Bally's Corp 10-Q

ITEM 1. Financial Statements BALLY’S CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (In thousands, except share data) June 30, 2023 December 31, 2022 Assets Cash and cash equivalents $ 183,611 $ 212,515 Restricted cash 139,237 52,669 Accounts receivable, net 65,601 71,673 Inventory 15,372 14,191 Tax receivable 15,157 53,771 Prepaid expenses and other current assets 103,282 100,717 Assets held for sale 5,588 17,177 Total current assets 527,848 522,713 Property and equipment, net 1,155,757 1,202,102 Right of use assets, net 1,186,749 808,926 Goodwill 1,819,720 1,746,202 Intangible assets, net 1,938,249 1,961,938 Deferred tax asset 23,884 25,544 Other assets 128,982 32,688 Total assets $ 6,781,189 $ 6,300,113 Liabilities and Stockholders’ Equity Current portion of long-term debt $ 29,450 $ 19,450 Current portion of lease liabilities 48,129 32,929 Accounts payable 78,074 70,071 Accrued income taxes 53,818 56,012 Accrued liabilities 467,602 573,931 Liabilities related to assets held for sale 1,560 3,409 Total current liabilities 678,633 755,802 Long-term debt, net 3,317,720 3,469,105 Long-term portion of financing obligation 200,000 200,000 Long-term portion of lease liabilities 1,174,937 803,212 Deferred tax liability 201,398 138,017 Naming rights liabilities 98,515 109,807 Other long-term liabilities 70,826 17,923 Total liabilities 5,742,029 5,493,866 Commitments and contingencies (Note 18) Stockholders’ equity: Common stock ($ 0.01 par value, 200,000,000 shares authorized; 45,626,013 and 46,670,057 shares issued; 45,626,013 and 46,670,057 shares outstanding) 456 466 Preferred stock ($ 0.01 par value; 10,000,000 shares authorized; no shares outstanding) — — Additional paid-in-capital 1,594,857 1,636,366 Treasury stock, at cost — — Accumulated deficit ( 351,639 ) ( 535,373 ) Accumulated other comprehensive loss ( 204,942 ) ( 295,640 ) Total Bally’s Corporation stockholders’ equity 1,038,732 805,819 Non-controlling interest 428 428 Total stockholders’ equity 1,039,160 806,247 Total liabilities and stockholders’ equity $ 6,781,189 $ 6,300,113 See accompanying notes to condensed consolidated financial statements. 3 BALLY’S CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (In thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenue: Gaming $ 493,296 $ 455,088 $ 980,191 $ 918,790 Non-gaming 112,910 97,408 224,735 181,977 Total revenue 606,206 552,496 1,204,926 1,100,767 Operating (income) costs and expenses: Gaming 218,939 204,051 436,600 423,263 Non-gaming 52,276 46,384 104,620 87,021 General and administrative 249,957 192,735 501,565 379,756 Gain from sale-leaseback, net ( 135 ) ( 50,766 ) ( 374,321 ) ( 50,766 ) Depreciation and amortization 79,187 74,773 153,748 153,654 Total operating costs and expenses 600,224 467,177 822,212 992,928 Income from operations 5,982 85,319 382,714 107,839 Other income (expense): Interest expense, net ( 67,093 ) ( 45,828 ) ( 130,357 ) ( 91,513 ) Other non-operating income, net 6,811 25,444 9,421 44,923 Total other income (expense), net ( 60,282 ) ( 20,384 ) ( 120,936 ) ( 46,590 ) (Loss) income before income taxes ( 54,300 ) 64,935 261,778 61,249 (Benefit) provision for income taxes ( 28,649 ) 5,434 109,093 ( 141 ) Net (loss) income $ ( 25,651 ) $ 59,501 $ 152,685 $ 61,390 Basic (loss) earnings per share $ ( 0.48 ) $ 0.98 $ 2.82 $ 1.02 Weighted average common shares outstanding - basic 53,942 60,506 54,173 60,263 Diluted (loss) earnings per share $ ( 0.48 ) $ 0.98 $ 2.80 $ 1.02 Weighted average common shares outstanding - diluted 53,942 60,541 54,582 60,332 See accompanying notes to condensed consolidated financial statements. 4 BALLY’S CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) (In thousands) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net (loss) income $ ( 25,651 ) $ 59,501 $ 152,685 $ 61,390 Other comprehensive income (loss): Foreign currency translation adjustment, net of tax 38,625 ( 198,813 ) 90,698 ( 270,355 ) Other comprehensive income (loss) 38,625 ( 198,813 ) 90,698 ( 270,355 ) Total comprehensive income (loss) $ 12,974 $ ( 139,312 ) $ 243,383 $ ( 208,965 ) See accompanying notes to condensed consolidated financial statements. 5 BALLY’S CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) (In thousands, except share data) Common Stock Additional Paid-in Capital Treasury Stock Retained (Deficit) Earnings Accumulated Other Comprehensive Loss Non-controlling Interest Total Stockholders’ Equity Shares Outstanding Amount Balance as of December 31, 2022 46,670,057 $ 466 $ 1,636,366 $ — $ ( 535,373 ) $ ( 295,640 ) $ 428 $ 806,247 Issuance of restricted stock and other stock awards 124,050 1 ( 1,332 ) — — — — ( 1,331 ) Share-based compensation — — 6,040 — — — — 6,040 Retirement of treasury shares — ( 10 ) ( 35,987 ) 19,753 16,244 — — — Share repurchases ( 1,026,343 ) — — ( 19,753 ) — — — ( 19,753 ) 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 Issuance of restricted stock and other stock awards 125,842 1 ( 495 ) 529 — — — 35 Share-based compensation — — 6,290 — — — — 6,290 Retirement of treasury shares — ( 7 ) ( 25,279 ) 10,176 14,805 — — ( 305 ) Share repurchases ( 748,502 ) — — ( 10,705 ) — — — ( 10,705 ) Issuance of MKF penny warrants — — 7,371 — — — — 7,371 Penny warrants exercised 377,253 4 — — — — — 4 Settlement of consideration to SportCaller 103,656 1 1,883 — — — — 1,884 Other comprehensive income — — — — — 38,625 — 38,625 Net loss — — — — ( 25,651 ) — — ( 25,651 ) Balance as of June 30, 2023 45,626,013 $ 456 $ 1,594,857 $ — $ ( 351,639 ) $ ( 204,942 ) $ 428 $ 1,039,160 Common Stock Additional Paid-in Capital Treasury Stock Retained (Deficit) Earnings Accumulated Other Comprehensive Loss Non-controlling Interest Total Stockholders’ Equity 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 Issuance of restricted stock and other stock awards 122,849 1 ( 2,534 ) — — — — ( 2,533 ) Share-based compensation — — 5,095 — — — — 5,095 Stock options exercised 20,000 — 86 — — — — 86 Penny warrants exercised 383,934 4 — — — — — 4 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 Settlement of consideration to SportCaller 107,832 1 3,699 — — — — 3,700 Other comprehensive loss — — — — — ( 71,542 ) — ( 71,542 ) Net income — — — — 1,889 — — 1,889 Balance as of March 31, 2022 52,538,476 $ 525 $ 1,832,224 $ — $ ( 186,935 ) $ ( 98,351 ) $ 3,760 $ 1,551,223 Issuance 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 See accompanying notes to condensed consolidated financial statements. 6 BALLY’S CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended June 30, (in thousands) 2023 2022 Cash flows from operating activities: Net income $ 152,685 $ 61,390 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 153,748 153,654 Non-cash lease expense 28,117 14,456 Share-based compensation 12,330 11,417 Impairment charges 9,653 — Amortization of debt discount and debt issuance costs 5,563 5,124 Gain on sale-leaseback ( 374,321 ) ( 50,766 ) Gain on extinguishment of debt ( 4,044 ) — Deferred income taxes 48,870 ( 28,879 ) (Gain) loss on assets and liabilities measured at fair value ( 293 ) 567 Gain on equity method investments ( 3,090 ) — Change in value of naming rights liabilities ( 7,291 ) ( 33,411 ) Change in contingent consideration payable 1,024 ( 10,175 ) Adjustment on bargain purchase — 107 Foreign exchange loss (gain) 5,947 ( 1,987 ) Other operating activities 1,041 3,507 Changes in current operating assets and liabilities 34,111 39,540 Net cash provided by operating activities 64,050 164,544 Cash flows from investing activities: Cash paid for acquisitions, net of cash acquired ( 38,243 ) — Proceeds from sale-leaseback 411,000 150,000 Capital expenditures ( 119,546 ) ( 116,081 ) Cash paid for internally developed software ( 14,342 ) ( 31,455 ) Acquisition of gaming licenses ( 10,150 ) ( 51,560 ) Purchase of equity securities — ( 3,175 ) Other intangible asset acquisitions — ( 1,825 ) Other investing activities ( 4,743 ) ( 1,738 ) Net cash provided by (used in) investing activities 223,976 ( 55,834 ) Cash flows from financing activities: Issuance of long-term debt 35,000 110,000 Repayments of long-term debt ( 177,345 ) ( 204,725 ) Payment of deferred consideration — ( 30,025 ) Share repurchases ( 30,458 ) ( 13,288 ) Other financing activities ( 1,716 ) ( 2,752 ) Net cash used in financing activities ( 174,519 ) ( 140,790 ) Effect of foreign currency on cash and cash equivalents ( 4,195 ) ( 11,404 ) Change in cash and cash equivalents and restricted cash held for sale ( 1,648 ) — Net change in cash and cash equivalents and restricted cash 107,664 ( 43,484 ) Cash and cash equivalents and restricted cash, beginning of period 265,184 274,840 Cash and cash equivalents and restricted cash, end of period $ 372,848 $ 231,356 7 BALLY’S CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended June 30, (in thousands) 2023 2022 Supplemental disclosure of cash flow information: Cash paid for interest, net of amounts capitalized $ 134,266 $ 93,976 Cash received from income tax refunds, net of cash paid 9,722 ( 56,224 ) Non-cash investing and financing activities: Unpaid property and equipment $ 26,793 $ 32,403 Bally’s Chicago - land development liability 135,290 — Investment in GLP Capital, L.P. 14,412 — Investment in RI Joint Venture 17,832 — Unpaid internally developed software 904 — June 30, December 31, Reconciliation of cash and cash equivalents and restricted cash: 2023 2022 Cash and cash equivalents $ 183,611 $ 212,515 Restricted cash 139,237 52,669 Restricted cash - Other assets 50,000 — Total cash and cash equivalents and restricted cash $ 372,848 $ 265,184 See accompanying notes to condensed consolidated financial statements. 8 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. GENERAL INFORMATION Description of Business 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: Casinos and Resorts Location Type Built/Acquired Bally’s Twin River Lincoln Casino Resort (“Bally’s Twin River”) Lincoln, Rhode Island Casino and Resort 2004 Bally’s Arapahoe Park Aurora, Colorado Racetrack/OTB Site 2004 Hard Rock Hotel & Casino Biloxi (“Hard Rock Biloxi”) (2) Biloxi, Mississippi Casino and Resort 2014 Bally’s Tiverton Casino & Hotel (“Bally’s Tiverton”) (2) Tiverton, Rhode Island Casino and Hotel 2018 Bally’s Dover Casino Resort (“Bally’s Dover”) (2) Dover, Delaware Casino, Resort and Raceway 2019 Bally’s Black Hawk (1)(2) Black Hawk, Colorado Three Casinos 2020 Bally’s Kansas City Casino (“Bally’s Kansas City”) Kansas City, Missouri Casino 2020 Bally’s Vicksburg Casino (“Bally’s Vicksburg”) Vicksburg, Mississippi Casino and Hotel 2020 Bally’s Atlantic City Casino Resort (“Bally’s Atlantic City”) Atlantic City, New Jersey Casino and Resort 2020 Bally’s Shreveport Casino & Hotel (“Bally’s Shreveport”) Shreveport, Louisiana Casino and Hotel 2020 Bally’s Lake Tahoe Casino Resort (“Bally’s Lake Tahoe”) Lake Tahoe, Nevada Casino and Resort 2021 Bally’s Evansville Casino & Hotel (“Bally’s Evansville”) (2) Evansville, Indiana Casino and Hotel 2021 Bally’s Quad Cities Casino & Hotel (“Bally’s Quad Cities”) (2) Rock Island, Illinois Casino and Hotel 2021 Tropicana Las Vegas Casino and Resort (“Tropicana Las Vegas”) (2) Las Vegas, Nevada Casino and Resort 2022 __________________________________ (1) Includes Bally’s Black Hawk North Casino, Bally’s Black Hawk West Casino and Bally’s Black Hawk East Casino. (2) Properties leased from Gaming and Leisure Properties, Inc. (“GLPI”). 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. 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation 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. The financial statements of our foreign subsidiaries are translated into US dollars using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations. 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). 9 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. Accordingly, certain information and note disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States have been condensed or omitted. In the Company’s opinion, these condensed consolidated financial statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There were no material changes in significant accounting policies from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates. Equity Method Investments 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 40 % ownership in the joint venture qualifies for equity method accounting. In addition to this joint venture, the Company also has another investment in an unconsolidated subsidiary which is accounted for using equity method accounting. The Company records its share of net income or loss within Other non-operating income, net” in the condensed consolidated statements of operations. For the three and six months ended June 30, 2023, the Company recorded a gain on equity method investments of $ 1.0 million and $ 3.1 million, respectively. 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 June 30, 2023 and December 31, 2022, Breckenridge had total assets of $ 155.3 million and $ 93.4 million, respectively, and total liabilities of $ 85.9 million and $ 77.1 million, respectively. Breckenridge had revenues of $ 76.5 million and $ 160.5 million for the three and six months ended June 30, 2023, respectively, and $ 73.9 million and $ 160.8 million for the three and six months ended June 30, 2022, respectively. 10 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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. 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 cash collateral in connection with amounts due to the Chicago Tribune (refer to Note 9 “ Property and Equipment ”), 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: June 30, December 31, (in thousands) 2023 2022 Amounts due from Rhode Island and Delaware (1) $ 14,987 $ 15,865 Gaming receivables 17,450 19,065 Non-gaming receivables 38,813 42,532 Accounts receivable 71,250 77,462 Less: Allowance for doubtful accounts ( 5,649 ) ( 5,789 ) Accounts receivable, net $ 65,601 $ 71,673 __________________________________ (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. 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 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 $ 47.8 million and $ 44.8 million for the three months ended June 30, 2023 and 2022, respectively, and $ 93.7 million and $ 102.5 million for the six months ended June 30, 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 and six months ended June 30, 2023, advertising expense was $ 3.2 million and $ 8.6 million, respectively. For the three and six months ended June 30, 2022, advertising expense was $ 7.3 million and $ 14.8 million, respectively. Advertising costs 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). 11 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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: • Level 1: Observable quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2: Inputs are observable for the asset or liability either directly or through corroboration with observable market data. • Level 3: 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 its Tennis Channel, Stadium sports network and STIRR streaming service. 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. 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, net of accumulated amortization, was $ 239.4 million and $ 255.6 million as of June 30, 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 June 30, 2023 and 2022, respectively, and $ 15.5 million and $ 16.8 million for the six months ended June 30, 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 June 30, 2023 and December 31, 2022 was $ 58.5 million and $ 59.3 million, respectively. The short-term portion of the liability, which was $ 7.0 million and $ 6.0 million as of June 30, 2023 and December 31, 2022, respectively, is recorded within “Accrued liabilities” and the long-term portion of the liability, which was $ 51.5 million and $ 53.3 million as of June 30, 2023 and December 31 2022, 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 June 30, 2023 and 2022, and $ 2.2 million for the six months ended June 30, 2023 and 2022. 12 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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. Penny Warrants & Options . The Penny Warrants and Options are equity classified instruments under ASC 815, Derivatives and Hedging , (“ASC 815”). 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 Company recorded $ 59.7 million as of June 30, 2023 and December 31, 2022, and is included within “Additional paid-in-capital” in the condensed consolidated balance sheets. Performance Warrants . The Performance Warrants are accounted for as a derivative liability because the underlying performance metrics represent an adjustment to the settlement amount that is not indexed to the Company’s own stock and thus equity classification is precluded under ASC 815. Refer to Note 11 “ Fair Value Measurements ” for further information. Tax Receivable Agreement - The Company is required to share 60 % of the tax benefit the Company receives from the Penny Warrants, Options, Performance Warrants and payments under the TRA with Sinclair over the term of the agreement as tax benefit amounts are determined through the filing of the Company’s annual tax returns. 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 $ 17.1 million and $ 19.4 million as of June 30, 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 six months ended June 30, 2023, the Company recorded a provision for income tax of $ 109.1 million, at an effective year to date tax rate of 41.7 % and a benefit for income tax of $ 0.1 million, at an effective year to date tax rate of ( 0.2 )%, 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. 3. CONSOLIDATED FINANCIAL INFORMATION General and Administrative Expenses Amounts included in General and administrative for the three and six months ended June 30, 2023 and 2022 were as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Advertising, general and administrative $ 223,760 $ 182,623 $ 444,765 $ 364,364 Acquisition and integration costs 13,104 10,112 26,885 15,392 Restructuring 3,440 — 20,262 — Impairment charges 9,653 — 9,653 — Total general and administrative $ 249,957 $ 192,735 $ 501,565 $ 379,756 13 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 and six months ended June 30, 2023 and 2022 were as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Change in value of naming rights liabilities $ 7,558 $ 20,032 $ 7,291 $ 33,411 Gain on equity method investments 990 — 3,090 — Gain on extinguishment of debt — — 4,044 — Foreign exchange (loss) gain ( 1,639 ) 1,813 ( 5,947 ) 1,995 Other, net ( 98 ) 3,599 943 9,517 Total other non-operating income (expenses), net $ 6,811 $ 25,444 $ 9,421 $ 44,923 4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS 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 . The amendments in this update address diversity in practice and inconsistency related to recognition of an acquired contract liability and the effect of payment terms on subsequent revenue recognition for the acquirer. 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’s adoption of this ASU in the first quarter of 2023 did not have a material impact to its condensed consolidated financial statements. 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’s adoption of this ASU in the second quarter of 2023 did not have a material impact to its condensed consolidated financial statements. 5. REVENUE RECOGNITION The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers , which requires companies to recognize revenue in a way that depicts the transfer of promised goods or services. In addition, the standard requires more detailed disclosures to enable readers of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company generates revenue from four principal sources: (1) gaming (which includes retail gaming, online gaming, sports betting and racing), (2) hotel, (3) food and beverage and (4) retail, entertainment and other. The Company determines revenue recognition through the following steps: • Identify the contract, or contracts, with the customer; • Identify the performance obligations in the contract; • Determine the transaction price; • Allocate the transaction price to performance obligations in the contract; and • Recognize revenue when or as the Company satisfies performance obligations by transferring the promised goods or services. 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. 14 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 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. These elements of honoring the outcome of the hand of play and generating a payout are considered one performance obligation. Online gaming and sports betting represent a single performance obligation for the Company to operate contests or games and award prizes or payouts to users based on results of the arrangement. Revenue is recognized at the conclusion of each contest, wager or wagering game hand. Incentives can be used across online gaming products. The Company allocates a portion of the transaction price to certain customer incentives that create material future customer rights and are a separate performance obligation. In addition, in the event of a multi-stage contest, the Company will allocate transaction price ratably from contest start to the contest’s final stage. Racing revenue is earned through advance deposit wagering which consists of patrons wagering through an advance deposit account. Each wagering contract contains a single performance obligation. The transaction price for a gaming wagering contract is the difference between gaming wins and losses, not the total amount wagered. 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 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: Gaming Revenue Retail Gaming The Company recognizes retail gaming revenue as the net win from gaming activities, which is the difference between gaming inflows and outflows, not the total amount wagered. Progressive jackpots are estimated and recognized as revenue at the time the obligation to pay the jackpot is established. Gaming revenues are recognized net of certain cash and free play incentives. Gaming services contracts have two performance obligations for those customers earning incentives under the Company’s player loyalty programs and a single performance obligation for customers who do not participate in the programs. The Company applies a practical expedient to account for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the impact on the consolidated financial statements of applying the revenue recognition guidance to the portfolio would not differ materially from the application of an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with incentives earned under loyalty programs, the Company allocates an amount to the loyalty program contract liability based on the stand-alone selling price of the incentive earned for a hotel room stay, food and beverage or other amenity. The performance obligation related to loyalty program incentives are deferred and recognized as revenue upon redemption by the customer. The amount associated with gaming wagers is recognized at the point the wager occurs, as it is settled immediately. Gaming revenue includes the share of VLT revenue for Bally’s Twin River and Bally’s Tiverton, in each case, as determined by each property’s respective master VLT contracts with the State of Rhode Island. 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. 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. 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 June 30, 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. 15 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. Bally’s Dover is authorized to conduct video lottery, sports wagering, table game and internet gaming operations as one of three “Licensed Agents” under the Delaware State Lottery Code. 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 June 30, 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 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. 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 increase. Online Gaming 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. Online gaming revenue is recognized at the point in time when the player completes a gaming session and payout occurs. There is no significant degree of uncertainty involved in quantifying the amount of gaming revenue earned, including bonuses, jackpot contributions and loyalty points. Bonuses, jackpot contributions and loyalty points are measured at fair value at each reporting date. Sports Betting 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 six months ended June 30, 2023 and 2022. Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $ 3.9 million and $ 4.1 million as of June 30, 2023 and December 31, 2022, respectively, 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. 16 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Racing Racing revenue includes Bally’s Twin River’s, Bally’s Tiverton’s, Bally’s Arapahoe Park’s and Bally’s Dover’s share of wagering from live racing and the import of simulcast signals. Racing revenue is recognized upon completion of the wager based upon an established take-out percentage. The Company functions as an agent to the pari-mutuel pool. 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. Non-gaming Revenue Non-gaming revenue consists of hotel, food, beverage, retail, entertainment and other revenue. Hotel revenue is recognized when the customer obtains control through occupancy of the room over the stay at the hotel. Advance deposits for hotel rooms are recorded as liabilities until revenue recognition criteria are met. 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, 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. 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 six months ended June 30, 2023 and 2022: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Hotel $ 24,123 $ 19,423 $ 46,558 $ 35,325 Food and beverage 19,823 18,056 39,297 34,766 Retail, entertainment and other 2,420 2,579 5,011 4,786 $ 46,366 $ 40,058 $ 90,866 $ 74,877 Sales tax and other taxes collected on behalf of governmental authorities are accounted for on a net basis and are not included in revenue or operating expenses. 17 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following tables provide a disaggregation of revenue by segment (in thousands): Three Months Ended June 30, 2023 Casinos & Resorts North America Interactive International Interactive Total Gaming $ 231,018 $ 19,111 $ 243,167 $ 493,296 Non-gaming: Hotel 51,391 — — 51,391 Food and beverage 35,224 — — 35,224 Retail, entertainment and other 15,529 6,159 4,607 26,295 Total non-gaming revenue 102,144 6,159 4,607 112,910 Total revenue $ 333,162 $ 25,270 $ 247,774 $ 606,206 Three Months Ended June 30, 2022 Gaming $ 225,716 $ 7,868 $ 221,504 $ 455,088 Non-gaming: Hotel 33,929 — — 33,929 Food and beverage 27,435 — — 27,435 Retail, entertainment and other 12,795 10,182 13,067 36,044 Total non-gaming revenue 74,159 10,182 13,067 97,408 Total revenue $ 299,875 $ 18,050 $ 234,571 $ 552,496 Six Months Ended June 30, 2023 Gaming $ 464,125 $ 35,718 $ 480,348 $ 980,191 Non-gaming: Hotel 98,723 — — 98,723 Food and beverage 68,832 — — 68,832 Retail, entertainment and other 30,268 13,914 12,998 57,180 Total non-gaming revenue 197,823 13,914 12,998 224,735 Total revenue $ 661,948 $ 49,632 $ 493,346 $ 1,204,926 Six Months Ended June 30, 2022 Gaming $ 443,521 $ 14,513 $ 460,756 $ 918,790 Non-gaming: Hotel 60,864 — — 60,864 Food and beverage 51,423 — — 51,423 Retail, entertainment and other 24,037 18,764 26,889 69,690 Total non-gaming revenue 136,324 18,764 26,889 181,977 Total revenue $ 579,845 $ 33,277 $ 487,645 $ 1,100,767 Revenue included in operations from Casino Secret from the date of its acquisition, January 5, 2023, is reported in International Interactive and was $ 10.0 million and $ 21.4 million for the three and six months ended June 30, 2023, respectively. 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 $ 39.9 million and $ 44.0 million as of June 30, 2023 and December 31, 2022, respectively. The Company has the following liabilities related to contracts with customers: liabilities for loyalty programs, advance deposits made for goods and services yet to be provided and unpaid wagers. All of the contract liabilities are short-term in nature and are included in “Accrued liabilities” in the condensed consolidated balance sheets. 18 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. Advance deposits are typically for future banquet events, hotel room reservations and interactive player deposits. The banquet and hotel reservation deposits are usually received weeks or months in advance of the event or hotel stay. The Company holds restricted cash for interactive player deposits and records a corresponding withdrawal liability. Unpaid wagers include the Company’s outstanding chip liability and unpaid slot, pari-mutuel and sports betting tickets. Liabilities related to contracts with customers as of June 30, 2023 and December 31, 2022 were as follows: June 30, December 31, (in thousands) 2023 2022 Loyalty programs $ 20,398 $ 20,264 Advanced deposits from customers 32,899 27,956 Unpaid wagers 10,712 14,038 Total $ 64,009 $ 62,258 The Company recognized $ 9.9 million and $ 7.7 million of revenue related to loyalty program redemptions for the three months ended June 30, 2023 and 2022, respectively, and $ 17.6 million and $ 15.9 million for the six months ended June 30, 2023 and 2022, respectively. 6. 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 $ 1.7 million cash acquired, was $ 146.5 million, excluding transaction costs. 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. 19 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 Casinos & Resorts acquisition as of June 30, 2023: (in thousands) Tropicana Las Vegas Preliminary (2) Total current assets $ 7,924 Property and equipment, net 136,116 Right of use assets, net 164,884 Intangible assets, net (1) 5,140 Other assets 766 Goodwill 8,794 Total current liabilities ( 10,129 ) Lease liabilities ( 164,884 ) Other long-term liabilities ( 395 ) Total purchase price $ 148,216 __________________________________ (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 six months ended June 30, 2023 which decreased total current assets by $ 0.2 million, increased goodwill by $ 0.2 million, decreased total current liabilities by $ 0.1 million and increased the total purchase price 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. The Company incurred $ 0.8 million of acquisition costs related to the above Casino & Resorts acquisition during the three and six months ended June 30, 2023, and $ 0.3 million and $ 0.5 million during the three and six months ended June 30, 2022, respectively. There were no acquisition costs related to the International Interactive acquisition during the three months ended June 30, 2023. These costs are included within “General and administrative” of the condensed consolidated statement of operations. 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. 20 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 International Interactive acquisition: (in thousands) Casino Secret Preliminary (2) Total current assets $ 8,862 Property and equipment, net 50 Right of use assets, net 392 Intangible assets, net (1) 29,471 Goodwill 18,139 Total current liabilities ( 7,163 ) Lease liabilities ( 412 ) Total purchase price $ 49,339 __________________________________ (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. (2) The Company did not record adjustments to the preliminary purchase price allocation during the six months ended June 30, 2023. Total goodwill recorded in connection with the above International Interactive acquisition was $ 18.1 million, and is not deductible for local tax purposes. 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 International Interactive reportable segment. 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 above International Interactive acquisition during the six months ended June 30, 2023. There were no acquisition costs related to the International Interactive acquisition during the three months ended June 30, 2023. These costs are included within “General and administrative” of the condensed consolidated statement of operations. 7. 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. Due to an evaluation of the expected fair value less costs to sell, during the three months ended June 30, 2023, the Company recognized impairment charges of $ 9.4 million and $ 0.3 million on goodwill and intangible assets held for sale, respectively. These charges have been accounted for within “General and administrative” in the condensed consolidated statement of operations. As of June 30, 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 June 30, 2023 and December 31, 2022 are as follows: 21 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (in thousands) June 30, 2023 December 31, 2022 Assets: Restricted cash, prepaid expenses and other current assets $ 1,820 $ 3,756 Goodwill — 9,399 Intangible assets, net 3,768 4,022 Assets held for sale (1) $ 5,588 $ 17,177 Liabilities related to assets held for sale (1)(2) $ 1,560 $ 3,409 __________________________________ (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 immaterial for the three and six months ended June 30, 2023 and 2022. 8. PREPAID EXPENSES AND OTHER CURRENT ASSETS As of June 30, 2023 and December 31, 2022, prepaid expenses and other current assets was comprised of the following: June 30, December 31, (in thousands) 2023 2022 Services and license agreements $ 30,342 $ 31,396 Due from payment service providers 29,009 30,621 Marketing 9,809 8,042 Deposits 8,845 2,016 Sales tax 7,697 5,900 Gaming taxes and licenses 6,362 4,644 Purse funds 4,863 8,093 Prepaid insurance 1,147 6,374 Other 5,208 3,631 Total prepaid expenses and other current assets $ 103,282 $ 100,717 9. PROPERTY AND EQUIPMENT As of June 30, 2023 and December 31, 2022, property and equipment was comprised of the following: June 30, December 31, (in thousands) 2023 2022 Land $ 238,997 $ 259,378 Land improvements 159,328 31,197 Building and improvements 547,593 752,964 Equipment 230,325 246,340 Furniture and fixtures 67,506 63,753 Construction in process 149,047 116,181 Total property, plant and equipment 1,392,796 1,469,813 Less: Accumulated depreciation ( 237,039 ) ( 267,711 ) Property and equipment, net $ 1,155,757 $ 1,202,102 22 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Depreciation expense relating to property and equipment was $ 19.0 million and $ 37.6 million for the three and six months ended June 30, 2023, respectively, and $ 16.1 million and $ 32.9 million for the three and six months ended June 30, 2022, respectively. During the three and six months ended June 30, 2023, there was $ 2.1 million and $ 5.0 million of capitalized interest, respectively, and during the three and six months ended June 30, 2022, there was $ 0.4 million and $ 0.7 million of capitalized interest, respectively. Bally’s Chicago 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 cash-collateralized letters of credit, issued by Citizens Bank. Cash collaterals are reported as restricted cash, with the long-term portion included within Other assets, as of June 30, 2023. The Company recorded the short-term portion of the payments of $ 85.6 million within “Accrued liabilities” and the remaining $ 49.7 million within Other long-term liabilities, with an offsetting increase to “Property and equipment, net” within the condensed consolidated balance sheets as of June 30, 2023. 10. GOODWILL AND INTANGIBLE ASSETS The change in carrying value of goodwill by reportable segment for the six months ended June 30, 2023 is as follows (in thousands): Casinos & Resorts North America Interactive International Interactive Total Goodwill as of December 31, 2022 (1) $ 209,257 $ 39,740 $ 1,497,205 $ 1,746,202 Goodwill from current year business acquisition — — 18,139 18,139 Effect of foreign exchange — 160 55,015 55,175 Purchase accounting adjustments on prior year business acquisition 204 — — 204 Goodwill as of June 30, 2023 (1) $ 209,461 $ 39,900 $ 1,570,359 $ 1,819,720 __________________________________ (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 six months ended June 30, 2023 is as follows (in thousands): Intangible assets, net as of December 31, 2022 $ 1,961,938 Intangible assets from current year business combinations 29,471 Change in TRA with Sinclair (1) ( 752 ) Effect of foreign exchange 37,389 Internally developed software 15,503 Other intangibles acquired 10,807 Less: Amortization ( 116,107 ) Intangible assets, net as of June 30, 2023 $ 1,938,249 __________________________________ (1) Refer to Note 2 “ Significant Accounting Policies ” for further information. The Company’s identifiable intangible assets consist of the following: 23 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Weighted average remaining life (in years) June 30, 2023 (in thousands, except years) Gross Carrying Amount Accumulated Amortization Net Amortizable intangible assets: Naming rights - Sinclair (1) 7.6 $ 313,833 $ ( 74,474 ) $ 239,359 Trade names 5.3 21,360 ( 16,738 ) 4,622 Hard Rock license 24.0 8,000 ( 2,182 ) 5,818 Customer relationships 5.3 964,697 ( 241,138 ) 723,559 Developed technology 5.3 265,239 ( 66,310 ) 198,929 Internally developed software 3.1 45,039 ( 16,856 ) 28,183 Gaming licenses 6.7 43,919 ( 8,211 ) 35,708 Other 2.4 5,237 ( 2,792 ) 2,445 Total amortizable intangible assets 1,667,324 ( 428,701 ) 1,238,623 Intangible assets not subject to amortization: Gaming licenses Indefinite 529,171 — 529,171 Trade names Indefinite 169,298 — 169,298 Other Indefinite 1,157 — 1,157 Total unamortizable intangible assets 699,626 — 699,626 Total intangible assets, net $ 2,366,950 $ ( 428,701 ) $ 1,938,249 __________________________________ (1) Naming rights intangible asset in connection with Sinclair Agreement. Refer to Note 2 “ Significant Accounting Policies ” for further information. Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks. Weighted average remaining life (in years) December 31, 2022 (in thousands, except years) Gross Carrying Amount Accumulated Amortization Net Amortizable intangible assets: Naming rights - Sinclair (2) 8.1 $ 314,585 $ ( 58,982 ) $ 255,603 Trade names 2.7 17,750 ( 16,196 ) 1,554 Hard Rock license 24.5 8,000 ( 2,061 ) 5,939 Customer relationships 5.8 907,199 ( 166,155 ) 741,044 Developed technology 5.7 256,512 ( 45,769 ) 210,743 Internally developed software 4.0 26,520 ( 5,444 ) 21,076 Gaming licenses 7.8 34,016 ( 4,892 ) 29,124 Other 2.6 4,917 ( 2,110 ) 2,807 Total amortizable intangible assets 1,569,499 ( 301,609 ) 1,267,890 Intangible assets not subject to amortization: Gaming licenses Indefinite 529,171 — 529,171 Trade names Indefinite 164,391 — 164,391 Other Indefinite 486 — 486 Total unamortizable intangible assets 694,048 — 694,048 Total intangible assets, net $ 2,263,547 $ ( 301,609 ) $ 1,961,938 __________________________________ (2) See note (1) above. 24 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Amortization of intangible assets was approximately $ 60.2 million and $ 58.7 million for the three months ended June 30, 2023 and 2022, respectively, and approximately $ 116.1 million and $ 120.8 million for the six months ended June 30, 2023 and 2022, respectively. The following table reflects the remaining amortization expense associated with the finite-lived intangible assets as of June 30, 2023: (in thousands) Remaining 2023 $ 113,069 2024 229,095 2025 220,223 2026 218,208 2027 217,555 Thereafter 240,473 Total $ 1,238,623 11. FAIR VALUE MEASUREMENTS Except for the assets and liabilities held for sale and the corresponding impairment described in Note 7, there were no assets and liabilities measured at fair value on a nonrecurring basis. 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: June 30, 2023 (in thousands) Balance Sheet Location Level 1 Level 2 Level 3 Assets: Cash and cash equivalents Cash and cash equivalents $ 183,611 $ — $ — Restricted cash Restricted cash 139,237 — — Restricted cash Other assets 50,000 — — Convertible loans Prepaid expenses and other current assets 876 — — Convertible loans Other assets — — 11,474 Investments in equity securities Other assets 3,019 — — Investment in GLPI partnership Other assets — 13,891 — Total $ 376,743 $ 13,891 $ 11,474 Liabilities: Sinclair Performance Warrants Naming rights liabilities $ — $ — $ 29,696 Total $ — $ — $ 29,696 25 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) December 31, 2022 (in thousands) Balance Sheet Location Level 1 Level 2 Level 3 Assets: Cash and cash equivalents Cash and cash equivalents $ 212,515 $ — $ — 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 Liabilities: Sinclair Performance Warrants Naming rights liabilities $ — $ — $ 36,987 Contingent consideration Accrued liabilities — — 8,220 Total $ — $ — $ 45,207 The following tables summarize the changes in fair value of the Company’s Level 3 assets and liabilities: (in thousands) Sinclair Performance Warrants Contingent Consideration Convertible Loans Total Beginning as of December 31, 2022 $ 36,987 $ 8,220 $ 10,212 $ 55,419 Additions in the period (acquisition fair value) — — 500 500 Change in fair value 267 1,241 126 1,634 Ending as of March 31, 2023 $ 37,254 $ 9,461 $ 10,838 $ 57,553 Additions in the period (acquisition fair value) — — 500 500 Reductions in the period — ( 9,292 ) — ( 9,292 ) Change in fair value ( 7,558 ) ( 169 ) 136 ( 7,591 ) Ending as of June 30, 2023 $ 29,696 $ — $ 11,474 $ 41,170 (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 March 31, 2022 $ 56,185 $ 13,077 $ 2,138 $ 71,400 Additions in the period (acquisition fair value) — — 500 500 Change in fair value ( 20,032 ) ( 4,376 ) ( 152 ) ( 24,560 ) Ending as of June 30, 2022 $ 36,153 $ 8,701 $ 2,486 $ 47,340 26 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 and six months ended June 30, 2023 and 2022 are as follows: Condensed Consolidated Statements of Operations Location Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Sinclair Performance Warrants Change in value of naming rights liabilities $ 7,558 $ 20,032 $ 7,291 $ 33,411 Sinclair Performance Warrants Sinclair Performance Warrants are accounted for as a derivative instrument classified as a liability within Level 3 of the hierarchy as the warrants are not traded in active markets and are subject to certain assumptions and estimates made by management related to the probability of meeting performance milestones. These assumptions and the probability of meeting performance targets may have a significant impact on the value of the warrant. 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 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 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 June 30, 2023 and December 31, 2022 and is recorded within “Additional paid-in-capital” in the condensed consolidated balance sheets. Contingent Consideration Contingent consideration related to acquisitions is recorded at fair value as a liability on the acquisition date and is remeasured at each reporting date, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. In connection with the acquisitions of SportCaller and MKF on February 5, 2021 and March 23, 2021, respectively, the Company recorded contingent consideration at fair value of $ 58.7 million as of the acquisition dates. After the acquisition dates and until the contingencies were resolved, the fair value of contingent consideration payable was adjusted each reporting period based primarily on the expected probability of achievement of the contingency targets which were subject to management’s estimate and the Company’s stock price. 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. During the second quarter of 2023, the Company settled the remaining contingent consideration of $ 9.3 million, comprised of 386,926 immediately exercisable penny warrants, 103,656 shares of Bally’s Corporation common stock and a de minimus payment in cash, all in satisfaction of contingencies related to the respective acquisition agreements. Convertible Loans The Company has certain agreements with vendors to provide a portfolio of games to its customers. Pursuant to these agreements, the Company has issued loans to its vendors and has an option to convert the loans to shares of the vendors’ equity, exercisable within a specified time period. 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 non-operating expenses, net” of the condensed consolidated statements of operations. 27 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Investments in Equity Securities The Company has a long term investment in an unconsolidated entity which it accounts for under the equity method of accounting. The Company has elected the fair value option allowed by ASC 825, Financial Instruments , with respect to this investment. 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 non-operating expenses, net” of the condensed consolidated statements of operations. 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 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 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. June 30, 2023 December 31, 2022 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value Term Loan Facility $ 1,877,654 $ 1,862,783 $ 1,884,082 $ 1,872,238 5.625 % Senior Notes due 2029 735,457 567,963 734,497 555,000 5.875 % Senior Notes due 2031 719,059 543,776 732,976 529,905 12. ACCRUED LIABILITIES As of June 30, 2023 and December 31, 2022, accrued liabilities consisted of the following: (in thousands) June 30, 2023 December 31, 2022 Gaming liabilities $ 180,499 $ 168,386 Bally’s Chicago - land development liability 85,619 — Compensation 67,034 60,463 Interest payable 33,508 36,173 GLPI advance deposit (1) — 200,000 Other 100,942 108,909 Total accrued liabilities $ 467,602 $ 573,931 __________________________________ (1) Refer to Note 15 “ Leases ” for further information. 28 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 13. 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 and six months ended June 30, 2023, the Company incurred restructuring charges of $ 3.4 million and $ 20.3 million, respectively, 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 June 30, 2023 Six Months Ended June 30, 2023 North America Interactive $ 1,789 $ 7,647 International Interactive 1,595 10,927 Other 56 1,688 Total restructuring charge $ 3,440 $ 20,262 The restructuring activity for the six months ended June 30, 2023 is as follows: (in thousands) Workforce Reduction Balance as of December 31, 2022 $ — Charges 20,262 Payments ( 16,703 ) Balance as of June 30, 2023 $ 3,559 The restructuring liability as of June 30, 2023 is included within “Accrued liabilities” on the condensed consolidated balance sheets. 14. LONG-TERM DEBT As of June 30, 2023 and December 31, 2022, long-term debt consisted of the following: (in thousands) June 30, 2023 December 31, 2022 Term Loan Facility $ 1,915,825 $ 1,925,550 Revolving Credit Facility 15,000 137,000 5.625 % Senior Notes due 2029 750,000 750,000 5.875 % Senior Notes due 2031 735,000 750,000 Less: Unamortized original issue discount ( 25,715 ) ( 27,729 ) Less: Unamortized deferred financing fees ( 42,940 ) ( 46,266 ) Long-term debt, including current portion 3,347,170 3,488,555 Less: Current portion of Term Loan and Revolving Credit Facility ( 29,450 ) ( 19,450 ) Long-term debt, net of discount and deferred financing fees; excluding current portion $ 3,317,720 $ 3,469,105 29 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Senior Notes 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”). The Senior Notes were issued pursuant to an indenture, dated as of August 20, 2021, among the Escrow Issuers and U.S. Bank National Association, as trustee. Certain of the net proceeds from the Senior Notes offering were placed in escrow accounts for use in connection with the Gamesys acquisition. On October 1, 2021, upon the closing of the Gamesys acquisition, the Company assumed the issuer obligation under the Senior Notes. The Senior Notes are guaranteed, jointly and severally, by each of the Company’s restricted subsidiaries that guarantees the Company’s obligations under its Credit Agreement. The 2029 Notes mature on September 1, 2029 and the 2031 Notes mature on September 1, 2031. Interest is payable on the Senior Notes in cash semi-annually on March 1 and September 1 of each year, beginning on March 1, 2022. The Company may redeem some or all of the Senior Notes at any time prior to September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at prices equal to 100% of the principal amount of the Senior Notes to be redeemed plus certain “make-whole” premiums, plus accrued and unpaid interest. In addition, prior to September 1, 2024, the Company may redeem up to 40 % of the original principal amount of each series of the Senior Notes with proceeds of certain equity offerings at a redemption price equal to 105.625 % of the principal amount, in the case of the 2029 Notes, and 105.875 %, in the case of the 2031 Notes, plus accrued and unpaid interest. 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 six months ended June 30, 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. These covenants are subject to exceptions and qualifications set forth in the indenture. Credit Facility 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. 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. 30 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) As of June 30, 2023, with the discontinuation of the LIBOR reference rate, borrowings under the credit facilities bear interest at a rate equal to, at the Company’s option, either (1) the term secured overnight financing rate (“SOFR”), 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 SOFR 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. In addition, on a quarterly basis, the Company is required to pay each lender under the Revolving Credit Facility a 0.50 % or 0.375 % commitment fee in respect of commitments under the Revolving Credit Facility, with the applicable commitment fee determined based on the Company’s total net leverage ratio. The credit facilities contain covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, sell assets, make certain investments and grant liens. These covenants are subject to exceptions and qualifications set forth in the Credit Agreement. The Revolving Credit Facility contains a financial covenant regarding a maximum first lien net leverage ratio that applies when borrowings under the Revolving Credit Facility exceed 30 % of the total revolving commitment. As of June 30, 2023, the Company’s borrowings under the Revolving Credit Facility did not exceed 30 % and therefore, financial covenants did not apply. 15. LEASES Operating Leases 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 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 June 30, 2023 and December 31, 2022, respectively, and right of use assets of $ 1.19 billion and $ 808.9 million as of June 30, 2023 and December 31, 2022, respectively, which were included in the condensed consolidated balance sheets. GLPI Leases As of June 30, 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 June 30, 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 six months ended June 30, 2023, the Company recorded a gain of $ 374.3 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 condensed consolidated statements of operations. 31 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 June 30, 2023. Components of lease expense included within “General and administrative” for operating leases during the three and six months ended June 30, 2023 and 2022 are as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Operating leases: Operating lease cost $ 36,956 $ 17,265 $ 73,775 $ 32,564 Variable lease cost 2,365 2,001 4,835 3,818 Operating lease expense 39,321 19,266 78,610 36,382 Short-term lease expense 3,785 4,966 6,111 8,703 Total lease expense $ 43,106 $ 24,232 $ 84,721 $ 45,085 Supplemental cash flow and other information related to operating leases for the three and six months ended June 30, 2023 and 2022 are as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Cash paid for amounts included in the lease liability - operating cash flows from operating leases $ 33,215 $ 15,820 $ 64,992 $ 29,007 Right of use assets obtained in exchange for operating lease liabilities $ 7,094 $ 148,759 $ 403,659 $ 150,122 June 30, 2023 December 31, 2022 Weighted average remaining lease term 18.0 years 20.7 years Weighted average discount rate 7.5 % 6.7 % As of June 30, 2023, future minimum lease payments under noncancelable operating leases are as follows: (in thousands) June 30, 2023 Remaining 2023 $ 67,306 2024 137,525 2025 142,196 2026 141,949 2027 136,794 Thereafter 1,734,278 Total lease payments 2,360,048 Less: present value discount ( 1,136,982 ) Lease obligations $ 1,223,066 Future minimum lease payments disclosed in the table above include $ 87.7 million related to extension options that are reasonably certain of being exercised. 32 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 $ 4.5 million and $ 8.7 million during the three and six months ended June 30, 2023, respectively. Lessor 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. The Company had lessor revenues related to the rental of hotel rooms of $ 51.4 million and $ 98.7 million for the three and six months ended June 30, 2023, respectively, and $ 33.9 million and $ 60.9 million for the three and six months ended June 30, 2022, 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. 16. EQUITY PLANS 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. The 2015 Incentive Plan authorized for the issuance of up to 1,700,000 shares of the Company’s common stock pursuant to grants of awards made under the plan. Effective May 18, 2021, no new awards were granted under the 2015 Incentive Plan as a result of the new 2021 Incentive Plan being approved at the Company’s 2021 Annual Shareholder Meeting. The 2021 Incentive Plan provides for the grant of stock options, RSAs, RSUs, PSUs and other awards (including those with performance-based vesting criteria) to employees, directors or consultants of the Company. 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 six months ended June 30, 2023, the Company granted 1,472,984 restricted awards with an aggregate intrinsic value of $ 27.5 million under the 2021 Incentive Plan. As of June 30, 2023, 1,322,867 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 1,879,918 restricted awards outstanding as of June 30, 2023. Share-Based Compensation The Company recognized total share-based compensation expense of $ 6.3 million and $ 12.3 million for the three and six months ended June 30, 2023, respectively, and $ 6.3 million and $ 11.4 million for the three and six months ended June 30, 2022, respectively. The total income tax benefit for share-based compensation arrangements was $ 1.7 million for both the three months ended June 30, 2023 and 2022, and $ 3.2 million and $ 2.9 million for the six months ended June 30, 2023 and 2022, respectively. 33 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 17. STOCKHOLDERS’ EQUITY Capital Return Program Total share repurchase activity during the three and six months ended June 30, 2023 and 2022 was as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands, except share and per share data) 2023 2022 2023 2022 Number of common shares repurchased 748,502 — 1,774,845 350,616 Total cost $ 10,705 $ — $ 30,458 $ 13,288 Average cost per share, including commissions $ 14.30 $ — $ 17.16 $ 37.90 Future share repurchases may be effected in various ways, which could include open-market or private repurchase transactions, accelerated stock repurchase programs, tender offers or other transactions. The amount, timing and terms of any return of capital transaction will be determined based on prevailing market conditions and other factors. There is no fixed time period to complete share repurchases. The Company retired 712,122 shares of its common stock held in treasury during the three months ended June 30, 2023. There were no shares retired during the three months ended June 30, 2022. The Company retired 1,738,465 and 1,146,194 shares of its common stock held in treasury during the six months ended June 30, 2023 and 2022, respectively. The shares were returned to the status of authorized but unissued shares. As of June 30, 2023, there were no shares remaining in treasury. As of June 30, 2023 and December 31, 2022, $ 164.1 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 On April 20, 2021, the Company completed an underwritten public offering of common stock at a price to the public of $ 55.00 per share. The Company issued a total of 12,650,000 shares of Bally’s common stock in the offering, which included 1,650,000 shares issued pursuant to the full exercise of the underwriters’ over-allotment option. The net proceeds from the offering were approximately $ 671.4 million, after deducting underwriting discounts, but before expenses. On April 20, 2021, the Company issued to affiliates of Sinclair a warrant to purchase 909,090 common shares for an aggregate purchase price of $ 50.0 million, the same price per share as the public offering price in Bally’s common stock public offering ($ 55.00 per share). The net proceeds were used to finance a portion of the purchase price of the Gamesys acquisition. The exercise price of the warrant is nominal, and its exercise is subject to, among other conditions, requisite gaming authority approvals. Sinclair agreed not to acquire more than 4.9 % of Bally’s outstanding common shares without such approvals. In addition, in accordance with the agreements that Bally’s and Sinclair entered into in November 2020, Sinclair exchanged 2,086,908 common shares for substantially identical warrants. Changes to Authorized Shares 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 June 30, 2023 and December 31, 2022, no shares of preferred stock have been issued. 34 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Shares Outstanding As of June 30, 2023, the Company had 45,626,013 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 are summarized below: Sinclair Penny Warrants (Note 2) 7,911,724 Sinclair Performance Warrants (Note 2) 3,279,337 Sinclair Options (1) (Note 2) 1,639,669 MKF penny warrants (Note 11) 44,128 Telescope contingent shares (Note 11) 8,626 Outstanding awards under Equity Incentive Plans (Note 16) 1,879,918 14,763,402 __________________________________ (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. Accumulated Other Comprehensive Income (Loss) The following tables reflect the changes in accumulated other comprehensive loss by component, net of tax, for the six months ended June 30, 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 income 90,698 — 90,698 Accumulated other comprehensive loss at June 30, 2023 $ ( 205,286 ) $ 344 $ ( 204,942 ) (in thousands) Foreign Currency Translation Adjustment Benefit Plans Total Accumulated other comprehensive loss at December 31, 2021 $ ( 25,833 ) $ ( 976 ) $ ( 26,809 ) Current period other comprehensive loss ( 270,355 ) — ( 270,355 ) Accumulated other comprehensive loss at June 30, 2022 $ ( 296,188 ) $ ( 976 ) $ ( 297,164 ) 35 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 18. COMMITMENTS AND CONTINGENCIES Litigation The Company is a party to various legal and administrative proceedings which have arisen in the ordinary course of its business. Estimated losses are accrued for these proceedings when the loss is probable and can be estimated. The current liability for the estimated losses associated with these proceedings is not material to the Company’s consolidated financial condition and those estimated losses are not expected to have a material impact on results of operations. Although the Company maintains what it believes is adequate insurance coverage to mitigate the risk of loss pertaining to covered matters, legal and administrative proceedings can be costly, time-consuming and unpredictable. Although no assurance can be given, the Company does not believe that the final outcome of these matters, including costs to defend itself in such matters, will have a material adverse effect on the company’s consolidated financial statements. Further, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters. 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. Bally’s Chicago - Per the host community agreement the Company is required to spend at least $ 1.34 billion on the design, construction and equipping of the temporary casino and the permanent resort and casino. The actual cost of the development may exceed this minimum capital investment requirement. In addition, land acquisition costs and financing costs, among other types of costs, are not counted toward meeting this requirement. 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 As of June 30, 2023, the Company has entered into multiple sponsorship agreements with various professional sports leagues and teams. These agreements commit a total of $ 106.9 million through 2036 and grant the Company rights to use official league marks for branding and promotions, among other benefits. 36 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 19. SEGMENT REPORTING 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, acquisition and other transaction costs and certain non-recurring charges. The Company’s three reportable segments as of June 30, 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. As of June 30, 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 26 % and 12 % of total revenue, respectively, for the three months ended June 30, 2023, and approximately 25 % and 12 %, respectively for the three months ended June 30, 2022. Revenue generated from the UK and Japan represented approximately 25 % and 12 % of total revenue, respectively, for the six months ended June 30, 2023, and approximately 26 % and 13 %, respectively for the six months ended June 30, 2022. The Company does not have any revenues from any individual customers that exceed 10% of total reported revenues. The Company utilizes Adjusted EBITDA (defined below) as a measure of its performance. 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 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. 37 BALLY’S CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Revenue Casinos & Resorts $ 333,162 $ 299,875 $ 661,948 $ 579,845 North America Interactive 25,270 18,050 49,632 33,277 International Interactive 247,774 234,571 493,346 487,645 Total $ 606,206 $ 552,496 $ 1,204,926 $ 1,100,767 Adjusted EBITDA (1) Casinos & Resorts $ 79,685 $ 88,001 $ 153,570 $ 161,791 North America Interactive ( 17,685 ) ( 20,874 ) ( 28,248 ) ( 40,199 ) International Interactive 84,574 82,612 164,875 155,939 Other ( 16,536 ) ( 12,710 ) ( 33,804 ) ( 25,802 ) Total 130,038 137,029 256,393 251,729 Operating income (expense) Depreciation and amortization ( 79,187 ) ( 74,773 ) ( 153,748 ) ( 153,654 ) Transaction costs ( 16,434 ) ( 15,520 ) ( 38,452 ) ( 21,543 ) Restructuring ( 3,440 ) — ( 20,262 ) — Share-based compensation ( 6,290 ) ( 6,322 ) ( 12,330 ) ( 11,417 ) Gain on sale-leaseback 135 50,766 374,321 50,766 Impairment charges ( 9,653 ) — ( 9,653 ) — Other ( 9,187 ) ( 5,861 ) ( 13,555 ) ( 8,042 ) Income from operations 5,982 85,319 382,714 107,839 Other income (expense) Interest expense, net of interest income ( 67,093 ) ( 45,828 ) ( 130,357 ) ( 91,513 ) Other 6,811 25,444 9,421 44,923 Total other income (expense), net ( 60,282 ) ( 20,384 ) ( 120,936 ) ( 46,590 ) (Loss) income before income taxes ( 54,300 ) 64,935 261,778 61,249 Benefit (provision) for income taxes 28,649 ( 5,434 ) ( 109,093 ) 141 Net (loss) income $ ( 25,651 ) $ 59,501 $ 152,685 $ 61,390 __________________________________ (1) Adjusted EBITDA is defined as earnings, or loss, for the Company before interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating (income) expense, acquisition, integration and restructuring expense, share-based compensation, and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments. 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. Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Capital Expenditures Casinos & Resorts $ 34,477 $ 55,808 $ 59,702 $ 104,381 North America Interactive 1,032 291 1,558 466 International Interactive 876 5,426 1,657 11,108 Other 39,483 40 56,629 126 Total $ 75,868 $ 61,565 $ 119,546 $ 116,081 38 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 June 30, 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 97 % of property and equipment is located within the US. 20. EARNINGS (LOSS) PER SHARE 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 June 30, Six Months Ended June 30, (in thousands, except per share data) 2023 2022 2023 2022 Net (loss) income applicable to common stockholders $ ( 25,651 ) $ 59,501 $ 152,685 $ 61,390 Weighted average common shares outstanding, basic 53,942 60,506 54,173 60,263 Weighted average effect of dilutive securities — 35 409 69 Weighted average common shares outstanding, diluted 53,942 60,541 54,582 60,332 Basic earnings per share $ ( 0.48 ) $ 0.98 $ 2.82 $ 1.02 Diluted earnings per share $ ( 0.48 ) $ 0.98 $ 2.80 $ 1.02 There were 5,193,897 and 5,429,361 share-based awards that were considered anti-dilutive for the three months ended June 30, 2023 and 2022, respectively, and 5,091,986 and 5,247,131 share-based awards that were considered anti-dilutive for the six months ended June 30, 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. In the period in which the contingencies are met, those instruments are participating securities to which income will be allocated using the two-class method. The Performance Warrants and Options do not participate in net losses. 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 six months ended June 30, 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. 39