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Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-09 · 156 added, 169 removed, 219 unchanged (60% of the section changed)

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Actual results may vary materially.

Forward-looking statements speak only as of the time of this Quarterly Report on Form 10-Q and we do not undertake to update or revise them as more information becomes available, except as required by law.

Forward-looking statements speak only as of the time of this report and we do not undertake to update or revise them as more information becomes available, except as required by law.

Important factors beyond those that apply to most businesses, some of which are beyond our control, that could cause actual results to differ materially from our expectations and assumptions include, without limitation:

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• risks associated with our rapid growth, including those affecting customer and employee retention, integration and controls;

• risks associated with the impact of the digitalization of gaming on our casino operations, our expansion into iGaming and sports betting and the highly competitive and rapidly changing aspects of our new interactive businesses generally;

• the very substantial regulatory restrictions applicable to us, including costs of compliance;

• restrictions and limitations in agreements to which we are subject, including our debt, could significantly affect our liquidity and our ability to operate our business;

• restrictions and limitations in agreements to which we are subject, including our debt;

• other risks identified in Part I.

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You should not to place undue reliance on our forward-looking statements.

Our objective is to be a leading omni-channel gaming and interactive entertainment company.

We are already a leading owner and operator of land-based casinos in ten states in the United States.

We are a global casino-entertainment company with a growing omni-channel presence of Online Sports Betting and iGaming offerings.

We own and manage 14 land-based casinos in ten states in the United States.

In 2020, we acquired the rights to the name “Bally’s” as part of our strategy to become the leading U.S.

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We took other key steps to build our iGaming and sports betting business in the past year, including entering into a strategic partnership with Sinclair Broadcast Group, Inc.

to leverage the Bally’s brand and combine our sports betting technology with Sinclair’s expansive national footprint, which includes 188 local TV stations, 21 regional sports networks (of which 19 have been rebranded Bally’s Sports), the STIRR streaming service, the Tennis Channel and five stadium digital TV and internet sports networks.

In 2021, we have acquired Bally’s Interactive, formerly Bet.Works, a sports betting platform provider, SportsCaller, a leading B2B free-to-play (“FTP”) game provider, Monkey Knife Fight, the third-largest fantasy sports platform in North America, and the Association of Volleyball Professionals (“AVP”), a premier professional beach volleyball organization.

Our properties on a combined basis have 706,457 square feet of gaming space, approximately 15,146 slot machines or VLTs, 500 gaming tables, 72 stadium gaming positions, 74 dining establishments, 36 bars, 3,885 hotel rooms and six entertainment venues.

We are a Delaware corporation with our global headquarters in Providence, Rhode Island.

Gamesys Acquisition

On April 13, 2021, we announced the terms of the Acquisition with Gamesys.

Gamesys is a leading international online gaming operator that provides entertainment to a global consumer base.

Under the terms of the Acquisition, Gamesys shareholders would have the option to receive, for each share of Gamesys, 1,850 pence in cash or shares of our common stock (at an exchange ratio of 0.343 for each Gamesys share) or a combination of both.

Certain of Gamesys’ current shareholders holding 25.6% of Gamesys’ shares have agreed to receive shares of our common stock in the Acquisition.

On June 30, 2021, the transaction was approved by a majority of the Gamesys and Bally’s shareholders who were present and voted, in person or by proxy, at the respective separate shareholder meetings.

The Acquisition is conditioned upon regulatory approvals and other customary closing conditions and is expected to close in the fourth quarter.

Financing for the Acquisition

We obtained a binding commitment pursuant to a commitment letter and an interim facilities agreement from Deutsche Bank AG, London Branch, Goldman Sachs USA and Barclays Bank PLC and other banks (the “Lenders”) to provide fully committed bridge term loan facilities up to £1,435.0 million €336.0 million (collectively, the “Bridge Commitment”) to fund the Acquisition.

On April 20, 2021, we announced the completion of an underwritten public offering of common stock.

We issued a total of 12.65 million shares of common stock in the offering.

On April 20, 2021, we escrowed £485.5 million of the net proceeds of the offering (including from the warrant issuance described below), reducing the Bridge Commitment by that amount.

On August 6, 2021, the Company’s subsidiaries, Premier Entertainment Sub, LLC and Premier Entertainment Finance Corp., entered into an agreement for the issuance of the New Notes.

The offering is expected to close on August 20, 2021, subject to customary closing conditions.

All or substantially all of the net proceeds from the notes offering will be placed in escrow accounts to fund a portion of the Acquisition.

If the Acquisition is not completed, the escrowed amounts will be released from escrow and applied to redeem the bonds and the remaining amounts will be returned to the Company.

Upon the Acquisition closing, the Company will assume the role of issuer under the New Notes and certain of the Company’s subsidiaries will guarantee the New Notes.

Upon closing of the notes offering and the placement of the proceeds in escrow, a portion of the Bridge Commitment will be retired and GLPI’s commitment to purchase shares of the Company’s common stock with a value up to $500.0 million (the “GLPI Commitment”) will terminate in accordance with its terms.

In order to manage the risk of appreciation of the GBP-denominated purchase price, the Company has entered into foreign exchange forward contracts.

On April 20, 2021, we issued to affiliates of Sinclair a warrant to purchase 909,090 common shares for an aggregate purchase price of $50 million, the same price per share as the public offering price in Bally’s common stock public offering ($55.00 per share).

(“Sinclair”) to leverage the Bally’s brand and combine our sports betting technology with Sinclair’s expansive national footprint, which includes 188 local TV stations, 21 regional sports networks (of which 19 have been rebranded Bally’s Sports), the STIRR streaming service, the Tennis Channel and five stadium digital TV and internet sports networks.

On October 1, 2021, we acquired Gamesys Group, Plc.

(“Gamesys”), a leading international online gaming operator that provides entertainment to a global consumer base.

Also in 2021, we have acquired Bally Interactive, formerly Bet.Works, a sports betting platform provider, SportsCaller, a leading B2B free-to-play (“FTP”) game provider, Monkey Knife Fight, the third-largest fantasy sports platform in North America, the Association of Volleyball Professionals (“AVP”), a premier professional beach volleyball organization, and Telescope Inc.

(“Telescope”), the leading provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams.

Our casino properties on a combined basis have 706,426 square feet of gaming space, approximately 15,028 slot machines or VLTs, 501 gaming tables, 72 stadium gaming positions, 71 dining establishments, 37 bars, 3,885 hotel rooms and seven entertainment venues.

2021 Acquisition Update

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We believe that our recent and pending acquisitions have expanded and will, in the case of the pending acquisitions, further expand both our operating and digital/interactive footprints, provide us access to the potentially lucrative interactive mobile sports betting and iGaming markets, and diversify us from a financial standpoint, while continuing to mitigate our susceptibility to regional economic downturns, idiosyncratic regulatory changes and increases in regional competition.

Gamesys Acquisition

On October 1, 2021, we acquired Gamesys, a leading UK-based global online gaming operator.

In connection with the acquisition, Gamesys shareholders received, in the aggregate, 9,773,537 shares of our common stock and approximately £1.544 billion in cash.

Based on the October 1, 2021 closing price of $53.08 per share of the Company’s common stock, and a foreign exchange rate of 1.354, the aggregate consideration paid to former Gamesys shareholders was approximately $2.62 billion, or $518.8 million of the Company’s common stock and $2.10 billion in cash.

We believe that Gamesys’ proven technology platform will foster our continued buildout of our interactive offerings in North America, including real-money gaming options in online sports betting and iGaming.

Additionally, unifying Bally’s and Gamesys’ player databases and technologies provides us with one of the largest portfolios of omni-channel cross-selling opportunities, consisting of land-based gaming, online sports betting, iCasino, poker, bingo, daily fantasy sports and free-to-play games.

We believe that these offerings, coupled with our media partnership with Sinclair Broadcast Group, position the Company to capitalize on significant growth opportunities in the rapidly expanding U.S.

online entertainment and sports betting markets.

Other 2021 Acquisitions

In addition to the Gamesys acquisition, we completed or signed definitive agreements for the following transactions in 2021:

• SportCaller - On February 5, 2021, we acquired SportCaller, one of the leading B2B FTP game providers for sports betting and media companies across North America, the UK, Europe, Asia, Australia, LATAM and Africa, for $24.0 million in cash and 221,391 shares of our common stock (valued at approximately $12.0 million), subject to adjustment, and up to $12.0 million in value of additional shares if SportCaller meets certain post-closing performance targets (calculated based on a $USD to Euro exchange ratio of 0.8334).

• Monkey Knife Fight - On March 23, 2021, we acquired MKF for (1) immediately exercisable penny warrants to purchase up to 984,446 Bally’s common shares (subject to adjustment) at closing and (2) contingent penny warrants to purchase up to 787,557 additional Bally’s common shares half of which are issuable on each of the first and second anniversary of closing.

• Monkey Knife Fight - On March 23, 2021, we acquired MKF for immediately exercisable penny warrants to purchase up to 984,446 of our common shares (subject to adjustment) at closing and contingent penny warrants to purchase up to 787,557 additional of our common shares half of which are issuable on each of the first and second anniversary of closing.

The total value of the warrants at signing was $90.0 million.

• Bally’s Lake Tahoe - On April 6, 2021, we acquired Bally’s Lake Tahoe Casino Resort, formally MontBleu Resort Casino & Spa, in Lake Tahoe, Nevada for $14.2 million, payable one year from the closing date, subject to customary post-closing adjustments.

• Tropicana Las Vegas - On April 13, 2021, we agreed to purchase the Tropicana Las Vegas Hotel and Casino in Las Vegas, Nevada from GLPI valued at approximately $300.0 million.

• Tropicana Las Vegas - On April 13, 2021, we agreed to purchase the Tropicana Las Vegas Hotel and Casino in Las Vegas, Nevada from GLPI.

The purchase price for the Tropicana property’s non-land assets is $150 million.

In addition, we agreed to lease the land underlying the Tropicana property from GLPI for an initial term of 50 years at annual rent of $10.5 million, subject to increase over time.

We also will enter into a sale-and-leaseback with GLPI relating to our Bally’s Black Hawk, formerly Black Hawk Casinos, properties and the Jumer’s property for a cash purchase price of $150 million payable by GLPI.

We also will enter into a sale-and-leaseback with GLPI relating to our Bally’s Black Hawk, formerly Black Hawk Casinos, properties and the Bally’s Quad Cities property for $150 million.

The lease will have initial annual fixed rent of $12.0 million, subject to increase over time.

• Bally’s Interactive - On May 28, 2021, we acquired Bally’s Interactive, formally Bet.Works Corp., for approximately $71.6 million in cash and 2,084,765 of the Company’s common shares, subject in each case to customary adjustments.

• Tropicana Evansville - On June 3, 2021, we acquired the Tropicana Evansville casino from Caesars Entertainment, Inc.

The total purchase price was $139.2 million, subject to customary adjustments.

• Jumer’s - On June 14, 2021, we acquired Jumer’s Casino & Hotel in Rock Island, Illinois for $119.2 million in cash, subject to customary post-closing adjustments.

• Bally Interactive - On May 28, 2021, we acquired Bally Interactive, formally Bet.Works Corp., for approximately $71.6 million in cash and 2,084,765 of our common shares, subject in each case to customary post-closing adjustments.

• Bally’s Evansville - On June 3, 2021, we acquired the Bally’s Evansville casino from Caesars Entertainment, Inc.

The total purchase price was $139.7 million, subject to customary post-closing adjustments.

• Bally’s Quad Cities - On June 14, 2021, we acquired Bally’s Quad Cities Casino & Hotel in Rock Island, Illinois for $118.9 million in cash, subject to customary post-closing adjustments.

• Association of Volleyball Professionals (“AVP”) - On July 12, 2021, we acquired AVP, a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the United States.

• Telescope Inc.

(“Telescope”) - On August 12, 2021 we acquired Telescope, the leading provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams.

• Degree 53 Limited (“Degree 53”) - On October 25, 2021 we acquired Degree 53, a UK-based creative agency that specializes in multi-channel website and personalized mobile app and software development for the online gambling and sports industries.

Operating Structure

As of June 30, 2021, the Company had four operating segments;

East, West, Bally’s Interactive and Mile High USA.

As of September 30, 2021, the Company had four operating segments;

East, West, Bally Interactive and Bally’s Arapahoe Park.

In the second quarter of 2021, we changed our management structure to better align with our strategic growth initiatives in light of recent and pending acquisitions, which resulted in the re-alignment of our operating and reportable segments.

The properties included within the East and West reportable segments, are as follows:

• East - includes Twin River Casino Hotel, Tiverton Casino Hotel, Dover Downs, Bally’s Atlantic City, and Tropicana Evansville

• West - includes Hard Rock Biloxi, Casino Vicksburg, Bally’s Kansas City, Shreveport, Bally’s Black Hawk, Bally’s Lake Tahoe, and Jumer’s

Bally’s Interactive, which includes SportCaller, MKF, Bally’s Interactive, and our online and mobile sports betting operations, and Mile High USA, were determined to be immaterial operating segments and are therefore, included in the “Other” category along with shared services provided by Twin River Management Group (our management subsidiary).

We are currently evaluating our pending acquisition of Gamesys for segment reporting purposes.

We expect that our pending acquisition of Tropicana Las Vegas will be reported in the West and the Centre City, Pennsylvania development project will be reported in the East (explained below).

• East - includes Bally’s Twin River, Bally’s Tiverton, Dover Downs, Bally’s Atlantic City, and Bally’s Evansville

• West - includes Hard Rock Biloxi, Bally’s Vicksburg, Bally’s Kansas City, Bally’s Shreveport, Bally’s Black Hawk, Bally’s Lake Tahoe, and Bally’s Quad Cities

Bally Interactive, which includes SportCaller, MKF, Bally Interactive, AVP, Telescope, our online and mobile sports betting operations, and Bally’s Arapahoe Park, were determined to be immaterial operating segments and are therefore, included in the “Other” category along with shared services provided by Twin River Management Group (our management subsidiary).

We are currently evaluating the acquisition of Gamesys for segment reporting purposes, but it is expected that it will be reported as International Interactive and our existing operating segment Bally Interactive, will be reported as North America Interactive.

It is expected that the pending acquisition of Tropicana Las Vegas will be reported in the West and the Pennsylvania development project will be included in the East (explained below).

Strategic Partnership - Sinclair Broadcast Group

Our agreements with Sinclair provide for a long-term strategic partnership for 10 years that combines our vertically integrated, proprietary sports betting technology and expansive market access footprint with Sinclair’s premier portfolio of local broadcast stations and live regional sports networks (“RSNs”), STIRR streaming service, its popular Tennis Channel, and digital and over-the-air television network, Stadium.

Our agreements with Sinclair provide for a long-term strategic partnership that combines our vertically integrated, proprietary sports betting technology and expansive market access footprint with Sinclair’s premier portfolio of local broadcast stations and live regional sports networks (“RSNs”), STIRR streaming service, its popular Tennis Channel, and digital and over-the-air television network, Stadium.

Bally’s and Sinclair will partner to create unrivaled sports gamification content on a national scale, positioning Bally’s as a leading omni-channel gaming company with physical casinos and online sports betting and iGaming solutions united under a single brand.

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Crisafulli Economic Development Act, which among other things, authorizes and directs the state to enter into and amend contracts with the Company and results in changes to our Regulatory Agreement in Rhode Island, including an increase in the ratios applicable to us and greater flexibility to complete sale-leaseback transactions.

In addition, our master contract with Rhode Island will be extended on existing terms until June 30, 2043, and we have committed to investing $100 million in Rhode Island over this extended term, including an expansion and the addition of new amenities at Twin River Casino Hotel.

This legislation authorizes a joint venture with International Gaming Technology PLC (“IGT”) to become a licensed technology provider and supply the State of Rhode Island with all VLTs at both Twin River Casino Hotel and Tiverton Casino Hotel for a 20-year period starting July 1, 2023.

This legislation authorizes a joint venture with International Gaming Technology PLC (“IGT”) to become a licensed technology provider and supply the State of Rhode Island with all VLTs at both Bally’s Twin River and Bally’s Tiverton for a 20-year period starting July 1, 2023.

IGT would own 60% of the joint venture.

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As of March 16, 2020, all of our properties at the time were temporarily closed as a result of the COVID-19 pandemic.

Our properties began to reopen in mid-2020 in some capacity and remained open for the rest of 2020, with the exception of Twin River Casino Hotel and Tiverton Casino Hotel which closed again from November 29, 2020 through December 20, 2020.

Our properties began to reopen in mid-2020 in some capacity and remained open for the rest of 2020, with the exception of Bally’s Twin River and Bally’s Tiverton which closed again from November 29, 2020 through December 20, 2020.

All of our properties have reopened with minimal restrictions.

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In addition, Adjusted EBITDA as used by us may not be defined in the same manner as other companies in our industry, and, as a result, may not be comparable to similarly titled non-GAAP financial measures of other companies.

Second Quarter and First Six Months 2021 Results

We reported revenue and income from operations of $267.7 million and $80.5 million, respectively, for the three months ended June 30, 2021, compared to revenue and loss from operations of $28.9 million and $21.0 million, respectively, for the same period last year.

We reported revenue and income from operations of $460.0 million and $110.0 million, respectively, for the six months ended June 30, 2021, compared to revenue and loss from operations of $138.1 million and $24.1 million, respectively for the same period last year.

During the second quarter of 2021, our properties returned to full capacity and began operating under minimal restrictions.

Third Quarter and First Nine Months 2021 Results

We reported revenue and income from operations of $314.8 million and $27.7 million, respectively, for the three months ended September 30, 2021, compared to revenue and loss from operations of $116.6 million and $23.4 million, respectively, for the same period last year.

We reported revenue and income from operations of $774.8 million and $137.7 million, respectively, for the nine months ended September 30, 2021, compared to revenue and loss from operations of $254.7 million and $0.7 million, respectively for the same period last year.

As of the third quarter of 2021, our properties have returned to full capacity and are operating under minimal restrictions.

In the prior year, our properties were closed from mid-March into June 2020.

Other notable factors affecting our results for the three and six months ended June 30, 2021 compared to the prior year comparable periods are as follows:

• Revenue for the second quarter increased 825.6% to $267.7 million driven by $105.4 million of aggregate revenue from acquisitions in the second half of 2020, including Bally’s Kansas City and Casino Vicksburg ($33.1 million), Bally’s Atlantic City ($35.9 million) and Shreveport ($36.4 million), and $29.2 million of aggregate revenue from acquisitions in the first half of 2021, including Bally’s Lake Tahoe ($9.7 million), Tropicana Evansville ($11.7 million), Jumer’s ($2.3 million), and those in the Bally’s Interactive operating segment ($5.5 million);

• Revenue for the first half of 2021 increased 233.2% to $460.0 million driven by $184.0 million of aggregate revenue from acquisitions completed in the second half of 2020 including Bally’s Kansas City and Casino Vicksburg ($60.5 million), Bally’s Atlantic City ($61.6 million) and Shreveport ($61.9 million) and $30.3 million aggregate revenue from acquisitions in the first half of 2021, Bally’s Lake Tahoe, Tropicana Evansville and Jumer’s, noted above, and those in the Bally’s Interactive operating segment ($6.6 million).

Other notable factors affecting our results for the three and nine months ended September 30, 2021 compared to the prior year comparable periods are as follows:

• $150.6 million of aggregate revenue from acquisitions in the fourth quarter of 2020, including Bally’s Atlantic City ($46.8 million) and Bally’s Shreveport ($28.7 million), and acquisitions in the first nine months of 2021, including Bally’s Evansville ($40.1 million), Bally’s Quad Cities ($12.3 million), Bally’s Lake Tahoe ($11.3 million), and those in the Bally Interactive operating segment ($11.4 million);

• $304.4 million of aggregate revenue from acquisitions completed in the fourth quarter of 2020, including Bally’s Atlantic City ($108.4 million) and Bally’s Shreveport ($90.6 million), and acquisitions in the first nine months of 2021, including Bally’s Evansville ($51.8 million), Bally’s Lake Tahoe ($21.0 million) and Bally’s Quad Cities ($14.6 million), and those in the Bally Interactive operating segment ($18.0 million).

• $53.4 million gain on sale-leaseback in connection with our sale of the Dover Downs property to GLPI during the second quarter of 2021;

• $24.1 million gain on bargain purchases during the second quarter related to the acquisitions of Tropicana Evansville and Bally’s Lake Tahoe;

• $23.1 million gain on bargain purchases during the nine months ended September 30, 2021 related to the acquisitions of Bally’s Evansville and Bally’s Lake Tahoe;

Results of Operations

The following table presents, for the periods indicated, certain revenue and income items:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(In millions) 2021 2020 2021 2020

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Income (loss) from operations 27.7 23.4 137.7 (0.7)

Net income (loss) 68.9 (23.6) 58.2 (32.4)

Net (loss) income (14.7) 6.7 43.5 (25.7)

The following table presents, for the periods indicated, certain income and expense items expressed as a percentage of total revenue:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Change in value of naming rights liabilities 2.2 % — % (0.2) % — %

Gain on bargain purchases 9.0 % — % 5.2 % — %

Gain (adjustment) on bargain purchases (0.3) % — % 3.0 % — %

Loss on extinguishment of debt (6.2) % — % (2.5) % — %

Other, net (1.0) % — % (0.9) % — %

Total other income (expense), net 5.7 % (52.2) % (6.4) % (19.2) %

Income (loss) before provision for income taxes 35.8 % (124.7) % 17.5 % (36.7) %

Provision (benefit) for income taxes 10.1 % (43.3) % 4.8 % (13.2) %

Net income (loss) 25.8 % (81.4) % 12.7 % (23.5) %

Total other expense, net (15.2) % (14.5) % (10.0) % (17.0) %

(Loss) income before provision for income taxes (6.4) % 5.6 % 7.8 % (17.3) %

(Benefit) provision for income taxes (1.7) % (0.2) % 2.2 % (7.2) %

Net (loss) income (4.7) % 5.8 % 5.6 % (10.1) %

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Segment Performance

The following table sets forth certain financial information associated with results of operations for the three and six months ended June 30, 2021 and 2020.

The following table sets forth certain financial information associated with results of operations for the three and nine months ended September 30, 2021 and 2020.

Non-gaming revenue includes hotel, food and beverage and other revenue.

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All amounts are before any allocation of corporate costs.

(In thousands, except percentages) Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except percentages) Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 $ Change % Change 2021 2020 $ Change % Change

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Advertising, general and administrative as a percentage of Total revenue 45 % 38 % 7 % 42 % 46 % (4) %

Three and Six Months Ended June 30, 2021 Compared to Three and Six Months Ended June 30, 2020

Revenue for the three months ended June 30, 2021 increased 825.6%, or $238.8 million, to $267.7 million, from $28.9 million in the same period last year.

Revenue for the six months ended June 30, 2021 increased 233.2%, or $321.9 million, to $460.0 million, from $138.1 million in the same period last year.

Gaming and racing revenue for the three months ended June 30, 2021 increased 766.6%, or $183.5 million, to $207.5 million from $23.9 million in the same period last year.

Gaming and racing revenue for the six months ended June 30, 2021 increased 253.1%, or $260.0 million, from $102.7 million in the same period last year.

Three and Nine Months Ended September 30, 2021 Compared to Three and Nine Months Ended September 30, 2020

As noted above, revenue for the three months ended September 30, 2021 increased 169.9%, or $198.2 million, to $314.8 million, from $116.6 million in the same period last year.

Revenue for the nine months ended September 30, 2021 increased 204.2%, or $520.1 million, to $774.8 million, from $254.7 million in the same period last year.

Gaming and racing revenue for the three months ended September 30, 2021 increased 133.7%, or $131.3 million, to $229.6 million from $98.3 million in the same period last year.

Gaming and racing revenue for the nine months ended September 30, 2021 increased 194.7%, or $391.4 million, from $201.0 million in the same period last year.

With less operating restrictions across our properties resulting from developments in the COVID-19 pandemic and an increase in consumer confidence and visitation, we saw gaming revenue grow, and exceed in some cases, pre-pandemic levels.

Incremental revenues from our recent acquisitions also contributed to the increase in revenue for the second quarter and first half of 2021.

Revenue from acquisitions which closed in the second half of 2020, including Bally’s Kansas City and Casino Vicksburg, Bally’s Atlantic City and Shreveport, in the aggregate contributed $105.4 million and $184.0 million to total revenue in the second quarter and first half of 2021, respectively.

Revenue from acquisitions that closed in the first half of 2021, including SportCaller, MKF, Bally’s Interactive, Bally’s Lake Tahoe, Tropicana Evansville, and Jumer’s, in the aggregate, contributed $29.2 million and $30.3 million for the second quarter and first half of 2021, respectively.

Incremental revenues from our recent acquisitions also contributed to the increase in revenue for the three and nine months ended September 30, 2021.

Revenue from acquisitions which closed in the fourth quarter of 2020, including Bally’s Atlantic City and Bally’s Shreveport, coupled with those that closed in the first nine months of 2021, including SportCaller, MKF, Bally Interactive, Bally’s Lake Tahoe, Bally’s Evansville, Bally’s Quad Cities, AVP and Telescope, contributed, in the aggregate, $150.6 million and $304.4 million to total revenue in the three and nine months ended September 30, 2021, respectively.

Refer to Note 5 “Acquisitions” for further information on our recent acquisitions.

Operating costs and expenses

Gaming and racing expenses for the three months ended June 30, 2021 increased $52.7 million, or 494.3%, to $63.4 million from $10.7 million in the prior year comparable period and increased $74.3 million, or 204.9%, to $110.6 million for the six months ended June 30, 2021 from $36.3 million in the prior year comparable period.

This increase was primarily attributable to the inclusion of Shreveport, Bally’s Atlantic City, Bally’s Kansas City and Casino Vicksburg, all acquired in the second half of 2020, which contributed an aggregate $32.0 million and $57.0 million of gaming expenses during the second quarter and first half of 2021, respectively.

Our acquisitions of Jumer’s, Tropicana Evansville and Bally’s Lake Tahoe during the second quarter of 2021, also contributed gaming expenses of $6.0 million for the second quarter and first half of 2021.

Non-gaming expenses for the three months ended June 30, 2021 increased $22.6 million, or 574.4%, to $26.5 million from $3.9 million in the same period last year.

Non-gaming expenses for the six months ended June 30, 2021 increased $23.3 million, or 103.7%, to $45.7 million from $22.4 million in the same period last year.

This increase was primarily attributable to the inclusion of Bally’s Atlantic City, Shreveport, Bally’s Kansas City and Casino Vicksburg, which were acquired in the second half of 2020, and contributed $13.0 million and $22.3 million of non-gaming expenses for the second quarter and first half of 2021, respectively.

Gaming and racing expenses for the three months ended September 30, 2021 increased $49.5 million, or 178.8%, to $77.2 million from $27.7 million in the prior year comparable period and increased $123.8 million, or 193.6%, to $187.8 million for the nine months ended September 30, 2021 from $64.0 million in the prior year comparable period.

This increase was primarily attributable to the inclusion of Bally’s Atlantic City and Bally’s Shreveport, acquired in the fourth quarter of 2020, and Bally’s Quad Cities, Bally’s Evansville and Bally’s Lake Tahoe, acquired during the second quarter of 2021, which in the aggregate contributed incremental gaming expenses of $38.4 million and $81.5 million for the third quarter and first nine months of 2021.

Non-gaming expenses for the three months ended September 30, 2021 increased $29.6 million, or 331.8%, to $38.5 million from $8.9 million in the same period last year.

Non-gaming expenses for the nine months ended September 30, 2021 increased $52.8 million, or 168.5%, to $84.1 million from $31.3 million in the same period last year.

This increase was primarily attributable to the inclusion of Bally’s Atlantic City and Bally’s Shreveport, acquired in the fourth quarter of 2020, and acquisitions of Bally’s Quad Cities, Bally’s Evansville and Bally’s Lake Tahoe, acquired during the second quarter of 2021, which in the aggregate contributed incremental non-gaming expenses of $21.2 million and $44.0 million for the third quarter and first nine months of 2021.

Advertising, general and administrative

Advertising, general and administrative expenses for the three months ended June 30, 2021 increased $77.2 million, or 321.9%, to $101.2 million from $24.0 million in the same period last year.

Advertising, general and administrative expenses for the six months ended June 30, 2021 increased $108.1 million, or 146.9%, to $181.7 million from $73.6 million in the same period last year.

The increase in advertising, general and administrative expenses year-over-year is primarily due to the additions of Bally’s Atlantic City, Shreveport, Bally’s Kansas City and Casino Vicksburg, all acquired in the second half of 2020, which contributed $35.3 million and $66.2 million of expense in the second quarter and first half of 2021, respectively.

Our acquisitions of Jumer’s, Tropicana Evansville, and Bally’s Lake Tahoe acquired in the second quarter of 2021, also contributed advertising, general and administrative expenses of $9.5 million to the second quarter of 2021.

Advertising, general and administrative expenses for the three months ended September 30, 2021 increased $98.9 million, or 224.8%, to $142.9 million from $44.0 million in the same period last year.

Advertising, general and administrative expenses for the nine months ended September 30, 2021 increased $207.0 million, or 176.0%, to $324.6 million from $117.6 million in the same period last year.

This increase year-over-year is primarily due to the additions of Bally’s Atlantic City and Bally’s Shreveport, acquired in the fourth quarter of 2020, and year-to-date 2021 acquisitions of Bally’s Quad Cities, Bally’s Evansville, Bally’s Lake Tahoe, Bally Interactive, MKF, Telescope, AVP and SportCaller which in the aggregate contributed $77.5 million and $143.8 million to advertising, general and administrative expenses for the third quarter and first nine months of 2021.

Acquisition, integration and restructuring expense

We incurred $18.4 million and $30.7 million of acquisition, integration and restructuring expenses during the three and six months ended June 30, 2021, respectively, compared to $2.5 million and $4.2 million in the prior year three and six month periods, respectively.

This increase was driven by costs incurred for the pending acquisition of Gamesys, $7.3 million and $13.6 million for the second quarter and first half of 2021, respectively, and acquisitions completed in 2021 which amounted to $9.3 million and $12.3 million for the second quarter and first half of 2021, respectively.

We incurred $6.8 million and $37.5 million of acquisition, integration and restructuring expenses during the three and nine months ended September 30, 2021, respectively, compared to $2.7 million and $7.0 million in the prior year three and nine month periods, respectively.

This increase was driven by costs incurred in connection with our acquisition of Gamesys, $3.7 million and $17.3 million for the three and nine months ended September 30, 2021, respectively, and acquisitions completed in 2021 which amounted to $1.4 million and $14.0 million for the three and nine months ended September 30, 2021, respectively.

Refer to Note 10 “Acquisition, Integration and Restructuring” for further information.

Other operating (income), costs and expenses

During the second quarter of 2021, we sold our Dover Downs property to GLPI and recorded a gain on sale-leaseback of $53.4 million.

Additionally, we recorded asset impairment charges of $4.7 million related to the Dover Downs and Bally’s Black Hawk tradenames in connection with our rebranding.

We also recorded a gain from insurance of $0.6 million, and $11.3 million during the second quarter and first half of 2021, respectively, primarily attributable to insurance proceeds received due to the effects of Hurricane Zeta which made landfall in Louisiana shutting down our Hard Rock Biloxi property for three days during the fourth quarter of 2020.

Additionally, we recorded rebranding expense of $0.4 million and $1.3 million during the second quarter and first six months of 2021, respectively, in connection with our corporate name change to Bally’s Corporation in November 2020.

During the third quarter and first nine months of 2021, we recorded gains of $7.9 million, and $19.2 million, respectively, primarily attributable to insurance proceeds received due to the effects of Hurricane Zeta which made landfall in Louisiana shutting down our Hard Rock Biloxi property for three days during the fourth quarter of 2020.

We also recorded rebranding expense of $0.4 million and $1.7 million during the third quarter and first nine months of 2021, respectively, in connection with our corporate name change to Bally’s Corporation in November 2020.

During the second quarter of 2021, we sold our Dover Downs property to GLPI and recorded a gain on sale-leaseback of $53.4 million and recorded asset impairment charges of $4.7 million related to the Dover Downs and Bally’s Black Hawk tradenames in connection with our rebranding.

Depreciation and amortization

Depreciation and amortization for the three months ended June 30, 2021 was $25.7 million, an increase of $16.6 million, and $38.5 million for the six months ended June 30, 2021, an increase of $20.4 million, each compared to the same period last year.

The increase in depreciation and amortization is attributable to the addition of properties acquired in the second half of 2020 and the first half of 2021, including fixed asset additions attributable to our Bally’s Interactive operating segment, which contributed an aggregate $9.1 million and $13.9 million of depreciation and amortization expense in the second quarter and first half of 2021, respectively.

Depreciation and amortization for the three months ended September 30, 2021 was $29.0 million, an increase of $19.1 million, and $67.5 million for the nine months ended September 30, 2021, an increase of $39.4 million, each compared to the same period last year.

The increase in depreciation and amortization is attributable to the additional properties acquired in 2020 and 2021, including fixed asset additions attributable to our Bally Interactive operating segment.

Income (loss) from operations

Income from operations was $80.5 million for the three months ended June 30, 2021 compared to loss from operations of $21.0 million in the comparable period in 2020.

Income from operations was $110.0 million for the six months ended June 30, 2021 compared to loss from operations of $24.1 million in 2020.

The three and six month comparable periods in 2020 were both impacted negatively by the COVID-19 pandemic with the shut-down of our properties from mid-March into June.

As noted above, during the second quarter and the second half of 2021, we experienced strong revenue growth and a return in visitation to our properties as restrictions were lifted.

Income from operations was $27.7 million for the three months ended September 30, 2021 compared to $23.4 million in the comparable period in 2020.

Income from operations was $137.7 million for the nine months ended September 30, 2021 compared to a loss from operations of $0.7 million in 2020.

The three and nine month comparable periods in 2020 were both impacted negatively by the COVID-19 pandemic with the shut-down of our properties from mid-March into June.

As noted above, during the three and nine months ended September 30, 2021, we experienced strong revenue growth and a return in visitation to our properties as restrictions were lifted.

Total other income (expense), net

Total other income (expense), net for the three months ended June 30, 2021 increased $30.5 million to $15.4 million of income compared to other expense of $15.1 million the same period last year.

This increase was driven by a $24.1 million gain on bargain purchases recorded in connection with the acquisitions of Tropicana Evansville and Bally’s Lake Tahoe, $21.5 million and $2.6 million, respectively, coupled with income of $19.1 million recorded to adjust the naming rights liability associated with our contracts with Sinclair Broadcast group to fair value as of June 30, 2021, offset by a $6.6 million increase in interest expense year-over-year.

Total other (income) expense, net for the six months ended June 30, 2021 increased $3.1 million to expense of $29.6 million compared to $26.5 million in the same period last year.

This increase was due to an increase in interest expense of $15.9 million year-over-year due to the timing of borrowings and expense of $8.3 million recorded in the first half of 2021 associated with our contracts with Sinclair Broadcast, offset by a gain on bargain purchases of $24.1 million, as noted above.

Total other expense, net for the three months ended September 30, 2021 increased $31.0 million to $47.9 million from $16.9 million the same period last year.

This increase was driven by a loss on extinguishment of debt of $19.4 million in connection with the redemption of $210 million of the 6.75% senior notes due 2027, coupled with a $14.9 million increase in interest expense.

Refer to Note 11 “Long-Term Debt” for further information.

Offsetting these increases was $7.0 million of income recorded to adjust the naming rights liability associated with our contracts with Sinclair Broadcast group to fair value as of September 30, 2021.

Total other expense, net for the nine months ended September 30, 2021 increased $34.1 million to $77.5 million compared to $43.4 million in the same period last year.

This was due to an increase in interest expense of $30.8 million year-over-year due to the timing of borrowings and the loss on extinguishment of debt of $19.4 million noted above, partially offset by a gain on bargain purchases of $23.1 million in connection with the acquisitions of Tropicana Evansville and Bally’s Lake Tahoe.

Provision (benefit) for income taxes

Provision for income taxes for the three months ended June 30, 2021 was $27.0 million compared to a benefit from income taxes of $12.5 million for the three months ended June 30, 2020.

The effective tax rate for the quarter was 28.1% compared to 34.7% for the three months ended June 30, 2020.

Provision for income taxes for the six months ended was $22.2 million compared to a benefit from income taxes of $18.2 million for the six months ended June 30, 2020.

The effective tax rate for the for the three months ended June 30, 2020 was 27.6% compared to 35.9% for the three months ended June 30, 2020.

The increase in provision for income taxes in 2021 is mostly attributable to the increase in net income in the current year and the removal of the favorable carryback rate available during 2020 as a result of the CARES Act.

Benefit for income taxes for the three months ended September 30, 2021 was $5.4 million compared to $0.2 million for the three months ended September 30, 2020.

The effective tax rate for the quarter was 26.8% compared to 3.8% for the three months ended September 30, 2020.

Provision for income taxes for the nine months ended September 30, 2021 was $16.8 million compared to a benefit from income taxes of $18.4 million for the nine months ended September 30, 2020.

The effective tax rate for the nine months ended September 30, 2021 was 27.8% compared to 41.8% for the nine months ended September 30, 2020.

The increase in the year to date provision for income taxes in 2021 is mostly attributable to the increase in net income in the current year and the removal of the favorable carryback rate available during 2020 as a result of the CARES Act.

Net income (loss) and earnings (loss) per share

Net income for the three months ended June 30, 2021 was $68.9 million, or $1.40 per diluted share, an increase of $92.5 million, or 392.7%, from a net loss of $23.6 million, or $(0.77) per diluted share, in the same period last year.

As a percentage of revenue, net income increased to 25.8% for the three months ended June 30, 2021 compared to a net loss of 81.4% for the three months ended June 30, 2020.

Net income for the six months ended June 30, 2021 was $58.2 million, an increase of $90.7 million, or 279.6%, from a net loss of $32.4 million, or $(1.05) per diluted share, in the same period last year.

As a percentage of revenue, net income increased to 12.7% for the six months ended June 30, 2020 from a net loss of 23.5% for the six months ended June 30, 2021.

Net loss for the three months ended September 30, 2021 was $14.7 million, or ($0.30) per diluted share, a decrease of $21.5 million, or 319.4%, from net income of $6.7 million, or $0.22 per diluted share, in the same period last year.

As a percentage of revenue, net income decreased from 5.8% for the three months ended September 30, 2020 to net loss of 4.7% for the three months ended September 30, 2021.

Net income for the nine months ended September 30, 2021 was $43.5 million, an increase of $69.2 million, or 269.2%, from a net loss of $25.7 million, or ($0.83) per diluted share, in the same period last year.

As a percentage of revenue, net income increased to 5.6% for the nine months ended September 30, 2021 from a net loss of 10.1% for the nine months ended September 30, 2020.

These changes were impacted by the factors noted above.

Adjusted EBITDA by Segment

Consolidated Adjusted EBITDA was $83.8 million for the three months ended June 30, 2021, up $94.5 million, or 881.1%, from negative Adjusted EBITDA of $10.7 million in the same period last year.

Consolidated Adjusted EBITDA was $136.2 million for the six months ended June 30, 2021, up $124.9 million, or 1101.6%, from $11.3 million in the same period last year.

Adjusted EBITDA for the East segment for the second quarter of 2021 increased $51.9 million, or 502.3%, to $41.6 million and increased $56.7 million, or 513.6%, to $67.7 million for the first half of 2021, each compared to the same prior year periods.

These increases were driven by strong results at our Rhode Island and Dover Downs properties.

Adjusted EBITDA for the West segment for the second quarter of 2021 increased $47.3 million to $52.1 million and increased $77.2 million, or 742.0%, to $87.6 million for the first half of 2021, each compared to the same prior year periods.

These increases were driven by the acquisitions of Shreveport and Bally’s Kansas City which were acquired in the second half of 2020 coupled with strong results at our Hard Rock Biloxi property.

Consolidated Adjusted EBITDA was $78.0 million for the three months ended September 30, 2021, up $40.0 million, or 105.2%, from $38.0 million in the same period last year.

Consolidated Adjusted EBITDA was $214.2 million for the nine months ended September 30, 2021, up $164.9 million, or 334.1%, from $49.3 million in the same period last year.

Adjusted EBITDA for the East segment for the third quarter of 2021 increased $30.9 million, or 137.9%, to $53.3 million and increased $87.6 million, or 261.8%, to $121.0 million for the nine months ended September 30, 2021, each compared to the same prior year periods.

The third quarter and year to date increases year over year were driven by the inclusion of Bally’s Evansville, which was acquired in the second quarter of 2021, coupled with strong results at our Rhode Island and Dover Downs properties.

Adjusted EBITDA for the West segment for the third quarter of 2021 increased $20.7 million to $41.8 million and increased $97.9 million, or 310.8%, to $129.4 million for the nine months ended September 30, 2021, each compared to the same prior year periods.

The third quarter increase year over year was driven by the acquisition of Bally’s Shreveport, which was acquired in the fourth quarter of 2020, and Bally’s Quad Cities and Bally’s Lake Tahoe which were acquired in the second quarter of 2021.

The year to date increase year over year was driven by Shreveport, which was acquired in the fourth quarter of 2020, and strong results at our Hard Rock Biloxi and Bally’s Kansas City properties.

The following tables reconcile Adjusted EBITDA, a non-GAAP measure, to net income (loss), as derived from our financial statements (in thousands):

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

East West Other Total

Revenue $ 176,975 $ 124,603 $ 13,201 $ 314,779

Net income (loss) $ 25,386 $ 24,001 $ (64,134) $ (14,747)

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Share-based compensation — — 5,449 5,449

Gain on sale-leaseback (53,425) — — (53,425)

1,397 (5,853) 13,453 8,997

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__________________________________

(1) Non-operating (income) expense for the applicable periods include:

(i) change in value of naming rights liabilities, (ii) gain on bargain purchases and, (iii) other expense, net.

(2) Other includes the following non-recurring items for the applicable periods:

(i) Goodwill and asset impairment, (ii) expansion and pre-opening expenses, (iii) rebranding expenses, (iv) Employee Retention Credit under the CARES Act which provides the Company with a refundable tax credit of 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19, (v) Credit Agreement amendment expenses include costs associated with amendments made to the Company’s Credit Agreement, (vi) gains related to insurance recovery proceeds received due to the effects of Hurricane Zeta on the Company’s Hard Rock Biloxi property, (vii) expenses incurred to establish the partnership with Sinclair and Bally's Interactive acquisition costs, (viii) costs incurred to apply for and obtain sports and iGaming licenses in various jurisdictions, (ix) expenses incurred associated with the Rhode Island State Police investigation into a tenant in the Lincoln property and a former employee of the Company, (x) expenses incurred associated with the campaign attempting to create an open bid process for the Rhode Island Lottery Contract, (xi) non-routine legal expenses incurred in connection with certain litigation matters (net of insurance reimbursements), and (xii) costs incurred in connection with the implementation of a new human resources information system.

Three Months Ended June 30, 2020

(1) Non-operating (income) expense includes:

(i) change in value of naming rights liabilities, (ii) loss on extinguishment of debt and (iii) other expense, net.

(2) Other includes the following non-recurring items:

(i) Goodwill and asset impairments, (ii) deal-related, rebranding, expansion and pre-opening expenses, (iii) Employee Retention Credits related to COVID-19, (iv) Credit Agreement amendment related expenses, (v) costs related to pursuing sports betting, iGaming and lottery access in various jurisdictions, (vi) non-routine legal expenses, and (vii) net gains related to insurance recoveries.

Three Months Ended September 30, 2020

East West Other Total

Revenue $ 59,065 $ 55,900 $ 1,659 $ 116,624

Net income (loss) $ 10,702 $ 11,381 $ (15,360) $ 6,723

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__________________________________

(1) Other includes the following non-recurring items for the applicable periods:

(i) Goodwill and asset impairment, (ii) Employee Retention Credit under the CARES Act which provides the Company with a refundable tax credit of 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19, (iii) Credit Agreement amendment expenses include costs associated with amendments made to the Company’s Credit Agreement, (iv) gain related to insurance recovery proceeds received for a damaged roof at the Company’s Arapahoe Park racetrack, (v) expenses incurred associated with the Rhode Island State Police investigation into a tenant in the Lincoln property and a former employee of the Company, (vi) expenses incurred associated with the campaign attempting to create an open bid process for the Rhode Island Lottery Contract, (vii) non-routine legal expenses incurred in connection with certain litigation matters (net of insurance reimbursements), and (viii) costs incurred in connection with the implementation of a new human resources information system.

Six Months Ended June 30, 2021

(1) Other includes the following non-recurring items:

(i) Expansion and pre-opening expenses, (ii) Employee Retention Credit under the CARES Act which provides the Company with a refundable tax credit of 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19, (iii) Credit Agreement amendment expenses include costs associated with amendments made to the Company’s Credit Agreement, (iv) gain related to insurance recovery proceeds received for a damaged roof at the Company’s Arapahoe Park racetrack, (v) expenses incurred associated with the Rhode Island State Police investigation into a tenant in the Lincoln property and a former employee of the Company, (vi) expenses incurred associated with the campaign attempting to create an open bid process for the Rhode Island Lottery Contract and (vii) non-routine legal expenses incurred in connection with certain litigation matters (net of insurance reimbursements).

Nine Months Ended September 30, 2021

East West Other Total

Revenue $ 408,458 $ 343,190 $ 23,130 $ 774,778

Net income (loss) $ 90,353 $ 77,397 $ (124,260) $ 43,490

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5,784 (15,329) 20,651 11,106

Allocation of corporate costs 14,858 14,200 (29,058) —

Allocated corporate costs 26,544 22,365 (48,909) —

Adjusted EBITDA $ 121,003 $ 129,424 $ (36,213) $ 214,214

__________________________________

(1) Non-operating (income) expense for the applicable periods include:

(i) change in value of naming rights liabilities, (ii) gain on bargain purchases, and (iii) other expense, net.

(2) Other includes the following non-recurring items for the applicable periods:

Six Months Ended June 30, 2020

(1) Non-operating (income) expense includes:

(i) change in value of naming rights liabilities, (ii) gain on bargain purchases (iii) loss on extinguishment of debt and (iv) other expense, net.

(2) Other includes the following non-recurring items:

Nine Months Ended September 30, 2020

East West Other Total

Revenue $ 146,848 $ 104,039 $ 3,809 $ 254,696

Net income (loss) $ 6,602 $ 7,710 $ (40,022) $ (25,710)

5 unchanged sentences

(2,379) 7,614 351 5,586

Allocation of corporate costs 6,092 3,341 (9,433) —

Allocated corporate costs 8,683 5,794 (14,477) —

Adjusted EBITDA $ 33,442 $ 31,508 $ (15,607) $ 49,343

__________________________________

(1) Other includes the following non-recurring items for the applicable periods:

(1) Other includes the following non-recurring items:

(i) Goodwill and asset impairment, (ii) Expansion and pre-opening expenses, (iii) Employee Retention Credit under the CARES Act which provides the Company with a refundable tax credit of 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19, (iv) Credit Agreement amendment expenses include costs associated with amendments made to the Company’s Credit Agreement, (v) gain related to insurance recovery proceeds received for a damaged roof at the Company’s Arapahoe Park racetrack, (vi) expenses incurred associated with the Rhode Island State Police investigation into a tenant in the Lincoln property and a former employee of the Company, (vii) expenses incurred associated with the campaign attempting to create an open bid process for the Rhode Island Lottery Contract, (viii) non-routine legal expenses incurred in connection with certain litigation matters (net of insurance reimbursements), and (ix) costs incurred in connection with the implementation of a new human resources information system.

Critical Accounting Policies and Estimates

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As such, we continued to invest in our land-based casino business and began to build on our interactive/iGaming gaming business despite the COVID-19 pandemic.

An existing credit facility provides for up to $325.0 million of revolving credit borrowings, the undrawn balance of which was $50.0 million at June 30, 2021.

Our weighted average cost of debt was 6.31% per annum for the 12 months ended June 30, 2021.

Based on existing debt market conditions, we expect to be able to reduce the all-in cost of our debt through the refinancings we contemplate but there can be no assurance of this.

On April 13, 2021, we announced the Gamesys Acquisition.

If only the committed Gamesys holders elect to receive shares of our common stock, the maximum cash consideration payable to Gamesys shareholders would amount to approximately £1.6 billion.

We arranged the Bridge Commitment to cover the maximum amount of cash payable in the transaction as required by U.K.

On April 20, 2021, we completed a public offering of 12,650,000 common shares at a price to the public of $55.00 per share and the sale of warrants to purchase 909,090 shares to affiliates of Sinclair Broadcast Group, Inc.

at the same offering price.

The net proceeds from the offering and the warrant sale, after deducting underwriting discounts and estimated expenses, of £485 million or $671 million were placed in escrow and the Bridge Commitment was reduced by the same amount.

On August 6, 2021, the Company obtained commitments, subject to satisfaction of customary closing conditions, for proposed senior secured credit facilities, pursuant to which the Lenders have agreed to extend to the Company the New Credit Facilities.

On August 6, 2021, the Company’s subsidiaries, Premier Entertainment Sub, LLC and Premier Entertainment Finance Corp., entered into an agreement for the New Notes.

The offering is expected to close on August 20, 2021, subject to customary closing conditions.

All or substantially all of the net proceeds from the notes offering will be placed in escrow at which time a portion of the Bridge Commitment will be retired and net proceeds from the equity offerings in excess of the cash consideration payable to shareholders of Gamesys will be released.

In addition, when the proceeds from the New Notes are placed in escrow, the GLPI Commitment will terminate in accordance with its terms.

If the Acquisition is not completed, the escrowed amounts will be released from escrow and applied to redeem the bonds and the remaining amounts will be returned to the Company.

These funds in escrow will be classified as restricted cash until the Acquisition closes or terminates.

We entered into foreign exchange contracts to hedge the risk of appreciation of the Gamesys’ GBP-denominated purchase price and the GBP-denominated and Euro-denominated debt to be paid off at closing.

In addition to the capital required to complete the proposed acquisition of Gamesys, we expect that our primary capital requirements going forward will relate to the operation, maintenance and improvement of our properties we acquired along with debt service, rent and acquisition payments.

The net proceeds from the offering and the warrant sale, after deducting underwriting discounts and estimated expenses, of £485 million or $671 million were placed in escrow and were included in restricted cash as of September 30, 2021.

On August 20, 2021, we issued $750.0 million aggregate principal amount of senior notes due 2029 and $750.0 million aggregate principal amount of Senior Notes due 2031 (together, the “New Senior Notes”).

Certain of the net proceeds from the New Senior Notes offering are included within restricted cash as of September 30, 2021.

On October 1, 2021, upon the closing of the Gamesys Acquisition, the Company assumed the issuer obligation under the New Senior Notes.

On October 1, 2021, we entered into a credit agreement (the “New Credit Agreement”) providing for a senior secured term loan facility in an aggregate principal amount of $1.945 billion (the “New Term Loan Facility”), which will mature in 2028, and a senior secured revolving credit facility in an aggregate principal amount of $620.0 million (the “New Revolving Credit Facility”), which will mature in 2026.

The New Revolving Credit Facility was undrawn at closing.

The credit facilities allow the Company to increase the size of the New Term Loan Facility or request one or more incremental term loan facilities or increase commitments under the New Revolving Credit Facility or add one or more incremental revolving facilities in an aggregate amount not to exceed the greater of $650 million and 100% of the Company’s consolidated EBITDA for the most recent four-quarter period plus or minus certain amounts as specified in the New Credit Agreement, including an unlimited amount subject to compliance with a consolidated total secured net leverage ratio.

On October 1, 2021, we acquired Gamesys for 9,773,537 shares of Bally’s common stock and approximately £1.544 billion in cash.

The acquisition and refinancing of our and Gamesys’ debt was funded with, among other sources, the proceeds of the public offering of common shares, the warrant sale, the New Senior Notes and the New Term Loan Facility.

We expect that our primary capital requirements going forward will relate to the operation, maintenance and improvement of our properties we acquired along with debt service, rent and acquisitions.

Our capital expenditure requirements are expected to moderately increase as a result of the properties acquired in the last 18 months.

We have a $40 million planned redevelopment project for the Bally’s Kansas City property we acquired in 2020 and we plan to invest $100 million in our Atlantic City property, which increased by $10 million during the second quarter of 2021 through our licensing process, that we acquired in 2020 over five-years.

We have a $40 million planned redevelopment project for the Bally’s Kansas City property that we acquired in 2020 and we plan to invest $100 million in our Atlantic City property over five-years.

In addition, we signed an agreement to jointly design and build a new casino in Centre County, Pennsylvania, in which we are a 51% owner.

We estimate the total cost of the project, including construction, licensing and sports betting/iGaming operations, at $120 million.

We plan to commence our expansion and other capital improvements at our Twin River Casino Hotel location

related to our partnership with IGT.

During the third quarter of 2021, we commenced the expansion and other capital improvements at our Bally’s Twin River location related to our partnership with IGT.

We expect to use cash on hand and cash generated from operations to meet such obligations.

For the six months ended June 30, 2021, capital expenditures were $35.8 million, compared to $5.4 million in the same period last year.

Finally, we agreed to acquire the Tropicana Las Vegas for $150 million, which we expect to finance through sale-leaseback transactions with GLPI.

For the nine months ended September 30, 2021, capital expenditures were $67.2 million, compared to $8.6 million in the same period last year.

We expect that our current liquidity, cash flows from operations and borrowings under our credit facility will be sufficient to fund our operations, capital requirements and service our outstanding indebtedness for the next 12 months, including giving effect to our pending acquisitions.

However, the COVID-19 pandemic has had, and is expected to continue to have, an adverse effect and caused, and may continue to cause, disruption in the financial markets.

While we have undertaken efforts to mitigate the impacts of COVID-19 on our business and maintain liquidity, the extent of the ongoing and future effects of the COVID-19 pandemic on our business, results of operations and financial condition is uncertain and may adversely impact our liquidity in the future.

In addition, our ability to access additional capital may also be adversely affected by restrictions on incurring additional indebtedness.

In addition, we have obtained commitments for the New Credit Facilities, which, subject to satisfaction of customary closing conditions, is expected to close substantially concurrently with the consummation of the Acquisition.

Cash Flows Summary

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) 2021 2020

Net cash provided by (used in) operating activities $ 34,225 $ (16,381)

Net cash provided by operating activities $ 70,843 $ 1,711

Net cash used in investing activities (302,127) (288,513)

5 unchanged sentences

Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2021 was $34.2 million, compared to net cash used in operating activities of $16.4 million for the six months ended June 30, 2020.

This increase was primarily attributable to increased operating income from properties acquired during the second half of 2020 and the first half of 2021.

Net cash provided by operating activities for the nine months ended September 30, 2021 was $70.8 million, compared to net cash provided by operating activities of $1.7 million for the nine months ended September 30, 2020.

This increase was primarily attributable to increased net income across our properties, including the additional properties acquired in the 2020 and 2021.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2021 was $379.7 million, an increase of $323.8 million compared to the six months ended June 30, 2020.

The increase primarily driven by cash paid for acquisitions year-over-year.

In the first half of 2021, we paid an aggregate $332.0 million for MKF, SportCaller, Bally’s Interactive, Bally’s Lake Tahoe, Tropicana Evansville and Jumer’s compared to $50.5 million for Bally’s Black Hawk in the first quarter of 2020.

Capital expenditures also increased $30.3 million compared to last year driven by renovations at our Biloxi property as a result of damage from Hurricane Zeta during the fourth quarter of 2020 coupled with the commencement of planned projects in 2021, as explained above, including Bally’s Atlantic City.

Net cash used in investing activities for the nine months ended September 30, 2021 was $302.1 million, an increase of $13.6 million compared to the nine months ended September 30, 2020.

The increase was primarily driven by cash paid for acquisitions year-over-year coupled with a $58.6 million increase in expenditures, driven mostly by the expansion and renovation projects at our Bally’s Atlantic City, Bally’s Kansas City, Hard Rock Biloxi and Rhode Island properties, offset by $144.0 million of proceeds related to the sale-leaseback transaction for our Dover Downs property to GLPI in the second quarter.

In the first nine months of 2021, we paid an aggregate $371.7 million for MKF, SportCaller, Bally Interactive, Bally’s Lake Tahoe, Bally’s Evansville, Bally’s Quad Cities, AVP and Telescope compared to $275.9 million for Bally’s Black Hawk and Bally’s Kansas City and Bally’s Vicksburg in the same period last year.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2021 was $1.09 billion compared to $219.5 million for the six months ended June 30, 2020.

In the first half of 2021, drivers of cash provided by financing activities included cash proceeds from equity issuances of $667.9 million in connection with the acquisition of Gamesys, $144.0 million of proceeds related to the sale-leaseback transaction for our Dover Downs property to GLPI in the second quarter, and $50.0 million in connection with the issuance of Sinclair penny warrants.

Net cash provided by financing activities for the nine months ended September 30, 2021 was $2.16 billion compared to $218.2 million for the nine months ended September 30, 2020.

Drivers of cash provided by financing activities for the first nine months of 2021 included $1.49 billion of cash proceeds from our senior notes offering and cash proceeds from equity issuances of $667.9 million in connection with the acquisition of Gamesys, revolver borrowings of $275.0 million and $50.0 million in connection with the issuance of Sinclair penny warrants, offset in part by payments on our revolver and senior notes.

Cash provided by financing activities in the first half of 2020 was driven by $261.2 million of borrowings, net of fees, on our additional term loan offset by $33.3 million spent on share repurchases and cash dividends paid of $3.2 million under our capital return program.

Working Capital

At June 30, 2021, our net working capital was $841.4 million compared to $145.8 million at December 31, 2020.

The increase in net working capital of $695.6 million was primarily attributable to $667.9 million of cash proceeds received from our equity issuances which were classified as restricted for use in our acquisition of Gamesys, as explained in Note 1 “General Information,” coupled with the timing of transactions in each respective period, as noted above.

At September 30, 2021, our net working capital was $1.97 billion compared to $145.8 million at December 31, 2020.

The increase in net working capital of $1.83 billion was primarily attributable to $1.49 billion of cash proceeds from our senior notes offering and $667.9 million of cash proceeds received from our equity issuance, both of which were classified as restricted for use in our acquisition of Gamesys, as explained in Note 1 “General Information,” coupled with the timing of transactions in each respective period, as noted above.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis