What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-09 compared with 2022-11-09 · 441 added, 682 removed, 654 unchanged (63% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 30,

2023 December 31,

5 unchanged sentences

Prepaid expenses and other current assets 93,223 100,717

Assets held for sale 15,801 17,177

Total current assets 604,206 522,713

12 unchanged sentences

Accrued liabilities 454,726 573,931

Liabilities related to assets held for sale 1,773 3,409

Total current liabilities 657,963 755,802

Long-term debt, net 3,315,064 3,469,105

Long-term portion of financing obligation 200,000 200,000

Long-term portion of lease liabilities 1,177,704 803,212

Pension benefit obligations 3,924 4,647

Deferred tax liability 204,841 138,017

Naming rights liabilities 107,756 109,807

Contingent consideration payable 8,436 34,931

Other long-term liabilities 75,462 17,923

Total liabilities 5,738,790 5,493,866

Commitments and contingencies

Commitments and contingencies (Note 18)

Stockholders’ equity:

7 unchanged sentences

Treasury stock, at cost — —

Retained deficit ( 58,364 ) ( 181,581 )

Accumulated deficit ( 340,793 ) ( 535,373 )

Accumulated other comprehensive loss ( 243,567 ) ( 295,640 )

7 unchanged sentences

(In thousands, except per share data)

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

2022 2021 2022 2021

Three Months Ended March 31,

Gaming $ 486,895 $ 463,702

Hotel 45,675 32,903 106,539 68,277

Food and beverage 31,724 29,504 83,147 68,386

Retail, entertainment and other 35,117 20,574 104,807 43,549

Non-gaming 111,825 84,569

Total revenue 598,720 548,271

1 unchanged sentence

Gaming 217,661 219,212

Hotel 11,752 9,413 30,065 22,068

Food and beverage 22,766 21,419 63,620 50,632

Retail, entertainment and other 18,976 8,802 46,830 12,620

Advertising, general and administrative 191,953 140,500 555,276 322,210

Goodwill and asset impairment — — — 4,675

Pre-opening — 232 717 1,772

Acquisition, integration and restructuring 9,282 6,797 24,674 37,457

Gain from insurance recoveries, net of losses ( 1,263 ) ( 7,942 ) ( 1,413 ) ( 19,197 )

Rebranding 72 427 546 1,722

Gain on sale-leaseback, net — — ( 50,766 ) ( 53,425 )

Non-gaming 52,344 40,637

General and administrative 251,608 187,021

Gain from sale-leaseback, net ( 374,186 ) —

Depreciation and amortization 74,561 78,881

2 unchanged sentences

Other income (expense):

Interest income 136 547 446 1,601

Interest expense, net of amounts capitalized ( 63,264 ) ( 45,685 )

Change in value of naming rights liabilities 37 6,965 33,448 ( 1,371 )

Gain (adjustment) on bargain purchases — ( 1,039 ) ( 107 ) 23,075

Loss on extinguishment of debt — ( 19,419 ) — ( 19,419 )

Foreign exchange gain (loss) 253 ( 42,896 ) 2,248 ( 43,353 )

Other, net 1,350 ( 3,084 ) 10,974 ( 6,450 )

Other non-operating income, net 2,610 19,479

Total other income (expense), net ( 60,654 ) ( 26,206 )

1 unchanged sentence

Provision (benefit) for income taxes 137,742 ( 5,575 )

Net income (loss) $ 593 $ ( 57,645 ) $ 61,983 $ 592

Basic earnings (loss) per share $ 0.01 $ ( 1.16 ) $ 1.05 $ 0.01

Net income $ 178,336 $ 1,889

Basic earnings per share $ 3.28 $ 0.03

Weighted average common shares outstanding - basic 54,420 60,017

Diluted earnings (loss) per share $ 0.01 $ ( 1.16 ) $ 1.05 $ 0.01

Diluted earnings per share $ 3.24 $ 0.03

Weighted average common shares outstanding - diluted 55,089 60,120

1 unchanged sentence

BALLY’S CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(In thousands)

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

2022 2021 2022 2021

Net income (loss) $ 593 $ ( 57,645 ) $ 61,983 $ 592

Three Months Ended March 31,

Net income $ 178,336 $ 1,889

Other comprehensive income (loss):

Foreign currency translation adjustment $ ( 213,193 ) $ ( 781 ) $ ( 483,548 ) $ ( 1,414 )

Defined benefit pension plan reclassification adjustment (1)

Other comprehensive loss ( 213,193 ) ( 740 ) ( 483,548 ) ( 1,292 )

Total comprehensive loss $ ( 212,600 ) $ ( 58,385 ) $ ( 421,565 ) $ ( 700 )

__________________________________

(1) Tax effect of reclassification adjustment was de minimis.

Foreign currency translation adjustment, net of tax 52,073 ( 71,542 )

Other comprehensive income (loss) 52,073 ( 71,542 )

Total comprehensive income (loss) $ 230,409 $ ( 69,653 )

See accompanying notes to condensed consolidated financial statements.

8 unchanged sentences

Balance as of December 31, 2022 46,670,057 $ 466 $ 1,636,366 $ — $ ( 535,373 ) $ ( 295,640 ) $ 428 $ 806,247

52,254,477 $ 530 $ 1,849,068 $ ( 29,166 ) $ ( 181,581 ) $ ( 26,809 ) $ 3,760 $ 1,615,802

Release of restricted stock 122,849 1 ( 2,534 ) — — — — ( 2,533 )

Release of restricted stock and other stock awards 124,050 1 ( 1,332 ) — — — — ( 1,331 )

Share-based compensation — — 6,040 — — — — 6,040

1 unchanged sentence

Share repurchases ( 1,026,343 ) — — ( 19,753 ) — — — ( 19,753 )

Stock options exercised 20,000 — 86 — — — — 86

Penny warrants exercised 383,934 4 — — — — — 4

Issuance of MKF penny warrants — — 12,010 — — — — 12,010

Settlement of consideration to SportCaller 107,832 1 3,699 — — — — 3,700

Other comprehensive loss — — — — — ( 71,542 ) — ( 71,542 )

Other comprehensive income — — — — — 52,073 — 52,073

Net income — — — — 178,336 — — 178,336

Balance as of March 31, 2023 45,767,764 $ 457 $ 1,605,087 $ — $ ( 340,793 ) $ ( 243,567 ) $ 428 $ 1,021,612

Release of restricted stock 38,775 — ( 308 ) — — — — ( 308 )

Share-based compensation — — 6,322 — — — — 6,322

Other comprehensive loss — — — — — ( 198,813 ) — ( 198,813 )

Net income — — — — 59,501 — — 59,501

Balance as of June 30, 2022 52,577,251 $ 525 $ 1,838,238 $ — $ ( 127,434 ) $ ( 297,164 ) $ 3,760 $ 1,417,925

Release of restricted stock 14,239 — ( 41 ) — — — — ( 41 )

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

Retirement of treasury shares — ( 54 ) ( 187,677 ) 119,254 68,477 — — —

Share repurchases (including tender offer) ( 5,368,334 ) — — ( 119,254 ) — — — ( 119,254 )

Conversion of non-controlling interest - Telescope 64,145 1 3,187 — — — ( 3,188 ) —

Other comprehensive loss — — — — — ( 213,193 ) — ( 213,193 )

Net income — — — — 593 — — 593

Balance as of September 30, 2022 47,287,301 $ 472 $ 1,660,422 $ — $ ( 58,364 ) $ ( 510,357 ) $ 572 $ 1,092,745

BALLY’S CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

(In thousands, except share data)

Common Stock Additional

1 unchanged sentence

Stock Retained

Earnings Accumulated Other Comprehensive Loss Non-controlling Interest Total Stockholders’

(Deficit) Earnings Accumulated Other Comprehensive Loss Non-controlling Interest Total Stockholders’

Shares Outstanding Amount

Balance as of December 31, 2021 52,254,477 $ 530 $ 1,849,068 $ ( 29,166 ) $ ( 181,581 ) $ ( 26,809 ) $ 3,760 $ 1,615,802

Release of restricted stock 23,811 — ( 990 ) — — — — ( 990 )

Release of restricted stock and other stock awards 122,849 1 ( 2,534 ) — — — — ( 2,533 )

Share-based compensation — — 5,095 — — — — 5,095

1 unchanged sentence

Penny warrants exercised 383,934 4 — — — — — 4

Reclassification of Sinclair options — — 59,724 — — — — 59,724

Retirement of treasury shares — ( 11 ) ( 35,200 ) 42,454 ( 7,243 ) — — —

Share repurchases ( 350,616 ) — — ( 13,288 ) — — — ( 13,288 )

Issuance of MKF penny warrants — — 12,010 — — — — 12,010

Shares issued for purchase of SportCaller 221,391 2 11,774 — — — — 11,776

Settlement of consideration to SportCaller 107,832 1 3,699 — — — — 3,700

Other comprehensive loss — — — — — ( 71,542 ) — ( 71,542 )

Net loss — — — — ( 10,705 ) — — ( 10,705 )

Balance as of March 31, 2021 31,894,089 $ 318 $ 434,457 $ ( 9 ) $ 24,087 $ ( 4,156 ) $ — $ 454,697

Release of restricted stock 9,181 — ( 205 ) ( 116 ) — — — ( 321 )

Share-based compensation — — 3,901 — — — — 3,901

Retirement of treasury shares — ( 21 ) ( 28,488 ) 114,842 ( 86,333 ) — — —

Common stock offering 12,650,000 127 667,746 — — — — 667,873

Sinclair shares exchanged for penny warrants ( 2,086,908 ) — 114,717 ( 114,717 ) — — — —

Sinclair issuance of penny warrants — — 50,000 — — — — 50,000

Bally’s Interactive equity issuance 2,084,765 21 121,479 — — — — 121,500

Stock options exercised 40,000 — 172 — — — — 172

Other comprehensive income — — — — — 460 — 460

Net income — — — — 1,889 — — 1,889

Balance as of June 30, 2021 44,591,127 $ 445 $ 1,363,779 $ — $ 6,696 $ ( 3,696 ) $ — $ 1,367,224

Release of restricted stock 483 — ( 12 ) — — — — ( 12 )

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

Retirement of treasury shares — — ( 308 ) 585 ( 277 ) — — —

Bally’s Interactive equity issuance ( 10,042 ) — — ( 585 ) — — — ( 585 )

Acquired non-controlling interest — — — — — — 3,760 3,760

Other comprehensive loss — — — — — ( 740 ) — ( 740 )

Net loss — — — — ( 57,645 ) — — ( 57,645 )

Balance as of September 30, 2021 44,581,568 $ 445 $ 1,368,908 $ — $ ( 51,226 ) $ ( 4,436 ) $ 3,760 $ 1,317,451

Balance as of March 31, 2022 52,538,476 $ 525 $ 1,832,224 $ — $ ( 186,935 ) $ ( 98,351 ) $ 3,760 $ 1,551,223

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2023 2022

1 unchanged sentence

Net income $ 178,336 $ 1,889

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization 74,561 78,881

1 unchanged sentence

Share-based compensation 6,040 5,095

Goodwill and asset impairment — 4,675

Amortization of debt discount and debt issuance costs 2,766 2,417

Loss on extinguishment of debt — 19,419

Gain from insurance recoveries ( 1,263 ) ( 18,660 )

Gain on sale-leaseback, net ( 50,766 ) ( 53,425 )

Gain on sale-leaseback ( 374,186 ) —

Gain on extinguishment of debt ( 4,044 ) —

Deferred income taxes 58,818 ( 18,594 )

(Gain) loss on assets and liabilities measured at fair value ( 437 ) 21,280

Loss on assets and liabilities measured at fair value ( 310 ) 139

Change in value of naming rights liabilities 267 ( 13,379 )

Change in contingent consideration payable 1,206 ( 5,859 )

Adjustment (gain) on bargain purchase 107 ( 23,075 )

Foreign exchange (gain) loss ( 2,227 ) 43,353

Adjustment on bargain purchase — 107

Foreign exchange loss (gain) 4,308 ( 175 )

Other operating activities ( 693 ) 1,925

Changes in current operating assets and liabilities 22,847 ( 38,857 )

Net cash provided by operating activities 225,316 70,843

Net cash (used in) provided by operating activities ( 16,112 ) 20,810

Cash flows from investing activities:

1 unchanged sentence

Proceeds from sale-leaseback 411,000 —

Advance deposit in connection with sale-leaseback transactions 200,000 —

Foreign exchange forward contract premiums — ( 22,592 )

Capital expenditures ( 43,678 ) ( 54,516 )

Insurance proceeds 1,265 18,660

Cash paid for internally developed software ( 7,143 ) ( 14,956 )

Acquisition of gaming licenses ( 1,900 ) ( 860 )

Purchase of equity securities ( 3,175 ) —

Other intangible asset acquisitions — ( 1,500 )

Other investing activities ( 400 ) ( 123 )

Net cash used in investing activities ( 69,455 ) ( 302,127 )

Net cash provided by (used in) investing activities 319,636 ( 71,955 )

Cash flows from financing activities:

1 unchanged sentence

Repayments of long-term debt ( 152,483 ) ( 84,863 )

Payment of financing fees — ( 9,968 )

Payment of redemption premium on debt extinguishment — ( 14,175 )

Payment of deferred consideration ( 30,025 ) —

Share repurchases ( 19,753 ) ( 13,288 )

Issuance of common stock, net — 667,872

Issuance of Sinclair penny warrants — 50,000

Other financing activities ( 1,332 ) ( 2,444 )

1 unchanged sentence

Effect of foreign currency on cash and cash equivalents 2,819 ( 4,430 )

Change in cash and cash equivalents held for sale ( 1,097 ) —

Net change in cash and cash equivalents and restricted cash 131,678 ( 51,170 )

6 unchanged sentences

Unpaid property and equipment $ 32,095 $ 33,743

Stock and equity instruments issued for acquisition of SportCaller and Monkey Knife Fight — 197,383

Acquisitions in exchange for contingent liability — 58,685

Deferred purchase price payable — 14,071

Deposit applied to acquisition purchase price — 4,000

Non-controlling interest ( 3,188 ) 3,760

Bally’s Chicago - land development liability 142,567 —

Investment in GLP Capital, L.P.

Investment in RI Joint Venture 17,832 —

BALLY’S CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

March 31, December 31,

Reconciliation of cash and cash equivalents and restricted cash:

Cash and cash equivalents $ 344,266 $ 212,515

Restricted cash 52,596 52,669

Total cash and cash equivalents and restricted cash $ 396,862 $ 265,184

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

Description of Business

Bally’s Corporation (the “Company”, “Bally’s”, “we” or “us”) is a global gaming, hospitality and entertainment company with casinos and resorts and online gaming (“iGaming”) business-to-business-to-consumer (“B2B2C”) businesses.

Bally’s Corporation (the “Company,” or “Bally’s”) is a global gaming, hospitality and entertainment company with casinos and resorts and online gaming (“iGaming”) businesses.

The Company owns and manages the following casino and resort properties:

29 unchanged sentences

__________________________________

(1) Properties leased from Gaming and Leisure Properties, Inc.

(1) Includes Bally’s Black Hawk North Casino, Bally’s Black Hawk West Casino and Bally’s Black Hawk East Casino.

Under the North America Interactive reportable segment, the Company owns and manages the following businesses:

• Bally’s Interactive, a B2B2C sportsbook and iCasino platform provider and operator;

• Horses Mouth Limited (“SportCaller”), a business-to-business (“B2B”) free-to-play game provider for sports betting companies;

• Monkey Knife Fight (“MKF”), a business-to-consumer daily fantasy sports (“DFS”) platform and operator;

• Joker Gaming, known as Live at the Bike, an online subscription streaming service featuring livestream and on-demand poker videos and podcasts;

• the Association of Volleyball Professionals (“AVP”), a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the United States (“US”);

• Telescope Inc.

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

• Degree 53, a United Kingdom (“UK”)-based creative agency that specializes in multi-channel website and personalized mobile app and software development for the online gambling and sports industries.

The North America Interactive reportable segment also includes the North American operations of Gamesys.

The Company’s International Interactive reportable segment includes the interactive activities in Europe and Asia of Gamesys Group Ltd.

(“Gamesys”), a B2B2C iCasino and online bingo platform provider and operator, acquired by the Company on October 1, 2021, and Solid Gaming, a games content aggregation business.

(2) Properties leased from Gaming and Leisure Properties, Inc.

Refer to Note 15 “ Leases ” for further information.

The North America Interactive reportable segment includes a portfolio of sports betting, iGaming and free-to-play gaming brands and the North American operations of Gamesys Group Ltd.

(“Gamesys”), an iCasino and online bingo platform provider and operator.

The Company’s International Interactive reportable segment includes the interactive activities in Europe and Asia of Gamesys.

Refer to Note 19 “ Segment Reportin g” for further information.

The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “BALY.”

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of the Company, its majority-owned subsidiaries and entities the Company identifies as variable interest entities (“VIEs”), of which the Company is determined to be the primary beneficiary.

All intercompany transactions and balances have been eliminated in the consolidation.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, its majority-owned subsidiaries and entities the Company identifies as variable interest entities (“VIEs”), of which the Company is determined to be the primary beneficiary.

All intercompany transactions and balances have been eliminated in consolidation.

Certain prior year amounts have been reclassified to conform to the current year’s presentation.

1 unchanged sentence

Adjustments resulting from financial statement translations are reflected as a separate component of accumulated other comprehensive income (loss).

Foreign currency transaction gains and losses are included in net income (loss).

Foreign currency transaction gains and losses are included in net income.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (the “SEC”) for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of the SEC’s Regulation S-X.

5 unchanged sentences

The actual results that we experience may differ materially from our estimates.

COVID-19 Pandemic

As of September 30, 2022, the Company’s properties are all operating with minimal restrictions.

Although the Company is experiencing positive trends as a result of the reopening of its properties, the COVID-19 pandemic is ongoing and future developments, which are uncertain and cannot be predicted at this time, could have a material negative impact on operations.

SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents and Restricted Cash

The Company considers all cash balances and highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.

As of September 30, 2022 and December 31, 2021, restricted cash of $ 55.7 million and $ 68.6 million, respectively, consisted primarily of player deposits and payment service provider deposits in connection with the Company’s iGaming operations.

Restricted cash also includes Video Lottery Terminal (“VLT”) and table games cash payable to the State of Rhode Island and certain cash accounts at other properties, which are unavailable for the Company’s use.

The following table reconciles cash and restricted cash in the condensed consolidated balance sheets to the total shown on the condensed consolidated statements of cash flows.

September 30, December 31,

(in thousands) 2022 2021

Cash and cash equivalents $ 164,462 $ 206,193

Restricted cash 55,669 68,647

Total cash and cash equivalents and restricted cash $ 220,131 $ 274,840

Rhode Island Joint Venture

On January 1, 2023, the Company and International Game Technology PLC (“IGT”) contributed certain tangible assets and leases to Rhode Island VLT Company, LLC (“RIVLT”) in exchange for equity interests of RIVLT.

The Company contributed video lottery terminals (“VLTs”) and player tracking equipment to the joint venture for a 40 % equity interest of RIVLT.

The joint venture will be accounted for under the equity method of accounting whereby the Company will record its 40 % share of the total joint venture net income or loss each period within Other non-operating income, net” in the condensed consolidated statements of operations.

For the three months ended March 31, 2023, the Company recorded equity income of $ 2.1 million.

Variable Interest Entities

The Company evaluates entities for which control is achieved through means other than voting rights to determine if it is the primary beneficiary of a VIE.

An entity is a VIE if it has any of the following characteristics (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support (ii) equity holders, as a group, lack the characteristics of a controlling financial interest or (iii) the entity is structured with non-substantive voting rights.

The primary beneficiary of the VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

The Company consolidates its investment in a VIE when it determines that it is its primary beneficiary.

In determining whether it is the primary beneficiary of the VIE, the Company considers qualitative and quantitative factors, including, but not limited to:

which activities most significantly impact the VIE’s economic performance and which party controls such activities and significance of the Company’s investment and other means of participation in the VIE’s expected profits/losses.

Significant judgments related to these determinations include estimates about the current and future fair values and performance of assets held by these VIEs and general market conditions.

Management has analyzed and concluded that Breckenridge Curacao B.V.

(“Breckenridge”) is a VIE because it does not have sufficient equity investment at risk.

The Company has determined that it is the primary beneficiary and consolidates the VIE because (a) although the Company does not control all decisions of Breckenridge, the Company has the power to direct the activities of Breckenridge that most significantly impact its economic performance through various contracts with the entity and (b) the nature of these agreements between Breckenridge and the Company provides the Company with the obligation to absorb losses and the right to receive benefits based on fees that are based upon off-market rates and commensurate to the level of services provided.

The Company receives significant benefits in the form of fees that are not at market and commensurate to the level of services provided.

As a result, the Company consolidates all of the assets, liabilities and results of operations of Breckenridge and its subsidiaries in the accompanying condensed consolidated financial statements.

As of March 31, 2023 and December 31, 2022, Breckenridge had total assets of $ 147.3 million and $ 93.4 million, respectively, and total liabilities of $ 81.1 million and $ 77.1 million, respectively.

Breckenridge had revenues of $ 84.0 million and $ 86.9 million for the three months ended March 31, 2023 and 2022, respectively.

The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary.

The Company performs this analysis on an ongoing basis.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents includes cash balances and highly liquid investments with an original maturity of three months or less.

Restricted cash includes player deposits, payment service provider deposits, and Video Lottery Terminal (“VLT”) and table games related cash payable to certain states where we operate, which are unavailable for the Company’s use.

Accounts Receivable, Net

Accounts receivable, net consists of the following:

September 30, December 31,

March 31, December 31,

(in thousands) 2023 2022

8 unchanged sentences

(1) Represents the Company’s share of VLT and table games revenue for Bally’s Twin River and Bally’s Tiverton due from the State of Rhode Island and from the State of Delaware for Bally’s Dover.

Gain from insurance recoveries, net of losses

Gain from insurance recoveries, net of losses, relate to losses incurred resulting from events impacting the Company, net of insurance recovery proceeds.

For the three and nine months ended September 30, 2022, the Company 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.

For 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 which made landfall in Louisiana during the fourth quarter of 2020.

Gaming Expenses

Gaming expenses include, among other things, payroll costs and expenses associated with the operation of VLTs, slots and table games, including gaming taxes payable to jurisdictions in which the Company operates outside of Rhode Island and Delaware, and advertising costs directly associated with the sale of the Company’s interactive gaming products and services.

Gaming expenses also includes racing expenses comprised of payroll costs, off track betting (“OTB”) commissions and other expenses associated with the operation of live racing and simulcasting.

Gaming expenses include, among other things, payroll costs and expenses associated with the operation of VLTs, slots and table games, including gaming taxes payable to jurisdictions in which the Company operates outside of Rhode Island and Delaware, and marketing costs directly associated with the Company’s iGaming products and services.

These marketing expenses are included within Gaming expenses in the condensed consolidated statements of operations and were $ 45.9 million and $ 57.7 million for the three months ended March 31, 2023 and 2022, respectively.

Gaming expenses also include racing expenses comprised of payroll costs, off track betting (“OTB”) commissions and other expenses associated with the operation of live racing and simulcasting.

Advertising Expense

The Company expenses advertising costs as incurred.

For the three months ended September 30, 2022 and 2021, advertising expense was $ 46.0 million and $ 2.1 million, respectively.

For the nine months ended September 30, 2022 and 2021, advertising expense was $ 163.3 million and $ 5.1 million, respectively.

Advertising expense attributable to the Company’s interactive business included within Gaming expenses for the three and nine months ended September 30, 2022 was $ 26.7 million and $ 139.4 million, respectively.

There was no advertising expense attributable to the Company’s interactive business included within Gaming expenses for the three and nine months ended September 30, 2021.

For the three months ended March 31, 2023 and 2022, advertising expense was $ 5.4 million and $ 7.5 million, respectively, and are included in “Gaming and administrative” on the condensed consolidated statement of operations.

Earnings (Loss) Per Share

Basic earnings (loss) per common share is calculated in accordance with Accounting Standards Codification (“ASC”) 260, Earnings Per Share , which requires entities that have issued securities other than common stock that participate in dividends with common stock (“participating securities”) to apply the two-class method to compute basic earnings (loss) per common share.

The two-class method is an earnings allocation method under which basic earnings (loss) per common share is calculated for each class of common stock and participating security as if all such earnings had been distributed during the period.

To calculate basic earnings (loss) per share, the earnings allocated to common shares is divided by the weighted average number of common shares outstanding, contingently issuable warrants and RSUs, RSAs and PSUs for which no future service is required as a condition to the delivery of the underlying common stock (collectively, basic shares).

Fair Value Measurements

Fair value is determined using the principles of ASC 820, Fair Value Measurement .

Fair value is described as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value hierarchy prioritizes and defines the inputs to valuation techniques as follows:

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Observable quoted prices (unadjusted) for identical assets or liabilities in active markets.

Inputs are observable for the asset or liability either directly or through corroboration with observable market data.

Unobservable inputs.

The inputs used to measure the fair value of an asset or a liability are categorized within levels of the fair value hierarchy.

The fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the measurement.

Strategic Partnership - Sinclair Broadcast Group

On November 18, 2020, the Company and Sinclair Broadcast Group, Inc.

(“Sinclair”) entered into a Framework Agreement (the “Sinclair Agreement”), which provides for a long-term strategic relationship between the Company and Sinclair combining Bally’s integrated, proprietary sports betting technology with Sinclair’s portfolio of local broadcast stations and live regional sports networks and its Tennis Channel, Stadium sports network and STIRR streaming service, whereby the Company will receive naming rights to the regional sports networks and certain integrations to network programming in exchange for annual fees paid in cash, the issuance of warrants and options, and an agreement to share in certain tax benefits resulting from the Tax Receivable Agreement (“TRA”) with Sinclair.

The Company received naming rights to the regional sports networks and certain integrations to network programming in exchange for annual fees paid in cash, the issuance of warrants and options and an agreement to share in certain tax benefits resulting from the Tax Receivable Agreement (“TRA”) with Sinclair.

The initial term of the agreement is ten years from the commencement date of the re-branded Sinclair regional sports networks and can be renewed for one additional five-year term unless either the Company or Sinclair elect not to renew.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Naming Rights Intangible Asset - Under the terms of the Sinclair Agreement, the Company is required to pay annual naming rights fees to Sinclair for naming rights of the regional sports networks which escalate annually and total $ 88.0 million over the 10-year term of the agreement beginning April 1, 2021.

The Company accounted for this transaction as an asset acquisition in accordance with the “Acquisition of Assets Rather Than a Business” subsections of Accounting Standards Codification (“ASC”) 805-50, Business Combinations—Related Issues , using a cost accumulation model.

Naming Rights Intangible Asset - Under the terms of the Sinclair Agreement, the Company is required to pay annual naming rights fees to Diamond Sports Group for naming rights of the regional sports networks which escalate annually and total $ 88.0 million over the 10-year term of the agreement beginning April 1, 2021.

The Company accounted for this transaction as an asset acquisition in accordance with the “Acquisition of Assets Rather Than a Business” subsections of ASC 805-50, Business Combinations—Related Issues , using a cost accumulation model.

The naming rights intangible asset represents the consideration transferred on the acquisition date comprised of the present value of annual naming rights fees, the fair value of the warrants and options and an estimate of the TRA payments, each explained below.

The naming rights intangible asset was $ 280.2 million and $ 311.7 million as of September 30, 2022 and December 31, 2021, respectively.

Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks, and was $ 8.2 million and $ 8.6 million for the three months ended September 30, 2022 and 2021, respectively, and $ 25.0 million and $ 17.2 million for the nine months ended September 30, 2022 and 2021, respectively.

The naming rights intangible asset, net of accumulated amortization, was $ 247.9 million and $ 255.6 million as of March 31, 2023 and December 31, 2022, respectively.

Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks, and was $ 7.7 million and $ 8.4 million for the three months ended March 31, 2023 and 2022, respectively.

Refer to Note 10 “ Goodwill and Intangible Assets ” for further information.

Naming Rights Fees - The present value of the annual naming rights fees was recorded as part of the cost of the naming rights intangible asset with a corresponding liability which will be accreted through interest expense over the life of the agreement.

The total value of the liability as of September 30, 2022 and December 31, 2021 was $ 59.2 million and $ 58.9 million, respectively.

The short-term portion of the liability, which was $ 2.0 million as of September 30, 2022 and December 31, 2021, is recorded within “Accrued liabilities” and the long-term portion of the liability, which was $ 57.2 million and $ 56.9 million as of September 30, 2022 and December 31 2021, respectively, is recorded within “Naming rights liabilities” in the condensed consolidated balance sheets.

Accretion expense reported in “Interest expense, net of amounts capitalized” in the condensed consolidated statements of operations was $ 1.1 million for the three months ended September 30, 2022 and 2021, and $ 3.3 million and $ 3.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Warrants and Options - The Company issued to Sinclair (1) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $ 0.01 per share (“the Penny Warrants”), (2) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $ 0.01 per share subject to the achievement of various performance metrics (the “Performance Warrants”), and (3) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $ 30.00 to $ 45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (the “Options”).

The total value of the liability as of March 31, 2023 and December 31, 2022 was $ 58.9 million and $ 59.3 million, respectively.

The short-term portion of the liability, which was $ 6.5 million and $ 6.0 million as of March 31, 2023 and December 31, 2022, respectively, is recorded within “Accrued liabilities” and the long-term portion of the liability, which was $ 52.4 million and $ 53.3 million as of March 31, 2023 and December 31 2022, respectively, is recorded within “Naming rights liabilities” in the condensed consolidated balance sheets.

Accretion expense for the three months ended March 31, 2023 and 2022, was $ 1.1 million and was reported in “Interest expense, net of amounts capitalized” in the condensed consolidated statements of operations.

Warrants and Options - The Company issued to Sinclair (i) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $ 0.01 per share (“the Penny Warrants”), (ii) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $ 0.01 per share subject to the achievement of various performance metrics (the “Performance Warrants”) and (iii) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $ 30.00 to $ 45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (the “Options”).

The exercise and purchase prices and the number of shares issuable upon exercise of the warrants and options are subject to customary anti-dilution adjustments.

The issuance pursuant to the warrants and options of shares in excess of 19.9 % of the Company’s currently outstanding shares was subject to the approval of the Company’s stockholders in accordance with the rules of the NYSE, which was obtained on January 27, 2021.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Penny Warrants & Options .

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The fair value of the Penny Warrants approximates the fair value of the underlying shares and was $ 150.4 million on November 18, 2020 at issuance, and was recorded to “Additional paid-in-capital” in the condensed consolidated balance sheets, with an offset to the naming rights intangible asset.

The fair value of the Options was $ 59.7 million as of December 31, 2021 and is recorded within “Additional paid-in-capital” in the condensed consolidated balance sheets.

The fair value of the Options was $ 59.7 million as of March 31, 2023 and December 31, 2022, and is recorded within “Additional paid-in-capital” in the condensed consolidated balance sheets.

Performance Warrants .

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Changes in estimate of the tax benefit to be realized and tax rates in effect at the time, among other changes, are treated as an adjustment to the naming rights intangible asset.

The TRA liability was $ 35.8 million and $ 42.2 million as of September 30, 2022 and December 31, 2021, respectively, and is included in “Naming rights liabilities” in the condensed consolidated balance sheets.

The change in value of the TRA liability is included in “Change in value of naming rights liabilities” in the condensed consolidated statements of operations.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Variable Interest Entities

The Company evaluates entities for which control is achieved through means other than voting rights to determine if it is the primary beneficiary of a VIE.

An entity is a VIE if it has any of the following characteristics :

(1) the entity has insufficient equity to permit it to finance its activities without additional subordinated financial support (2) equity holders, as a group, lack the characteristics of a controlling financial interest or (3) the entity is structured with non-substantive voting rights.

The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

The Company consolidates its investment in a VIE when it determines that it is the primary beneficiary of such entity.

In determining whether it is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to:

which activities most significantly impact the VIE’s economic performance and which party controls such activities;

and significance of the Company’s investment and other means of participation in the VIE’s expected profits/losses.

Significant judgments related to these determinations include estimates about the current and future fair values and performance of assets held by these VIEs and general market conditions.

Management analyzed and concluded that Breckenridge Curacao B.V.

(“Breckenridge”) is a VIE because it does not have sufficient equity investment at risk.

The Company receives significant benefits in the form of fees that are not at market and commensurate to the level of services provided.

As a result, the Company consolidates all of the assets, liabilities and results of operations of Breckenridge and its subsidiaries in the accompanying consolidated financial statements.

As of September 30, 2022 and December 31, 2021 Breckenridge had total assets of $ 85.0 million and $ 85.4 million, respectively, and total liabilities of $ 70.9 million and $ 75.2 million, respectively.

Breckenridge had revenues of $ 68.9 million and $ 229.7 million for the three and nine months ended September 30, 2022.

The Company performs this analysis on an ongoing basis.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Related Party Transaction

On September 26, 2019, prior to the Company’s acquisition of Gamesys, Gamesys (Holdings) Limited (“GHL”) was acquired by JPJ Group plc (“JPJ”) and subsequently renamed Gamesys.

In connection with the JPJ acquisition, £ 10.0 million of the cash consideration was deferred and payable (plus interest) to GHL’s majority shareholders 30 months after closing.

The Company recorded deferred consideration of $ 15.1 million within current liabilities of the condensed consolidated balance sheets as of December 31, 2021.

Of such amount, approximately $ 7.4 million was payable to related parties as former majority shareholders.

The Company paid the deferred consideration in April 2022.

The TRA liability was $ 17.9 million and $ 19.4 million as of March 31, 2023 and December 31, 2022, respectively, and is included in “Naming rights liabilities” in the condensed consolidated balance sheets.

The change in value of the TRA liability is included in “Other non-operating expenses, net” in the condensed consolidated statements of operations.

Provision (Benefit) for Income Taxes

During the three months ended September 30, 2022 and 2021, the Company recorded a provision for income tax of $ 1.1 million, and a benefit for income tax of $ 5.4 million, respectively.

During the nine months ended September 30, 2022 and 2021, the Company recorded a provision for income tax of $ 1.0 million, at an effective year to date tax rate of 1.6 % and a provision for income tax of $ 16.8 million, at an effective year to date tax rate of 96.6 %, respectively.

During the three months ended March 31, 2023 and 2022, the Company recorded a provision for income tax of $ 137.7 million, at an effective year to date tax rate of 43.6 % and a benefit for income tax of $ 5.6 million, at an effective year to date tax rate of 151.2 %, respectively.

The 2023 year to date effective tax rate was higher than the US federal statutory tax rate of 21%, largely due to an increase in the valuation allowance and a tax liability for a discrete item related to the deferred gain on sale leaseback transactions in Mississippi and Rhode Island.

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.

In the second quarter of 2022, the Company changed its assertion and will no longer permanently reinvest in its undistributed foreign earnings and plans to remit cash back to the United States.

The Company has determined, based on certain tax planning strategies available, no deferred taxes were accrued related to unremitted earnings as of the period ending September 30, 2022.

CONSOLIDATED FINANCIAL INFORMATION

General and Administrative Expenses

Amounts included in General and administrative for the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended March 31,

(in thousands) 2023 2022

Advertising, general and administrative $ 221,005 $ 181,741

Acquisition and transaction related costs 13,781 5,280

Restructuring 16,822 —

Total general and administrative $ 251,608 $ 187,021

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Other Non-Operating Income (Expense)

Amounts included in Other non-operating income (expenses), net for the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended March 31,

(in thousands) 2023 2022

Change in value of naming rights liabilities $ ( 267 ) $ 13,379

Gain on equity method investments 2,100 —

Gain on extinguishment of debt 4,044 —

Foreign exchange (loss) gain ( 4,308 ) 182

Other, net 1,041 5,918

Total other non-operating income (expenses), net $ 2,610 $ 19,479

RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements

Standards to be implemented

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update No.

Standards Implemented

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No.

2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

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This update is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, with early adoption permitted.

The Company is currently in the process of evaluating the impact of this amendment on its condensed consolidated financial statements.

The Company’s adoption of this ASU in the first quarter of 2023 did not have a material impact to its condensed consolidated financial statements.

Standards to Be Implemented

In December 2022, the Financial Accounting Standards Board issued ASU No.

2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 .

The amendments in this update defer the sunset date of Topic 848, which applies to entities which have transactions that reference LIBOR or other reference rates which are expected to be discontinued due to reference rate reform, until December 31, 2024.

The Company is currently in the process of evaluating the impact of this amendment on its consolidated financial statements.

REVENUE RECOGNITION

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• Recognize revenue when or as the Company satisfies performance obligations by transferring the promised goods or services.

The Company is currently engaged in gaming services, which include retail, online and racing.

Additional services include hotel, food and beverage.

The amount of revenue recognized by the Company is measured at the transaction price or the amount of consideration that the Company expects to receive through satisfaction of the identified performance obligations.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Retail gaming, online gaming and sports betting revenue, each as described below, contain a single performance obligation.

Retail gaming, online gaming and sports betting revenue, each as described below, contain two performance obligations.

Retail gaming transactions have an obligation to honor the outcome of a wager and to pay out an amount equal to the stated odds, including the return of the initial wager, if the customer receives a winning hand.

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The transaction price for racing operations, inclusive of live racing events conducted at the Company’s racing facilities, is the commission received from the pari-mutuel pool less contractual fees and obligations primarily consisting of purse funding requirements, simulcasting fees, tote fees and certain pari-mutuel taxes that are directly related to the racing operations.

The transaction price for food and beverage and hotel is the net amount collected from the customer for such goods and services.

Hotel, food and beverage services have been determined to be separate, stand-alone performance obligations and revenue is recognized as the good or service is transferred at the point in time of the transaction.

The transaction price for hotel, food, beverage, retail, entertainment and other is the net amount collected from the customer for such goods and services.

Hotel, food, beverage, retail, entertainment and other services have been determined to be separate, stand-alone performance obligations and revenue is recognized as the good or service is transferred at the point in time of the transaction.

The following contains a description of each of the Company’s revenue streams:

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Bally’s Twin River is entitled to a 28.85 % share of VLT revenue on the initial 3,002 units and a 26.00 % share on VLT revenue generated from units in excess of 3,002 units.

Beginning July 1, 2021, Bally’s Twin River is entitled to an additional 7.00 % share of revenue on VLTs owned by the Company.

Bally’s Tiverton is entitled to receive a percentage of VLT revenue that is equivalent to the percentage received by Bally’s Twin River.

From July 1, 2021 through December 31, 2022, Bally’s Twin River and Bally’s Tiverton were entitled to an additional 7.00 % share of revenue, as the Technology Provider, on VLTs owned by the Company.

Beginning on January 1, 2023, the Company contributed all of its VLT assets to the Rhode Island Joint Venture and the Rhode Island Joint Venture, as the sole Technology Provider, is now entitled to that additional 7% of VLT revenue.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Gaming revenue also includes Bally’s Twin River’s and Bally’s Tiverton’s share of table games revenue.

Bally’s Twin River and Bally’s Tiverton each were entitled to an 83.5 % share of table games revenue generated as of September 30, 2022 and 2021.

Bally’s Twin River and Bally’s Tiverton each were entitled to an 83.5 % share of table games revenue generated as of March 31, 2023 and 2022.

Revenue is recognized when the wager is settled, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment.

The Company records revenue from its Rhode Island operations on a net basis which is the percentage share of VLT and table games revenue received as the Company acts as an agent in operating the gaming services on behalf of the State of Rhode Island.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Gaming revenue also includes Bally’s Dover’s share of revenue as determined under the Delaware State Lottery Code from the date of its acquisition.

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Licensing, administration and control of gaming operations in Delaware is under the Delaware State Lottery Office and Delaware’s Department of Safety and Homeland Security, Division of Gaming Enforcement.

As of September 30, 2022 and 2021, Bally’s Dover was entitled to an approximate 42 % share of VLT revenue and 80 % share of table games revenue.

As of March 31, 2023 and 2022, Bally’s Dover was entitled to an approximate 42 % share of VLT revenue and 80 % share of table games revenue.

Revenue is recognized when the wager is complete, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment.

The Company records revenue from its Delaware operations on a net basis, which is the percentage share of VLT and table games revenue received, as the Company acts as an agent in operating the gaming services on behalf of the State of Delaware.

Gaming revenue also includes the casino revenue of Hard Rock Biloxi, Bally’s Black Hawk, beginning January 23, 2020, Bally’s Kansas City and Bally’s Vicksburg, beginning July 1, 2020, Bally’s Atlantic City, beginning November 18, 2020, Bally’s Shreveport, beginning December 23, 2020, Bally’s Lake Tahoe, beginning April 6, 2021, Bally’s Evansville, beginning June 3, 2021, Bally’s Quad Cities, beginning June 14, 2021 and Tropicana Las Vegas, beginning September 26, 2022, which is the aggregate net difference between gaming wins and losses, with deferred revenue recognized for prepaid deposits by prior to play, for chips outstanding and “ticket-in, ticket-out” coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots.

Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of credits played, are charged to revenue as the amount of the progressive jackpots increases.

Gaming revenue includes casino revenue of the Company’s other properties which is the aggregate net difference between gaming wins and losses, with deferred revenue recognized for prepaid deposits by customers prior to play, for chips outstanding and “ticket-in, ticket-out” coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots.

Online Gaming

Online gaming refers to digital versions of wagering games available in land-based casinos, such as blackjack, roulette and slot machines.

For these offerings, the Company operates similarly to land-based casinos, generating revenue from user wagers net of payouts and incentives awarded to users.

Online gaming revenue includes the online bingo and casino revenue of Gamesys, beginning October 1, 2021.

The Company’s online gaming operates similarly to land-based casinos, generating revenue from player wagers net of payouts and incentives awarded to players.

Online gaming revenue includes the online bingo and casino revenue of Gamesys since the date of acquisition, beginning October 1, 2021.

The revenue is earned from operating online bingo and casino websites, which consists of the difference between total amounts wagered by players less winnings payable to players, bonuses allocated and jackpot contributions.

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Sports Betting

Sports betting involves a user wagering money on an outcome or series of outcomes.

If a user wins the wager, the Company pays the user a pre-determined amount known as fixed odds.

Sports betting revenue is generated through built-in theoretical margins in each sports wagering opportunity offered to users.

Revenue is recognized as total wagers net of payouts made and incentives awarded to users.

During 2020, the Company entered into several multi-year agreements with third-party operators for online sports betting and iGaming market access in the states of Colorado and New Jersey from which the Company has received or expects to receive one-time, up front market access fees in cash or equity securities (specific to one operator agreement) and certain other fees in cash generally based on a percentage of the gross gaming revenue generated by the operator, with certain annual minimum guarantees due to the Company.

Sports betting involves a player wagering money on an outcome or series of outcomes.

If a player wins the wager, the Company pays the player a pre-determined amount known as fixed odds.

Sports betting revenue is generated through built-in theoretical margins in each sports wagering opportunity offered to players.

Revenue is recognized as total wagers net of payouts made and incentives awarded to players.

The Company has entered into several multi-year agreements with third-party operators for online sports betting and iGaming market access in several jurisdictions from which the Company has received or expects to receive one-time, up front market access fees in cash or equity securities (specific to one operator agreement) and certain other fees in cash generally based on a percentage of the gross gaming revenue generated by the operator, with certain annual minimum guarantees due to the Company.

The one-time market access fees received have been recorded as deferred revenue and will be recognized as gaming revenue ratably over the respective contract terms, beginning with the commencement of operations of each respective agreement.

The Company recognized commissions in certain states from online sports betting and iGaming which are included in gaming revenue for the three and nine months ended September 30, 2022 and 2021.

Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $ 6.5 million and $ 6.8 million as of September 30, 2022 and December 31, 2021, respectively, and is included in “Accrued liabilities” and “Other long-term liabilities” in the condensed consolidated balance sheets.

All other revenues, including market access, daily fantasy sports and B2B service revenue generated by the North America Interactive and International Interactive reportable segments, are recognized at the time the goods are sold or the service is provided.

The Company recognized commissions in certain states from online sports betting and iGaming which are included in gaming revenue for the three months ended March 31, 2023 and 2022.

Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $ 4.1 million as of March 31, 2023 and December 31, 2022, and is included in “Accrued liabilities” and “Other long-term liabilities” in the condensed consolidated balance sheets.

All other revenues, including market access and B2B service revenue generated by the North America Interactive and International Interactive reportable segments, are recognized at the time the goods are sold or the service is provided.

BALLY’S CORPORATION

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Therefore, fees and obligations related to the Company’s share of purse funding, simulcasting fees, tote fees, pari-mutuel taxes, and other fees directly related to the Company’s racing operations are reported on a net basis and included as a reduction to racing revenue.

Hotel, Food and Beverage and Retail, Entertainment and Other Revenue

Non-gaming Revenue

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

Hotel revenue is recognized at the time of occupancy, which is when the customer obtains control through occupancy of the room.

Advance deposits for hotel rooms are recorded as liabilities until revenue recognition criteria are met.

Food and beverage revenues are recognized at the time the goods are sold from Company-operated outlets.

Food, beverage and retail revenues are recognized at the time the goods are sold from Company-operated outlets.

The estimated standalone selling price of hotel rooms is determined based on observable prices.

The standalone selling price of food and beverage as well as retail, entertainment and other goods and services are determined based upon the actual retail prices charged to customers for those items.

Cancellation fees for hotel and meeting space services are recognized upon cancellation by the customer and are included in hotel, food and beverage revenue within our consolidated statements of operations.

The estimated retail value related to goods and services provided to guests without charge or upon redemption under the Company’s player loyalty programs included in departmental revenues, and therefore reducing gaming revenues, are as follows for the three and nine months ended September 30, 2022 and 2021:

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

The standalone selling price of food, beverage, retail, entertainment and other goods and services are determined based upon the actual retail prices charged to customers for those items.

Cancellation fees for hotel and meeting space services are recognized upon cancellation by the customer and are included in Non-gaming revenue within our condensed consolidated statements of operations.

Three Months Ended March 31,

(in thousands) 2023 2022

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In the fourth quarter of 2021, the Company changed its reportable segments to better align with its strategic growth initiatives in light of recent and pending acquisitions.

Refer to Note 18 “ Segment Reporting ” for further information.

The following tables provide a disaggregation of revenue by segment:

(in thousands) Casinos & Resorts North America Interactive International Interactive Total

Three Months Ended September 30, 2022

Gaming $ 237,951 $ 10,567 $ 217,215 $ 465,733

Hotel 45,675 — — 45,675

Food and beverage 31,724 — — 31,724

Retail, entertainment and other 13,190 11,563 10,364 35,117

Total revenue $ 328,540 $ 22,130 $ 227,579 $ 578,249

Three Months Ended September 30, 2021

Gaming $ 229,034 $ 2,764 $ — $ 231,798

Hotel 32,903 — — 32,903

Food and beverage 29,504 — — 29,504

Retail, entertainment and other 11,929 8,645 — 20,574

Total revenue $ 303,370 $ 11,409 $ — $ 314,779

Nine Months Ended September 30, 2022

The following tables provide a disaggregation of revenue by segment (in thousands):

Three Months Ended March 31, 2023 Casinos & Resorts North America Interactive International Interactive Total

Gaming $ 233,107 $ 16,607 $ 237,181 $ 486,895

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Retail, entertainment and other 14,739 7,755 8,391 30,885

Total non-gaming revenue 95,679 7,755 8,391 111,825

Total revenue $ 328,786 $ 24,362 $ 245,572 $ 598,720

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Gaming $ 217,805 $ 6,645 $ 239,252 $ 463,702

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Retail, entertainment and other 11,242 8,582 13,822 33,646

Total non-gaming revenue 62,165 8,582 13,822 84,569

Total revenue $ 279,970 $ 15,227 $ 253,074 $ 548,271

Revenue included in operations from Bally’s Lake Tahoe from the date of its acquisition, April 6, 2021, Bally’s Evansville from the date of its acquisition, June 3, 2021, Bally’s Quad Cities from the date of its acquisition, June 14, 2021 and Tropicana Las Vegas from the date of its acquisition, September 26, 2022, are reported in Casinos & Resorts.

Revenue included in operations from SportCaller from the date of its acquisition, February 5, 2021, MKF from the date of its acquisition, March 23, 2021, Bally’s Interactive from the date of its acquisition, May 28, 2021, AVP from the date of its acquisition, July 12, 2021, Telescope from the date of its acquisition, August 12, 2021, Degree 53 from the date of its acquisition, October 25, 2021, and the North American operations of Gamesys from the date of its acquisition, October 1, 2021, are reported in North America Interactive.

Revenue included in operations from the European and Asian activities from Gamesys is reported in International Interactive.

Refer to Note 5 “ Acquisitions ” for further information.

Revenue included in operations from Casino Secret from the date of its acquisition, January 5, 2023, is reported in International Interactive and was $ 11.3 million in the three months ended March 31, 2023.

Refer to Note 6 “ Business Combinations ” for further information.

Contract Assets and Contract Related Liabilities

The Company’s receivables related to contracts with customers are primarily comprised of marker balances and other amounts due from gaming activities, amounts due for hotel stays and amounts due from tracks and OTB locations.

The Company’s receivables related to contracts with customers were $ 43.2 million and $ 35.5 million as of September 30, 2022 and December 31, 2021, respectively.

The Company’s receivables related to contracts with customers were $ 43.3 million and $ 44.0 million as of March 31, 2023 and December 31, 2022, respectively.

The Company has the following liabilities related to contracts with customers:

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All of the contract liabilities are short-term in nature and are included in “Accrued liabilities” in the condensed consolidated balance sheets.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Loyalty program incentives earned by customers are typically redeemed within one year from when they are earned and expire if a customer’s account is inactive for more than 12 months;

therefore, the majority of these incentives outstanding at the end of a period will either be redeemed or expire within the next 12 months.

While properties were operating at limited capacity, many properties extended the expiration dates for tiered status programs or temporarily suspended periodic purges of unused loyalty points.

As properties have resumed operations at full capacity, many have reinstated their pre-COVID-19 practices or put new loyalty programs into place.

Advance deposits are typically for future banquet events, hotel room reservations and interactive player deposits.

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The Company holds restricted cash for interactive player deposits and records a corresponding withdrawal liability.

Unpaid wagers include the Company’s outstanding chip liability, unpaid slot and pari-mutuel and sports betting tickets.

Liabilities related to contracts with customers as of September 30, 2022 and December 31, 2021 were as follows:

September 30, December 31,

Unpaid wagers include the Company’s outstanding chip liability and unpaid slot, pari-mutuel and sports betting tickets.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Liabilities related to contracts with customers as of March 31, 2023 and December 31, 2022 were as follows:

March 31, December 31,

(in thousands) 2023 2022

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Total $ 66,475 $ 62,258

The Company recognized $ 7.1 million and $ 5.8 million of revenue related to loyalty program redemptions for the three months ended September 30, 2022 and 2021, respectively, and $ 23.0 million and $ 18.0 million for the nine months ended September 30, 2022 and 2021, respectively.

Recent Acquisitions

The Company accounted for all of the following acquisitions as business combinations using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805.

Under this method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed of the acquiree based upon their estimated fair values at the acquisition date.

The fair value of the identifiable intangible assets acquired are determined by using an income approach.

Significant assumptions utilized in the income approach are based on company-specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance.

The purchase price allocation for Gamesys and certain of the Bally’s Interactive Acquisitions, as defined below, are preliminary and will be finalized when valuations are complete and final assessments of the fair value of other acquired assets and assumed liabilities are completed.

There can be no assurance that such finalizations will not result in material changes from the preliminary purchase price allocations.

The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date), as the Company finalizes the valuations of certain tangible and intangible assets acquired and liabilities assumed.

The Company recorded transaction costs related to its recent and pending acquisitions of $ 9.3 million and $ 24.7 million during the three and nine months ended September 30, 2022, respectively, and $ 6.8 million and $ 37.5 million during the three and nine months ended September 30, 2021, respectively.

These costs are included in “Acquisition, integration and restructuring” in the condensed consolidated statements of operations.

Refer to Note 11 “ Acquisition, Integration and Restructuring ” for further information.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Bally’s Lake Tahoe

On April 6, 2021, the Company acquired Bally’s Lake Tahoe in Lake Tahoe, Nevada from Eldorado Resorts, Inc.

(“Eldorado”) and certain of its affiliates for $ 14.2 million, payable in cash one year from the closing date and subject to customary post-closing adjustments.

The deferred purchase price is included within “Accrued liabilities” of the condensed consolidated balance sheet as of December 31, 2021 and was paid in April 2022.

The identifiable intangible assets recorded in connection with the closing of the Bally’s Lake Tahoe acquisition include gaming licenses of $ 5.2 million with an indefinite life and a trade name of $ 0.2 million, which was amortized on a straight-line basis over its estimated useful life of approximately six months .

The fair value of the identifiable intangible assets acquired was determined by using an income approach.

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Lake Tahoe on April 6, 2021:

As of April 6, 2021

(in thousands) Preliminary as of December 31, 2021 Year to Date Adjustments Final

Total current assets $ 4,683 $ — $ 4,683

Property and equipment, net 6,361 — 6,361

Right of use assets, net 57,017 — 57,017

Intangible assets, net 5,430 — 5,430

Accounts payable and accrued liabilities ( 3,402 ) ( 144 ) ( 3,546 )

Lease liabilities ( 52,927 ) — ( 52,927 )

Other long-term liabilities ( 941 ) 37 ( 904 )

Net assets acquired 16,221 ( 107 ) 16,114

Bargain purchase gain ( 2,049 ) 107 ( 1,942 )

Total purchase price $ 14,172 $ — $ 14,172

During the year ended December 31, 2021, the Company recorded a bargain purchase gain of $ 2.0 million based on the preliminary purchase price allocation as the fair value of the assets acquired and liabilities assumed exceeded the purchase price consideration.

During the nine months ended September 30, 2022, based on the final purchase price allocation, an adjustment of $ 0.1 million was recorded reducing the bargain purchase gain to $ 1.9 million.

The original agreement to acquire Bally’s Lake Tahoe from Eldorado was made concurrently with the agreement of Bally’s Shreveport and the Company believes that it was able to acquire Bally’s Lake Tahoe for less than fair value as a result of a distressed sale whereby Eldorado was required by the Federal Trade Commission to divest the properties prior to its merger with Caesars coupled with the timing of the agreement to purchase which was in the middle of COVID-19 related shutdowns of casinos in the US.

Bally’s Evansville

On June 3, 2021, the Company completed the acquisition of the Bally’s Evansville casino operations from Caesars.

The Company recognized $ 5.9 million and $ 8.3 million of revenue related to loyalty program redemptions for the three months ended March 31, 2023 and 2022, respectively.

BUSINESS COMBINATIONS

Casinos & Resorts Acquisition

Tropicana Las Vegas - On September 26, 2022, the Company completed its acquisition of Tropicana Las Vegas.

The total purchase price was $ 148.2 million.

Cash paid by the Company at closing net of $ 1.8 million cash acquired, was $ 146.4 million, excluding transaction costs.

In connection with the acquisition of the Bally’s Evansville casino operations, the Company entered into a sale-leaseback arrangement with an affiliate of GLPI for the Bally’s Dover property.

Refer to Note 13 “ Leases ” for further information.

The identifiable intangible assets recorded in connection with the closing of the Bally’s Evansville acquisition include gaming licenses of $ 153.6 million with an indefinite life and rated player relationships of $ 0.6 million which are being amortized on a straight-line basis over an estimated useful life of approximately eight years .

The fair value of the identifiable intangible assets acquired was determined by using an income approach.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Evansville on June 3, 2021.

There were no purchase accounting adjustments recorded during the nine months ended September 30, 2022.

As of June 3, 2021

(in thousands) Final

Cash and cash equivalents $ 9,355

Accounts receivable, net 1,474

Inventory and prepaid expenses and other current assets 1,202

In connection with the acquisition of Tropicana Las Vegas, the Company entered into a lease arrangement with GLPI to lease the land underlying the Tropicana Las Vegas property for an initial term of 50 years at annual rent of $ 10.5 million.

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the Casinos & Resorts acquisition as of March 31, 2023:

(in thousands) Tropicana Las Vegas

Preliminary (2)

Total current assets $ 8,141

Property and equipment, net 136,116

2 unchanged sentences

Other assets 766

Accounts payable and accrued liabilities ( 10,927 )

Goodwill 8,716

Total current liabilities ( 10,268 )

Lease liabilities ( 164,884 )

Deferred tax liability ( 7,233 )

Other long-term liabilities ( 395 )

Net assets acquired 160,564

Bargain purchase gain ( 20,856 )

Total purchase price $ 148,216

The fair value of the assets acquired and liabilities assumed exceeded the purchase price consideration and therefore, a bargain purchase gain of $ 20.9 million was recorded during the year ended December 31, 2021.

The Company believes it was able to acquire Bally’s Evansville for less than fair value as a result of a distressed sale prior to Eldorado’s merger with Caesars, as noted above, coupled with the timing of the agreement to purchase which was in the middle of COVID-19 related shutdowns of casinos in the US.

Bally’s Quad Cities

On June 14, 2021, the Company completed its acquisition of Bally’s Quad Cities in Rock Island, Illinois.

Pursuant to the terms of the Equity Purchase Agreement, the Company acquired all of the outstanding equity securities of The Rock Island Boatworks, Inc., for a purchase price of $ 118.9 million in cash.

Cash paid by the Company, net of $ 2.9 million cash acquired and the $ 4.0 million deposit paid in the third quarter of 2020, was $ 112.0 million, excluding transaction costs.

The identifiable intangible assets recorded in connection with the closing of the Bally’s Quad Cities acquisition include gaming licenses of $ 30.3 million with an indefinite life, as well as rated player relationships and a trade name of $ 0.7 million and $ 0.2 million, respectively, which are being amortized on a straight-line basis over their estimated useful lives of approximately nine years and four months , respectively.

The fair value of the identifiable intangible assets acquired was determined by using an income approach.

__________________________________

(1) Intangible assets include rated player relationships, a trade name and pre-bookings of $ 2.6 million, $ 1.7 million and $ 0.8 million, respectively, which are being amortized on a straight-line basis over their estimated useful lives of approximately 9 years, 3 years and 2 years, respectively.

(2) The Company recorded adjustments to the preliminary purchase price allocation during the three months ended March 31, 2023 which increased goodwill by $ 0.1 million

Goodwill recognized is deductible for local tax purposes and has been assigned as of the acquisition date to the Company’s Casinos & Resorts reportable segment, which includes the reporting unit expected to benefit from the synergies of the acquisition.

Qualitative factors that contribute to the recognition of goodwill include an organized workforce and expected synergies from integrating the property into the Company’s casino portfolio and future development of its omni-channel strategy.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the Bally’s Quad Cities acquisition on June 14, 2021.

As of June 14, 2021

(in thousands) Preliminary as of December 31, 2021 Year to Date Adjustments Final

Cash and cash equivalents $ 2,933 $ — $ 2,933

Accounts receivable, net 2,986 — 2,986

Inventory and prepaid expenses and other current assets 798 — 798

Property and equipment, net 73,135 — 73,135

Intangible assets, net 31,180 — 31,180

Goodwill 14,593 ( 1,285 ) 13,308

Total current liabilities ( 6,697 ) 1,285 ( 5,412 )

Total purchase price $ 118,928 $ — $ 118,928

The Company incurred $ 0.8 million and $ 0.2 million of acquisition costs related to the above Casino & Resorts acquisition during the three months ended March 31, 2023 and 2022, respectively.

These costs are included within “General and administrative” of the condensed consolidated statement of operations.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Tropicana Las Vegas

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

(“PENN”) and GLPI.

The total purchase price was $ 148.3 million.

International Interactive Acquisition

Casino Secret - On January 5, 2023, the Company completed the acquisition of BACA Limited (“Casino Secret”), a European based online casino that offers slots, tables and live dealer games to Asian markets for total consideration of $ 49.3 million.

Cash paid by the Company at closing net of $ 8.3 million cash acquired was $ 38.2 million, excluding transaction costs.

The identifiable intangible assets recorded in connection with the closing of the Tropicana Las Vegas acquisition are based on preliminary valuations and include rated player relationships, a trade name and pre-bookings of $ 2.6 million, $ 1.7 million and $ 0.8 million, respectively, which are being amortized on a straight-line basis over their estimated useful lives of approximately 9 years, 3 years and 2 years, respectively.

The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach.

The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the Tropicana Las Vegas acquisition on September 26, 2022.

(in thousands) Preliminary as of September 30, 2022

Cash and cash equivalents $ 1,775

Accounts receivable, net 4,384

Inventory and prepaid expenses and other current assets 4,622

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the International Interactive Acquisition:

(in thousands) Casino Secret

Total current assets $ 8,862

Property and equipment, net 50

2 unchanged sentences

Goodwill 18,139

Other assets 766

Total current liabilities ( 7,163 )

Lease liabilities ( 412 )

Other long-term liabilities ( 395 )

Total purchase price $ 49,339

North America Interactive Acquisitions

SportCaller - On February 5, 2021, the Company acquired SportCaller for total consideration of $ 42.6 million including $ 24.0 million in cash and 221,391 of the Company’s common shares at closing, pending adjustment, and up to $ 12.0 million in value of additional shares if SportCaller meets certain post-closing performance targets (calculated based on a US Dollar (“USD”) to Euro exchange ratio of 0.8334 ).

Monkey Knife Fight - On March 23, 2021, the Company acquired Fantasy Sports Shark, LLC (d/b/a Monkey Knife Fight) for total consideration of $ 118.6 million including, (1) immediately exercisable penny warrants to purchase up to 984,446 of the Company’s common shares (subject to adjustment) at closing and (2) contingent penny warrants to purchase up to 787,557 additional Company common shares, half of which are issuable on each of the first and second anniversary of closing.

The contingency relates to MKF’s continued operations in jurisdictions in which it operates at closing at future dates.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company paid cash of $ 22.4 million, net of cash acquired, for SportCaller and MKF.

Total non-cash consideration transferred for SportCaller and MKF was $ 135.3 million, which included $ 58.7 million of the fair value of contingent consideration as of the SportCaller and MKF acquisition dates.

Refer to Note 9 “ Fair Value Measurements ” for further information.

Bally’s Interactive - On May 28, 2021, the Company acquired Bally’s Interactive, formerly Bet.Works Corp., for total consideration of $ 192.1 million, which consisted of $ 70.4 million in cash, net of cash acquired, and 2,084,765 of the Company’s common shares, subject in each case to customary adjustments.

The shareholders of Bally’s Interactive will not transfer any shares of Company common stock received prior to June 1, 2022 and, for the following 12 months, may transfer only up to 1% of the Company’s common stock per every 90 days.

AVP - On July 12, 2021, the Company acquired AVP, a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the US, for $ 10.0 million in cash.

Telescope - On August 12, 2021, the Company acquired an 84.16 % controlling interest in Telescope, a leading provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams, for $ 25.9 million in cash, net of cash acquired.

The remaining 15.84 % of Telescope is owned by certain selling shareholders and is reported as a non-controlling interest.

The non-controlling interest is convertible into shares of Bally’s common stock based on a fixed exchange ratio share-settlement feature, valued using the Company’s common stock price, and is classified as permanent equity.

During the three and nine months ended September 30, 2022, certain selling shareholders exercised their right to convert to Bally’s common stock reducing the non-controlling interest.

Earnings attributable to the non-controlling interest are not material for the three and nine months ended September 30, 2022 and 2021.

Degree 53 - On October 25, 2021, the Company acquired Degree 53, a UK-based creative agency that specializes in multi-channel website and personalized mobile app and software development for the online gambling and sports industries, for $ 7.8 million in cash, net of cash acquired.

The identifiable intangible assets recorded in connection with the closing of SportCaller, MKF, Bally’s Interactive, AVP, Telescope and Degree 53 (collectively the “North America Interactive Acquisitions”) include customer relationships of $ 41.5 million, which are being amortized over estimated useful lives between three and ten years , developed software of $ 122.4 million, which is being amortized over estimated useful lives between three and ten years , and trade names of $ 3.1 million, which are being amortized over estimated useful lives between 10 and 15 years.

Total goodwill recorded in connection with the North America Interactive Acquisitions was $ 250.7 million.

Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill, which consist primarily of benefits from acquiring a talented technology workforce and management team experienced in the online gaming industry, and securing buyer-specific synergies expected to contribute to the Company’s omni-channel strategy which are expected to increase revenue and profits within the Company’s North America Interactive reportable segment.

The goodwill of the North America Interactive Acquisitions has been assigned, as of the acquisition date, to the Company’s North America Interactive reportable segment.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the North America Interactive Acquisitions.

(in thousands) As of September 30, 2022 (1)

Cash and cash equivalents $ 8,689

Accounts receivable, net 4,498

Prepaid expenses and other current assets 3,104

Property and equipment, net 596

Intangible assets, net 167,075

Goodwill 250,730

Total current liabilities ( 14,787 )

Deferred tax liability ( 15,811 )

Acquired non-controlling interest ( 3,760 )

Net investment in the North America Interactive Acquisitions $ 400,334

__________________________________

(1) As of September 30, 2022, the purchase price allocation of Degree 53 is preliminary and are final for Bally’s Interactive, AVP, Telescope, SportCaller and MKF.

During the three and nine months ended September 30, 2022, the Company recorded purchase accounting adjustments for the North America Interactive Acquisitions, increasing both goodwill and accrued liabilities by $ 0.2 million.

Gamesys Acquisition

On October 1, 2021, the Company completed the acquisition of Gamesys.

Total consideration was $ 2.60 billion, which consisted of $ 2.08 billion paid in cash and 9,773,537 shares of Bally’s common stock.

Cash paid by the Company at closing, net of cash received of $ 183.3 million and a $ 10.3 million post-acquisition expense, explained below, was $ 1.90 billion, excluding transaction costs.

The identifiable intangible assets recorded in connection with the closing of the Gamesys acquisition are based on preliminary valuations and primarily include customer relationships of $ 980.2 million and developed technology of $ 282.0 million, both of which are being amortized over seven years , and trade names of $ 249.8 million, which have indefinite lives.

Total goodwill of $ 1.68 billion represents the excess purchase price over the preliminary fair value of the assets acquired and liabilities assumed.

Goodwill associated with the Gamesys acquisition is assigned as of the acquisition date to the Company’s International Interactive and North America Interactive reportable segments in the amounts of $ 1.65 billion and $ 33.3 million, respectively, which include the reporting units expected to benefit from the synergies arising from the acquisition.

The assignment of goodwill to reporting units is based upon preliminary valuations subject to change throughout the measurement period.

Goodwill recognized is not deductible for local tax purposes.

In connection with the acquisition of Gamesys, certain unvested and outstanding equity options held by Gamesys employees were discretionarily accelerated and vested by the Gamesys Board of Directors, requiring allocation of the fair value of post-acquisition service to purchase consideration, with the remainder allocated to non-recurring post-acquisition expense.

The fair value of $ 36.4 million was attributed to pre-acquisition service and included in consideration transferred.

In the fourth quarter of 2021, the fair value of $ 10.3 million, attributable to post-acquisition expense was recorded within “Advertising, general, and administrative” expense in the consolidated statements of operations.

(1) Casino Secret intangible assets include player relationships and trade names of $ 26.0 million and $ 3.5 million, respectively, which are both being amortized on a straight-line basis over their estimated useful lives of approximately 7 years.

Total goodwill recorded in connection with the above International Interactive Acquisition was $ 18.1 million, and is not deductible for local tax purposes.

The goodwill of the International Interactive Acquisition has been assigned, as of the acquisition date, to the Company’s International Interactive reportable segment.

The Company incurred $ 1.2 million of acquisition costs related to the International Interactive Acquisition during the three months ended March 31, 2023.

These costs are included within “General and administrative” of the condensed consolidated statement of operations.

ASSETS AND LIABILITIES HELD FOR SALE

The Company applies a criteria that must be met before an asset is classified as held for sale, including that management, with the appropriate authority, commits to a plan to sell the asset at a reasonable price in relation to its fair value and is actively seeking a buyer.

The Company recognizes assets held for sale at the lower of carrying value or fair market value less costs to sell, as estimated based on comparable asset sales, offers received, or a discounted cash flow model.

The Company then compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset.

If the undiscounted cash flows do not exceed the carrying value, then an impairment charge may be recorded for any difference between fair value and the carrying value.

As of March 31, 2023 and December 31, 2022, one of the Company’s North America Interactive businesses met the criteria to be classified as assets held for sale but did not qualify as discontinued operations as it did not represent a strategic shift having a major effect on the Company’s operations and financial results.

The major classes of assets and liabilities classified as held for sale as of March 31, 2023 and December 31, 2022 are as follows:

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of Gamesys as of October 1, 2021.

(in thousands) Preliminary as of December 31, 2021 Year to Date Adjustments Preliminary as of September 30, 2022

Cash and cash equivalents and restricted cash $ 183,306 $ — $ 183,306

Accounts receivable, net 35,851 — 35,851

Prepaid expenses and other current assets

(in thousands) March 31, 2023 December 31, 2022

Restricted cash, prepaid expenses and other current assets $ 2,380 $ 3,756

Goodwill 9,399 9,399

Intangible assets, net 4,022 4,022

Assets held for sale (1)

$ 15,801 $ 17,177

Property and equipment, net 15,230 — 15,230

Right of use assets, net 14,185 — 14,185

Liabilities related to assets held for sale (1)(2)

$ 1,773 $ 3,409

Intangible assets, net 1,513,023 — 1,513,023

Other assets 17,668 — 17,668

Accounts payable ( 47,881 ) — ( 47,881 )

Accrued income taxes ( 40,250 ) — ( 40,250 )

Accrued liabilities ( 177,109 ) ( 819 ) ( 177,928 )

Long-term debt, net ( 456,469 ) — ( 456,469 )

Lease liabilities ( 14,185 ) — ( 14,185 )

Deferred tax liability ( 143,924 ) — ( 143,924 )

Other long-term liabilities ( 6,680 ) — ( 6,680 )

Total purchase price

__________________________________

Supplemental Pro Forma Consolidated Information

The following unaudited pro forma consolidated financial information for the three and nine months ended September 30, 2021 combines the Company’s historical results with pro forma amounts for Bally’s Lake Tahoe, Bally’s Evansville and Gamesys.

The unaudited pro forma consolidated financial information assumes that the acquisitions of Bally’s Lake Tahoe, Bally’s Evansville and Gamesys had occurred as of January 1, 2020.

The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments related to the issuance of new debt and equity offerings as of January 1, 2020 as well as non-recurring adjustments for amortization of acquired intangible assets, compensation expense for share-based compensation arrangements that were cash settled in conjunction with the acquisitions, interest expense, transaction costs, together with the consequential tax effects.

The revenue, earnings and pro forma effects of the Bally’s Interactive Acquisitions and Bally’s Quad Cities completed during the year ended December 31, 2021 and Tropicana Las Vegas in the third quarter of 2022 are not material to results of operations, individually or in the aggregate.

These unaudited pro forma financial results are presented for informational purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the acquisitions actually taken place on January 1, 2020.

In addition, these results are not intended to be a projection of future results and do not reflect events that may occur, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the acquisitions.

Three Months Ended Nine Months Ended

(in thousands) September 30, 2021 September 30, 2021

Revenue $ 595,051 $ 1,676,782

Net loss $ ( 27,092 ) $ ( 53,411 )

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(1) All assets and liabilities held for sale were classified as current as it’s probable the sale will be completed within one year.

(2) Liabilities related to assets held for sale were comprised of accounts payable and accrued liabilities.

The revenues and net loss attributable to the business classified as held for sale were not significant for the three months ended March 31, 2023 and 2022.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of September 30, 2022 and December 31, 2021, prepaid expenses and other current assets was comprised of the following:

September 30,

As of March 31, 2023 and December 31, 2022, prepaid expenses and other current assets was comprised of the following:

(in thousands) 2023 2022

1 unchanged sentence

Due from payment service providers 26,541 30,621

Sales tax 8,346 18,308

Deposits 9,898 2,016

Prepaid marketing 9,875 8,042

Convertible loans 4,796 —

Purse funds 9,336 8,286

Unbilled revenue 3,504 7,759

Sales tax 6,815 5,900

Prepaid insurance 2,800 6,374

Purse funds 369 8,093

Other 8,170 8,275

1 unchanged sentence

PROPERTY AND EQUIPMENT

As of September 30, 2022 and December 31, 2021, property and equipment was comprised of the following:

September 30, December 31,

As of March 31, 2023 and December 31, 2022, property and equipment was comprised of the following:

March 31, December 31,

(in thousands) 2023 2022

8 unchanged sentences

Property and equipment, net $ 1,111,714 $ 1,202,102

Depreciation expense relating to property and equipment for the three months ended September 30, 2022 and 2021 was $ 17.0 million and $ 13.5 million, respectively.

Depreciation expense relating to property and equipment for the nine months ended September 30, 2022 and 2021 was $ 49.9 million and $ 37.4 million, respectively.

During the three and nine months ended September 30, 2022 there was $ 0.5 million and $ 1.2 million of capitalized interest, respectively.

There was no capitalized interest during the three and nine months ended September 30, 2021.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Depreciation expense relating to property and equipment for the three months ended March 31, 2023 and 2022 was $ 18.7 million and $ 16.7 million, respectively.

During the three months ended March 31, 2023 and 2022, there was $ 2.9 million and $ 0.3 million of capitalized interest, respectively.

Bally’s Chicago Permanent Facility

A wholly-owned indirect subsidiary of the Company, Bally’s Chicago Operating Company, LLC entered into a Lease Termination and Short Term License Agreement with Chicago Tribune Company, LLC (“Tribune”), effective March 31, 2023, which among other things provides that the Company will have possession of 777 West Chicago Avenue, Chicago Illinois 60610 (the “Permanent Chicago Site”) on or before July 5, 2024, subject to $ 150 million in payments by the Company to Tribune payable in full upon Tribune vacating the site on or prior to July 5, 2024 (the “Payment”).

$ 140 million of the Payment is secured by standby letters of credit, issued by Citizens Bank.

The Company recorded the short-term portion of the payments of $ 93.9 million within “Accrued liabilities” and the remaining $ 48.7 million within Other long-term liabilities, with an offsetting increase to “Property and equipment, net” within the condensed consolidated balance sheets as of March 31, 2023.

GOODWILL AND INTANGIBLE ASSETS

The change in carrying value of goodwill by reportable segment for the nine months ended September 30, 2022 is as follows (in thousands):

The change in carrying value of goodwill by reportable segment for the three months ended March 31, 2023 is as follows (in thousands):

Casinos & Resorts North America Interactive International Interactive Total

1 unchanged sentence

$ 209,257 $ 39,740 $ 1,497,205 $ 1,746,202

Goodwill from current year business acquisitions 4,402 — — 4,402

Goodwill from current year business acquisition — — 18,139 18,139

Effect of foreign exchange — 59 30,512 30,571

Purchase accounting adjustments on prior year business acquisitions ( 1,285 ) 239 277 ( 769 )

Goodwill as of September 30, 2022 (1)

Purchase accounting adjustments on prior year business acquisition 126 — — 126

Goodwill as of March 31, 2023 (1)

$ 209,383 $ 39,799 $ 1,545,856 $ 1,795,038

__________________________________

(1) Casinos & Resorts amounts are net of accumulated goodwill impairment charges of $ 5.4 million.

The change in intangible assets, net for the nine months ended September 30, 2022 is as follows (in thousands):

(1) Amounts are shown net of accumulated goodwill impairment charges of $ 5.4 million and $ 140.4 million for Casinos and Resorts and North America Interactive, respectively.

The change in intangible assets, net for the three months ended March 31, 2023 is as follows (in thousands):

Intangible assets, net as of December 31, 2022 $ 1,961,938

Additions in current period 106,354

Intangible assets from current year business combinations 29,471

Change in TRA with Sinclair (1)

Effect of foreign exchange 21,975

Other ( 574 )

Internally developed software 7,143

Other intangibles acquired 2,909

Amortization ( 55,875 )

Intangible assets, net as of September 30, 2022

Intangible assets, net as of March 31, 2023

__________________________________

(1) Refer to Note 2 “ Significant Accounting Policies ” for further information.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company’s identifiable intangible assets consist of the following:

remaining life

(in years) September 30, 2022

(in years) March 31, 2023

(in thousands, except years) Gross Carrying Amount Accumulated

21 unchanged sentences

Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

remaining life

21 unchanged sentences

(2) See note (1) above.

Amortization of intangible assets was approximately $ 56.8 million and $ 15.5 million for the three months ended September 30, 2022 and 2021, respectively, and approximately $ 177.6 million and $ 30.1 million for the nine months ended September 30, 2022 and 2021, respectively.

The following table reflects the remaining amortization expense associated with the finite-lived intangible assets as of September 30, 2022:

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Amortization of intangible assets was approximately $ 55.9 million and $ 62.1 million for the three months ended March 31, 2023 and 2022, respectively.

The following table reflects the remaining amortization expense associated with the finite-lived intangible assets as of March 31, 2023:

(in thousands)

3 unchanged sentences

FAIR VALUE MEASUREMENTS

The Company categorizes financial assets and liabilities based on the following fair value hierarchy:

Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets or liabilities;

Inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly;

Unobservable inputs in which little or no market data exists requiring an entity to develop its own assumptions.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:

September 30, 2022

March 31, 2023

(in thousands) Balance Sheet Location Level 1 Level 2 Level 3

Cash and cash equivalents Cash and cash equivalents $ 344,266 $ — $ —

Restricted cash Cash and cash equivalents 55,669 — —

Other current assets Prepaid expenses and other current assets 7 — —

Restricted cash Restricted cash 52,596 — —

Convertible loans Prepaid expenses and other current assets 692 — —

1 unchanged sentence

Investments in equity securities Other assets 2,125 — —

Investment in GLPI partnership Other assets — 14,923 —

Total $ 399,679 $ 14,923 $ 10,838

1 unchanged sentence

Naming rights liabilities $ — $ — $ 37,254

Contingent consideration Contingent consideration payable — — 8,436

Contingent consideration Accrued liabilities — — 9,461

Total $ — $ — $ 46,715

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

December 31, 2022

1 unchanged sentence

Cash and cash equivalents Cash and cash equivalents $ 212,515 $ — $ —

Restricted cash Cash and cash equivalents 68,647 — —

Other current assets Prepaid expenses and other current assets 176 — —

Restricted cash Restricted cash 52,669 — —

Convertible loans Prepaid expenses and other current assets 657 — —

Convertible loans Other assets — — 10,212

Investments in equity securities Other assets 2,395 — —

Total $ 268,236 $ — $ 10,212

Sinclair Performance Warrants Naming rights liabilities $ — $ — $ 36,987

Contingent consideration Contingent consideration payable — — 34,931

Contingent consideration Accrued liabilities — — 8,220

Total $ — $ — $ 45,207

3 unchanged sentences

Additions in the period (acquisition fair value) — — 500 500

Reductions in the period — ( 15,862 ) — ( 15,862 )

Change in fair value 267 1,241 126 1,634

Ending as of September 30, 2022

Ending as of March 31, 2023

$ 37,254 $ 9,461 $ 10,838 $ 57,553

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(in thousands) Sinclair Performance Warrants Contingent Consideration Total

(in thousands) Sinclair Performance Warrants Contingent Consideration Convertible Loans Total

Beginning as of December 31, 2021 $ 69,564 $ 34,931 $ 2,025 $ 106,520

Additions in the period (acquisition fair value) — — 167 167

Reductions in the period — ( 15,862 ) — ( 15,862 )

Change in fair value ( 13,379 ) ( 5,992 ) ( 54 ) ( 19,425 )

Ending as of September 30, 2021

Ending as of March 31, 2022

$ 56,185 $ 13,077 $ 2,138 $ 71,400

The gains (losses) recognized in the condensed consolidated statement of operations for derivatives not designated as hedging instruments during the three and nine months ended September 30, 2022 and 2021 are as follows:

Condensed Consolidated Statements of Operations Location Three Months Ended September 30, Nine Months Ended September 30,

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The gains (losses) recognized in the condensed consolidated statement of operations for derivatives not designated as hedging instruments during the three months ended March 31, 2023 and 2022 are as follows:

Condensed Consolidated Statements of Operations Location Three Months Ended March 31,

(in thousands) 2023 2022

Foreign exchange forward contracts Other, net $ — $ ( 6,003 ) $ — $ ( 20,776 )

Sinclair Performance Warrants Change in value of naming rights liabilities $ ( 267 ) $ 13,379

Sinclair Options Change in value of naming rights liabilities $ — $ — $ — $ ( 1,526 )

Sinclair Performance Warrants

2 unchanged sentences

The Performance Warrants are valued using an option pricing model, considering the Company’s estimated probabilities of achieving the performance milestones for each tranche.

Inputs to this valuation approach include volatility of 63 %, risk free rates between 1.02 % and 1.24 %, the Company’s common stock price for each period and expected terms between 3.4 and 4.9 years.

Inputs to this valuation approach include volatility between 63 % and 66 %, risk free rates between 1.02 % and 4.01 %, the Company’s common stock price for each period and expected terms between 3.4 and 8.0 years.

Sinclair Options

As of December 31, 2020, the Options were accounted for as a derivative liability because the Options could have been required to be settled in cash, outside the Company’s control, prior to formal stockholder approval.

Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity, at which point, the Options were adjusted to fair value of $ 59.7 million and were reclassified from “Naming rights liabilities” to “Additional paid-in-capital” in the consolidated balance sheet.

The increase in fair value of the Options from $ 58.2 million as of December 31, 2020, through January 27, 2021 was $ 1.5 million and resulted in a mark to market loss in the first quarter of 2021, reported within “Change in value of naming rights liabilities” in the consolidated statements of operations.

The fair value was based on a Black-Scholes model using Level 2 inputs, including volatility rates, risk free rates, the Company’s common stock price and expected term.

Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Sinclair Options are accounted for as an equity classified instrument under ASC 815, Derivatives and Hedging .

The fair value of the options are based on a Black-Scholes model using Level 2 inputs, including volatility rates, risk free rates, the Company’s common stock price and expected term.

The fair value of the Options was $ 59.7 million as of March 31, 2023 and December 31, 2022 and is recorded within “Additional paid-in-capital” in the condensed consolidated balance sheets.

Contingent Consideration

2 unchanged sentences

After the acquisition dates and until the contingencies are resolved, the fair value of contingent consideration payable is adjusted each reporting period based primarily on the expected probability of achievement of the contingency targets which are subject to management’s estimate and the Company’s stock price.

These changes in fair value are recognized within “Other, net” of the condensed consolidated statements of operations.

During the first quarter of 2022, the Company settled contingent consideration of $ 15.9 million comprised of 393,778 immediately exercisable penny warrants to MKF and 107,832 shares of Bally’s Corporation common stock and $ 0.1 million in cash to SportCaller in satisfaction of contingencies related to the respective acquisition agreements (as described in Note 5 “ Acquisitions ”).

Other current assets

The Company has agreements with certain third-party sports betting operators for online sports betting and related iGaming market access.

Pursuant to one of these agreements, the Company has a present right to payment for a fixed number of equity securities in exchange for market access.

The Company recorded these securities as a stock receivable at their fair value based on quoted prices in active markets and classified within Level 1 of the hierarchy with changes to fair value included within “Other, net” of the condensed consolidated statements of operations.

These changes in fair value are recognized within “Other, non-operating expenses, net” of the condensed consolidated statements of operations.

During the first quarter of 2022, the Company settled contingent consideration of $ 15.9 million comprised of 393,778 immediately exercisable penny warrants and 107,832 shares of Bally’s Corporation common stock and $ 0.1 million in cash in satisfaction of contingencies related to the respective acquisition agreements.

Convertible Loans

2 unchanged sentences

The Company recorded the short-term portion of the instruments within “Prepaid expenses and other current assets” and the long-term portion of the instruments within “Other assets” at their fair value.

The fair value of the loans to vendors with share prices quoted on active markets are classified within Level 1 of the hierarchy and the fair value of the loans to vendors with share values based on unobservable inputs are classified within Level 3 of the hierarchy, both with changes to fair value included within “Other, net” of the condensed consolidated statements of operations.

The fair value of the loans to vendors with share prices quoted on active markets are classified within Level 1 of the hierarchy and the fair value of the loans to vendors with share values based on unobservable inputs are classified within Level 3 of the hierarchy, both with changes to fair value included within “Other non-operating expenses, net” of the condensed consolidated statements of operations.

Investments in Equity Securities

2 unchanged sentences

Under the fair value option, the investment is remeasured at fair value at each reporting period through earnings.

The Company measures fair value using quoted prices in active markets that are classified within Level 1 of the hierarchy, with changes to fair value included within “Other, net” of the condensed consolidated statements of operations.

The Company measures fair value using quoted prices in active markets that are classified within Level 1 of the hierarchy, with changes to fair value included within “Other non-operating expenses, net” of the condensed consolidated statements of operations.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Investment in GLPI Partnership

The Company holds a limited partnership interest in GLP Capital, L.P., the operating partnership of GLPI.

The investment is reported at fair value based on Level 2 inputs, with changes to fair value included within “Other non-operating expenses, net” of the condensed consolidated statements of operations.

Long-Term Debt

The fair values of the Company’s Term Loan Facility and senior notes are estimated based on quoted prices in active markets and are classified as a Level 1 measurements.

The fair value of the Company’s Term Loan Facility and senior notes are estimated based on quoted prices in active markets and are classified as Level 1 measurements.

The fair value of the Revolving Credit Facility approximates its carrying amount as it is revolving, variable rate debt, and is also classified as a Level 1 measurement.

In the table below, the carrying amount of the Company’s long-term debt is net of debt issuance costs and debt discounts.

In the table below, the carrying amounts of the Company’s long-term debt is net of debt issuance costs and debt discounts.

Refer to Note 14 “ Long-Term Debt ” for further information.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(in thousands) Carrying Amount Fair Value Carrying Amount Fair Value

4 unchanged sentences

718,688 527,702 732,976 529,905

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

ACCRUED LIABILITIES

As of September 30, 2022 and December 31, 2021, accrued liabilities consisted of the following:

(in thousands) September 30,

As of March 31, 2023 and December 31, 2022, accrued liabilities consisted of the following:

(in thousands) March 31,

2023 December 31,

GLPI advance deposit (1)

$ 200,000 $ —

Gaming liabilities $ 172,609 $ 168,386

Bally’s Chicago - land development liability 93,872 —

Compensation 68,403 60,463

Interest payable 13,531 36,173

GLPI advance deposit (1)

Other 106,311 108,909

2 unchanged sentences

(1) Refer to Note 15 “ Leases ” for further information.

ACQUISITION, INTEGRATION AND RESTRUCTURING

The following table reflects acquisition, integration and restructuring expenses the Company recorded during the three and nine months ended September 30, 2022 and 2021:

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

(in thousands) 2022 2021 2022 2021

Acquisition and integration costs:

Gamesys $ 2,941 $ 3,749 $ 4,119 $ 17,320

North America Interactive acquisitions (1)

686 842 3,033 4,833

Chicago, Illinois 2,226 — 8,098 —

2,551 2,206 6,112 15,304

Total 8,404 6,797 21,362 37,457

Restructuring expense 878 — 3,312 —

Total acquisition, integration and restructuring $ 9,282 $ 6,797 $ 24,674 $ 37,457

__________________________________

(1) Includes costs associated with the acquisition and integration of Bally’s Interactive, SportCaller, MKF, AVP and Telescope, which are included within the North America Interactive segment.

(2) Includes costs in connection with the development of a casino in Centre County, Pennsylvania, the completed acquisitions of Bally’s Atlantic City, Bally’s Black Hawk, Bally’s Dover, Bally’s Evansville, Bally’s Lake Tahoe, Bally’s Quad Cities, Bally’s Shreveport, Tropicana Las Vegas and other transactions.

Restructuring Expense

During the three and nine months ended September 30, 2022, the Company incurred restructuring expense of $ 0.9 million and $ 3.3 million, respectively, attributable to severance costs incurred.

There was no restructuring expense in the three and nine months ended September 30, 2021.

The following table summarizes the restructuring liability accrual activity by segment during the nine months ended September 30, 2022:

(in thousands) North America Interactive International Interactive Total

Restructuring liability as of December 31, 2021

$ 142 $ 264 $ 406

Additions 212 3,100 3,312

Payments ( 354 ) ( 3,364 ) ( 3,718 )

Restructuring liability as of September 30, 2022

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

RESTRUCTURING EXPENSE

On January 18, 2023, the Company announced a restructuring plan (the “Plan”) of the Interactive business intended to reduce operating costs and continue the Company’s commitment to achieving profitable operations in its North America Interactive segment.

The Plan included a reduction of the Company’s current Interactive workforce by up to 15 percent.

During the three months ended March 31, 2023, the Company incurred restructuring charges of $ 16.8 million, attributable to the workforce reduction representing employee transition costs and severance.

These costs are included within “General and administrative” of the condensed consolidated statement of operations.

The restructuring charges by segment are summarized as follows:

(in thousands) Three Months Ended March 31, 2023

North America Interactive $ 5,858

International Interactive 9,332

Total restructuring charge $ 16,822

The restructuring activity for the three months ended March 31, 2023 is as follows:

(in thousands) Workforce Reduction

Balance as of December 31, 2022

Charges 16,822

Payments ( 11,934 )

Balance as of March 31, 2023

The restructuring liability as of March 31, 2023 is included within “Accrued liabilities” on the condensed consolidated balance sheets.

LONG-TERM DEBT

As of September 30, 2022 and December 31, 2021, long-term debt consisted of the following:

(in thousands) September 30,

As of March 31, 2023 and December 31, 2022, long-term debt consisted of the following:

(in thousands) March 31,

2023 December 31,

11 unchanged sentences

excluding current portion $ 3,315,064 $ 3,469,105

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

On August 20, 2021, two unrestricted subsidiaries (together, the “Escrow Issuers”) of the Company issued $ 750.0 million aggregate principal amount of 5.625 % senior notes due 2029 (the “2029 Notes”) and $ 750.0 million aggregate principal amount of 5.875 % Senior Notes due 2031 (the “2031 Notes” and, together with the 2029 Notes, the “Senior Notes”).

9 unchanged sentences

The Company may redeem some or all of the Senior Notes at any time on or after September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at certain redemption prices set forth in the indenture plus accrued and unpaid interest.

During the three months ended March 31, 2023, the Company repurchased and retired $ 15.0 million of the 2031 Notes at a weighted average price of 70.80 % of the principal.

In connection with the repurchase of these 2031 Notes, the Company recorded a gain on extinguishment of debt of $ 4.0 million recorded within “Other non-operating income (expense), net” in the condensed consolidated statements of operations.

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.

2 unchanged sentences

On October 1, 2021, the Company and certain of its subsidiaries entered into a credit agreement (the “Credit Agreement”) with Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the other lenders party thereto, providing for senior secured financing of up to $ 2.565 billion, consisting of a senior secured term loan facility in an aggregate principal amount of $ 1.945 billion (the “Term Loan Facility”), which will mature in 2028, and a senior secured revolving credit facility in an aggregate principal amount of $ 620.0 million (the “Revolving Credit Facility”), which will mature in 2026.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

The credit facilities are guaranteed by the Company’s restricted subsidiaries, subject to certain exceptions, and secured by a first-priority lien on substantially all of the Company’s and each of the guarantors’ assets, subject to certain exceptions.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Borrowings under the credit facilities bear interest at a rate equal to, at the Company’s option, either (1) LIBOR determined by reference to the costs of funds for USD deposits for the interest period relevant to such borrowing, adjusted for certain additional costs and subject to a floor of 0.50 % in the case of term loans and 0.00 % in the case of revolving loans or (2) a base rate determined by reference to the greatest of (a) the federal funds rate plus 0.50 %, (b) the prime rate, (c) the one-month LIBOR rate plus 1.00 %, (d) solely in the case of term loans, 1.50 % and (e) solely in the case of revolving loans, 1.00 %, in each case of clauses (1) and (2), plus an applicable margin.

3 unchanged sentences

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.

As of September 30, 2022, the Company’s borrowings under the Revolving Credit Facility did not exceed 30 % and therefore, financial covenants did not apply.

In connection with the acquisition of Bally’s Evansville, an affiliate of GLPI has agreed to acquire the real estate associated with Bally’s Evansville from the seller for $ 340.0 million and lease it to the Company under a master lease agreement (the “Master Lease”).

GLPI also agreed to acquire the real estate associated with Bally’s Dover for $ 144.0 million and lease it back to the Company under the Master Lease.

The Master Lease with GLPI has an initial term of 15 years and includes four , five-year options to renew and requires combined minimum annual payments of $ 40.0 million, subject to escalation.

The acquisition of Bally’s Evansville and commencement of the Master Lease occurred on June 3, 2021.

During the second quarter of 2021, the Company sold the real estate associated with Bally’s Dover to GLPI and recorded a gain of $ 53.4 million representing the difference in the transaction price and the derecognition of assets.

During the second quarter of 2021, the Company recognized a lease liability and corresponding right of use asset of $ 117.3 million and $ 276.9 million related to Bally’s Dover and Bally’s Evansville, respectively.

On April 1, 2022, the Company completed the sale of its Bally’s Quad Cities and Bally’s Black Hawk properties to GLPI for $ 150.0 million, subsequently leasing the properties back under the above-mentioned Master Lease for combined minimum annual payments of $ 12.0 million, subject to escalation.

During the second quarter of 2022, the Company recorded a net gain of $ 50.8 million, representing the difference in the transaction price and the derecognition of assets, and recorded lease liabilities and corresponding right of use assets of $ 82.7 million and $ 21.8 million, respectively.

On September 26, 2022, the Company completed its acquisition of the non-land assets of Tropicana Las Vegas from PENN and GLPI for $ 148.3 million, subsequently leasing the land underlying the Tropicana Las Vegas property from GLPI, for an initial term of 50 years (with a maximum term of 99 years with renewal options) at annual rent of $ 10.5 million.

During the third quarter of 2022, the Company recognized a lease liability and corresponding right of use asset of $ 164.2 million and $ 164.3 million, respectively.

All GLPI leases are accounted for as operating leases within the provisions of ASC 842, Leases (“ASC 842”), over the lease term or until a re-assessment event occurs.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

During the third quarter of 2022, the Company received an advance deposit of $ 200.0 million in connection with an agreement entered into with GLP Capital, L.P., the operating partnership of GLPI (“GLP”), on June 28, 2022 to acquire the real property assets of Hard Rock Biloxi along with Bally’s Tiverton.

Pursuant to the terms of the transaction, the Company will immediately lease back both properties under the above-mentioned Master Lease with GLPI.

The deposit will be credited or repaid to GLP at the earlier of closing or December 31, 2023 and is recorded within “Accrued liabilities” in the condensed consolidated balance sheets.

As of March 31, 2023, the Company’s borrowings under the Revolving Credit Facility did not exceed 30 % and therefore, financial covenants did not apply.

Operating Leases

In addition to the operating lease components under the 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.

These leases include various renewal options which are included in the lease term when the Company has determined it is reasonably certain of exercising the options.

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

Certain leases include various renewal options which are included in the lease term when the Company has determined it is reasonably certain of exercising the options.

Certain of these leases include percentage rent payments based on property revenues and/or rent escalation provisions determined by increases in the consumer price index (“CPI”).

These percentage rent and escalation provisions are treated as variable lease payments and recognized as lease expense in the period in which the obligation for those payments are incurred.

Discount rates used to determine the present value of the lease payments are based on a credit-adjusted secured borrowing rate commensurate with the term of the lease.

In the second quarter of 2021, in connection with the acquisition of Bally’s Lake Tahoe, the Company assumed a lease for the real estate and land underlying the operations of Bally’s Lake Tahoe facility.

The original term of the lease expires on December 31, 2035, at which point the Company will have five options to renew the lease for additional periods of five years each.

The renewal options have not been included in the calculation of the lease liability or right of use asset as the Company is not reasonably certain to exercise the options.

The fixed rent due under the lease can escalate each year based on changes in CPI.

Additionally, the Company is obligated to pay an annual percentage rent based on property net revenues.

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.

Variable expenses generally represent the Company’s share of the landlord’s operating expenses, percentage rent and CPI increases.

The Company does not have any leases classified as financing leases.

The Company had operating lease liabilities of approximately $ 823.3 million and $ 531.0 million as of September 30, 2022 and December 31, 2021, respectively, and right of use assets of approximately $ 798.0 million and $ 507.8 million as of September 30, 2022 and December 31, 2021, respectively, which were included in the condensed consolidated balance sheets.

Total lease cost under ASC 842 for the three and nine months ended September 30, 2022 and 2021 was as follows:

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

Discount rates used to determine the present value of the lease payments are based on the Company’s incremental borrowing rate commensurate with the term of the lease.

The Company had total operating lease liabilities of $ 1.22 billion and $ 836.1 million as of March 31, 2023 and December 31, 2022, respectively, and right of use assets of $ 1.19 billion and $ 808.9 million as of March 31, 2023 and December 31, 2022, respectively, which were included in the condensed consolidated balance sheets.

As of March 31, 2023, the Company’s Bally’s Evansville, Bally’s Dover, Bally’s Quad Cities, Bally’s Black Hawk, Bally’s Tiverton and Hard Rock Biloxi properties are leased under the terms of a master lease agreement (the “Master Lease”) with GLPI.

All GLPI leases are accounted for as operating leases within the provisions of ASC 842 over the lease term or until a re-assessment event occurs.

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 $ 100.5 million, subject to minimum 1% annual escalation or greater escalation dependent on CPI.

The renewal options are not reasonably certain of exercise as of March 31, 2023.

In connection with the sale of the real estate for Bally’s Quad Cities and Bally’s Black Hawk during the second quarter of 2022, the Company received proceeds of $ 150.0 million and recognized a gain of $ 50.8 million.

The gains recorded on the transactions represent the difference in the respective transaction prices and the derecognition of assets and are recorded within “General and administrative” in the condensed consolidated statements of operations.

On January 3, 2023, the Company 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 total consideration of $ 625.4 million.

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

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

An advance deposit of $ 200.0 million was received in the third quarter of 2022 in connection with this agreement, which was recorded within “Accrued liabilities” in the condensed consolidated balance sheets as of December 31, 2022.

During the three months ended March 31, 2023, the Company recorded a gain of $ 374.2 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.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In addition to the properties under the Master Lease explained above, the Company also entered into a lease with GLPI for the land associated with Tropicana Las Vegas, which the Company acquired during the third 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.

The renewal options are not reasonably certain of exercise as of March 31, 2023.

Components of lease expense included within “General and administrative” for operating leases during the three months ended March 31, 2023 and 2022 are as follows:

Three Months Ended March 31,

(in thousands) 2023 2022

5 unchanged sentences

Total lease expense $ 41,615 $ 20,853

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Supplemental cash flow and other information for the three and nine months ended September 30, 2022 and 2021, related to operating leases was as follows:

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

Supplemental cash flow and other information related to operating leases for the three months ended March 31, 2023 and 2022 are as follows:

Three Months Ended March 31,

(in thousands) 2023 2022

1 unchanged sentence

Right of use assets obtained in exchange for operating lease liabilities $ 396,565 $ 1,363

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Weighted average remaining lease term 18.2 years 20.7 years

Weighted average discount rate 7.5 % 6.7 %

As of September 30, 2022, future minimum rental commitments under noncancelable operating leases are as follows:

(in thousands) September 30, 2022

As of March 31, 2023, future minimum lease payments under noncancelable operating leases are as follows:

(in thousands) March 31, 2023

Remaining 2023 $ 99,944

Thereafter 1,719,249

Total 1,703,314

Total lease payments 2,373,882

present value discount ( 1,148,935 )

Operating lease liabilities $ 823,301

Future operating lease payments as shown above include $ 87.7 million related to extension options that are reasonably certain of being exercised.

The Company also has leasing arrangements with third-party lessees at its properties.

Leasing arrangements for which the Company acts as a lessor are not deemed material as of September 30, 2022 and December 31, 2021.

Equity Incentive Plans

The Company has three equity incentive plans:

the 2010 BLB Worldwide Holdings, Inc.

Stock Option Plan (the “2010 Option Plan”), the 2015 Stock Incentive Plan (“2015 Incentive Plan”) and the Bally’s Corporation 2021 Equity Incentive Plan (“2021 Incentive Plan”), collectively (the “Equity Incentive Plans”).

The 2010 Option Plan provided for options to acquire 2,455,368 shares of the Company’s common stock.

Options granted to employees, officers and directors of the Company under the 2010 Option Plan vested on various schedules by individual as defined in the individual participants’ option agreements.

Vested options can generally be exercised all or in part at any time until the tenth anniversary of the date of grant.

Effective December 9, 2015, it was determined that no new awards would be granted under the 2010 Option Plan.

During the three months ended March 31, 2022, there were 20,000 options exercised at a weighted average exercise price of $ 4.31 per share and an aggregate intrinsic value of $ 0.1 million.

As of September 30, 2022, there were no unexercised options outstanding.

Lease obligations $ 1,224,947

Future minimum lease payments disclosed in the table above include $ 87.7 million related to extension options that are reasonably certain of being exercised.

The table above does not include $ 18.1 million of payments for leases signed but not yet commenced as of March 31, 2023.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Financing Obligation

Bally’s Chicago Operating Company, LLC., an indirect wholly-owned subsidiary of the Company, entered into a ground lease for the land on which Bally’s Chicago will be built, which is accounted for as a financing obligation in accordance with ASC 470 Debt as the transaction did not qualify as a sale under ASC 842.

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

The Company recorded land within property and equipment, net of $ 200.0 million with a corresponding long-term financing obligation of $ 200.0 million on its consolidated balance sheets as of December 31, 2022.

All lease payments are recorded as interest expense and there is no reduction to the financing obligation over the lease term.

Bally’s Chicago made cash payments, and recorded corresponding interest expense, of $ 4.3 million during the three months ended March 31, 2023.

The Company leases its hotel rooms to patrons and records the corresponding lessor revenue in “ Non-gaming revenue ” within our condensed consolidated statements of operations.

For the three months ended March 31, 2023 and 2022, the Company recognized $ 47.3 million and $ 26.9 million of lessor revenues related to the rental of hotel rooms, respectively.

Hotel leasing arrangements vary in duration, but are short-term in nature.

The cost and accumulated depreciation of property and equipment associated with hotel rooms is included in “Property and equipment, net” within our condensed consolidated balance sheets.

Equity Incentive Plans

The Company has two equity incentive plans:

the 2015 Stock Incentive Plan (“2015 Incentive Plan”) and the Bally’s Corporation 2021 Equity Incentive Plan (“2021 Incentive Plan”), collectively (the “Equity Incentive Plans”).

The 2015 Incentive Plan provided for the grant of stock options, time-based restricted stock units (“RSUs”), restricted stock awards (“RSAs”), performance-based restricted stock units (“PSUs”) and other awards (collectively, “restricted awards”) (including those with performance-based vesting criteria) to employees, directors or consultants of the Company.

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The 4,250,000 shares of the Company’s common stock, decreased by the number of shares subject to awards granted under the 2015 Incentive Plan between December 31, 2020 and May 18, 2021, or 221,464 shares, plus any shares subject to awards granted under the 2021 Incentive Plan or the 2015 Incentive Plan that are added back to the share pool under the 2021 Incentive Plan pursuant to the plan’s share counting rules, are authorized for issuance under the 2021 Incentive Plan.

During the nine months ended September 30, 2022, the Company granted 427,484 restricted awards with an aggregate intrinsic value of $ 13.5 million under the 2021 Incentive Plan.

As of September 30, 2022, 3,121,976 shares remain available for grant under the 2021 Incentive Plan, which includes shares added back to the share pool based on share counting rules.

There were 1,057,052 restricted awards outstanding as of September 30, 2022.

During the three months ended March 31, 2023, the Company granted 1,256,132 restricted awards with an aggregate intrinsic value of $ 24.1 million under the 2021 Incentive Plan.

As of March 31, 2023, 1,553,149 shares remain available for grant under the 2021 Incentive Plan, which includes shares added back to the share pool based on share counting rules.

There were 1,785,662 restricted awards outstanding as of March 31, 2023.

Share-Based Compensation

The Company recognized total share-based compensation expense of $ 6.7 million and $ 18.1 million for the three and nine months ended September 30, 2022, respectively, and $ 5.4 million and $ 13.8 million for the three and nine months ended September 30, 2021, respectively.

The total income tax benefit for share-based compensation arrangements was $ 1.8 million and $ 1.5 million for the three months ended September 30, 2022 and 2021, respectively, and $ 4.7 million and $ 4.0 million for the nine months ended September 30, 2022 and 2021, respectively.

BENEFIT PLANS

The Company participates in and contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain of its union-represented employees.

The Company acquired a defined benefit pension plan with the acquisition of Bally’s Dover on March 28, 2019 (“Dover Downs Pension Plan”) which is a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011.

Dover Downs Defined Benefit Pension Plan

The net periodic benefit (income) cost and other changes in plan assets and benefit obligations, excluding service cost, is set forth in the table below for the three and nine months ended September 30, 2022 and 2021.

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

(in thousands) 2022 2021 2022 2021

Service cost $ — $ — $ — $ —

Interest cost 202 224 606 672

Expected return on plan assets ( 443 ) ( 357 ) ( 1,329 ) ( 1,071 )

Net periodic benefit income $ ( 241 ) $ ( 133 ) $ ( 723 ) $ ( 399 )

Contributions

There is no minimum pension contribution required to be made to the Dover Downs Pension Plan under the Employee Retirement Income Security Act of 1974, as amended in 2021, for the year ended December 31, 2022.

The Company does no t expect to contribute in 2022.

There were no contributions made to the Dover Downs Pension Plan during the three and nine months ended September 30, 2022, and $ 0.2 million and $ 0.4 million in contributions made to the Dover Downs Pension Plan during the three and nine months ended September 30, 2021, respectively.

The Company recognized total share-based compensation expense of $ 6.0 million for the three months ended March 31, 2023 and $ 5.1 million for the three months ended March 31, 2022.

The total income tax benefit for share-based compensation arrangements was $ 1.6 million and $ 1.2 million for the three months ended March 31, 2023 and 2022, respectively.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Defined Contribution Plans

The Company has a retirement savings plan under Section 401(k) of the Internal Revenue Code covering its US non-union employees and certain union employees.

The plan allows employees to defer up to the lesser of the Internal Revenue Code prescribed maximum amount or 100 % of their income on a pre-tax basis through contributions to the plan.

Gamesys also operates defined contribution retirement benefit plans for their UK, US, Toronto, Isle of Man and Gibraltar offices.

Eligible employees are allowed to contribute between 3-5% of their base salary to the various plans and the Company matches all employee contributions.

Total employer contribution expense was $ 1.6 million and $ 0.9 million for the three months ended September 30, 2022 and 2021, respectively, and $ 5.4 million and $ 2.2 million for the nine months ended September 30, 2022 and 2021, respectively.

STOCKHOLDERS’ EQUITY

Capital Return Program and Quarterly Cash Dividend

On July 27, 2022, the Company completed a modified Dutch auction tender offer (the “Offer”) and repurchased 4.7 million shares of its common stock for cash at a price of $ 22.00 per share for an aggregate purchase price of $ 103.3 million.

Total share repurchase activity during the nine months ended September 30, 2022 was as follows:

(in thousands, except share and per share data) Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Capital Return Program

Total share repurchase activity during the three months ended March 31, 2023 and 2022 was as follows:

Three Months Ended March 31,

(in thousands, except share and per share data) 2023 2022

Number of common shares repurchased 1,026,343 350,616

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Average cost per share, including commissions $ 19.25 $ 37.90

__________________________________

There was no share repurchase activity during the three and nine months ended September 30, 2021.

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.

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There is no fixed time period to complete share repurchases.

The Company retired 5,368,334 and 6,514,528 shares of its common stock held in treasury during the three and nine months ended September 30, 2022, respectively.

The Company retired 10,042 and 2,099,268 shares of its common stock held in treasury during the three and nine months ended September 30, 2021, respectively.

The Company retired 1,026,343 and 1,146,194 shares of its common stock held in treasury during the three months ended March 31, 2023 and 2022, respectively.

The shares were returned to the status of authorized but unissued shares.

As of September 30, 2022, there were no shares remaining in treasury.

There were no cash dividends paid during the nine months ended September 30, 2022 and 2021.

As of September 30, 2022 and December 31, 2021, $ 215.4 million and $ 347.9 million, respectively, remained available for use under the above-mentioned capital return program, subject to regulatory and debt agreements limitations.

As of March 31, 2023, there were no shares remaining in treasury.

As of March 31, 2023 and December 31, 2022, $ 174.8 million and $ 194.6 million, respectively, remained available for use under the above-mentioned capital return program, subject to regulatory and debt agreements limitations.

Common Stock Offering

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The net proceeds were used to finance a portion of the purchase price of the Gamesys acquisition.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The exercise price of the warrant is nominal, and its exercise is subject to, among other conditions, requisite gaming authority approvals.

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On May 18, 2021, following receipt of required shareholder approvals, the Company amended its Certificate of Incorporation to increase the number of authorized shares of common stock from 100 million to 200 million, and authorize the issuance of up to 10 million shares of preferred stock.

As of September 30, 2022 and December 31, 2021, no shares of preferred stock have been issued.

As of March 31, 2023 and December 31, 2022, no shares of preferred stock have been issued.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Shares Outstanding

As of September 30, 2022, the Company had 47,287,301 common shares issued and outstanding.

As of March 31, 2023, the Company had 45,767,764 common shares issued and outstanding.

The Company issued warrants, options and other contingent consideration in acquisitions and strategic partnerships that are expected to result in the issuance of common shares in future periods resulting from the exercise of warrants and options or the achievement of certain performance targets.

These incremental shares as of September 30, 2022 are summarized below:

These incremental shares are summarized below:

Sinclair Penny Warrants (Note 2)

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(1) Consists of four equal tranches to purchase shares with exercise prices ranging from $ 30.00 to $ 45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing of the Sinclair Agreement.

(2) The contingent consideration related to the SportCaller acquisition is 6.5 M EUR as of September 30, 2022, payable in shares subject to certain post-acquisition earn-out targets and based on share price at time of payment.

For purposes of this estimate, the Company used the EUR>US Dollar conversion rate of 0.9706 as of September 30, 2022 and the closing share price of Company common shares of $ 19.76 per share to calculate the shares expected to be issued if earn-out targets are met.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables reflect the changes in accumulated other comprehensive loss by component, net of tax, for the nine months ended September 30, 2022 and 2021, respectively:

(2) The contingent consideration related to the SportCaller acquisition is 6.5 M EUR as of March 31, 2023, payable in shares subject to certain post-acquisition earn-out targets and based on share price at time of payment.

For purposes of this estimate, the Company used the EUR>US Dollar conversion rate of 1.0875 as of March 31, 2023 and the closing share price of Company common shares of $ 19.52 per share to calculate the shares expected to be issued if earn-out targets are met.

Accumulated Other Comprehensive Income (Loss)

The following tables reflect the changes in accumulated other comprehensive loss by component, net of tax, for the three months ended March 31, 2023 and 2022, respectively:

(in thousands) Foreign Currency Translation Adjustment Benefit Plans Total

Accumulated other comprehensive loss at December 31, 2022 $ ( 295,984 ) $ 344 $ ( 295,640 )

Current period other comprehensive loss ( 483,548 ) — ( 483,548 )

Accumulated other comprehensive loss at September 30, 2022

Current period other comprehensive income 52,073 — 52,073

Accumulated other comprehensive loss at March 31, 2023

$ ( 243,911 ) $ 344 $ ( 243,567 )

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Current period other comprehensive loss ( 71,542 ) — ( 71,542 )

Reclassification adjustment to net earnings — 122 122

Accumulated other comprehensive loss at September 30, 2021

Accumulated other comprehensive loss at March 31, 2022

$ ( 97,375 ) $ ( 976 ) $ ( 98,351 )

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

COMMITMENTS AND CONTINGENCIES

Capital Expenditure Commitments

Bally’s Atlantic City - As part of the regulatory approval process with the State of New Jersey, the Company committed to spend $ 100 million in capital expenditures over a five year period to invest in and improve the property.

The commitment calls for expenditures of no less than $ 25 million each in 2021, 2022 and 2023 and $ 85 million in aggregate for 2021, 2022 and 2023.

The remaining $ 15 million of committed capital must be spent over 2024 and 2025.

From 2021 through 2025, no less than $ 35 million must be invested in the hotel and no less than $ 65 million must be invested in non-hotel projects.

Bally’s Twin River - Per the terms of the Regulatory Agreement in Rhode Island, the Company is committed to invest $ 100 million in its Rhode Island properties over the term of the master contract through June 30, 2043, including an expansion and the addition of new amenities at Bally’s Twin River.

City of Chicago Guaranty

In connection with the host community agreement, signed by Bally’s Chicago Operating Company, LLC (the “Developer”), a wholly-owned indirect subsidiary of the Company, 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.

Bally’s Chicago Casino Fees

Under the Illinois Gambling Act, the Company will be responsible to pay various gaming license fees to the Illinois Gaming Board in connection with the Company’s casino operations.

These fees include:

(i) a $250,000 land based gaming fee to operate the casino on land prior to commencing operations, (ii) a $250,000 license fee prior to receiving an owners license and gambling operations commence, (iii) gaming position fees equal to the minimum initial fee of $30,000 per gaming position to be paid within 30 days of issuance of an owners license or Temporary Operating Permit (“TOP”), (iv) a $15 million reconciliation fee upon issuance of a TOP or an owners license, whichever is earlier, and (v) a reconciliation fee payment three years after the date operations commenced (in a temporary or permanent facility) in an amount equal to 75% of the adjusted gross receipt (“AGR”) for the most lucrative 12-month period of operations, minus the amount equal to the initial payment per gaming position paid.

Sponsorship Commitments

The Company has entered into several sponsorship agreements, totaling $ 107.5 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 CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

SEGMENT REPORTING

During the fourth quarter of 2021, the Company updated its operating and reportable segments to better align with its strategic growth initiatives in light of recent acquisitions.

The growth and diversification achieved through the Company’s recent acquisitions resulted in a change in the way the Company’s chief operating decision maker makes operating decisions, assesses the performance of the business and allocates resources.

As a result of this realignment, the Company determined it had three operating and reportable segments:

The Company has three operating and reportable segments:

Casinos & Resorts, North America Interactive and International Interactive.

The “Other” category includes interest expense for the Company and certain unallocated corporate operating expenses and other adjustments, including eliminations of transactions among segments to reconcile to the Company’s consolidated results including, among other expenses, share-based compensation, merger and acquisition costs and certain non-recurring charges.

During the first quarter of 2022 as a result of the segment realignment noted above, the Company changed its methodology for allocating certain corporate operating expenses within advertising, general and administrative expense previously reported in “Other” to directly apply such costs to the segment supported.

The prior year results presented below were reclassified to conform to the new segment presentation.

The Company’s three reportable segments as of September 30, 2022 are:

Casinos & Resorts - Bally’s Atlantic City, Bally’s Black Hawk, Bally’s Dover, Bally’s Evansville, Bally’s Kansas City, Bally’s Lake Tahoe, Bally’s Quad Cities, Bally’s Shreveport, Bally’s Tiverton, Bally’s Twin River, Bally’s Vicksburg, Hard Rock Biloxi, Tropicana Las Vegas and Bally’s Arapahoe Park.

North America Interactive - Bally’s Interactive, SportCaller, MKF, AVP, Telescope, Degree 53, Live at the Bike, Gamesys’ North American operations and online and mobile sports betting operations.

The “Other” category includes interest expense for the Company and certain unallocated corporate operating expenses and other adjustments, including eliminations of transactions among segments to reconcile to the Company’s consolidated results including, among other expenses, share-based compensation, acquisition and other transaction costs and certain non-recurring charges.

The Company’s three reportable segments as of March 31, 2023 are:

Casinos & Resorts - Includes the Company’s 15 casino and resort properties and one horse race track.

North America Interactive - A portfolio of sports betting, iGaming and free-to-play gaming brands.

International Interactive - Gamesys’ European and Asian operations.

The Company is currently evaluating the impact of the development of casinos in Centre County, Pennsylvania and Chicago, Illinois on its operating and reportable segments;

however, it is expected that they will be included within the Casinos & Resorts segment.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of September 30, 2022, the Company’s operations were predominately in the US, Europe and Asia with a less substantive footprint in other countries world-wide.

As of March 31, 2023, the Company’s operations were predominately in the US, Europe and Asia with a less substantive footprint in other countries world-wide.

For geographical reporting purposes, revenue generated outside of the US has been aggregated into the International Interactive reporting segment, and consists primarily of revenue from the UK and Japan.

Revenue generated from the UK and Japan represented approximately 24 % and 12 % of total revenue, respectively, for the three months ended March 31, 2023, and approximately 26 % and 15 %, respectively for the three months ended March 31, 2022.

The Company does not have any revenues from any individual customers that exceed 10% of total reported revenues.

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Management believes Adjusted EBITDA is representative of its ongoing business operations including its ability to service debt and to fund capital expenditures, acquisitions and operations, in addition to it being a commonly used measure of performance in the gaming industry and used by industry analysts to evaluate operations and operating performance.

The following tables set forth certain operating data for the Company’s three reportable segments.

The following table sets forth revenue and Adjusted EBITDA for the Company’s three reportable segments and reconciles Adjusted EBITDA on a consolidated basis to net income (loss).

The Other category is included in the following tables in order to reconcile the segment information to the Company’s condensed consolidated financial statements.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2023 2022

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Depreciation and amortization ( 74,561 ) ( 78,881 )

Acquisition, integration and restructuring ( 9,282 ) ( 6,797 ) ( 24,674 ) ( 37,457 )

Transaction costs ( 22,018 ) ( 6,023 )

Restructuring ( 16,822 ) —

Share-based compensation ( 6,040 ) ( 5,095 )

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(Provision) benefit for income taxes ( 137,742 ) 5,575

Net income (loss)

$ 178,336 $ 1,889

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Adjusted EBITDA should not be construed as an alternative to GAAP net income, its most directly comparable GAAP measure, nor is it directly comparable to similarly titled measures presented by other companies.

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Three Months Ended March 31,

(in thousands) 2023 2022

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Total $ 43,678 $ 54,516

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Total assets are not regularly reviewed for each operating segment when assessing segment performance or allocating resources and accordingly, are not presented.

As of March 31, 2023, the Company’s long-lived assets located outside of the US, consisting primarily of goodwill and intangible assets, were aggregated into the International Interactive reporting segment as disclosed in Note 10 “ Goodwill and Intangible Assets .” Over 98 % of property and equipment is located within the US.

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per common share is calculated in accordance with ASC 260, Earnings Per Share , which requires entities that have issued securities other than common stock that participate in dividends with common stock (“participating securities”) to apply the two-class method to compute basic earnings (loss) per common share.

To calculate basic earnings (loss) per share, the earnings allocated to common shares is divided by the weighted average number of common shares outstanding, contingently issuable warrants, and RSUs, RSAs, and PSUs for which no future service is required as a condition to the delivery of the underlying common stock (collectively, basic shares).

Diluted earnings per share includes the determinants of basic earnings per share and, in addition, reflects the dilutive effect of the common stock deliverable for stock options, using the treasury stock method, and for RSUs, RSAs and PSUs for which future service is required as a condition to the delivery of the underlying common stock.

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

Three Months Ended March 31,

(in thousands, except per share data) 2023 2022

Net income (loss) $ 593 $ ( 57,645 ) $ 61,983 $ 592

Weighted average shares outstanding - basic 57,020 49,506 59,170 45,573

Net income applicable to common stockholders $ 178,336 $ 1,889

Weighted average common shares outstanding, basic 54,420 60,017

Weighted average effect of dilutive securities 669 103

Weighted average shares outstanding - diluted 57,062 49,506 59,238 45,876

Basic earnings (loss) per share $ 0.01 $ ( 1.16 ) $ 1.05 $ 0.01

Diluted earnings (loss) per share $ 0.01 $ ( 1.16 ) $ 1.05 $ 0.01

There were 5,299,749 and 5,105,113 share-based awards that were considered anti-dilutive for the three and nine months ended September 30, 2022, respectively.

There were 4,953,791 and 4,922,577 share-based awards that were considered anti-dilutive for the three and nine months ended September 30, 2021, respectively.

Weighted average common shares outstanding, diluted 55,089 60,120

Basic earnings per share $ 3.28 $ 0.03

Diluted earnings per share $ 3.24 $ 0.03

There were 5,094,394 and 4,801,394 share-based awards that were considered anti-dilutive for the three months ended March 31, 2023 and 2022, respectively.

On November 18, 2020, the Company issued Penny Warrants, Performance Warrants and Options which participate in dividends with the Company’s common stock subject to certain contingencies.

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The Penny Warrants were considered exercisable for little to no consideration and are therefore included in basic shares outstanding at their issuance date.

For the three and nine months ended September 30, 2022 and 2021, the shares underlying the Performance Warrants were anti-dilutive as certain contingencies were not met.

For the three months ended March 31, 2023 and 2022, the shares underlying the Performance Warrants were anti-dilutive as certain contingencies were not met.

Refer to Note 2 “ Significant Accounting Policies ” for further information regarding the Sinclair Agreement.

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 1. Financial Statements