While Wall Street fixates on bowling alleys, Bowlero Corp. is quietly making a game-changing move, one that could redefine its growth trajectory and leave analysts scrambling to catch up. Hidden within the recent earnings call transcript lies a clue, a seemingly innocuous detail that hints at a much larger strategy: Bowlero's acquisition of Raging Waves Waterpark and its plan to introduce alcohol sales.

Sure, the move into waterparks might seem like a departure from Bowlero's core competency, but CEO Thomas Shannon isn't just throwing darts at a board. He's meticulously building an experiential entertainment empire, one where bowling is just the opening act. And this waterpark play? It's a stroke of genius with the potential to unlock a multi-billion dollar opportunity that Wall Street has completely missed.

Here's why this is so significant. Bowlero has spent years mastering the art of creating high-margin, low-variable-cost entertainment experiences. Bowling, with its predictable costs and high customer engagement, has been the perfect proving ground. But as Shannon astutely pointed out, the bowling market in the U.S. is capped at roughly $4 billion. To truly scale, Bowlero needs to diversify, and it needs to do so without sacrificing the winning formula that's brought it this far.

Enter Raging Waves Waterpark. This isn't some backyard slip-n-slide. It's the largest waterpark in Illinois, boasting 53.5 acres of prime real estate and a proven track record of profitability. More importantly, it's a business ripe for Bowlero's optimization playbook.

Shannon didn't mince words when he described the park's untapped potential, highlighting a glaring omission: the absence of alcohol sales. Imagine a scorching summer day, a packed park teeming with 8,000 thirsty patrons, and no beer in sight. This seemingly simple addition, along with other "fundamental basics" Shannon alluded to, could easily double Raging Waves' existing EBITDA.

Now, let's talk numbers. While the exact purchase price of Raging Waves remains undisclosed, Shannon confirmed it was acquired at a multiple "commensurate with what we paid for the majority of our bowling acquisitions over the last couple of years." Given Bowlero's history of acquiring bowling centers at attractive valuations and driving significant EBITDA growth, it's safe to assume they snagged Raging Waves at a bargain.

Furthermore, Shannon suggested that Raging Waves, once optimized, could be a prime candidate for a sale-leaseback transaction. Even at current cap rates, such a move could generate proceeds exceeding the initial purchase price while allowing Bowlero to retain roughly 50% of the cash flow. Talk about an infinite return!

This single acquisition isn't just about one waterpark. It's a blueprint for expansion into a vastly larger market. The regional waterpark space, excluding behemoths like Six Flags and Cedar Fair, is a fragmented landscape teeming with undervalued assets ripe for Bowlero's expertise.

While Wall Street obsesses over bowling comps and digital initiatives, Bowlero is discreetly assembling an entertainment juggernaut. The waterpark play is a shrewd move, a testament to Shannon's vision and Bowlero's ability to leverage its core strengths into new, high-growth verticals. Don't be surprised if you start seeing beer gardens sprouting up at waterparks across the country. Bowlero is just getting started.

Hypothetical Growth and Sale-Leaseback Potential of Raging Waves

This section outlines a hypothetical scenario based on the information provided in the article.

Hypothesis:

Bowlero's existing bowling center acquisitions have generated an average EBITDA growth of 20% in the first year after acquisition.

Assuming similar growth at Raging Waves, the park's EBITDA could increase from $5 million to $6 million within 12 months.

Based on comparable waterpark valuations, a sale-leaseback transaction could generate proceeds of $40 million, exceeding the assumed purchase price of $35 million.

Bowlero could then replicate this model, acquiring and optimizing regional waterparks across the U.S., generating a portfolio of high-margin, high-growth assets.

Disclaimer: This hypothesis and the accompanying numbers are illustrative and should be adjusted based on further research and publicly available data.

Bowlero's Q3 2024 Earnings Call Transcript

Below is the transcript from Bowlero's Q3 2024 Earnings Conference Call on May 6, 2024:

[SEE PROVIDED TRANSCRIPT]

"Fun Fact: Did you know that the popularity of bowling peaked in the 1960s, with over 12,000 bowling centers operating in the United States? Despite declining alley numbers, bowling remains one of the most popular recreational activities in the country, with over 67 million Americans bowling at least once a year."