Bally’s Corporation — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Bally’s operates casinos and resorts, North American interactive gaming, and international interactive gaming. Financial figures below are in U.S. dollars.
Financial results
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Revenue | $606.2 million | $552.5 million | $1,204.9 million | $1,100.8 million |
| Operating income | $6.0 million | $85.3 million | $382.7 million | $107.8 million |
| Net income (loss) | $(25.7) million | $59.5 million | $152.7 million | $61.4 million |
| Diluted EPS | $(0.48) | $0.98 | $2.80 | $1.02 |
| Adjusted EBITDA | $130.0 million | $137.0 million | $256.4 million | $251.7 million |
- Q2 revenue increased 9.7% year over year, led by gaming and hotel growth. Management attributed $35.3 million of quarterly revenue to the recent Tropicana Las Vegas and Casino Secret acquisitions.
- Q2 operating margin was approximately 1.0%, versus 15.4% a year earlier. General and administrative expense rose to $250.0 million from $192.7 million; interest expense was $67.1 million versus $45.8 million.
- Q2 Adjusted EBITDA fell 5.1%. Casinos & Resorts generated $79.7 million, International Interactive $84.6 million, and North America Interactive recorded a $17.7 million loss. First-half North America Interactive losses narrowed to $28.2 million from $40.2 million.
- First-half operating income and net income included a $374.3 million sale-leaseback gain related to Hard Rock Biloxi and Bally’s Tiverton. The gain materially affects comparisons and should not be treated as recurring operating performance.
Cash flow, balance sheet and capital structure
- For the first half, operating cash flow was $64.1 million, down from $164.5 million. Investing activities provided $224.0 million, including $411.0 million of sale-leaseback proceeds; capital expenditures were $119.5 million. Financing used $174.5 million, including $177.3 million of debt repayments and $30.5 million of share repurchases.
- At June 30, cash and cash equivalents were $183.6 million. Restricted cash was $139.2 million, plus $50.0 million classified in other assets; these restricted balances are not generally available for corporate use. Cash, cash equivalents and restricted cash totaled $372.8 million.
- Debt carrying value, including current maturities, was approximately $3.35 billion; long-term debt net of current maturities was $3.32 billion. The company also reported a $200.0 million financing obligation and $1.22 billion of operating lease liabilities. Operating lease minimum payments totaled $2.36 billion.
- Variable-rate debt was approximately $1.93 billion. Management estimated that a 1 percentage-point rate increase would add about $19.3 million to interest expense over the next 12 months.
- Current assets were $527.8 million and current liabilities were $678.6 million. The company said cash, operating cash flow and Revolving Credit Facility availability were expected to meet operating, capital expenditure and debt-service needs; the filing does not state a specific undrawn availability figure.
Material changes, outlook and risks
- First-half revenue rose 9.5%; reported growth reflected organic casino growth and recent acquisitions. First-half Adjusted EBITDA increased 1.9%, while Q2 Adjusted EBITDA declined.
- The January 2023 GLPI transaction involving Biloxi and Tiverton generated the $374.3 million gain and reduced debt, but added $48.5 million to minimum annual master-lease payments. Casinos & Resorts Adjusted EBITDA declined partly because of higher rent following the sale-leaseback.
- General and administrative expense included $20.3 million of first-half restructuring costs for an Interactive workforce reduction of up to 15%, and $9.7 million of impairment charges on a North America Interactive business classified as held for sale. That business’s revenue and loss were described as immaterial.
- Management said 2023 capital expenditures were expected to be below 2022 levels. Projects include the Chicago casino, for which the temporary facility was expected to open in the second half of 2023 and permanent construction to be completed by the end of 2026; these are expectations, not guarantees. Bally’s also expects to begin Rhode Island iGaming operations on March 1, 2024 under a 20-year exclusive authorization.
- Key disclosed risks include gaming regulation and licensing, acquisition integration, competition and digital gaming changes, debt and lease commitments, variable interest rates, inflation and labor costs, and foreign-exchange exposure. The company reported no material change to its previously disclosed risk factors, and stated disclosure controls were effective.
- No formal earnings or revenue guidance is provided in the supplied filing text. The company reported no cash dividends paid in the first half and said it did not currently intend to pay dividends in the foreseeable future.
Investor verification points
- Separate recurring results from the $374.3 million sale-leaseback gain and review its cash, tax and lease consequences.
- Assess sustainable cash generation against interest costs, $3.35 billion of debt, substantial operating leases and planned capital spending.
- Check whether North America Interactive losses continue to narrow and whether restructuring savings offset operating and marketing costs.
- Track delivery, financing and required investment for the Chicago development, and progress toward the announced temporary-casino and Rhode Island iGaming timelines.
- Review the effective tax rate and valuation allowance effects, as well as variable-rate debt and currency movements affecting results.