Bally's Corp 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the securities laws. Forward-looking statements are statements as to matters that are not historical facts, and include statements about our plans, objectives, expectations and intentions. Forward-looking statements are not guarantees and are subject to risks and uncertainties. Forward-looking statements are based on our current expectations and assumptions. Although we believe that our expectations and assumptions are reasonable at this time, they should not be regarded as representations that our expectations will be achieved. Actual results may vary materially. 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: • unexpected costs, difficulties integrating and other events impacting our recently completed and proposed acquisitions and our ability to realize anticipated benefits; • 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 businesses generally; • uncertainties surrounding the COVID-19 pandemic, including limitations on our operations, increased costs, changes in customer behaviors, impact on our employees and the ongoing impact of COVID-19 on general economic conditions • 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; and • other risks identified in Part I. Item 1A. “Risk Factors” of Bally’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the SEC on March 1, 2022 and other filings with the SEC. The foregoing list of important factors is not exclusive and does not include matters like changes in general economic conditions that affect substantially all gaming businesses. You should not place undue reliance on our forward-looking statements. 44 Overview We are a global gaming, hospitality and entertainment company with a portfolio of casinos and resorts and online gaming businesses. We provide our customers with physical and interactive entertainment and gaming experiences, including traditional casino offerings, iCasino, online bingo games, sportsbook, daily fantasy sports (“DFS”) and free-to-play (“F2P”) games. As of June 30, 2022, we own and manage 14 land-based casinos and one horse racetrack in ten states across the United States (“US”) operating under Bally’s brand. Our land-based casino operations include approximately 14,300 slot machines, 500 table games and 3,900 hotel rooms, along with various restaurants, entertainment venues and other amenities. Certain of our properties are leased under a master lease agreement with Gaming and Leisure Properties, Inc. (“GLPI”), a publicly traded gaming-focused real estate investment trust (“REIT”). With our acquisition of London-based Gamesys Group Ltd. (“Gamesys”) on October 1, 2021, we expanded our geographical and product footprints to include an iGaming business with well-known brands providing iCasino and online bingo experiences to our global online customer base with concentrations in Europe and Asia and a growing presence in North America. Our iCasino and online bingo platforms and games content, sportsbook and F2P games are provided on a business-to-business (“B2B”) as well as a business-to-consumer (“B2C”) basis. Our revenues are primarily generated by these gaming and entertainment offerings. We own and operate our proprietary software and technology stack designed to allow us to provide consumers differentiated offerings and exclusive content. Our Strategy and Business Developments We seek to continue to grow our business by actively pursuing the acquisition and development of new gaming opportunities and reinvesting in our existing operations. We believe that interactive gaming represents a significant strategic opportunity for the future growth of Bally’s. We seek to increase revenues at our casinos and resorts through enhancing the guest experience by providing popular games, restaurants, hotel accommodations, entertainment and other amenities in attractive surroundings with high-quality guest service. We believe that our recent acquisitions have expanded and diversified us from financial and market exposure perspectives, while continuing to mitigate our susceptibility to regional economic downturns, idiosyncratic regulatory changes and increases in regional competition. In 2021, we acquired three casino and resort properties - Bally’s Lake Tahoe, Bally’s Evansville and Bally’s Quad Cities. We also agreed to purchase Tropicana Las Vegas in Las Vegas, Nevada and announced plans to construct a land-based casino in Centre County, Pennsylvania, adding to our land-based casino presence. With the pending acquisition of Tropicana Las Vegas and the completion of construction in both Centre County, Pennsylvania and Chicago, Illinois, we will own and manage 17 land-based casinos across 11 states. In addition, we also expanded our interactive business by: • launching our Bally Sports Network through our partnership with Sinclair, which combines our sports betting technology with Sinclair’s expansive footprint. With Bally’s brand, the media partnership and the unencumbered skins (gaming licenses) that we have acquired and reserved in our portfolio, we can now provide our customers omni-channel gaming and entertainment across our various physical properties while having a singular online and mobile presence with a brand that is synonymous with gaming, hospitality and entertainment; • acquiring Gamesys, a leading international online gaming operator that provides gaming entertainment to a global customer base; and • acquiring Bally’s Interactive, formerly Bet.Works, and its proprietary technology stack and turnkey solutions, which include marketing, operations, customer service, risk management and compliance. We believe that the Bet.Works acquisition provides us with a suite of advanced omni-channel products, platforms, software and content solutions positioning us to deliver competitive sports betting and iCasino offerings to customers on a national scale. These steps have positioned us to become a leading, full-service, vertically integrated sports betting and iGaming company in the US with physical casinos and online gaming solutions united under a single, leading brand. 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 $2.08 billion in cash. 45 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 US online entertainment and sports betting markets. Operating Structure Our business is organized into three reportable segments: (1) Casinos & Resorts, (2) North America Interactive, and (3) International Interactive. Casinos & Resorts - includes our 14 land-based casino properties and one horse racetrack: Property Name Location Bally’s Twin River Lincoln Casino Resort (“Bally’s Twin River”) Lincoln, Rhode Island Bally’s Tiverton Casino & Hotel (“Bally’s Tiverton”) Tiverton, Rhode Island Bally’s Dover Casino Resort (“Bally’s Dover”) Dover, Delaware Bally’s Atlantic City Casino Resort (“Bally’s Atlantic City”) Atlantic City, New Jersey Bally’s Evansville Casino & Hotel (“Bally’s Evansville”) Evansville, Indiana Hard Rock Hotel & Casino Biloxi (“Hard Rock Biloxi”) Biloxi, Mississippi Bally’s Vicksburg Casino (“Bally’s Vicksburg”) Vicksburg, Mississippi Bally’s Kansas City Casino (“Bally’s Kansas City”) Kansas City, Missouri Bally’s Black Hawk (3 properties) Black Hawk, Colorado Bally’s Shreveport Casino & Hotel (“Bally’s Shreveport”) Shreveport, Louisiana Bally’s Lake Tahoe Casino Resort (“Bally’s Lake Tahoe”) Lake Tahoe, Nevada Bally’s Quad Cities Casino & Hotel (“Bally’s Quad Cities”) Rock Island, Illinois Bally’s Arapahoe Park Aurora, Colorado North America Interactive - includes the following North America businesses: • Bally’s Interactive, a business-to-business-to-consumer (“B2B2C”) sportsbook and iCasino platform provider and operator; • Horses Mouth Limited (“SportCaller”), a B2B and F2P game provider for sports betting companies; • Monkey Knife Fight (“MKF”), a B2C DFS platform and operator; • Joker Gaming, known as Live at the Bike, an online subscription streaming service featuring livestream and on-demand poker videos and podcasts; • Association of Volleyball Professionals (“AVP”), a professional beach volleyball organization and host of the longest-running domestic beach volleyball tour; • Telescope, Inc. (“Telescope”), a provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams; and • Degree 53, a United Kingdom (“UK”)-based creative agency that specializes in multi-channel website and personalized mobile app and software development for online gambling and sports industries. The North America Interactive reportable segment also includes the North American operations of Gamesys. International Interactive - includes the following businesses in Europe and Asia: • Gamesys, a B2B2C iCasino and online bingo platform provider and operator; and • Solid Gaming, a games content aggregation business. Refer to Note 18 “ Segment Reporting ” to our condensed consolidated financial statements for additional information on our segment reporting structure. 46 Rhode Island Regulatory Agreement On February 17, 2022, certain of our subsidiaries, the Rhode Island Department of Business Regulation (“DBR”) and the Division of Lotteries (“DoL”) of the Rhode Island Department of Revenue amended and restated our Regulatory Agreement (the “Regulatory Agreement”). The Regulatory Agreement contains financial and other covenants that, among other things, (1) restrict the acquisition of stock and other financial interests in us, (2) relate to the licensing and composition of members of our management and Board of Directors (the “Board”), (3) prohibit certain competitive activities and related-party transactions and (4) restrict our ability to declare or make restricted payments (including dividends), incur additional indebtedness or take certain other actions, if our leverage ratio exceeds 5.50 to 1.00 (in general being gross debt divided by Adjusted EBITDA, each as defined in the Regulatory Agreement). The Regulatory Agreement also provides affirmative obligations, including setting a minimum number of employees that we must employ in Rhode Island and providing the DBR and DoL with periodic information updates about us. Among other things, the Regulatory Agreement prohibits us and our subsidiaries from owning, operating, managing or providing gaming specific goods and services to any properties in Rhode Island (other than Bally’s Twin River and Bally’s Tiverton), Massachusetts, Connecticut or New Hampshire. A failure to comply with the Regulatory Agreement could subject us to injunctive or monetary relief, payments to the Rhode Island regulatory agencies and ultimately the revocation or suspension of our licenses to operate in Rhode Island. In addition, our master contracts with Rhode Island were extended through June 30, 2043, and allow for consolidation of promotional points between Bally’s Twin River and Bally’s Tiverton, obligate Bally’s Twin River to build a 50,000 square foot expansion, obligate Bally’s Twin River to lease at least 20,000 square feet of commercial space in Providence, and commit us to invest $100 million in Rhode Island over this extended term, including an expansion and the addition of new amenities at Bally’s Twin River. June 2021 legislation enacted in Rhode Island authorized a joint venture with International Gaming Technology PLC (“IGT”) to become a licensed technology provider and supply the State of Rhode Island with all Video Lottery Terminals (“VLTs”) at both Bally’s Twin River and Bally’s Tiverton for a 20.5-year period starting January 1, 2023. IGT will own 60% of the joint venture. As of July 1, 2021, until the joint venture is operating, we will supply 23% of all VLTs in return for 7% net terminal income from the machines. COVID-19 Pandemic The COVID-19 pandemic significantly impacted, and could continue to impact, our business in a material manner. Currently, all of our properties are open and operating with minimal restrictions. The pandemic and its consequences dramatically reduced travel and demand for hotel rooms and other casino resort amenities, which had a negative impact on our results. While many restrictions have been relaxed at this point, there is no assurance that a resurgence of future COVID-19 variants will not cause disruption to our business, including the closure of our facilities. In addition, future demand for gaming activities may be negatively impacted by the adverse changes in the perceived or actual economic climate due to the impact of the COVID-19 pandemic. Our business could also be impacted if the disruptions from the COVID-19 pandemic impact construction projects, including our projects in Centre County, Pennsylvania and Chicago, Illinois, described above. Key Performance Indicators The main key performance indicator used in managing our business is Adjusted EBITDA. Adjusted EBITDA is defined as earnings for the Company, or where noted its reporting segments, before, in each case, interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating income, acquisition, integration and restructuring expense, share-based compensation, and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments. We use Adjusted EBITDA to analyze the performance of our business and it is used as a determining factor for performance based compensation for members of our management team. We have historically used Adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period performance. Also, we present Adjusted EBITDA because it is used by some investors and creditors as an indicator of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations. These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare operating performance and value companies within our industry. Adjusted EBITDA information is presented because management believes that it is a commonly used measure of performance in the gaming industry and that it is considered by many to be a key indicator of our operating results. 47 Adjusted EBITDAR is used outside of our financial statements solely as a valuation metric. Adjusted EBITDAR is defined as Adjusted EBITDA (as defined above) for our Casinos & Resorts segment plus rent expense associated with triple net operating leases. Management believes Adjusted EBITDAR is an additional metric traditionally used by analysts in valuing gaming companies subject to triple net leases since it eliminates the effects of variability in leasing methods and capital structures. This metric is included as supplemental disclosure because (i) we believe Adjusted EBITDAR is traditionally used by gaming operator analysts and investors to determine the equity value of gaming operators and (ii) Adjusted EBITDAR is one of the metrics used by other financial analysts in valuing our business. We believe Adjusted EBITDAR is useful for equity valuation purposes because (i) its calculation isolates the effects of financing real estate, and (ii) using a multiple of Adjusted EBITDAR to calculate enterprise value allows for an adjustment to the balance sheet to recognize estimated liabilities arising from operating leases related to real estate. Adjusted EBITDA and Adjusted EBITDAR should not be construed as an alternative to GAAP net income, the most directly comparable GAAP measure, as an indicator of our performance. In addition, Adjusted EBITDA and Adjusted EBITDAR 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. Adjusted EBITDAR should not be viewed as a measure of overall operating performance or considered in isolation or as an alternative to net income because it excludes the rent expense associated with our triple net operating leases with GLPI and the lease for real estate and land underlying the operations of the Bally’s Lake Tahoe property. Second Quarter and First Six Months 2022 Results We reported revenue and income from operations of $552.5 million and $85.3 million, respectively, for the three months ended June 30, 2022, compared to revenue and income from operations of $267.7 million and $80.5 million, respectively, for the same period last year. We reported revenue and income from operations of $1.10 billion and $107.8 million, respectively, for the six months ended June 30, 2022, compared to revenue and income from operations of $460.0 million and $110.0 million, respectively, for the same period last year. Our properties are at full capacity and are operating under minimal restrictions and we have seen an increase in consumer confidence, which contributed to such increases. In addition, the increases include incremental revenues and income from our recent acquisitions. 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, (in millions) 2022 2021 2022 2021 Total revenue $ 552.5 $ 267.7 $ 1,100.8 $ 460.0 Income from operations 85.3 80.5 107.8 110.0 Net income 59.5 68.9 61.4 58.2 48 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, 2022 2021 2022 2021 Total revenue 100.0 % 100.0 % 100.0 % 100.0 % Gaming, hotel, food and beverage, retail, entertainment and other expenses 45.3 % 33.6 % 46.4 % 34.0 % Advertising, general and administrative 32.9 % 37.8 % 33.0 % 39.5 % Goodwill and asset impairment — % 1.7 % — % 1.0 % Gain on sale-leaseback, net (9.2) % (20.0) % (4.6) % (11.6) % Other operating costs and expenses 2.0 % 7.1 % 1.5 % 4.8 % Depreciation and amortization 13.5 % 9.6 % 14.0 % 8.4 % Total operating costs and expenses 84.6 % 69.9 % 90.2 % 76.1 % Income from operations 15.4 % 30.1 % 9.8 % 23.9 % Other income (expense) Interest income — % 0.2 % — % 0.2 % Interest expense, net of amounts capitalized (8.3) % (8.2) % (8.3) % (9.3) % Change in value of naming rights liabilities 3.6 % 7.1 % 3.0 % (1.8) % Gain on bargain purchases — % 9.0 % — % 5.2 % Other, net 1.0 % (2.4) % 1.1 % (0.8) % Total other income (expense), net (3.7) % 5.7 % (4.2) % (6.4) % Income before income taxes 11.8 % 35.8 % 5.6 % 17.5 % Provision for income taxes 1.0 % 10.1 % 0.0 % 4.8 % Net income 10.8 % 25.8 % 5.6 % 12.7 % __________________________________ Note: Amounts in table may not subtotal due to rounding. Segment Performance During the fourth quarter of 2021, the Company updated its reportable segments to better align with its strategic growth initiatives in light of recent acquisitions. As a result of this realignment, the Company determined it had three reportable segments: Casinos & Resorts, North America Interactive and International Interactive. Additionally, during the first quarter of 2022 as a result of the segment realignment, the Company changed its methodology for allocating certain corporate operating expenses within advertising, general and administrative expense previously reported in “Other” to directly apply such costs to the segment supported. Prior year amounts have been reclassified to conform to the new segment presentation. The following table sets forth certain financial information associated with results of operations for the three and six months ended June 30, 2022 and 2021. Non-gaming revenue includes hotel, food and beverage and retail, entertainment and other revenue. Non-gaming expenses include hotel, food and beverage and retail, entertainment and other expenses. All amounts are before any allocation of corporate costs. 49 Three Months Ended June 30, Six Months Ended June 30, (in thousands, except percentages) 2022 2021 $ Change 2022 2021 $ Change Revenue: Gaming Casinos & Resorts $ 225,716 $ 206,699 $ 19,017 $ 443,521 $ 361,128 $ 82,393 North America Interactive 7,868 791 7,077 14,513 1,640 12,873 International Interactive 221,504 — 221,504 460,756 — 460,756 Total Gaming revenue 455,088 207,490 247,598 918,790 362,768 556,022 Non-gaming Casinos & Resorts 74,159 55,489 18,670 136,324 90,493 45,831 North America Interactive 10,182 4,754 5,428 18,764 6,738 12,026 International Interactive 13,067 — 13,067 26,889 — 26,889 Total Non-gaming revenue 97,408 60,243 37,165 181,977 97,231 84,746 Total revenue $ 552,496 $ 267,733 $ 284,763 $ 1,100,767 $ 459,999 $ 640,768 Operating costs and expenses: Gaming Casinos & Resorts $ 78,714 $ 63,195 $ 15,519 $ 155,095 $ 110,145 $ 44,950 North America Interactive 14,472 155 14,317 21,801 459 21,342 International Interactive 110,865 — 110,865 246,367 — 246,367 Total Gaming expenses 204,051 63,350 140,701 423,263 110,604 312,659 Non-gaming Casinos & Resorts 34,615 26,178 8,437 64,663 44,819 19,844 North America Interactive 3,028 353 2,675 4,346 867 3,479 International Interactive 8,741 — 8,741 18,012 — 18,012 Total Non-gaming expenses 46,384 26,531 19,853 87,021 45,686 41,335 Advertising, general and administrative Casinos & Resorts 103,412 79,996 23,416 203,163 145,644 57,519 North America Interactive 24,311 4,944 19,367 51,066 5,562 45,504 International Interactive 32,353 — 32,353 67,327 — 67,327 Other 21,631 16,271 5,360 41,767 30,504 11,263 Total Advertising, general and administrative $ 181,707 $ 101,211 $ 80,496 $ 363,323 $ 181,710 $ 181,613 Margins: Gaming expenses as a percentage of Gaming revenue 45 % 31 % 46 % 30 % Non-gaming expenses as a percentage of Non-gaming revenue 48 % 44 % 48 % 47 % Advertising, general and administrative as a percentage of Total revenue 33 % 38 % 33 % 40 % 50 Three and Six Months Ended June 30, 2022 Compared to Three and Six Months Ended June 30, 2021 Total revenue Total revenue for the three and six months ended June 30, 2022 and 2021 consisted of the following (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2022 2021 $ Change % Change 2022 2021 $ Change % Change Gaming $ 455,088 $ 207,490 $ 247,598 119.3 % $ 918,790 $ 362,768 $ 556,022 153.3 % Hotel 33,929 22,315 11,614 52.0 % 60,864 35,374 25,490 72.1 % Food and beverage 27,435 23,382 4,053 17.3 % 51,423 38,882 12,541 32.3 % Retail, entertainment and other 36,044 14,546 21,498 147.8 % 69,690 22,975 46,715 203.3 % Total revenue $ 552,496 $ 267,733 $ 284,763 106.4 % $ 1,100,767 $ 459,999 $ 640,768 139.3 % Revenue for the three months ended June 30, 2022 increased 106.4%, or $284.8 million, to $552.5 million, from $267.7 million in the same period last year. Revenue for the six months ended June 30, 2022 increased 139.3%, or $640.8 million, to $1.10 billion, from $460.0 million in the same period last year. We saw gaming, hotel, food and beverage, and retail, entertainment and other revenues grow, as we were able to operate with less restrictions across our properties compared to the prior year periods resulting from developments in the COVID-19 pandemic and an increase in consumer confidence. Incremental revenues from our acquisitions that closed in 2021, which included Bally’s Evansville, Bally’s Lake Tahoe, Bally’s Quad Cities, Gamesys, and several of the North America Interactive acquisitions (collectively, the “2021 Acquisitions”), drove the increase in revenue year over year, contributing $281.8 million and $613.1 million to total revenue in the three and six months ended June 30, 2022, respectively. Refer to Note 5 “ Acquisitions ” for further information on our recent acquisitions. Operating costs and expenses In the three months ended June 30, 2022, we recorded total operating costs and expenses of $467.2 million, up $280.0 million, or 149.6%, from $187.2 million in the same period last year. Total operating costs and expenses for the six months ended June 30, 2022 increased $642.9 million, or 183.7%, to $992.9 million, from $350.0 million in the same period last year. The change in total operating costs and expenses was driven by fluctuations in our gaming and non-gaming expenses, advertising general and administrative costs, acquisition, integration and restructuring expenses and other operating costs and expenses, each described below. We expect our total operating costs and expenses to continue to increase in 2022 as compared to 2021 as a result of the inclusion of our recent acquisitions, most notably, Gamesys. Gaming and non-gaming expenses Gaming and racing expenses for the three months ended June 30, 2022 increased $140.7 million, or 222.1%, to $204.1 million from $63.4 million in the prior year comparable period and increased $312.7 million, or 282.7%, to $423.3 million for the six months ended June 30, 2022 from $110.6 million in the prior year comparable period. These increases were primarily attributable to the inclusion of expenses from our 2021 Acquisitions which contributed, in the aggregate, $137.1 million and $299.6 million, during the three and six months ended June 30, 2022, respectively. Non-gaming expenses for the three months ended June 30, 2022 increased $19.9 million, or 74.8%, to $46.4 million from $26.5 million in the same period last year. Non-gaming expenses for the six months ended June 30, 2022 increased $41.3 million, or 90.5%, to $87.0 million from $45.7 million in the same period last year. These increases were primarily attributable to the inclusion of expenses from our 2021 Acquisitions which contributed, in the aggregate, $14.5 million and $32.9 million, during the three and six months ended June 30, 2022, respectively. 51 Advertising, general and administrative Advertising, general and administrative expenses for the three months ended June 30, 2022 increased $80.5 million, or 79.5%, to $181.7 million from $101.2 million in the same period last year. Advertising, general and administrative expenses for the six months ended June 30, 2022 increased $181.6 million, or 99.9%, to $363.3 million from $181.7 million in the same period last year. These increases were primarily attributable to the inclusion of expenses from our 2021 Acquisitions which contributed, in the aggregate, $69.1 million and $155.0 million, during the three and six months ended June 30, 2022, respectively. Acquisition, integration and restructuring expense We incurred $10.1 million and $15.4 million of acquisition, integration and restructuring expenses during the three and six months ended June 30, 2022, respectively, compared to $18.4 million and $30.7 million in the prior year three and six month periods, respectively. This decrease in expense for the current year was driven mainly by costs incurred for the acquisition of Gamesys in the prior year, $7.3 million and $13.6 million for the second quarter and first half of 2021, respectively. Refer to Note 11 “ Acquisition, Integration and Restructuring ” for further information. Other operating (income), costs and expenses During the three and six months ended June 30, 2021, the Company recorded Gain from insurance recoveries, net of losses of $0.6 million and $11.3 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. Additionally, the Company recorded rebranding expenses of $0.2 million and $0.4 million during the three months ended June 30, 2022 and 2021, respectively, and $0.5 million and $1.3 million during the six months ended June 30, 2022 and 2021, respectively. During the second quarter of 2022, we sold our Bally’s Black Hawk and Bally’s Quad Cities properties to GLPI and recorded a gain on sale-leaseback of $50.8 million. 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 we also 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, 2022 was $74.8 million, an increase of $49.1 million, and $153.7 million for the six months ended June 30, 2022, an increase of $115.2 million, each compared to the same period last year. The increase in depreciation and amortization is attributable to the inclusion of our 2021 acquisitions, most notably amortization expense from our Gamesys business, which contributed an aggregate of $44.3 million and $90.4 million in the three and six months ended June 30, 2022, respectively. Income from operations Income from operations was $85.3 million for the three months ended June 30, 2022, compared to $80.5 million in the comparable period in 2021. Income from operations was $107.8 million for the six months ended June 30, 2022 compared to $110.0 million in 2021. These changes year-over-year were driven by revenue growth resulting from a return in visitation to our properties as COVID-19 restrictions were lifted coupled with a benefit from our 2021 Acquisitions, offset by increased operating expenses. Other income (expense) Total other expense for the three months ended June 30, 2022 was $20.4 million, compared to other income of $15.4 million in the same period last year. This change was driven mainly by the bargain purchase gains of $24.1 million recorded in the second quarter of 2021 related to the acquisitions of Bally’s Lake Tahoe and Bally’s Evansville. Total other expense for the six months ended June 30, 2022 increased $17.0 million to $46.6 million compared to $29.6 million in the same period last year. During the first six months of 2022, in addition to the bargain purchase gains described above, there was an increase in interest expense of $49.2 million due to increased borrowings and higher interest rates year-over-year, offset by the increase in income recorded of $41.7 million for the change in fair value of the naming rights liability associated with our contracts with Sinclair. 52 Provision (benefit) for income taxes Provision for income taxes for the three months ended June 30, 2022 was $5.4 million compared to $27.0 million for the three months ended June 30, 2021. The effective tax rate for the quarter was 8.4% compared to 28.1% for the three months ended June 30, 2021. The benefit for income taxes for the six months ended June 30, 2022 was $0.1 million compared to a provision of $22.2 million for the six months ended June 30, 2021. The effective tax rate for the six months ended June 30, 2022 was (0.2)% compared to 27.6% for the six months ended June 30, 2021. The decrease in the year to date provision for income taxes in 2022 is largely due to a tax benefit recorded in foreign jurisdictions during the quarter offset by discrete tax items related to gain on sale leaseback transactions. Net income (loss) and earnings per share Net income for the three months ended June 30, 2022 was $59.5 million, or $0.98 per diluted share, a decrease of $9.4 million, or 13.7%, from net income of $68.9 million, or $1.40 per diluted share, in the same period last year. As a percentage of revenue, net income decreased from 25.8% for the three months ended June 30, 2021 to 10.8% for the three months ended June 30, 2022. Net income for the six months ended June 30, 2022 was $61.4 million, an increase of $3.2 million, or 5.4%, from $58.2 million, or $1.37 per diluted share, in the same period last year. As a percentage of revenue, net income increased to 5.6% for the six months ended June 30, 2022 from 12.7% for the six months ended June 30, 2021. These changes were impacted by the factors noted above. Adjusted EBITDA and Adjusted EBITDAR by Segment Consolidated Adjusted EBITDA was $141.2 million for the three months ended June 30, 2022, up $58.4 million, or 70.5%, from $82.8 million in the same period last year. Consolidated Adjusted EBITDA was $256.2 million for the six months ended June 30, 2022, up $121.5 million, or 90.2%, from $134.7 million in the same period last year. Adjusted EBITDA for the Casinos & Resorts segment for the three months ended June 30, 2022 decreased $3.8 million, or 4.1%, to $88.0 million and increased $12.4 million, or 8.3%, to $161.8 million for the six months ended June 30, 2022, each compared to the same prior year periods. Casinos & Resorts Adjusted EBITDAR was $99.5 million and $184.7 million in the three and six months ended June 30, 2022, respectively, which further adjusts Adjusted EBITDA for rent expense associated with our operating leases, as defined below. There was no such rent expense in the prior year period. Adjusted EBITDA for the North America Interactive segment for the three months ended June 30, 2022 decreased $17.1 million to $(17.0) million and decreased $37.8 million to $(36.3) million for the six months ended June 30, 2022, each compared to the same prior year periods, mainly due to increased operating costs. Adjusted EBITDA for the International Interactive segment for the three and six months ended June 30, 2022 was $82.6 million and $155.9 million, respectively, directly attributable to our acquisition of Gamesys on October 1, 2021. 53 The following tables reconcile Adjusted EBITDA and Casinos & Resorts Adjusted EBITDAR, non-GAAP measures, to net income, as derived from our financial statements (in thousands): Three Months Ended June 30, 2022 Casinos & Resorts North America Interactive International Interactive Other Total Net income (loss) $ 70,775 $ (24,766) $ 42,504 $ (29,012) $ 59,501 Interest expense, net of interest income (10) (1) (130) 45,969 45,828 Provision (benefit) for income taxes 27,229 (5,758) (5,399) (10,638) 5,434 Depreciation and amortization 14,757 7,273 44,311 8,432 74,773 Non-operating (income) expense (1) — (1,541) 435 (24,338) (25,444) Acquisition, integration and restructuring — 487 884 8,741 10,112 Strategic initiatives (2) 3,018 — — 2,390 5,408 Launch costs (3) — 6,800 — 282 7,082 Share-based compensation — — — 6,322 6,322 Gain on sale-leaseback, net (50,766) — — — (50,766) Other, net (4) 2,580 — — 394 2,974 Allocation of corporate costs 20,418 545 7 (20,970) — Adjusted EBITDA $ 88,001 $ (16,961) $ 82,612 $ (12,428) $ 141,224 Rent expense associated with triple net operating leases (5) 11,471 Adjusted EBITDAR $ 99,472 __________________________________ (1) Non-operating (income) expense for the applicable periods include: (i) change in value of naming rights liabilities, (ii) gain (adjustment) on bargain purchases, and (iii) other (income) expense, net. (2) Includes costs incurred to address the Standard General takeover bid, the recent tender offer process and rent expense related to Bally's Black Hawk and Quad Cities properties, as the Company recently entered into sale lease-back transactions associated with these properties to finance the pending Tropicana Las Vegas property acquisition. (3) Includes upfront and ramp up costs related to the launch of interactive businesses in new jurisdictions prior to full operational commencement. (4) Other includes the following items: (i) non-routine legal expenses, net of recoveries for matters outside the normal course of business ($2.0 million), and (ii) and other individually de minimis expenses. (5) Rent expense associated with triple net leases for our Bally’s Lake Tahoe, Bally’s Evansville and Bally’s Dover properties. Three Months Ended June 30, 2021 Casinos & Resorts North America Interactive Other Total Net income (loss) $ 79,644 $ (3,230) $ (7,472) $ 68,942 Interest expense, net of interest income 8 (2) 21,293 21,299 Provision (benefit) for income taxes 29,504 (513) (2,010) 26,981 Depreciation and amortization 13,453 3,385 8,879 25,717 Non-operating (income) expense (1) — 17 (36,707) (36,690) Acquisition, integration and restructuring — — 18,402 18,402 Strategic initiatives (2) — — 56 56 Launch costs (3) — — 954 954 Share-based compensation — — 3,901 3,901 Gain on sale-leaseback (53,425) — — (53,425) Other (4) 4,018 — 2,670 6,688 Allocation of corporate costs 18,604 436 (19,040) — Adjusted EBITDA $ 91,806 $ 93 $ (9,074) $ 82,825 __________________________________ (1) Non-operating income (expense) includes: (i) change in value of naming rights liabilities, (ii) gain on bargain purchases and (iii) other, net. (2) Includes costs incurred related to the amended credit agreement. (3) Includes upfront and ramp up costs related to the launch of interactive businesses in new jurisdictions prior to full operational commencement. (4) Other includes the following items: (i) asset impairment charges of $4.7 million related to the Dover Downs and Bally’s Black Hawk tradenames in connection with our rebranding, (ii) $2.0 million of professional fees and other costs incurred to establish the partnership with Sinclair and acquire Bally Interactive, (iii) storm related gains of $0.6 million related to insurance recoveries received due to the effects of Hurricane Zeta on the Company’s Hard Rock Biloxi property, (iv) rebranding expenses of $0.4 million in connection with Bally’s corporate name change, and (v) other individually de minimis expenses. 54 Six Months Ended June 30, 2022 Casinos & Resorts North America Interactive International Interactive Other Total Net income (loss) $ 98,798 $ (50,139) $ 71,312 $ (58,581) $ 61,390 Interest expense, net of interest income (6) (3) 36 91,486 91,513 Provision (benefit) for income taxes 36,457 (8,642) (8,566) (19,390) (141) Depreciation and amortization 30,110 16,247 90,375 16,922 153,654 Non-operating (income) expense (1) — (3,136) 1,550 (43,337) (44,923) Acquisition, integration and restructuring — 776 1,225 13,391 15,392 Strategic initiatives (2) 3,018 — — 3,133 6,151 Launch costs (3) — 7,650 — 535 8,185 Share-based compensation — — — 11,417 11,417 Gain on sale-leaseback (50,766) — — — (50,766) Other (4) 2,416 — — 1,889 4,305 Allocation of corporate costs 41,764 961 7 (42,732) — Adjusted EBITDA $ 161,791 $ (36,286) $ 155,939 $ (25,267) $ 256,177 Rent expense associated with triple net operating leases (5) 22,882 Adjusted EBITDAR $ 184,673 __________________________________ (1) Non-operating (income) expense for the applicable periods include: (i) change in value of naming rights liabilities, (ii) gain (adjustment) on bargain purchases, and (iii) other (income) expense, net. (2)Includes costs incurred to address the Standard General takeover bid, the recent tender offer process and rent expense related to Bally's Black Hawk and Quad Cities properties, as the Company recently entered into sale lease-back transactions associated with these properties to finance the pending Tropicana Las Vegas property acquisition. (3) Includes upfront and ramp up costs related to the launch of interactive businesses in new jurisdictions prior to full operational commencement. (4) Other includes the following items: (i) $2.1 million of non-routine legal expenses, net of recoveries for matters outside the normal course of business, (ii) storm related gains of $0.2 million related to insurance recoveries received due to the effects of Hurricane Zeta on the Company’s Hard Rock Biloxi property, (iii) rebranding expenses of $0.5 million in connection with Bally’s corporate name change, and (iv) other individually de minimis expenses. (5) Rent expense associated with triple net leases for our Bally’s Lake Tahoe, Bally’s Evansville and Bally’s Dover properties. Six Months Ended June 30, 2021 Casinos & Resorts North America Interactive Other Total Net income (loss) $ 112,745 $ (2,771) $ (51,737) $ 58,237 Interest expense, net of interest income 19 (2) 41,556 41,573 Benefit for income taxes 41,450 (605) (18,694) 22,151 Depreciation and amortization 25,061 4,417 9,025 38,503 Non-operating (income) expense (1) — (35) (11,920) (11,955) Acquisition, integration and restructuring — — 30,660 30,660 Strategic initiatives (2) — — 770 770 Launch costs (3) — — 1,340 1,340 Share-based compensation — — 8,384 8,384 Gain on sale-leaseback (53,425) — — (53,425) Other (4) (6,629) — 5,088 (1,541) Allocation of corporate costs 30,205 486 (30,691) — Adjusted EBITDA $ 149,426 $ 1,490 $ (16,219) $ 134,697 __________________________________ (1) Non-operating income (expense) includes: (i) change in value of naming rights liabilities, (ii) gain on bargain purchases and (iii) other, net. (2) Includes costs incurred related to the amended credit agreement. (3) Includes upfront and ramp up costs related to the launch of interactive businesses in new jurisdictions prior to full operational commencement. (4) Other includes the following items: (i) storm related gains of $11.3 million related to insurance recoveries received due to the effects of Hurricane Zeta on the Company’s Hard Rock Biloxi property, (ii) asset impairment charges of $4.7 million related to the Dover Downs and Bally’s Black Hawk tradenames in connection with our rebranding (iii) $3.4 million of professional fees and other costs incurred to establish the partnership with Sinclair and acquire Bally Interactive, (iv) rebranding expenses of $1.3 million in connection with Bally’s corporate name change, (v) $0.4 million of expenses incurred to establish the partnership with Sinclair, and (vi) other individually de minimis expenses. 55 Critical Accounting Estimates There were no material changes in critical accounting estimates during the period covered by this Quarterly Report on Form 10-Q. Refer to Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for a complete list of our Critical Accounting Estimates. Recent Accounting Pronouncements Refer to Note 3 “ Recently Adopted and Issued Accounting Pronouncements ” in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that affect us. Liquidity and Capital Resources Overview We are a holding company. Our ability to fund our obligations depends on existing cash on hand, cash flow from our subsidiaries and our ability to raise capital. Our primary sources of liquidity and capital resources have been cash on hand, cash flow from operations, borrowings under our Revolving Credit Facility (as defined herein) and proceeds from the issuance of debt and equity securities. We assess liquidity in terms of the ability to generate cash or obtain financing in order to fund operating, investing and debt service requirements. Our primary ongoing cash requirements include the funding of operations, capital expenditures, acquisitions and other investments in line with our business strategy and debt repayment obligations and interest payments. Our strategy has been to maintain moderate leverage and substantial capital resources in order to take advantage of opportunities, to invest in our businesses and acquire properties at what we believe to be attractive valuations. As such, we have continued to invest in our land-based casino business and began to build on our interactive/iGaming gaming business despite the COVID-19 pandemic. We believe that existing cash balances, operating cash flows and availability under our Revolving Credit Facility, will be sufficient to meet funding needs for operating, capital expenditure and debt service purposes. Additionally, while we may seek other funding alternatives, we believe existing sources will provide the cash necessary to fund our proposed acquisition of Tropicana Las Vegas. Cash Flows Summary Six Months Ended June 30, (in thousands) 2022 2021 Net cash provided by operating activities $ 164,544 $ 34,225 Net cash used in investing activities (55,834) (235,727) Net cash (used in) provided by financing activities (140,790) 948,147 Effect of foreign currency on cash and cash equivalents (11,404) 483 Net change in cash and cash equivalents and restricted cash (43,484) 747,128 Cash and cash equivalents and restricted cash, beginning of period 274,840 126,555 Cash and cash equivalents and restricted cash, end of period $ 231,356 $ 873,683 Operating Activities Net cash provided by operating activities for the six months ended June 30, 2022 was $164.5 million, compared to $34.2 million for the six months ended June 30, 2021. The increase in cash provided by operating activities was primarily driven by the $115.2 million increase in depreciation and amortization expense, mainly attributable to the increased amortization of intangible assets acquired through our acquisitions of Gamesys in the second half of 2021. 56 Investing Activities Net cash used in investing activities for the six months ended June 30, 2022 was $55.8 million, a decrease of $179.9 million compared to $235.7 million for the six months ended June 30, 2021. The change was primarily driven by a $332.0 million reduction in cash paid for acquisitions, offset by an $80.3 million increase in capital expenditures, mainly attributable to our expansion and renovation projects at Bally’s Atlantic City, Bally’s Twin River and Bally’s Kansas City, $51.6 million for the acquisition of gaming licenses, primarily for Bally’s Chicago, and $31.5 million paid for internally developed software. Financing Activities Net cash used in financing activities for the six months ended June 30, 2022 was $140.8 million compared to net cash provided by financing activities of $948.1 million for the six months ended June 30, 2021. This change was mainly attributable to cash proceeds related to the equity issuances of $667.9 million received during the second quarter of 2021 and the increase in repayments of long-term debt of $166.9 million year-over-year. Capital Return Program During the six months ended June 30, 2022, we repurchased 350,616 common shares for an aggregate price of $13.3 million under our previously announced capital return program. As of June 30, 2022, there was $334.6 million available for use under the capital return program. On July 27, 2022, we completed a tender offer and repurchased approximately 4.7 million shares of our common stock for cash at a price of $22.00 per share for an aggregate purchase price of $103.3 million. The Offer was funded with cash on hand and through borrowings on the Company’s revolving credit facility. In connection with the COVID-19 pandemic, we ceased paying dividends. We do not currently intend to pay any dividends on our common stock in the foreseeable future. Any future determinations relating to our dividend policies will be made at the discretion of our Board and will depend on conditions then existing, including our financial condition, results of operations, contractual restrictions, capital and regulatory requirements and other factors our Board may deem relevant. Common Stock and Warrant Offerings 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 issued to affiliates of Sinclair warrants to purchase 909,090 common shares at the same offering price. The net proceeds from the public offering and the private warrant sale, after deducting underwriting discounts, were $671.4 million and $50.0 million, respectively, and were used to finance a portion of the purchase price of Gamesys and to retire certain of our existing indebtedness. Debt and Lease Obligations Senior Notes On August 20, 2021, we issued $750.0 million aggregate principal amount of 5.625% senior notes due 2029 and $750.0 million aggregate principal amount of 5.875% Senior Notes due 2031 (together the “Senior Notes”). On October 1, 2021, upon the closing of the Gamesys acquisition, we assumed the issuer obligation under the Senior Notes. The indenture contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, (1) incur additional indebtedness, (2) pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, (3) enter into certain transactions with affiliates, (4) sell or otherwise dispose of assets, (5) create or incur liens and (6) merge, consolidate or sell all or substantially all of the Company’s assets. These covenants are subject to exceptions and qualifications set forth in the indenture. Credit Facility On October 1, 2021, we entered into the Credit Agreement providing for a senior secured term loan facility in an aggregate principal amount of $1.945 billion (the “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 “Revolving Credit Facility”), which will mature in 2026. 57 The credit facilities allow us to increase the size of the Term Loan Facility or request one or more incremental term loan facilities or increase commitments under the 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 Credit Agreement, including an unlimited amount subject to compliance with a consolidated total secured net leverage ratio. The credit facilities contain covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, sell assets, make certain investments, and grant liens. These covenants are subject to exceptions and qualifications set forth in the Credit Agreement. The Revolving Credit Facility contains a financial covenant regarding a maximum first lien net leverage ratio that applies when borrowings under the Revolving Credit Facility exceed 30% of the total revolving commitment. Refer to Note 12 “ Long-Term Debt ” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information. GLPI Master Lease Our Master Lease is accounted for as an operating lease and was $479.7 million as of June 30, 2022. In connection with the acquisition of Bally’s Evansville, an affiliate of GLPI agreed to acquire the real estate associated with the Evansville Casino for $340.0 million and lease it to us under a master lease agreement (the “Master Lease”). GLPI has also agreed to acquire the real estate associated with Bally’s Dover for $144.0 million and lease it back to the us under the Master Lease. The Master Lease with GLPI has an initial term of 15 years and includes four, five-year options to renew and requires combined minimum annual payments of $40.0 million, subject to escalation. The acquisition of Bally’s Evansville and commencement of the Master Lease occurred on June 3, 2021. During the second quarter of 2021, the Company sold the real estate associated with Bally’s Dover to GLPI and recorded a gain of $53.4 million representing the difference in the transaction price and the derecognition of assets. On April 1, 2022, the Company completed the sale of its Bally’s Quad Cities and Bally’s Black Hawk properties to GLPI for $150.0 million, subsequently leasing the properties back under the above mentioned Master Lease for combined minimum annual payments of $12.0 million, subject to escalation. During the second quarter of 2022, the Company recorded a net gain of $50.8 million, representing the difference in the transaction price and the derecognition of assets, and recorded lease liabilities and corresponding right of use assets of $82.7 million and $21.8 million, respectively. On June 28, 2022, the Company announced that it had entered into a binding term sheet with GLP Capital, L.P., the operating partnership of GLPI (“GLP”), to acquire certain real property assets of Bally’s, subject to customary regulatory approvals, with Bally’s Twin River also subject to lender consent. GLP will acquire the real property assets of Hard Rock Biloxi along with Bally’s Tiverton for total consideration of $635 million and GLP will also have the option, subject to receipt of required consents, to acquire the real property assets of Bally’s Twin River prior to December 31, 2024 for a purchase price of $771 million. Pursuant to the terms of the transaction, the Company will immediately lease back both properties and continue to own, control and manage all the gaming operations of the facilities on an uninterrupted basis. Both properties are expected to be added to the Master Lease with GLPI. We also expect to finance our proposed agreement to acquire the Tropicana Las Vegas for $150 million through the sale-leaseback transactions with GLPI. Operating leases In addition to the operating lease components under the GLPI Master Lease, the Company is committed under various long-term operating lease agreements primarily related to submerged tidelands, property and equipment at Hard Rock Biloxi, Bally’s Kansas City, Bally’s Shreveport and Bally’s Lake Tahoe. Additionally, certain of the Company’s subsidiaries lease office space, data centers, parking space, memorabilia and equipment under agreements classified as operating leases that expire on various dates through 2030. Minimum rent payable under operating leases was $1.05 billion as of June 30, 2022. Refer to Note 13 “ Leases ” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information. 58 Capital Expenditures Capital expenditures are accounted for as either project, maintenance or capitalized software expenditures. Project capital expenditures are for fixed asset additions that expand an existing facility or create a new facility. Maintenance capital expenditures are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost effective to repair, along with spending on other small projects that do not fit into the project category. Capitalized software expenditures relate to the creation, production and preparation of software for use in our online gaming operations. For the six months ended June 30, 2022, capital expenditures were $116.1 million compared to $35.8 million in the same period last year. In 2021 as our properties reopened and operations resumed, we commenced spending on maintenance and planned projects at our casino properties though our progress lagged due to nationwide supply chain shortages. We expect that capital expenditures in 2022 will exceed 2021 amounts as we plan to make significant progress towards project goals, particularly at Bally’s Twin River, Bally’s Atlantic City and Bally’s Kansas City, and increase spending relating to the maintenance and improvements at our other casino properties. A summary of our planned projects follows: Bally’s Twin River - In connection with our partnership with IGT, we have committed to invest $100 million in Bally’s Twin River over the term of our master contract with Rhode Island to expand the property and add additional amenities along with other capital improvements. Plans include adding a 40,000-square-foot gaming area, an additional casino bar, and a 14,000-square-foot spa. Construction began in September 2021 with a target completion in the fourth quarter of 2022. Spending in 2022 is estimated at approximately $50 million. Bally’s Atlantic City - Construction on our Bally’s Atlantic City property commenced in 2021. We are committed to invest approximately $100 million over five years to refurbish and upgrade Bally’s Atlantic City’s facilities and expand its amenities, including renovated hotel rooms and suites, outdoor beer hall and lobby bar. Spending in 2022 is estimated at approximately $40 million. Bally’s Kansas City - We began construction on the planned redevelopment project of Bally’s Kansas City in November 2021. We believe the redevelopment of the property, which includes a 40,000 square foot land-based building, restaurant, bar and retail space, will improve the property and guest experience and drive growth and our return on investment. Spending on the project is estimated to be approximately $50 million, largely in 2022, with a target completion date in the first half of 2023. Centre County, PA - On December 31, 2020, we signed a framework agreement with entities affiliated with an established developer to design, develop, construct and manage a Category 4 licensed casino in Centre County, Pennsylvania. Construction of the casino is expected to begin in the first half of 2023 and will take approximately one year to complete. Subject to receipt of regulatory approvals, it will house up to 750 slot machines and 30 table games. The casino will also provide, subject to receipt of separate licenses and certificates, retail sports betting, online sports betting and online gaming. We estimate the total cost of the project, including construction, licensing and sports betting/iGaming operations, to be approximately $120 million. If completed, we will acquire a majority equity interest in the partnership, including 100% of the economic interests of all retail sports betting, online sports betting and iGaming activities associated with the project. Bally’s Chicago - On June 9, 2022, a wholly-owned indirect subsidiary of the Company, Bally’s Chicago Operating Company, LLC (the “Developer”), signed a host community agreement with the City of Chicago to develop a $1.7 billion destination casino resort, to be names Bally’s Chicago, in downtown Chicago, Illinois. Among other features and amenities, Bally's Chicago will include 3,400 slots, 170 table games, 10 food and beverage venues, a 500-room hotel tower with rooftop bar, a 3,000 seat, 65,000 square foot entertainment center, a 20,000 square foot exhibition and an outdoor green space including an expansive public riverwalk with a water taxi stop. The project also provides the Developer with the exclusive right to operate a temporary casino for up to three years while the permanent casino resort is constructed. The temporary casino is expected to open by the end of the first half of 2023, subject to regulatory approval and other customary conditions. In connection with the entry into the host community agreement with the City of Chicago, the Company made a one-time up-front payment to the City of Chicago equal to $40.0 million, and the Developer will be required to make ongoing payments based on certain performance and time-based thresholds detailed in the host community agreement. Additionally, in connection with the host community agreement, the Company provided the City of Chicago with a performance guaranty whereby the Company agreed to have and maintain available financial resources in an amount reasonably sufficient to allow the Developer to complete its obligations under the host community agreement. In addition, upon notice from the City of Chicago that the Developer has failed to perform various obligations under the host community agreement, the Company has indemnified the City of Chicago against any and all liability, claim or reasonable and documented expense the City of Chicago may suffer or incur by reason of any nonperformance of any of the Developer’s obligations. 59 Other Contractual Obligations Bally’s Trade Name - We acquired Bally’s brand from Caesars Entertainment, Inc. on October 13, 2020 for $20.0 million payable in cash in two equal installments of $10.0 million on the first and second anniversary of the purchase date. The Company made the first installment payment during 2021 and will pay the second installment in 2022. Deferred Consideration - In September of 2019, prior to our acquisition of Gamesys, Gamesys (Holdings) Limited (“GHL”) was acquired by JPJ Group plc (“JPJ”) and subsequently renamed Gamesys. In connection with the JPJ acquisition, £10.0 million of the cash consideration was deferred and payable (plus interest) to GHL’s majority shareholders 30 months after closing. We recorded deferred consideration of $15.1 million within current liabilities of the condensed consolidated balance sheets as of December 31, 2021. Of such amount, approximately $7.4 million was payable to related parties as former majority shareholders. We paid the deferred consideration in April 2022. 60