What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-04 · 132 added, 135 removed, 355 unchanged (43% of the section changed)

20 unchanged sentences

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.

We provide our customers with physical and interactive entertainment and gaming experiences, including traditional casino offerings, iCasino, online bingo, sportsbook, daily fantasy sports (“DFS”) and free-to-play (“F2P”) games.

As of September 30, 2022, we own and manage 15 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 14,400 slot machines, 600 table games and 5,300 hotel rooms, along with various restaurants, entertainment venues and other amenities.

12 unchanged sentences

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.

We also announced plans to construct a land-based casino in Centre County, Pennsylvania, adding to our land-based casino presence.

In 2022, we signed an agreement with the City of Chicago to develop a destination casino resort in downtown Chicago, Illinois and we completed the acquisition of Tropicana Las Vegas.

Upon 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:

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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 Black Hawk Black Hawk, Colorado

Bally’s Dover Casino Resort (“Bally’s Dover”) Dover, Delaware

Bally’s Evansville Casino & Hotel (“Bally’s Evansville”) Evansville, Indiana

Bally’s Kansas City Casino (“Bally’s Kansas City”) (1)

Kansas City, Missouri

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 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 Tiverton Casino & Hotel (“Bally’s Tiverton”) Tiverton, Rhode Island

Bally’s Twin River Lincoln Casino Resort (“Bally’s Twin River”) Lincoln, Rhode Island

Bally’s Vicksburg Casino (“Bally’s Vicksburg”) Vicksburg, Mississippi

Hard Rock Hotel & Casino Biloxi (“Hard Rock Biloxi”) Biloxi, Mississippi

Tropicana Las Vegas Casino and Resort (“Tropicana Las Vegas”) Las Vegas, Nevada

Bally’s Arapahoe Park Aurora, Colorado

__________________________________

(1) Consists of three casino properties:

Bally's Black Hawk North Casino, Bally's Black Hawk West Casino and Bally's Black Hawk East Casino.

North America Interactive - includes the following North America businesses:

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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.

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 the city of 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.

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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.

Beginning in the third quarter ended September 30, 2022, we have revised our calculation of Adjusted EBITDA to exclude adjustments for launch costs and preopening expenses.

Tables reflected below within “Adjusted EBITDA and Adjusted EBITDAR by Segment” have been revised to reflect this new presentation.

Third Quarter and First Nine Months 2022 Results

We reported revenue and income from operations of $578.2 million and $53.7 million, respectively, for the three months ended September 30, 2022, compared to revenue and income from operations of $314.8 million and $27.7 million, respectively, for the same period last year.

We reported revenue and income from operations of $1.68 billion and $161.5 million, respectively, for the nine months ended September 30, 2022, compared to revenue and income from operations of $774.8 million and $137.7 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.

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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) 2022 2021 2022 2021

1 unchanged sentence

Income from operations 53.7 27.7 161.5 137.7

Net income 59.5 68.9 61.4 58.2

Net income (loss) 0.6 (57.6) 62.0 0.6

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,

2022 2021 2022 2021

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

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

Foreign exchange gain (loss) — % (13.6) % 0.1 % (5.6) %

Other, net 0.2 % (1.0) % 0.7 % (0.8) %

Total other income (expense), net (9.0) % (28.8) % (5.9) % (15.5) %

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 %

Income (loss) before income taxes 0.3 % (20.0) % 3.8 % 2.2 %

Provision (benefit) for income taxes 0.2 % (1.7) % 0.1 % 2.2 %

Net income (loss) 0.1 % (18.3) % 3.7 % 0.1 %

__________________________________

6 unchanged sentences

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.

The following table sets forth certain financial information associated with results of operations for the three and nine months ended September 30, 2022 and 2021.

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

1 unchanged sentence

All amounts are before any allocation of corporate costs.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except percentages) 2022 2021 $ Change 2022 2021 $ Change

26 unchanged sentences

Advertising, general and administrative as a percentage of Total revenue 33 % 45 % 33 % 42 %

Three and Six Months Ended June 30, 2022 Compared to Three and Six Months Ended June 30, 2021

Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 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,

Total revenue for the three and nine months ended September 30, 2022 and 2021 consisted of the following (in thousands):

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

2022 2021 $ Change % Change 2022 2021 $ Change % Change

4 unchanged sentences

Total revenue $ 578,249 $ 314,779 $ 263,470 83.7 % $ 1,679,016 $ 774,778 $ 904,238 116.7 %

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.

Revenue for the three months ended September 30, 2022 increased 83.7%, or $263.5 million, to $578.2 million, from $314.8 million in the same period last year.

Revenue for the nine months ended September 30, 2022 increased 116.7%, or $904.2 million, to $1.68 billion, from $774.8 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.

Incremental revenues from our acquisitions that closed in 2021, which included Bally’s Evansville, Bally’s Lake Tahoe, Bally’s Quad Cities, Gamesys, and the majority of the North America Interactive acquisitions (collectively, the “2021 Acquisitions”), drove the increase in revenue year over year, contributing $232.4 million and $845.5 million to total revenue in the three and nine months ended September 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.

In the three months ended September 30, 2022, we recorded total operating costs and expenses of $524.6 million, up $237.5 million, or 82.8%, from $287.0 million in the same period last year.

Total operating costs and expenses for the nine months ended September 30, 2022 increased $880.5 million, or 138.2%, to $1.52 billion, from $637.0 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.

1 unchanged sentence

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.

Gaming and racing expenses for the three months ended September 30, 2022 increased $118.8 million, or 151.5%, to $197.2 million from $78.4 million in the prior year comparable period and increased $431.5 million, or 228.3%, to $620.5 million for the nine months ended September 30, 2022 from $189.0 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, $116.8 million and $416.3 million, during the three and nine months ended September 30, 2022, respectively.

Non-gaming expenses for the three months ended September 30, 2022 increased $13.9 million, or 35.0%, to $53.5 million from $39.6 million in the same period last year.

Non-gaming expenses for the nine months ended September 30, 2022 increased $55.2 million, or 64.7%, to $140.5 million from $85.3 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, $11.7 million and $44.6 million, during the three and nine months ended September 30, 2022, respectively.

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.

Advertising, general and administrative expenses for the three months ended September 30, 2022 increased $51.5 million, or 36.6%, to $192.0 million from $140.5 million in the same period last year.

Advertising, general and administrative expenses for the nine months ended September 30, 2022 increased $233.1 million, or 72.3%, to $555.3 million from $322.2 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, $37.2 million and $192.2 million, during the three and nine months ended September 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.

We incurred $9.3 million and $24.7 million of acquisition, integration and restructuring expenses during the three and nine months ended September 30, 2022, respectively, compared to $6.8 million and $37.5 million in the prior year three and nine month periods, respectively.

The decrease in expense year over year is driven by a reduction in Gamesys acquisition and integration costs offset by an increase in costs attributable to Bally’s Chicago.

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.

During the three and nine months ended September 30, 2022, we recorded a gain from insurance recoveries, net of losses of $1.3 million and $1.4 million, respectively, primarily attributable to insurance recoveries related to prior litigation matters.

During the three and nine months ended September 30, 2021, the Company recorded a gain from insurance recoveries, net of losses of $7.9 million and $19.2 million, respectively, primarily attributable to insurance proceeds received due to the effects of Hurricane Zeta.

The Company recorded rebranding expenses of $0.1 million and $0.4 million during the three months ended September 30, 2022 and 2021, respectively, and $0.5 million and $1.7 million during the nine months ended September 30, 2022 and 2021, respectively.

During the nine months ended September 30, 2021, we also recorded asset impairment charges of $4.7 million related to the Dover Downs and Bally’s Black Hawk trade names in connection with our rebranding.

Additionally, during the nine months ended September 30, 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 nine months ended September 30 2021, we sold our Bally’s Dover property to GLPI and recorded a gain on sale-leaseback of $53.4 million.

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.

Depreciation and amortization for the three months ended September 30, 2022 was $73.9 million, an increase of $44.9 million, and $227.5 million for the nine months ended September 30, 2022, an increase of $160.0 million, each compared to the same period last year.

The increase in depreciation and amortization is attributable to the inclusion of our 2021 acquisitions, which contributed an aggregate of $46.3 million and $154.7 million in the three and nine months ended September 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.

Income from operations was $53.7 million for the three months ended September 30, 2022, compared to $27.7 million in the comparable period in 2021.

Income from operations was $161.5 million for the nine months ended September 30, 2022 compared to $137.7 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.

Total other expense for the three months ended September 30, 2022 was $51.9 million, compared to $90.8 million in the same period last year.

This change was driven mainly by a decrease in foreign currency losses of $43.1 million and a loss on extinguishment of debt of $19.4 million incurred during the three months ended September 30, 2022, offset by an increase in interest expense of $21.9 million.

Total other expense for the nine months ended September 30, 2022 decreased $21.9 million to $98.5 million compared to $120.4 million in the same period last year.

During the first nine months of 2022, there was a decrease in foreign currency exchange losses of $45.6 million and a decrease in losses from the extinguishment of debt of $19.4 million, offset by bargain purchase gains described above, and an increase in interest expense of $71.1 million due to increased borrowings and higher interest rates year-over-year.

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.

Provision for income taxes for the three months ended September 30, 2022 was $1.1 million compared to a tax benefit of $5.4 million for the three months ended September 30, 2021.

The effective tax rate for the quarter was 65.7% compared to 8.6% for the three months ended September 30, 2021.

The provision for income taxes for the nine months ended September 30, 2022 was $1.0 million compared to $16.8 million for the nine months ended September 30, 2021.

The effective tax rate for the nine months ended September 30, 2022 was 1.6% compared to 96.6% for the nine months ended September 30, 2021.

The 2022 year to date effective tax rate was lower than the US federal statutory tax rate of 21%, largely due to a tax benefit recorded in foreign jurisdictions during the year, offset by a discrete item related to the gain on sale leaseback transactions in Colorado and Illinois.

The 2021 year to date effective tax rate was higher than the US federal statutory rate of 21%, largely due to discrete items related to the gain on sale leaseback in Delaware and foreign currency translation.

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.

Net income for the three months ended September 30, 2022 was $0.6 million, or $0.01 per diluted share, an increase of $58.2 million, or 101.0%, from net loss of $57.6 million, or $(1.16) per diluted share, in the same period last year.

As a percentage of revenue, net income increased from (18.3)% for the three months ended September 30, 2021 to 0.1% for the three months ended September 30, 2022.

Net income for the nine months ended September 30, 2022 was $62.0 million, an increase of $61.4 million, or 10370.1%, from $0.6 million, or $0.01 per diluted share, in the same period last year.

As a percentage of revenue, net income decreased to 3.7% for the nine months ended September 30, 2022 from 0.1% for the nine months ended September 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.

Consolidated Adjusted EBITDA was $151.0 million for the three months ended September 30, 2022, up $73.1 million, or 93.9%, from $77.8 million in the same period last year.

Consolidated Adjusted EBITDA was $402.7 million for the nine months ended September 30, 2022, up $191.5 million, or 90.7%, from $211.2 million in the same period last year.

Adjusted EBITDA for the Casinos & Resorts segment for the three months ended September 30, 2022 increased $13.8 million, or 14.8%, to $106.9 million and increased $26.2 million, or 10.8%, to $268.7 million for the nine months ended September 30, 2022, each compared to the same prior year periods.

Casinos & Resorts Adjusted EBITDAR was $118.7 million and $303.4 million in the three and nine months ended September 30, 2022, respectively, which further adjusts Adjusted EBITDA for rent expense associated with our operating leases, as defined below.

Adjusted EBITDA for the North America Interactive segment for the three months ended September 30, 2022 decreased $14.1 million to $(19.7) million and decreased $55.8 million to $(59.9) million for the nine months ended September 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 nine months ended September 30, 2022 was $76.3 million and $232.3 million, respectively, directly attributable to our acquisition of Gamesys on October 1, 2021.

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

Three Months Ended September 30, 2022

Casinos & Resorts North America Interactive International Interactive Other Total

5 unchanged sentences

— (113) (912) (362) (1,387)

Foreign exchange (gain) loss — (1,465) 1,224 (12) (253)

Acquisition, integration and restructuring — 164 2,713 6,405 9,282

1 unchanged sentence

3,061 — — 5,709 8,770

Launch costs (3)

— 6,800 — 282 7,082

Share-based compensation — — — 6,715 6,715

Gain on sale-leaseback, net (50,766) — — — (50,766)

Other, net (4)

(698) 338 — (954) (1,314)

5 unchanged sentences

(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.

(i) change in value of naming rights liabilities and (ii) other (income) expense, net.

(2) Includes costs incurred for financing related transactions including 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 Tropicana Las Vegas property acquisition.

(3) 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

(i) non-routine legal expenses, net of recoveries for matters outside the normal course of business, (ii) rebranding expenses in connection with Bally’s corporate name change, and (ii) other individually de minimis expenses.

(4) Rent expense associated with triple net leases for the Company's Bally’s Lake Tahoe, Bally’s Evansville and Bally’s Dover properties.

Three Months Ended September 30, 2021

Casinos & Resorts North America Interactive Other Total

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— — 16,577 16,577

Foreign exchange loss — 22 42,874 42,896

Acquisition, integration and restructuring — — 6,797 6,797

Strategic initiatives (2)

Launch costs (3)

— 12,500 (29) 12,471

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

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

(4,688) 77 1,009 (3,602)

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__________________________________

(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.

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

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

(2) Includes costs incurred related to the amended credit agreement and a lump sum one-time contribution of $12.5 million to support a referendum campaign to legalize sports betting in the State of California.

(3) 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.

Six Months Ended June 30, 2022

(i) professional fees and other costs incurred to establish the partnership with Sinclair and acquire Bally Interactive, (ii) storm related gains related to insurance recoveries received due to the effects of Hurricane Zeta on the Company’s Hard Rock Biloxi property, (iii) rebranding expenses in connection with Bally’s corporate name change, (iv) business interruption related recoveries, and (v) other individually de minimis expenses.

Nine Months Ended September 30, 2022

Casinos & Resorts North America Interactive International Interactive Other Total

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— (106) (519) (43,690) (44,315)

Foreign exchange (gain) loss — (4,608) 2,381 (21) (2,248)

Acquisition, integration and restructuring — 940 3,938 19,796 24,674

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6,079 — — 8,842 14,921

Launch costs (3)

— 7,650 — 535 8,185

Share-based compensation — — — 18,132 18,132

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(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.

(2) Includes costs incurred related to financing related transactions including the recent tender offer process, costs incurred to address the Standard General takeover bid, 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 Tropicana Las Vegas property acquisition.

(3) 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

(i) rebranding expenses in connection with Bally’s corporate name change (ii) non-routine legal expenses, net of recoveries for matters outside the normal course of business, and (iii) other individually de minimis expenses.

(4) Rent expense associated with triple net leases for the Company's Bally’s Lake Tahoe, Bally’s Evansville and Bally’s Dover properties.

Nine Months Ended September 30, 2021

Casinos & Resorts North America Interactive Other Total

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Interest expense, net of interest income 24 (12) 72,867 72,879

Benefit for income taxes 41,450 (605) (18,694) 22,151

Provision (benefit) for income taxes 57,744 (6,385) (34,608) 16,751

Depreciation and amortization 39,171 10,691 17,641 67,503

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— — 4,165 4,165

Foreign exchange (gain) loss — (13) 43,366 43,353

Acquisition, integration and restructuring — — 37,457 37,457

Strategic initiatives (2)

Launch costs (3)

— 12,500 741 13,241

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__________________________________

(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.

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

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

(3) 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.

(i) asset impairment charges related to the Dover Downs and Bally’s Black Hawk trade names in connection with Bally's rebranding, (ii) professional fees and other costs incurred to establish the partnership with Sinclair and acquire Bally Interactive, (iii) storm related gains related to insurance recoveries received due to the effects of Hurricane Zeta on the Company’s Hard Rock Biloxi property, (iv) rebranding expenses in connection with Bally’s corporate name change, (v) business interruption related recoveries, and (vi) other individually de minimis expenses.

Critical Accounting Estimates

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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.

As such, we have continued to invest in our land-based casino business and build on our interactive/iGaming gaming business.

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,

Nine Months Ended September 30,

(in thousands) 2022 2021

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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.

Net cash provided by operating activities for the nine months ended September 30, 2022 was $225.3 million, compared to $70.8 million for the nine months ended September 30, 2021.

The increase in cash provided by operating activities was primarily driven by the $160.0 million increase in depreciation and amortization expense, mainly attributable to the increased amortization of intangible assets acquired through our acquisition of Gamesys in the fourth quarter of 2021.

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.

Net cash used in investing activities for the nine months ended September 30, 2022 was $69.5 million, a decrease of $232.7 million compared to $302.1 million for the nine months ended September 30, 2021.

The change was primarily driven by a $223.1 million reduction in cash paid for acquisitions year over year coupled with a $200.0 million advance deposit received from GLPI for the sale of our Bally’s Tiverton and Hard Rock Biloxi properties, offset by an increase in capital expenditures of $102.2 million mainly attributable to our expansion and renovation projects at Bally’s Atlantic City, Bally’s Twin River and Bally’s Kansas City, $53.0 million for the acquisition of gaming licenses, primarily for Bally’s Chicago, and $45.8 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.

Net cash used in financing activities for the nine months ended September 30, 2022 was $189.9 million compared to net cash provided by financing activities of $2.16 billion for the nine months ended September 30, 2021.

This change was mainly attributable to cash proceeds related to the senior note proceeds of $1.49 billion and equity issuances of $667.9 million received during 2021.

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.

During the nine months ended September 30, 2022, we repurchased 5,718,950 common shares, including 4.7 million shares repurchased in a cash tender offer, for an aggregate price of $132.5 million under our previously announced capital return program.

As of September 30, 2022, there was $215.4 million available for use under the capital return program, subject to regulatory and debt agreements limitations.

In connection with the COVID-19 pandemic, we ceased paying dividends.

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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

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.

The indenture governing the Senior Notes 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.

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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.

Our GLPI leases are accounted for as operating leases and were $638.4 million as of September 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”).

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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.

On September 6, 2022, Company received an advance deposit of $200.0 million advanced deposit related to the purchase of Bally’s Tiverton and Hard Rock Biloxi.

We currently anticipate the initial closing will occur in early 2023 and will include the real property assets of Biloxi and Tiverton.

On September 26, 2022, the Company completed its acquisition of the non-land assets of Tropicana Las Vegas from Penn Entertainment, Inc.

and GLPI for $148.3 million, subsequently leasing the land underlying the Tropicana property from GLPI for an initial term of 50 years at an annual rent of $10.5 million.

Operating leases

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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.

Minimum rent payable under operating leases was $1.70 billion as of September 30, 2022.

Refer to Note 13 “ Leases ” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

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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.

For the nine months ended September 30, 2022, capital expenditures were $167.4 million compared to $65.1 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.

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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.

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 named 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.

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Other Contractual Obligations

Sponsorship Commitments - The Company has entered into several sponsorship agreements, totaling $87.2 million over 15 years, with various professional sports leagues and teams, allowing the Company use of official league marks for branding and promotions, among other rights.

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.

The Company made the first installment payment during 2021 and paid the final installment in the fourth quarter of 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis