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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-01 · 195 added, 252 removed, 201 unchanged (69% of the section changed)

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Executive 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, DFS and F2P.

As of December 31, 2021, we own and manage 14 land-based casinos and one horse racetrack in ten states across the US operating under Bally’s brand.

Our land-based casino operations include approximately 14,900 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 GLPI, a publicly traded gaming-focused REIT.

With our acquisition of London-based 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 B2B as well as a 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.

In late 2020, we changed our name to Bally’s Corporation.

We believe that the “Bally’s” trade name brand has a rich history of gaming, hospitality and entertainment providing immediate and enhanced nationwide brand recognition.

In 2021, we took significant steps forward in our strategy.

We acquired multiple casino and resort properties, including 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 Centre County, Pennsylvania, we will own and manage 16 land-based casinos across 12 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;

• 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.

COVID-19 Pandemic

The COVID-19 pandemic has significantly impacted, and is likely to continue to impact, our business in a material manner.

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

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

As of December 31, 2021, 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 in 2020 and 2021.

While many restrictions have been relaxed at this point, there are no assurances that a resurgence of future COVID-19 variants will not cause similar disruptions that existed in 2020 and 2021.

In addition, future demand for gaming activities may be negatively impacted by the adverse changes in the perceived or actual economic climate, including higher unemployment rates, declines in income levels and loss of personal wealth or reduced business spending 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 project in Centre County, Pennsylvania, described below.

While we are working closely with government officials on operational aspects of our properties, we cannot predict the duration of any limitations the government or we may impose on our operations.

Continuing restrictions on our operations, the economic uncertainty that COVID-19 continues to cause and the personal risk tolerances of our customers have caused, and may continue to cause, our business to be negatively impacted.

Because the situation is ongoing, and because the duration and severity of the pandemic remain unclear, it is difficult to forecast any impacts on our future results.

We currently expect the COVID-19 pandemic to continue to impact our operations negatively in 2022.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law.

The CARES Act provides opportunities for additional liquidity, loan guarantees and other government programs to support companies affected by the COVID-19 pandemic and their employees, including those like us that operate in the gaming area.

The benefits of the CARES Act that were available to us included:

• refund of federal income taxes due to five-year carryback of net operating loss incurred in 2020 when our 2020 tax return was filed in 2021;

• relaxation of interest expense deduction limitation for income tax purposes;

• the employee retention credit, providing a refundable federal tax credit equal to 50% of the first $10,000 of qualified wages and benefits, including qualified medical plan contributions, paid to employees while they are not performing services after March 12, 2020 and before January 1, 2021.

Recent and Pending Acquisitions

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.

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, online bingo, daily fantasy sports and free-to-play games.

We believe that these offerings, coupled with our media partnership with Sinclair, position the Company to capitalize on significant growth opportunities in the rapidly expanding US online entertainment and sports betting markets.

Other 2021 Acquisitions

In addition to the Gamesys acquisition, we completed or signed definitive agreements for multiple transactions within our Casinos & Resorts and North America Interactive reportable segments.

The pending acquisition of Tropicana Las Vegas is expected to close during the second half of 2022.

Refer to “ Our Strategy and Business Developments ” section above and Note 5 “ Acquisitions ” to our consolidated financial statements presented in Part II, Item 8 for further information.

During 2022, we continued to grow our business by actively pursuing the acquisition and development of new gaming opportunities and reinvesting in our existing operations.

We completed our acquisition of Tropicana Las Vegas, providing us with a presence on the Las Vegas Strip.

We signed an agreement to develop Bally’s Chicago, a flagship destination casino resort in downtown Chicago, Illinois.

We made significant progress on our capital improvement and expansion projects at our Bally’s Atlantic City, Bally’s Lincoln, and Bally’s Kansas City properties focusing on enhancing amenities to improve the customer experience.

We launched Bally Casino, an iCasino app, and Bally Bet Sportsbook & Casino, our first combined casino and sportsbook app.

These steps continue to position us as a prominent, full-service, vertically integrated iGaming company, with physical casinos and online gaming solutions united under a single, leading brand.

Acquisitions and Development Projects

Our acquisitions and business development projects are summarized above in “ Our Strategy and Business Developments ” section above and in Note 6 “ Business Combinations ” to our consolidated financial statements presented in Part II, Item 8 of this Annual Report on Form 10-K.

Macroeconomic and Other Factors

Our business is subject to risks caused by global economic challenges, including those caused by the COVID-19 pandemic, the impact of the war in Ukraine, rising inflation, rising interest rates and supply-chain disruptions, that can cause economic uncertainty and volatility.

These challenges can negatively impact discretionary consumer spending and could result in a reduction in visitors to our properties, including those that stay in our hotels, or discretionary spending by our customers on entertainment and leisure activities.

In addition, inflation generally affects our business by increasing our cost of labor.

In periods of sustained inflation, it may be difficult to effectively control such increases to our costs and retain key personnel.

Key Performance Indicators

The key performance indicators used in managing our business is adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), a non-GAAP measure.

Adjusted EBITDA is defined as earnings for the Company, or where noted our reportable 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 reportable segments, an adjustment related to the allocation of corporate cost among segments.

The key performance indicator used in managing our business is adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), a non-GAAP measure.

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 and other transaction related costs, 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.

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 more fulsome 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.

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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.

Management believes that while certain items excluded from Adjusted EBITDA may be recurring in nature and should not be disregarded in evaluating our earnings performance, it is useful to exclude such items when comparing current performance to prior periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods presented or they may not relate specifically to current operating trends or be indicative of future results.

Adjusted EBITDA should not be construed as an alternative to GAAP net income, its most directly comparable GAAP measure, as an indicator of our performance.

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

Adjusted EBITDAR is used outside of our financial statements solely as a valuation metric.

Adjusted EBITDAR is defined as Adjusted EBITDA for our Casinos & Resorts segment plus rent expense associated with triple net operating leases.

Adjusted EBITDAR is an additional metric 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 used by gaming operator analysts and investors to determine the equity value of gaming operators and (ii) financial analysts refer to Adjusted EBITDAR when 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 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.

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

The tables below within “Adjusted EBITDA and Adjusted EBITDAR by Segment” have been revised to reflect this new presentation for applicable periods.

Results of Operations

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Total revenue $ 2,255.7 $ 1,322.4 $ 372.8

Income (loss) from operations 93.4 (18.4) 114.6

Net (loss) income (71.8) (5.5) 55.1

(Loss) income from operations (293.0) 93.4 (18.4)

Net loss (425.5) (114.7) (5.5)

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

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Total revenue 100.0 % 100.0 % 100.0 %

Gaming, hotel, food and beverage, retail, entertainment and other expenses 40.5 % 37.2 % 35.4 %

Advertising, general and administrative 38.7 % 47.5 % 34.5 %

Goodwill and asset impairment 0.4 % 2.3 % — %

Gain on sale-leaseback (4.0) % — % — %

Contract termination 2.3 % — % — %

Other operating costs and expenses 4.3 % 7.8 % 2.1 %

Gaming and non-gaming expenses 44.7 % 40.5 % 37.2 %

General and administrative 34.4 % 41.2 % 55.3 %

Impairment charges 20.6 % 0.4 % 2.3 %

Depreciation and amortization 13.3 % 10.9 % 10.2 %

Total operating costs and expenses 113.0 % 92.9 % 104.9 %

Income (loss) from operations 7.1 % (4.9) % 21.9 %

(Loss) income from operations (13.0) % 7.1 % (4.9) %

Other income (expense):

Interest income 0.2 % 0.2 % 0.4 %

Interest expense, net of amounts capitalized (9.1) % (17.0) % (7.6) %

Change in value of naming rights liabilities 1.3 % (15.5) % — %

Gain on bargain purchases 1.7 % 17.1 % — %

Loss on extinguishment of debt (7.8) % — % (0.3) %

Other, net 0.9 % — % — %

Interest expense, net (9.2) % (8.9) % (16.8) %

Other non-operating expenses, net 2.1 % (7.1) % 1.7 %

Total other expense, net (7.2) % (16.1) % (15.1) %

(Loss) income before provision for income taxes (5.8) % (20.1) % 14.4 %

(Benefit) provision for income taxes (0.3) % (18.6) % 3.8 %

Net (loss) income (5.4) % (1.5) % 10.5 %

Loss before provision for income taxes (20.1) % (9.0) % (20.1) %

Benefit for income taxes (1.3) % (0.3) % (18.6) %

Net loss (18.9) % (8.7) % (1.5) %

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Segment Information

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:

The Company has three reportable segments:

Casinos & Resorts, North America Interactive and International Interactive.

Prior year amounts have been reclassified to conform to this new presentation.

Refer to “Our Operating Structure” in Item 1 “ Business ” for a listing of entities by segment and Note 19 “ Segment Reporting ” for further information.

Refer to “Our Operating Structure” in Part I, Item 1 “ Business ” of this Annual Report on Form 10-K and Note 21 “ Segment Reporting ” to our consolidated financial statements presented in Part II, Item 8 of this Annual Report on Form 10-K for additional information on our segment reporting structure .

The following table sets forth certain financial information associated with results of operations for the years ended December 31, 2022, 2021 and 2020.

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Years Ended December 31, 2022 over 2021 2021 over 2020

(In thousands, except percentages) 2021 2020 2019 $ Change % Change $ Change % Change

(In thousands, except percentages) 2022 2021 2020 $ Change $ Change

Casinos & Resorts $ 907,431 $ 803,940 $ 298,070 $ 103,491 $ 505,870

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Total Non-gaming expenses 196,318 128,047 42,768 68,271 85,279

Advertising, general and administrative

General and administrative

Casinos & Resorts 460,163 343,639 173,249 116,524 170,390

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Other 51,696 110,959 32,759 (59,263) 78,200

Total Advertising, general and administrative $ 511,669 $ 176,943 $ 180,400 $ 334,726 189.2 % $ (3,457) (1.9) %

Total General and administrative $ 774,940 $ 544,521 $ 206,008 $ 230,419 $ 338,513

Gaming expenses as a percentage of Gaming revenue 44 % 39 % 32 %

Non-gaming expenses as a percentage of Non-gaming revenue 48 % 48 % 57 %

Advertising, general and administrative as a percentage of Total revenue 39 % 47 % 34 % (8) % 13 %

General and administrative as a percentage of Total revenue 34 % 41 % 55 %

Year ended December 31, 2022 compared to year ended December 31, 2021

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Total revenue $ 2,255,705 $ 1,322,443 $ 933,262 70.6 %

Total revenue for the year ended December 31, 2021 increased $949.7 million, or 254.7%, to $1.32 billion, from $372.8 million in 2020.

We saw gaming, hotel, food and beverage and retail, entertainment and other revenues grow and exceed, in some cases, pre-pandemic levels, as we were able to operate with less restrictions across our properties in 2021, in addition to fewer days closed year-over-year, resulting from developments in the COVID-19 pandemic and an increase in consumer confidence and visitation.

In addition to the above, incremental revenues from acquisitions completed in 2021, including Gamesys, Bally’s Evansville, Bally’s Lake Tahoe, Bally’s Quad Cities and our North America Interactive acquisitions (collectively the “2021 Acquisitions”), and from our acquisitions completed in 2020, including Bally’s Atlantic City, Bally’s Shreveport, Bally’s Kansas City, Bally’s Vicksburg and Bally’s Black Hawk (collectively, the “2020 Acquisitions”), contributed, in the aggregate, $704.9 million.

Operating costs and expenses

For 2021, we recorded total operating costs and expenses of $1.23 billion, up $837.9 million, or 214.2%, from $391.2 million in 2020.

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 increase in 2022 as compared to 2021 as a result of the inclusion of our recent acquisitions, most notably, Gamesys.

We saw gaming, hotel, food and beverage, and retail, entertainment and other revenues grow, as we were able to operate with fewer restrictions across our properties compared to the prior year period as a result of developments in the COVID-19 pandemic and an increase in consumer confidence.

Incremental revenues from the recent acquisition of Tropicana Las Vegas and the acquisitions completed in 2021, including Gamesys, Bally’s Evansville, Bally’s Lake Tahoe, Bally’s Quad Cities and our North America Interactive acquisitions (collectively the “2021 Acquisitions”), contributed, in the aggregate, $868.7 million.

Gaming and non-gaming expenses

Gaming expenses for the year ended December 31, 2021 increased $311.1 million, or 324.4%, to $407.0 million from $95.9 million in 2020.

The increase in gaming expenses primarily attributable to the inclusion of expenses from our 2021 Acquisitions and incremental gaming expenses from our 2020 Acquisitions which contributed, in the aggregate, $269.4 million.

Non-gaming expenses for the year ended December 31, 2021 increased $85.3 million, or 199.4%, to $128.0 million from $42.8 million in 2020.

This increase was primarily due to the inclusion of our 2021 Acquisitions and incremental expense from our 2020 Acquisitions which contributed, in the aggregate, $69.8 million.

Advertising, general and administrative

Advertising, general and administrative expenses for the year ended December 31, 2021 increased $334.7 million, or 189.2%, to $511.7 million from $176.9 million, in 2020.

The increase year-over-year is primarily due to the impact of our 2021 Acquisitions and 2020 Acquisitions which, in the aggregate, contributed $245.9 million to advertising, general and administrative expenses for the year ended December 31, 2021.

Additionally, in connection with the Gamesys acquisition, the Company recognized post-combination expense related to the acceleration and cash settlement of unvested historical Gamesys’ employee stock awards of $10.3 million included within Advertising, general and administrative expense.

Acquisition, integration and restructuring

We incurred $71.3 million of acquisition, integration and restructuring expense during the year ended December 31, 2021 compared to $13.3 million in 2020 driven by $43.5 million of costs incurred in connection with our acquisition of Gamesys on October 1, 2021, as well as our other 2021 Acquisitions.

Refer to Note 11 “ Acquisition, integration and restructuring expense ” for further information.

Other operating costs and expenses

During the fourth quarter of 2021, we recorded contract termination expense of $30.0 million related to the early termination of retail and online sportsbook operating agreements with William Hill at certain of our casino properties.

During the fourth quarter of 2020, Hurricane Zeta made landfall in Louisiana shutting down our Hard Rock Biloxi property for three days.

As a result, during the year ended December 31, 2021, we recorded gains from insurance recoveries, net of losses, of $19.3 million attributable to insurance proceeds received in the year compared to a loss of $14.1 million in 2020.

In connection with our corporate name change to Bally’s Corporation in November 2020 and the rebranding of our casino properties across our portfolio, we incurred rebranding expense of $2.5 million and $0.8 million during the years ended December 31, 2021 and 2020, respectively.

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

During the year ended December 31, 2021, we recorded asset impairment charges of $4.7 million related to the former trade names at our Bally’s Dover and Bally’s Black Hawk in connection with our rebranding.

During the year ended December 31, 2020, we recorded an impairment charge of $8.7 million as a result of an impairment analysis performed on goodwill and intangible assets acquired in connection with our acquisition of Bally’s Black Hawk.

Gaming and non-gaming expenses for the year ended December 31, 2022 increased $405.9 million and $68.3 million, respectively, primarily due to the acquisition of Tropicana Las Vegas and our 2021 Acquisitions which contributed, in the aggregate, $419.2 million to gaming expenses and $55.1 million to non-gaming expense.

General and administrative

General and administrative expenses for the year ended December 31, 2022 increased $230.4 million from $544.5 million, in 2021, primarily due to inclusion of expenses from our acquisition of Tropicana Las Vegas and our 2021 Acquisitions which contributed, in the aggregate, $201.7 million.

Impairment Charges

In 2022, we recorded total impairment charges of $464.0 million which included $390.7 million as a result of our annual goodwill and asset impairment analysis related to our North America Interactive segment and $73.3 million in the International Interactive segment related to a long-standing indefinite lived trademark acquired as part of the Gamesys acquisition that is being de-emphasized for other newer brands in Asia and Rest of World.

Depreciation and amortization

Depreciation and amortization of intangibles expense for the year ended December 31, 2021 was $144.8 million, an increase of $106.9 million, or 282.6%, compared to $37.8 million in 2020 driven by the inclusion of incremental expense from our 2021 Acquisitions and 2020 Acquisitions, which contributed, in the aggregate, $83.9 million year-over-year.

(Loss) income from operations

Income from operations was $93.4 million for the year ended December 31, 2021 compared to loss from operations of $18.4 million in 2020.

This increase was driven by revenue growth resulting from a return in visitation to our properties as COVID-19 restrictions were lifted as well as more days open in 2021 compared to 2020 coupled with incremental revenues from our 2021 Acquisitions and 2020 Acquisitions, offset by operating expenses as noted above.

Depreciation and amortization for the year ended December 31, 2022 was $300.6 million, compared to $144.8 million in 2021 driven by the inclusion of incremental expense from our acquisition of Tropicana Las Vegas and our 2021 Acquisitions, which contributed, in the aggregate, $159.4 million year-over-year.

Income (loss) from operations

Loss from operations was $293.0 million for the year ended December 31, 2022 compared to income from operations of $93.4 million in 2021.

This change year-over-year was primarily driven by the impairment charges noted above, partially offset by an overall benefit of $14.7 million from our acquisition of Tropicana Las Vegas and our 2021 Acquisitions.

Other (income) expense

Total other expense increased $113.1 million, or 200.5%, to $169.6 million for the year ended December 31, 2021 from $56.4 million in 2020.

This increase was driven by a loss on extinguishment of debt of $103.0 million in connection with the termination of our obligations under our prior revolving credit facility and prior term loan facility and the redemption of our 6.75% senior notes due 2027 in connection with our credit facility entered into on October 1, 2021 and a $56.9 million increase in interest expense year-over-year due to higher borrowings and interest rates.

Refer to Note 12 “ Long-Term Debt ” for further information.

Offsetting these increases was $17.0 million of income recorded to adjust the naming rights liability associated with our contracts with Sinclair to fair value and a gain on bargain purchases of $22.8 million in connection with the acquisitions of Bally’s Evansville and Bally’s Lake Tahoe.

(Benefit) provision for income taxes

Total other expense, net decreased to $161.5 million for the year ended December 31, 2022 from $212.5 million in 2021.

This decrease was driven by a loss on extinguishment of debt in the prior year of $103.0 million in connection with the termination of our obligations under our prior revolving credit facility and prior term loan facility and the redemption of our 6.75% senior notes due 2027 in connection with our credit facility entered into on October 1, 2021, coupled with a foreign exchange loss of $33.5 million in the prior year, compared to a gain of $0.5 million in 2022.

These decreases were offset by increased interest expense on our debt due to the timing of borrowings and interest rates.

Benefit for income taxes

Benefit for income taxes for the years ended December 31, 2022 and 2021 was $28.9 million and $4.4 million, respectively.

The effective tax rate for the year ended December 31, 2022 was 6.4% compared to 3.7% in 2021.

The decrease in the effective tax rate was due to an increase in state tax expense and an increase in nondeductible costs related to the acquisition of Gamesys during 2021, as well as a lower bargain purchase gain in 2021 as compared to 2020.

Further, the 2020 provision included a significant rate benefit as a result of the CARES Act, and we had a lesser benefit in the 2021 provision.

In addition, Gamesys entities are taxed at lower rates versus the US federal tax rate, which impacted 2021 beneficially due to the rate differential.

This benefit was offset by amounts related to share-based compensation, loss on derivative instruments and other permanent amounts.

The increase in the effective tax rate was due to increases in state tax expense and nondeductible costs related to the acquisition of Gamesys during 2021 offset by the impact of a current year goodwill impairment charge and a valuation allowance established associated with the potential to not be able to utilize certain deferred tax assets in the future.

Lower bargain purchase gains activity and less CARES act related tax benefits in 2022 as compared to 2021 also contributed to the increase in the effective tax rate.

Net loss and loss per share

Net loss for the year ended December 31, 2021 was $71.8 million compared to net loss of $5.5 million in 2020.

Net loss for the year ended December 31, 2022 was $425.5 million compared to $114.7 million in 2021.

As a percentage of revenue, net loss increased from 8.7% for the year ended December 31, 2021 to a net loss of 18.9% for the year ended December 31, 2022.

Diluted loss per share for the year ended December 31, 2021 and December 31, 2020 was $1.45 and $0.18, respectively, and was impacted by the factors noted above.

Adjusted EBITDA by Segment

Diluted loss per share for the year ended December 31, 2022 and 2021 was $7.32 and $2.31, respectively, and was impacted by the factors noted above.

Adjusted EBITDA and Adjusted EBITDAR by Segment

Consolidated Adjusted EBITDA was $548.5 million for the year ended December 31, 2022, an increase of $218.6 million, or 66.3%, from $329.9 million in 2021.

Adjusted EBITDA for the Casinos & Resorts segment for the year ended December 31, 2022 increased $27.9 million, or 8.8%, to $345.6 million from $317.7 million in 2021.

This increase was driven by strong results across our portfolio due to higher visitation to our properties, particularly at Bally’s Twin River property, Hard Rock Biloxi and Bally’s Dover properties, a full year of 2021 results from properties which were acquired in 2020, including Bally’s Shreveport and Bally’s Kansas City, and the inclusion of Bally’s Evansville, which was acquired during the second quarter of 2021.

Adjusted EBITDA for the North America Interactive segment was $(12.4) million for the year ended December 31, 2021.

Adjusted EBITDA for our International Interactive segment was $69.9 million for the year ended December 31, 2021, directly attributable to our acquisition of Gamesys on October 1, 2021.

Casinos & Resorts Adjusted EBITDAR was $398.9 million for the year ended December 31, 2022, which further adjusts Adjusted EBITDA for rent expense associated with our operating leases, as defined below.

The growth in 2022 was primarily driven by increases in customer volumes at certain casino properties, partially offset by local regulatory changes, such as smoking bans, adversely impacting the performance of certain other properties.

Adjusted EBITDA for the North America Interactive segment for the year ended December 31, 2022 was $(65.7) million compared to $(12.4) million in 2021.

The decrease from prior year is attributable to the acquisition of various businesses throughout 2021, as well as costs of launching in new markets.

Adjusted EBITDA for the International Interactive segment for the year ended December 31, 2022 increased $251.7 million, or 359.9%, to $321.7 million from $69.9 million in 2021, directly attributable to our acquisition of Gamesys on October 1, 2021.

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

Year Ended December 31.

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— 122 (2,707) (43,591) (46,176)

Acquisition, integration and restructuring — 182 1,444 69,662 71,288

Foreign exchange (gain) loss, net — (1,466) 977 (27) (516)

Transaction costs (2)

6,079 16,182 9,484 53,859 85,604

Share-based compensation — — — 27,912 27,912

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

Contract termination — — — 30,000 30,000

Impairment charges — 390,656 73,322 — 463,978

Planned business divestiture (3)

— 5,585 — — 5,585

Other, net (4)

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Adjusted EBITDA $ 345,617 $ (65,729) $ 321,651 $ (53,024) $ 548,515

Rent expense associated with triple net operating leases (5)

Adjusted EBITDAR $ 398,930

__________________________________

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

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

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

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

(2) Includes acquisition costs, integration costs related to our Interactive business, financing related expenses, Bally’s Chicago costs, and restructuring costs.

(3) Losses related to a North America Interactive business that Bally’s is marketing as held-for-sale as of December 31, 2022.

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

(i) Post-combination expense related to the acceleration and cash settlement of unvested historical Gamesys’ employee stock awards, (ii) Goodwill and asset impairments, (ii) deal-related, rebranding, expansion and pre-opening expenses, (iii) Employee Retention Credits related to COVID-19, (iv) Credit Agreement amendment related expenses, (v) costs related to pursuing sports betting, iGaming and lottery access in various jurisdictions, (vi) non-routine legal expenses, and (vii) net gains related to insurance recoveries.

(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 (vi) other individually de minimis expenses.

(5) Consists of the operating lease components contained within our triple net master lease dated June 4, 2021 with GLPI for the real estate assets used in the operation of Bally’s Evansville, Bally’s Dover, Bally’s Quad Cities and Bally’s Black Hawk, the individual triple net lease with GLPI for the land underlying the operations of Tropicana Las Vegas, and the triple net lease assumed in connection with the acquisition of Bally’s Lake Tahoe for real estate and land underlying the operations of the Bally’s Lake Tahoe facility.

Year Ended December 31, 2021 (in thousands)

Casinos & Resorts Other Total

Casinos & Resorts North America Interactive International Interactive Other Total

Net income (loss) $ 186,287 $ (36,879) $ 24,337 $ (288,442) $ (114,697)

Interest expense, net of interest income 37 (15) (27) 117,929 117,924

Benefit for income taxes (16,018) (53,306) (69,324)

Provision (benefit) for income taxes 72,128 (8,281) (4,261) (63,963) (4,377)

Depreciation and amortization 54,120 18,096 46,341 26,229 144,786

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— — (3) 61,074 61,071

Acquisition, integration and restructuring 20 13,237 13,257

Foreign exchange loss, net — 355 643 32,463 33,461

Transaction costs (2)

— 12,682 1,444 70,417 84,543

Share-based compensation — — — 20,143 20,143

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

Contract termination expense — — — 30,000 30,000

Impairment charges 4,675 — — — 4,675

Other, net (3)

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

(i) change in value of naming rights liabilities and (ii) gain on bargain purchase.

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

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

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

(2) Includes acquisition, integration and restructuring costs, 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) 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.

Year Ended December 31, 2020 (in thousands)

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— (6,211) (6,211)

Acquisition, integration and restructuring 1,617 10,551 12,168

Transaction costs (2)

20 14,030 14,050

Share-based compensation — 17,706 17,706

Impairment charges 8,659 — 8,659

Other, net (2)

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

(i) loss on extinguishment of debt, and (ii) other, net.

(i) change in value of naming rights liabilities and (ii) gain on bargain purchase.

(2) Includes acquisition, integration and restructuring costs and costs incurred related to the amended credit agreement.

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

(i) deal-related, rebranding, expansion and pre-opening expenses, (ii) Credit Agreement amendment related expenses, (iii) costs related to pursuing sports betting, iGaming and lottery access in various jurisdictions, (iv) non-routine legal expenses, (v) net gains from insurance recoveries, and (vi) pension payment for out-of-period unpaid contributions.

(i) rebranding (ii) Employee Retention Credits related to the COVID-19 pandemic, (iv) non-routine legal expenses, (v) storm related losses, and (vi) other individually de minimis expenses.

Year ended December 31, 2021 compared to year ended December 31, 2020

The information required by this section can be found in our Part II.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2020 .

This information can be found under Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Year ended December 31, 2021 compared to year ended December 31, 2020” in our Annual Report on Form 10-K/A for the year ended December 31, 2021.

Liquidity and Capital Resources

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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, throughout 2021, we continued to invest in our land-based casino business and began to build on our interactive/iGaming gaming business despite the COVID-19 pandemic.

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, as explained below, 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

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Effect of foreign currency on cash and cash equivalents (20,722) (42,163) —

Change in cash and cash equivalents and restricted cash classified as assets held for sale (220) — —

Net change in cash and cash equivalents and restricted cash (9,656) 148,285 (58,947)

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Cash and cash equivalents and restricted cash, end of period $ 265,184 $ 274,840 $ 126,555

A discussion of changes in cash flows comparing the years ended December 31, 2020 and 2019 has been omitted from this Form 10-K and can be found in Part II.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” of our Annual Report on Form 10-K for the year ended December 31, 2020 .

A description of changes in cash flows comparing the years ended December 31, 2021 and 2020 can be found in Part II.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” of our Annual Report on Form 10-K/A for the year ended December 31, 2021.

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2021 was $82.8 million, an increase of $63.3 million from $19.5 million in 2020.

This increase was primarily attributable to increased net loss resulting from higher interest expense due to increased borrowings, amortization expense related to Gamesys’ intangible assets and loss on extinguishment of debt, as noted above.

The increase in cash provided by operating activities was primarily attributable to total impairment charges of $464.0 million in 2022 resulting from our goodwill and asset impairment analysis related to our North America Interactive segment and an impairment charge related to an indefinite lived trademark acquired as part of the Gamesys acquisition, coupled with increased amortization in 2022 related to our 2021 Acquisitions, partially offset by the loss on extinguishment of debt recorded in the prior year.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2021 was $2.30 billion, an increase of $1.85 billion compared to $444.8 million used in investing activities for 2020.

The increase was primarily driven by an additional $1.85 billion of cash paid for acquisitions year-over-year, $2.27 billion in 2021 compared to $425.1 million in 2020, most notably cash paid for Gamesys of $1.90 billion, coupled with a $82.2 million increase in capital expenditures in connection with our expansion and renovation projects at Bally’s Atlantic City, Hard Rock Biloxi, Bally’s Kansas City and Bally’s Twin River.

These increases were offset by $144.0 million of proceeds related to the sale-leaseback transaction for Bally’s Dover with GLPI.

The decrease in cash used in investing activities was primarily driven by a decrease in cash paid for acquisitions year-over-year, coupled with a $200.0 million advance deposit received in connection with our transaction with GLPI for our Bally’s Tiverton and Hard Rock Biloxi properties, which closed in January 2023.

These decreases were offset by increased capital expenditures mainly attributable to our expansion and renovation projects at Bally’s Atlantic City, Bally’s Twin River and Bally’s Kansas City.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2021 was $2.40 billion compared to $366.4 million for 2020, an increase of $2.04 billion year-over-year.

Cash provided by financing activities in 2021 was driven by our debt borrowings, offset by repayments, as follows:

The decrease in cash provided by financing activities was driven by the change in our debt borrowings, offset by repayments, as follows:

Years Ended December 31,

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Repayments of long-term debt $ (564,450) $ (1,877,575)

In addition, we received proceeds from equity issuances from our public offering and the issuance of Sinclair penny warrants, offset in part, by increased spending on share repurchases under our capital return program, explained below.

In addition, in 2021, we received proceeds from equity issuances from our public offering and the issuance of Sinclair penny warrants, coupled with increased spending in 2022 on share repurchases under our capital return program.

Capital Return Program

On June 14, 2019, we announced that our Board approved a capital return program allowing for a total of up to $250.0 million for a share repurchase program and payment of dividends.

This was subsequently increased by $100.0 million on February 10, 2020 and another $350.0 million on October 4, 2021.

On July 26, 2019, we completed a modified Dutch auction tender offer, purchasing 2,504,971 common shares at an aggregate purchase price of $73.9 million.

In addition, during 2019 we repurchased 6,558,379 common shares at an aggregate purchase price of $148.8 million.

During the year ended December 31, 2021, we repurchased 2,188,532 common shares for an aggregate price of $87.0 million.

During the year ended December 31, 2020, we repurchased 1,812,393 common shares for an aggregate price of $33.3 million.

During the years ended December 31, 2020 and 2019, the Company paid cash dividends of $0.10 and $0.20 per common share for a total cost of approximately $3.2 million and $7.6 million, respectively.

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.

We have a Board approved capital return program under which we may expend a total of up to $700 million for a share repurchases and payment of dividends.

During the year ended December 31, 2022, we completed a modified Dutch auction tender offer (the “Offer”) and repurchased 4.7 million common shares at a price of $22.00 per common share, at an aggregate purchase price of $103.3 million.

We also repurchased 6,621,841 common shares for an aggregate purchase price of $153.4 million during the year ended December 31, 2022.

As of December 31, 2022, there was $194.6 million available for use under the Capital Return Program, subject to limitations in our regulatory and debt agreements.

Future share repurchases may be effected in various ways, which could include open-market or private repurchase transactions, accelerated stock repurchase programs, tender offers or other transactions.

The amount, timing and terms of any return of capital transaction will be determined based on prevailing market conditions and other factors.

There is no fixed time period to complete share repurchases.

We did not pay cash dividends during the year ended December 31, 2022, nor do we 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.

As of December 31, 2021, there was $347.9 million available for use under the capital return program.

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

May 2019 Senior Secured Credit Facility

On May 10, 2019, the Company entered into a credit agreement with Citizens Bank, N.A., as administrative agent, and the lenders party thereto, consisting of a $300 million term loan B facility and a $250 million revolving credit facility.

On May 11, 2020, the Company amended the credit agreement to increase the term loan facility by $275 million to $525 million.

On March 9, 2021, the Company amended the credit agreement to increase the borrowing limit under the revolving credit facility to $325 million.

The Company’s obligations under the revolving credit facility and the term loan facility were terminated and amounts outstanding were repaid in connection with the Company’s entry into the Credit Facility on October 1, 2021 as described below.

6.75% Senior Notes due 2027

On May 10, 2019, the Company issued $400 million aggregate principal amount of 6.75% unsecured senior notes due June 1, 2027 and, on October 9, 2020, the Company issued an additional $125 million aggregate principal amount of 6.75% unsecured senior notes due June 1, 2027 (together, the “2027 Notes”).

On September 7, 2021, the Company redeemed $210 million aggregate principal amount of the 2027 Notes at a redemption price of 106.750% of the principal amount using a portion of the proceeds of the Company’s April 2021 public offering of common stock.

On October 5, 2021, the Company redeemed the remaining $315 million aggregate principal amount of the 2027 Notes at a redemption price of 109.074% of the principal amount using a portion of the proceeds of its Term Loan Facility (as defined herein).

As of December 31, 2021, no amounts pertaining to these 2027 Notes remained outstanding.

In connection with the termination of the prior credit agreement and the 2027 Notes, the Company recorded a loss on extinguishment of debt of $103.0 million in the year ended December 31, 2021.

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 contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, (i) incur additional indebtedness, (ii) pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, (iii) enter into certain transactions with affiliates, (iv) sell or otherwise dispose of assets, (v) create or incur liens and (vi) 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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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 Item 8 of this Annual Report on Form 10-K.

GLPI Master Lease

Our Master Lease is accounted for as an operating lease and was $384.8 million as of December 31, 2021.

In connection with the acquisition of Bally’s Evansville, an affiliate of GLPI has agreed to acquire the real estate associated with the Evansville Casino from the Seller 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 Dover Downs Gaming & Entertainment, Inc.

(“Dover Downs”) 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 Evansville and commencement of the Master Lease was June 4, 2021.

During the second quarter of 2021, the Company sold the real estate associated with Dover Downs to GLPI and recorded a gain of $53.4 million representing the difference in the transaction price and the de-recognition of assets.

This gain is reflected as “Gain on sale-leaseback” in the consolidated statements of operations.

We also expect to finance our proposed agreement to acquire the Tropicana Las Vegas for $150 million through sale-leaseback transactions with GLPI.

Refer to Note 14 “ Long-Term Debt ” in Item 8 of this Annual Report on Form 10-K for further information.

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 $834.8 million as of December 31, 2021.

The Company is committed under various operating lease agreements for real estate and property used in operations.

Minimum rent payable under operating leases was $1.71 billion as of December 31, 2022, of which $82.7 million is due within the next twelve months.

Refer to Note 15 “ Leases ” in Item 8 of this Annual Report on Form 10-K for further information.

As of December 31, 2022, the Company’s Bally’s Evansville, Bally’s Dover, Bally’s Quad Cities and Bally’s Black Hawk properties were leased under the terms of a master lease agreement (the “Master Lease”) with GLPI.

The Master Lease has an initial term of 15 years and includes four, five-year options to renew and requires combined minimum annual payments of $52.0 million, subject to a minimum 1% annual escalation or greater escalation dependent on CPI.

On January 3, 2023, we completed a transaction with GLP Capital, L.P., the operating partnership of GLPI, related to the land and real estate assets of Bally’s Tiverton and Hard Rock Biloxi for a total consideration of $635.0 million.

The transaction was structured as a tax-free capital contribution and a substantial portion of the proceeds will be applied to reduce the Company’s debt.

These properties will be added to the Master Lease, increasing minimum annual payments by $48.5 million.

In addition to the properties under the Master Lease, the Company has also entered into a sale-leaseback transaction with GLPI for the non-land assets of Tropicana Las Vegas, which the Company acquired during the fourth quarter of 2022.

This lease has an initial term of 50 years (with a maximum term of 99 years with renewal options) at annual rent of $10.5 million, subject to minimum 1% annual escalation or greater escalation dependent on CPI.

Financing Obligation

Bally’s Chicago Operating Company, LLC, an indirect wholly-owned subsidiary of the Company, has entered into an agreement to lease the land on which Bally’s Chicago will be built.

The lease commenced November 18, 2022 and has a 99-year term followed by ten separate 20-year renewals at the Company’s option.

As of December 31, 2022, the Company has recorded this lease as a corresponding long-term financing obligation of $200.0 million.

Capital Expenditures

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For the year ended December 31, 2022, capital expenditures were $212.3 million compared to $97.5 million in 2021.

In 2020, as a result of the COVID-19 pandemic and the Company’s efforts to proactively manage expenses and retain sufficient liquidity, all major projects were suspended.

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.

In addition, during 2022 we plan to commence construction on the Centre County, Pennsylvania development project.

We expect to fund these expenditures from a combination of cash flow from operations and cash on hand.

Because the pandemic is ongoing and the duration and severity remains unclear, it is difficult to forecast any impacts on our future results and therefore, planned spending on these projects may be impacted as we continue in 2022.

Below is a summary of our planned projects:

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.

In 2022 we continued our spending on maintenance and planned projects at our casino properties, making significant progress on our Bally’s Twin River and Bally’s Atlantic City properties.

We expect that significant capital expenditures in 2023 will decrease as compared to 2022 as we focus on generating cash flows to invest in long-term growth opportunities for the entire Bally’s portfolio.

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, ending in 2043, with Rhode Island to expand the property and add additional amenities along with other capital improvements.

As a major component of this, we have constructed and opened a 14,000 square foot Korean-style spa, and are currently in the process of constructing a 40,000 square foot casino expansion, for a combined investment of approximately $60 million.

The spa opened in January 2023, and the expanded casino is expected to open in the second quarter of 2023.

Bally’s Atlantic City - Construction on our Bally’s Atlantic City property commenced in 2021.

We are committed to invest approximately $100 million over a span of 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.

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, an outdoor beer hall and lobby bar.

Spending in 2023 is estimated at approximately $20 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.

Spend on the project is estimated to be approximately $50 million, largely in 2022, with a target completion date in the first half of 2023.

Spending on the project is estimated to be approximately $50 million, with a target completion date in the summer 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 2022 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.

We estimate the total cost of the project, including construction, licensing and iGaming/sports betting 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 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.

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 in the second 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.

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, £11.2 million of the cash consideration was deferred and payable (plus interest) to GHL’s majority shareholders 30 months after closing.

The Company has recorded $15.1 million representing the deferred consideration which is payable on March 26, 2022, and recorded within current liabilities of the consolidated balance sheet as of December 31, 2021.

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

As of December 31, 2022, obligations related to these agreements were $83.3 million, with contracts extending through June 2036.

Critical Accounting Estimates

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The following is a summary of our critical accounting estimates and how they are applied in preparation of our consolidated financial statements.

Valuation of Intangible Assets Acquired in Business Combinations

Intangible assets consist primarily of gaming licenses, trade names, developed technology and customer lists which have all been obtained through business combinations or asset acquisitions, as well as a Naming Rights intangible asset obtained through our agreement with Sinclair and internally developed software attributable to our interactive businesses.

Gaming licenses obtained through business combinations are generally recorded at their fair values through purchase accounting using the Greenfield Method under the income approach.

This method estimates isolated income that properly attributable to a license based on modeling a hypothetical start-up company going into business without any other assets than the gaming license being valued and building a new casino with similar utility to the existing casino.

Using this method, the valuation of the gaming license is dependent upon significant estimates such as projected revenues and cash flows, estimated construction costs, duration of that construction, pre-opening expenses and appropriate discounting.

Gaming licenses accounted for as asset acquisitions are valued at cost.

Trade names obtained through business combinations are valued using the relief-from-royalty method under the income approach.

This method estimates the cost savings that accrue to the owner of an intangible asset who would otherwise have to pay royalties or license fees on revenues earned through the use of the asset.

As such, the value of a trade name acquired through a business combination is dependent upon estimates such as projected revenues, selection of an appropriate hypothetical royalty rate and appropriate discounting.

Trade names accounted for as asset acquisitions are valued at cost.

Developed technology is obtained through business combinations and is recorded at fair value through purchase accounting using the Multi-Period Excess Earnings Method under the income approach.

The principle behind this method is that the value of an intangible asset is equal to the present value of the incremental after tax cash flows attributable only to the subject intangible asset after deducting Contributory Asset Charges (“CACs”).

The principle behind a CAC is that an intangible asset ‘rents’ or ‘leases’ from a hypothetical third party all the assets it requires to produce the cash flows resulting from its development, that each project rents only those assets it needs and not the ones that it does not need, and that each project pays the owner of the assets a fair return on the value of the rented assets.

Under this method, the valuation of developed technology is dependent on estimates such as projected revenues and cash flows, CAC and appropriate discounting.

The Naming Rights intangible asset obtained through our agreement with Sinclair was accounted for as an asset acquisition and recorded at its cost at the acquisition date.

The cost consisted of 1) discounted cash payments due over a 10 year term, 2) the fair value of warrants and options issued to Sinclair, and 3) an estimate of tax receivable agreement payments due to Sinclair.

The cash payments were subject to estimation through the selection of an appropriate discount rate.

The warrants and options were estimated at their fair values using an option pricing model, which was dependent upon assumptions and key inputs such as our common stock price volatility, risk free rates, our common stock price, expected terms and our estimated probabilities of achievement of performance vesting conditions inherent in certain warrants.

Certain gaming licenses and trade names are considered to be indefinite lived based on future expectations of operating our gaming properties indefinitely, continuing to brand our corporate name and certain properties under the Bally’s trade name indefinitely and continuing to indefinitely brand our online casino offerings within the International Interactive segment with the trade names acquired through the Gamesys acquisition.

Intangible assets not subject to amortization are reviewed for impairment annually as of October 1 and between annual test dates whenever events or changes in circumstances may indicate that the carrying amount of the related asset may not be recoverable.

For its finite-lived intangible assets, we establish a useful life upon initial recognition based on the period over which the asset is expected to contribute to the future cash flows of the Company and periodically evaluates the remaining useful lives to determine whether events and circumstances warrant a revision to the remaining amortization period.

Finite-lived intangible assets are amortized over their remaining useful lives in a pattern in which the economic benefits of the intangible asset are consumed, which is generally on a straight-line basis.

Valuation and Subsequent Measurement of Goodwill

Goodwill represents the excess future economic benefits of a business combination and is measured as the excess of consideration transferred over the fair value of the assets acquired and liabilities assumed in a business combination.

Accounting for goodwill involves significant management judgment both in the initial measurement through purchase price allocations of business combinations and valuations of assets acquired within those business combinations and in the ongoing assessment of impairment.

We are required to test goodwill for impairment at least annually and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

We have elected to perform our annual tests for indications of goodwill impairment as of the first day of the fourth quarter of each year.

We test for goodwill impairment at the reporting unit level, which is at or one level below the operating segment level.

Goodwill and Intangible Assets

Assessing goodwill and indefinite-lived intangible assets for impairment is a process that involves significant judgment and requires a qualitative and quantitative analysis with many assumptions which fluctuate based on our business.

We review goodwill and indefinite-lived intangible assets at least annually and between annual test dates if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

We have elected to perform our annual tests for indications of impairment as of the first day of the fourth quarter of each year.

The evaluation of goodwill and indefinite-lived intangible assets requires the use of estimates about future operating results of each reporting unit to determine the estimated fair value of the reporting unit and the indefinite lived intangible assets.

The Company must make various assumptions and estimates in performing its impairment testing, including assumptions and estimates about future cash flows.

Changes in estimates and assumptions used in estimating future cash flows could produce significantly different results.

If our ongoing estimates of future cash flows are not met, we may have to record impairment charges in future periods.

When assessing goodwill for impairment, first, qualitative factors are assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

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If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed.

The quantitative goodwill test compares the estimated fair value of each reporting unit with its carrying value (including goodwill and identifiable intangible assets).

The fair value of a reporting unit is estimated using an income approach, whereby a discounted cash flow model is utilized and may also consider a market approach using guideline public company data.

There are significant management judgments involved in estimating fair value through the use of a discounted cash flow model, which include, but not limited to, (i) projected financial information for the reporting unit and (ii) selecting an appropriate discount rate.

If the reporting unit’s estimated fair value exceeds its estimated net book value, goodwill is not impaired.

An impairment is recognized if the estimated fair value of a reporting unit is less than its estimated net book value, in an amount not to exceed the carrying value of the reporting unit’s goodwill.

For the quantitative goodwill impairment test, we estimate the fair value of the reporting unit and asset group using both income and market-based approaches.

Specifically, the Company applies the discounted cash flow (“DCF”) model under the income approach and the guideline company under the market approach and weighs the results of the two valuation methodologies based on the facts and circumstances surrounding the reporting unit.

For the DCF model, we rely on the present value of expected future cash flows, including terminal value, utilizing a market-based weighted average cost of capital (“WACC”) determined separately for the reporting unit as of the valuation date.

The determination of fair value under the DCF model involves the use of significant estimates and assumptions, including revenue growth rates driven by future gaming activity, operating margins, capital expenditures, working capital requirements, tax rates, terminal growth rates, and discount rates.

For the market approach, we utilize a comparison of the reporting unit to comparable publicly-traded companies and transactions and, based on the observed earnings multiples, ultimately selects multiples to apply to the reporting unit.

We then compare the fair value of our reporting units to the carrying amounts.

If the carrying amount of the reporting unit exceeds the fair value, an impairment is recorded equal to the amount of the excess (not to exceed the amount of goodwill allocated to the reporting unit).

Assumptions and estimates about future cash flow levels and multiples by individual reporting units are complex and subjective.

The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining the fair value of goodwill, including long-term revenue growth projections, profitability, discount rates, external factors, such as industry, market and macro-economic conditions, and internal factors, such as changes in the Company’s business strategy, which may re-allocate capital and resources to different or new opportunities but, in turn, may be to the detriment of an individual reporting unit.

The Company completed its annual assessment for goodwill impairment as of October 1, 2022, which resulted in impairment charges to goodwill.

Reporting units with goodwill which were identified as having less than a substantial cushion were subject to a sensitivity analysis to determine the potential impairment losses.

The carrying value of the International Interactive reporting unit was $2.3 billion as of December 31, 2022 and the estimated fair value exceeded this amount by 8%.

The most sensitive inputs to the estimated fair value of the International Interactive reporting unit were the discount rate and terminal growth rate.

A hypothetical 100 basis point decline in the discount rate or a 50 basis point decline in the terminal growth rate would not have resulted in an impairment charge.

The carrying value for the North America Interactive reporting unit exceeded its fair value as of October 1, 2022 and the Company recorded an impairment loss during the year ended December 31, 2022.

The most sensitive input to the estimated fair value of the North America Interactive reporting unit was forecasted revenue.

A hypothetical 10% decline in forecasted revenues for the reporting unit would have resulted in an additional goodwill impairment charge of $10 million.

Material changes in these estimates could occur and result in additional impairment in future periods.

We consider certain of our gaming licenses and tradenames as indefinite-lived intangible assets that do not require amortization based on our future expe ctations to operate our gaming properties indefinitely as well as our historical experience in renewing these intangible assets at minimal cost with various state commissions.

Rather, these intangible assets are tested annually for impairment, or more frequently if indicators of impairment exist, by comparing the fair value of the recorded assets to their carrying amount.

If the carrying amounts of the indefinite-lived intangible assets exceed their fair value, an impairment loss is recognized.

We assess the fair value of our tradenames using the relief-from-royalty method under the income approach.

Based on the annual impairment assessment of intangible assets, the Company identified indefinite lived trademarks totaling $206.3 million in the International Interactive segment that did not significantly exceed their respective carrying values.

The Company recognized an impairment loss of $73.3 million related to one of the trademarks acquired as part of the Gamesys acquisition.

This trademark is being de-emphasized for other newer brands in Asia and Rest of World, resulting in a decline in actual and projected revenues attributable to the trademark as compared to when the fair value was determined during the purchase price allocation of the Gamesys acquisition.

The fair value of the trademarks was determined using a relief from royalty method, which utilized Level 3 inputs such as projected revenue, discount rates, long term growth rates and royalty rates.

To the extent revenues associated with these trademarks decline in the near future, discount rates increase significantly, or selected royalty rates decline, we may recognize further impairments, and such impairments could be material.

The selected royalty rate represents the most sensitive input in our estimates and a hypothetical increase of 50 bps in the royalty rates would result in additional impairment of approximately $10.6 million on the assets that do not significantly exceed their carrying values.

Additionally, a hypothetical 10% decline in projected revenue derived from the trademarks would result in additional impairment of approximately $5.6 million on the assets that do not significantly exceed their carrying values.

We prepare our income tax provision in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes.

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The consolidated financial statements reflect expected future tax consequences of uncertain tax positions presuming the taxing authorities’ full knowledge of the position and all relevant facts.

We assessed our deferred tax liabilities arising from taxable temporary differences and concluded such liabilities are not a sufficient source of income for the realization of deferred tax assets, including indefinite life taxable temporary differences which offset, subject to limitation, deferred tax assets with unlimited carryovers, such as the Section 163(j) interest limitation.

Accordingly, a $60.1 million valuation allowance has been established as of December 31, 2022.

The allocation of shared costs and intangible assets among our subsidiaries in various U.S.

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federal taxes, and conforming states.

Recently Issued Accounting Pronouncements

For a discussion of recently issued financial accounting standards, refer to Note 4 “ Recently Issued Accounting Pronouncements ,” of Part II.

Item 8 of this Annual Report on Form 10-K for further detail.

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-K

Item 7. Management’s Discussion and Analysis