Bally’s Corporation — Q3 2021 Form 10-Q
Business context and reporting period. The filing covers the quarter and nine months ended September 30, 2021. Bally’s operated land-based casinos alongside growing sports betting and interactive businesses. Recent acquisitions expanded its casino and digital operations; the Gamesys acquisition closed on October 1, 2021, after quarter-end.
Key financial metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $314.8 million, versus $116.6 million in 2020 | $774.8 million, versus $254.7 million in 2020 |
| Operating income (loss) | $27.7 million, versus $23.4 million | $137.7 million, versus a $0.7 million loss |
| Net income (loss) | $(14.7) million, or $(0.30) per diluted share, versus $6.7 million, or $0.22 per share | $43.5 million, or $0.95 per diluted share, versus a $25.7 million loss, or $(0.83) per share |
| Adjusted EBITDA | $78.0 million, versus $38.0 million | $214.2 million, versus $49.3 million |
| Operating margin | 8.8%, versus 20.0% | 17.8%, versus negative 0.3% |
| Operating cash flow | Not separately presented for the quarter in the supplied filing text | $70.8 million, versus $1.7 million |
For the nine months, investing cash outflow was $302.1 million and financing cash inflow was $2.16 billion. Cash and restricted cash totaled $2.009 billion at quarter-end, including $1.845 billion of restricted cash, much of it escrowed for the Gamesys acquisition. Unrestricted cash and cash equivalents were $164.3 million.
At September 30, debt carrying value, including current maturities, was approximately $2.562 billion. Operating lease liabilities were approximately $525.5 million. The company reported $1.97 billion of net working capital, substantially affected by funds restricted for the Gamesys transaction.
Material changes versus the prior comparable periods
- Revenue rose 169.9% in Q3 and 204.2% year to date. Management attributed growth to reopened properties operating with minimal restrictions, improved visitation, and acquisitions; the comparison is also affected by 2020 COVID-related closures.
- Q3 operating income increased, but net income fell to a loss, principally reflecting higher interest expense and a $19.4 million loss on extinguishment of debt related to redeeming $210 million of 6.75% notes.
- Nine-month net income turned positive. Results included a $53.4 million sale-leaseback gain, $23.1 million of bargain-purchase gains, and $19.2 million of net insurance recovery gains.
- Financing and acquisition activity expanded the balance sheet: the company raised equity and issued $1.5 billion of senior notes during 2021, while also acquiring casino and interactive businesses. Shares outstanding increased to 44.6 million at September 30.
Outlook, risks, contingencies, and unusual items
- Outlook: Management expected liquidity, operating cash flows, and credit-facility availability to fund operations, capital needs, and debt service for the next 12 months, including pending acquisitions. The filing provides no quantified earnings or revenue guidance.
- Gamesys and financing after quarter-end: Gamesys was acquired for approximately $2.62 billion in cash and stock. Bally’s entered a $1.945 billion term loan facility and a $620 million revolving facility, undrawn at closing, and assumed obligations on $1.5 billion of new senior notes. The purchase accounting was incomplete at filing.
- Capital commitments: Planned investments include a $100 million five-year Atlantic City refurbishment commitment, a planned $40 million Kansas City redevelopment, a $100 million Rhode Island investment commitment, and a Pennsylvania casino project estimated at $120 million. Tropicana Las Vegas was agreed for $150 million for non-land assets, with a long-term land lease and related sale-leaseback arrangements.
- Risks: The filing highlights ongoing COVID-19 uncertainty, acquisition integration and execution, rapid growth and internal-control integration, competitive and fast-changing online gaming markets, regulatory requirements, and debt restrictions. Management said properties were at full capacity with minimal restrictions but could not predict future pandemic effects or when demand would return to pre-pandemic levels.
- Cash-flow correction: The company disclosed that $144 million of Dover Downs sale-leaseback proceeds had been misclassified as financing rather than investing cash flow in its June 2021 Form 10-Q. It planned to correct that prior presentation in a future filing; management stated the error did not affect operating cash flow or the other specified financial statements.
- Controls and contingencies: Management concluded disclosure controls were effective as of September 30, while acquired businesses’ internal controls were still being integrated. The company reported ordinary-course legal proceedings and said estimated losses were not material at the reporting date.
Important facts for investors to verify
- How post-Gamesys debt, cash generation, interest costs, and covenant headroom compare with the company’s stated liquidity outlook.
- How much of reported cash and working capital is unrestricted and available after completing the Gamesys transaction and refinancing.
- Whether acquired businesses deliver expected operating contributions, and how much reported growth reflects acquisitions, reopening effects, or one-time gains.
- The final purchase-price allocation for Gamesys and other acquisitions, and the scale of any resulting adjustments.
- Progress and funding requirements for casino refurbishment, development, and lease commitments, including Tropicana Las Vegas.
- The planned correction of the prior-period sale-leaseback cash-flow classification and continued integration of acquired companies’ financial controls.