The special purpose acquisition company (SPAC) boom has brought some rather interesting companies to the public markets in recent years, but this one might take the cake. There is now a bowling alley operator that also happens to be a software-as-a-service (SaaS) play that is going public by merging with a SPAC. Yes, you heard that right, a bowling alley SaaS SPAC can now be yours.
Here's what bowling alley technology investors need to know.
Image source: Getty Images.
The top dog in bowling
Bowlero, the largest operator of bowling alleys in the world as well as the owner of the Professional Bowlers Association (PBA), announced this week that it will merge with Isos Acquisition Corporation (ISOS). The definitive agreement comes just a few months after the SPAC went public in March, raising $225 million in the process.
The company's retail brands include Bowlero, Bowlmor Lanes, and AMF. In no uncertain terms, Bowlero leads the fragmented industry by a significant margin with 321 locations (including those that are currently in development) in North America. That's over seven times the next largest competitor, Main Event, which has just 44 locations. The majority of Bowlero's (286) are located in the U.S., with the rest in Mexico in Canada. The market is highly fragmented, with an estimated 3,500 bowling alleys operated by smaller, independent companies. Bowlero sees this as an opportunity for market consolidation.
Of course, the COVID-19 pandemic crushed most retail entertainment businesses, including the bowling industry. Bowlero highlights its pre-pandemic performance, which showed steady growth in revenue per center through 2019. Bowling alleys also offer stronger profitability compared to other entertainment-oriented sectors like movie theaters. The PBA, which Bowlero acquired in 2019, also provides recurring revenue from highly engaged bowlers.
The company sees additional opportunities in licensing its brands, both domestically and internationally, which could generate stable, high-margin revenue. But perhaps the most promising potential growth driver lies in software.
A bowling alley SaaS SPAC
Earlier this year, Bowlero launched Quantitative Management Solutions (QMS), a SaaS platform that provides analytics and other services catered to managing and optimizing retail operations. The company says it developed the proprietary technology in-house in order to manage its own portfolio of retail locations, leveraging data aggregation and analysis to improve financial performance.
Bowlero believes that QMS can be sold to a wide variety of other market verticals that could benefit from the platform, which the company suggests will lead to a virtuous cycle where QMS becomes more powerful over time as it aggregates an increasing amount of data. QMS could have use cases in amusement parks, gyms, commercial real estate, and even healthcare, among others. The company hopes to sell QMS to customers operating over 6,000 locations after 2024. Bowlero estimates that the total addressable market of all of these industries combined is an astronomical $10 trillion. That's not a typo.
The SPAC deal gives Bowlero an enterprise value of $2.6 billion. "Bowling alley SaaS SPAC" is not a term that I ever anticipated writing, but 2021 has been a strange year for investing.