Bowlero has been valued at $2.6 billion in advance of the IPO, which is expected to close by November.Courtesy Bowlero
In a few months, bowling center operator Bowlero will put one of the quietest success stories in sports business on the public stage when it begins trading on the New York Stock Exchange. The transaction, which is expected to close by November, will value the company at $2.6 billion and mark a major milestone for SPAC sponsor Isos Capital Management, the financial firm founded earlier this year by former WWE executives George Barrios and Michelle Wilson.
“What the future holds, and what I think the SPAC represents, is us taking the next step,” said Bowlero President, CFO and Vice Chairman Brett Parker, who joined the company in 2001. “Having gone from a young, upstart company to a middle market consolidator, to now being a public company with not just the credit profile but the capital access and ability to do transactions — both continued at the mom-and-pop consolidation level but also to play in bigger M&A using the public shares as currency.”
Bowlero is going public via merger with Isos Acquisition Corp., a SPAC from the firm launched in January by Barrios and Wilson, who last year left co-president roles at WWE after more than a decade at the $4.2 billion sports entertainment giant. The fledgling company has a venture arm that’s already taken stakes in some half-dozen companies, and its first SPAC will give Barrios and Wilson an opportunity to be hands-on and leverage their experience leading a publicly traded company.
According to the co-founders, Bowlero quickly emerged as an obvious acquisition target in their wide-ranging search. Bowling has a large and growing market — an estimated $4.5 billion in the U.S., up 50% over the past 10 years — and offers appealing economics. “An extra bowling game has no cost to them. An extra shoe rental has no cost. So they grow their revenue and the costs don’t move,” said Barrios. “The capex required, once you build or convert [a bowling center], is miniscule. These things get built to last almost forever, so it’s about 1.5% of revenue. So you have organic growth, huge variable margins, low maintenance capex: It’s a free cashflow machine.”
That model has allowed Bowlero to thrive on acquiring and turning around standalone bowling centers. In fact, according to Parker, the company is typically able to more than double a bowling center’s margins, excluding restructuring costs, to over 40% thanks to benefits of scale and a proprietary, AI-powered algorithm that identifies operational inefficiencies. Last year, Bowlero posted earnings of $105 million on revenue of $381 million, beating EBTIDA projections by 14% despite the pandemic’s impact on live entertainment. Bowlero recently raised its earnings guidance for 2022 by 4% to $285 million.
Around a dozen SPACs made offers to take Bowlero public, but Parker said Isos won out specifically because of Barrios and Wilson’s track record in the areas of media and international dealmaking. In fact, though the transaction will add about $69 million to Bowlero’s balance sheet — that extra cash is expected to pay down debt and accelerate the ongoing expansion strategy — Parker said the decision to go public via SPAC, rather than a traditional IPO, was largely about bringing on a strategic partner.
“The two primary differences between a SPAC and an IPO are that, one, you can provide projections to the market in your materials. And two, you have the opportunity to bring in a partner that can help you accelerate the growth of the business,” said Parker. “Ultimately, we decided to partner with Isos largely because there was a kind of unique, symbiotic relationship between us and George and Michelle, and the skill sets of the two groups.”
The Isos founders, who will both have seats on Bowlero’s nine-member board, are already eyeing opportunities to drive interest in the core business while creating new revenue streams. Those initiatives include in-center gambling and international expansion.
Perhaps most appealing of all is the PBA, the pro bowling league Bowlero acquired in 2019 but has thus far failed to establish relevancy. “We believe there’s an opportunity to introduce bowling to a new fan base, and we know a little bit about how to make TV interesting,” said Wilson. “You can create global stars from around the world. And you can create a global community around PBA using digital and social platforms, which is the playbook of the WWE. So we really see that as an opportunity over the long-term.”
Bowlero’s roots go back to 1997, when company founder, Chairman and CEO Tom Shannon bought the original Bowlmor Lanes in Manhattan’s Union Square. Bowlero has since rolled up its top competitors — it acquired AMF out of bankruptcy in 2013, going from 300 employees to 8,500 overnight, a year before buying Brunswick Corp.’s 85 centers — and hundreds of independently owned centers throughout the nation. The company now has 310 total centers, or roughly seven times as many as the next biggest operator — Main Event, with 44 — and has its sights set on the 3,500 or so that are still independently owned.
