Bally’s Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparison with the three months ended March 31, 2023. Bally’s operates Casinos & Resorts, International Interactive, and North America Interactive businesses. Amounts below are in U.S. dollars.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $618.5 million | $598.7 million | +3.3% |
| Operating income (loss) | $(74.0) million | $376.7 million | Down $450.7 million |
| Net income (loss) | $(173.9) million | $178.3 million | Down $352.2 million |
| Diluted earnings (loss) per share | $(3.61) | $3.24 | — |
| Cash from operating activities | $(7.9) million | $(16.1) million | Use decreased $8.3 million |
| Capital expenditures | $28.1 million | $43.7 million | Down $15.6 million |
Gaming revenue rose 6.0% to $516.1 million; non-gaming revenue fell 8.4% to $102.4 million. Operating costs and expenses were 112.0% of revenue, versus 37.1% in the prior-year quarter; the comparison is heavily affected by the prior-year sale-leaseback gain and current-quarter accelerated depreciation. Net loss margin was 28.1%, versus a 29.8% net income margin.
- Segment revenue / Adjusted EBITDAR: Casinos & Resorts $342.3 million / $89.4 million; International Interactive $234.7 million / $83.5 million; North America Interactive $41.5 million / $(10.2) million. Segment EBITDAR is a non-GAAP measure.
- Consolidated Adjusted EBITDA: $116.5 million, down 7.8% from $126.4 million. Casinos & Resorts EBITDAR declined $15.7 million, which management attributed primarily to winter weather; International Interactive EBITDAR increased $3.2 million, mainly on stronger U.K. performance. North America Interactive’s EBITDAR loss narrowed by $0.4 million.
- Cash and liquidity: Cash and cash equivalents were $169.4 million at March 31, 2024; restricted cash was another $141.5 million and is not generally available for company use. Cash plus restricted cash totaled $310.9 million. Management said cash, operating cash flow, and revolver availability should be sufficient for operating, capital expenditure, and debt-service needs.
- Debt and leases: Long-term debt, including current portion, was $3.68 billion principal amount ($3.66 billion net of discounts and fees); $355 million was drawn on the $620 million revolving facility. Operating lease liabilities were $1.19 billion, and the Chicago financing obligation was $200 million. The company reported compliance with applicable debt covenants.
- Interest and tax: Net interest expense was $73.1 million, up from $63.3 million. The company recorded a $31.4 million income-tax provision despite its pretax loss; the reported effective tax rate was negative 22.0%, primarily reflecting increased valuation allowance and foreign discrete tax items.
Material changes and unusual items
- Revenue increased $19.8 million, led by Casinos & Resorts and North America Interactive. Bally’s cited the Chicago temporary casino, opened in September 2023, and expanded North American online gaming and sportsbook operations. International Interactive revenue declined 4.4%.
- The $450.7 million year-over-year operating-income decline principally reflects the absence of the $374.2 million sale-leaseback gain recognized in Q1 2023 and $80.1 million of accelerated depreciation associated with Tropicana Las Vegas. That property closed April 2, 2024, for planned site redevelopment with an integrated resort and ballpark.
- Q1 2024 restructuring charges were $98.7 million, including $80.1 million of accelerated depreciation and $18.6 million of severance and employee-related costs. These are included in reported expenses, with depreciation and severance classified in different line items.
- In March 2024, a bankruptcy court approved settlement terms resolving Diamond Sports Group claims against Bally’s and others. Bally’s naming-rights payment obligation terminated; Bally’s recorded a $202.6 million non-cash liability related to the remaining commercial-rights intangible asset. The filing says this effect is expected to occur in 2024.
- Cash used in investing activities was $43.4 million, compared with $319.6 million provided in Q1 2023, when the company received sale-leaseback proceeds. Financing activities provided $51.3 million, including $135.0 million of debt issuance and $119.9 million of debt repayments.
Outlook, risks and contingencies
- The filing provides no consolidated earnings or revenue guidance. It estimates $100–$200 million of 2024 spending primarily for demolition and site preparation for the permanent Bally’s Chicago facility; completion is currently estimated by the end of 2026. The project requires at least $1.34 billion of qualifying development spending, and actual cost may exceed that minimum.
- Other disclosed commitments include $146.2 million under sponsorship agreements through 2037 and approximately $46.1 million of minimum interactive technology and market-access obligations through 2029. Remaining stated investment commitments include approximately $57.4 million for Rhode Island properties and $5.5 million for non-hotel projects at Bally’s Atlantic City.
- Key risks discussed include substantial gaming regulation and licensing requirements, competition and rapid change in online gaming, debt and lease obligations, interest-rate and foreign-currency exposure, inflation and labor costs, and execution and funding of development projects. A hypothetical 1% interest-rate increase would add approximately $22.6 million to interest expense over the next 12 months, based on March 31 debt levels and the filing’s sensitivity analysis.
- The company disclosed that its disclosure controls and procedures were not effective at quarter-end because of previously reported material weaknesses in internal control over financial reporting. Remediation efforts are ongoing, including staffing and review enhancements, stronger journal-entry and reconciliation controls, and an ERP implementation; the company cautioned that remediation is not assured.
- Bally’s reported that ordinary-course litigation loss accruals were not material, while noting that outcomes and insurance coverage are uncertain. The filing reported no material changes to the risk factors in its 2023 Form 10-K.
Important facts for investors to verify
- Whether operating results and cash generation improve after the Tropicana closure and its associated one-time depreciation and restructuring charges.
- Progress, remaining funding requirements, schedule, and potential cost overruns for the permanent Bally’s Chicago development.
- Debt balances, revolver availability, interest costs, covenant headroom, and the effect of lease obligations on liquidity.
- The accounting, timing, and cash implications of the $202.6 million Diamond-related non-cash liability and the terminated naming-rights obligation.
- Whether management remediates the disclosed material weaknesses and demonstrates that controls operate effectively.