March 27, 2022 | | March 28, 2021 |
| Class A | | Class B | | Total | | Class A | | Class B | | Total |
Numerator | | | | | | | | | | | |
Net loss allocated to stockholders | $ | (13,344) | | | $ | (7,461) | | | $ | (20,805) | | | $ | (25,103) | | | $ | — | | | $ | (25,103) | |
| | | | | | | | | | | |
Denominator | | | | | | | | | | | |
Weighted-average shares outstanding | 104,279,718 | | 58,311,203 | | 162,590,921 | | | 146,848,329 | | — | | 146,848,329 | |
| | | | | | | | | | | |
Net loss per share, basic and diluted | $ | (0.13) | | | $ | (0.13) | | | $ | (0.13) | | | $ | (0.17) | | | $ | — | | | $ | (0.17) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| March 27, 2022 | | March 28, 2021 |
| Class A | | Class B | | Total | | Class A | | Class B | | Total |
Numerator | | | | | | | | | | | |
Net loss allocated to stockholders | $ | (37,867) | | | $ | (6,300) | | | $ | (44,167) | | | $ | (118,998) | | | $ | — | | | $ | (118,998) | |
| | | | | | | | | | | |
Denominator | | | | | | | | | | | |
Weighted-average shares outstanding | 130,944,782 | | 21,786,603 | | 152,731,385 | | | 146,848,329 | | — | | 146,848,329 | |
| | | | | | | | | | | |
Net loss per share, basic and diluted | $ | (0.29) | | | $ | (0.29) | | | $ | (0.29) | | | $ | (0.81) | | | $ | — | | | $ | (0.81) | |
(21)Segment Information
The Company has one reporting segment, which consists of operating a bowling entertainment business. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker ("CODM") in making decisions regarding resource allocation and assessing performance. Management continually assesses the Company’s operating structure, and this structure could be modified further based on future circumstances and business conditions. Our CODM assesses performance based on consolidated as well as bowling center-level revenue and operating profit.
The Company attributes revenue to individual countries based on the Company’s bowling center locations. The Company’s bowling centers are located in the United States, Mexico and Canada. The Company’s revenues generated outside of the United States and invoiced in Mexico and Canada for the three and nine months ended March 27, 2022 and March 28, 2021 are not material.
The Company’s long-lived assets in Mexico and Canada based on country of location, which includes property and equipment, but excludes intangible assets and goodwill, net of related depreciation and amortization are not material.