CEC Entertainment LLC

Overview Key strengths Key risks Good brand recognition in a niche subsector of gaming and restaurants. Competes in highly competitive market with many available substitutes. Positive operating cash flows, undrawn revolver, and discretionary capital spending plans provide flexibility. Narrow customer focus on gaming entertainment targeting children ages two to 12.Cost pressures brought on by labor shortages and inflation. CEC faces ongoing labor and commodity cost inflation, which we expect will hinder profitability somewhat through the remainder of 2022. However, the impact from food commodity pressures will be less onerous than traditional restaurant peers because the company generates more than half of its revenue from its entertainment offerings. Despite cost pressures, we anticipate S&P Global Ratings'-adjusted EBITDA margin will expand about

...Inflationary pressures continue to weigh on CEC Entertainment LLC's operating performance while declining consumer discretionary spending could also lead to weaker top-line performance than we anticipate. CEC faces ongoing labor and commodity cost inflation, which we expect will hinder profitability somewhat through the remainder of 2022. However, the impact from food commodity pressures will be less onerous than traditional restaurant peers because the company generates more than half of its revenue from its entertainment offerings. Despite cost pressures, we anticipate S&P Global Ratings'-adjusted EBITDA margin will expand about 350 basis points (bps) compared with the previous year as the company benefits from a more normal sales environment. In 2023, we anticipate about 100 bps of EBITDA margin contraction owing to ongoing labor cost pressures. Weakening consumer sentiment and increasing possibility of a recession pose risks to our forecast, though we expect declining consumer discretionary...

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