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Item 7. Management’s Discussion and Analysis

2024-03-15 compared with 2023-03-01 · 168 added, 179 removed, 217 unchanged (62% of the section changed)

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Executive Overview

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

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

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

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

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

During 2023, we continued to grow our business by actively pursuing new gaming opportunities and reinvesting in our existing operations.

In our Casinos & Resorts segment, we:

• announced a binding deal with the Oakland Athletics of Major League Baseball to site their new ballpark on a portion of our Bally’s Las Vegas property;

• opened our temporary casino at the Medinah Temple in Chicago, Illinois and are on track to break ground to develop a permanent flagship destination casino resort in downtown Chicago, Illinois;

• opened our property expansion at Bally’s Kansas City and Bally’s Twin River, which provides for enhanced amenities to improve the customer experience;

• we acquired Bally’s Golf Links at Ferry Point in the Bronx, New York.

In our International Interactive and North America Interactive segments, we:

• rolled out our new Bally Bet sportsbook app with our new partners, Kambi and White Hat Gaming in seven US states;

• launched iGaming app in Pennsylvania;

• launched Bally Casino, an iGaming app, and Bally Bet Sportsbook & Casino, our first combined casino and sportsbook app;

• anticipate launching a new iGaming app in Rhode Island following the legalization of iGaming in Rhode Island.

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

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Macroeconomic and Other Factors

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

Our business is subject to risks caused by global economic challenges, including those caused by public health crises such as the COVID-19 pandemic, the impact of global and regional conflicts, rising inflation, rising interest rates and supply-chain disruptions, that can cause economic uncertainty and volatility.

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

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Key Performance Indicators

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

Adjusted EBITDA is defined as earnings for the Company, or where noted its reporting segments, before, in each case, interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating income, acquisition and other transaction related costs, share-based compensation and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments.

We use Adjusted EBITDA to analyze the performance of our business and it is used as a determining factor for performance based compensation for members of our management team.

We have historically used Adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a more fulsome understanding of our core operating results and as a means to evaluate period-to-period performance.

Also, we present Adjusted EBITDA because it is used by some investors and creditors as an indicator of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations.

The key performance indicator used in managing our business is consolidated Adjusted EBITDA and segment Adjusted EBITDAR which are non-GAAP measures.

Adjusted EBITDA is defined as earnings, or loss, for the Company, or where noted its reporting segments, before, in each case, interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating (income) expense, acquisition and other transaction related costs, share-based compensation and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments.

Segment Adjusted EBITDAR is Adjusted EBITDA (as defined above) for the Company’s reportable segments, plus rent expense associated with triple net operating leases with GLPI for the real estate assets used in the operation of the Bally’s casinos and the assumption of the lease for real estate and land underlying the operations of the Bally’s Lake Tahoe property.

We use consolidated Adjusted EBITDA and segment Adjusted EBITDAR to analyze the performance of our business and they are used as determining factors for performance-based compensation for members of our management team.

We use consolidated Adjusted EBITDA and segment Adjusted EBITDAR when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a more fulsome understanding of our core operating results and as a means to evaluate period-to-period performance.

Also, we present consolidated Adjusted EBITDA and segment Adjusted EBITDAR because they are used by some investors and creditors as indicators of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations.

These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare operating performance and value companies within our industry.

Adjusted EBITDA information is presented because management believes that it is a commonly used measure of performance in the gaming industry and that it is considered by many to be a key indicator of our operating results.

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

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

Adjusted EBITDAR is an additional metric used by analysts in valuing gaming companies subject to triple net leases since it eliminates the effects of variability in leasing methods and capital structures.

This metric is included as supplemental disclosure because (i) we believe Adjusted EBITDAR is used by gaming operator analysts and investors to determine the equity value of gaming operators and (ii) financial analysts refer to Adjusted EBITDAR when valuing our business.

We believe Adjusted EBITDAR is useful for equity valuation purposes because (i) its calculation isolates the effects of financing real estate, and (ii) using a multiple of Adjusted EBITDAR to calculate enterprise value allows for an adjustment to the balance sheet to recognize estimated liabilities arising from operating leases related to real estate.

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

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

Adjusted EBITDAR should not be viewed as a measure of overall operating performance or considered in isolation or as an alternative to net income, because it excludes the rent expense associated with our triple net operating leases with GLPI and the lease for real estate and land underlying the operations of the Bally’s Lake Tahoe property.

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

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

Consolidated Adjusted EBITDA and segment Adjusted EBITDAR information is presented because management believes that they are commonly used measures of performance in the gaming industry and that they are considered by many to be key indicators of our operating results.

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

Consolidated Adjusted EBITDAR is defined as consolidated Adjusted EBITDA plus rent expense associated with triple net operating leases.

Consolidated Adjusted EBITDAR is an additional metric used by analysts in valuing gaming companies subject to triple net leases since it eliminates the effects of variability in leasing methods and capital structures.

This metric is included as supplemental disclosure because (i) we believe Consolidated Adjusted EBITDAR is used by gaming operator analysts and investors to determine the equity value of gaming operators and (ii) financial analysts refer to Consolidated Adjusted EBITDAR when valuing our business.

We believe Consolidated Adjusted EBITDAR is useful for equity valuation purposes because (i) its calculation isolates the effects of financing real estate, and (ii) using a multiple of Consolidated Adjusted EBITDAR to calculate enterprise value allows for an adjustment to the balance sheet to recognize estimated liabilities arising from operating leases related to real estate.

Consolidated Adjusted EBITDA and segment Adjusted EBITDAR should not be construed as alternatives to net income, the most directly comparable GAAP measure, as indicators of our performance.

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

Consolidated Adjusted EBITDAR should not be viewed as a measure of overall operating performance or considered in isolation or as an alternative to net income, because it excludes the rent expense associated with our triple net operating leases with GLPI and the lease for real estate and land underlying the operations of the Bally’s Lake Tahoe property.

Results of Operations

In connection with the finalization of the financial close process for the year ended December 31, 2023, and subsequent to the publication of the Company’s unaudited Statements of Operations and Balance Sheet data included within its earnings press release on February 21, 2024, the Company recorded additional impairment charges of $18.1 million as it relates to its annual impairment test on indefinite-lived intangible assets, a balance sheet reclassification resulting in a $12.9 million increase to restricted cash from other current assets and, a $3.2 million net adjustment to the provision for income taxes reflecting the tax effect of these and other adjustments.

Amounts included in the audited financial statements in this Annual Report on Form 10-K reflect the effect of these adjustments and no other amounts presented in the earnings release have been revised.

The following table presents, for the periods indicated, certain revenue and income items:

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Total revenue $ 2,449.1 $ 2,255.7 $ 1,322.4

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

Income (loss) from operations 104.0 (293.0) 93.4

Net loss (187.5) (425.5) (114.7)

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General and administrative 45.5 % 36.6 % 45.2 %

Gain from sale-leaseback, net (15.3) % (2.3) % (4.0) %

Impairment charges 6.1 % 20.6 % 0.4 %

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Total operating costs and expenses 95.8 % 113.0 % 92.9 %

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

Income (loss) from operations 4.2 % (13.0) % 7.1 %

Other income (expense):

Interest expense, net (11.3) % (9.2) % (8.9) %

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

Other non-operating income (expense), net (0.5) % 2.1 % (7.1) %

Total other expense, net (11.8) % (7.2) % (16.1) %

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

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

Loss before income taxes (7.6) % (20.1) % (9.0) %

Provision (benefit) for income taxes 0.1 % (1.3) % (0.3) %

Net loss (7.7) % (18.9) % (8.7) %

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The Company has three reportable segments:

Casinos & Resorts, North America Interactive and International Interactive.

Casinos & Resorts, International Interactive and North America Interactive.

Refer to “Our Operating Structure” in Part I, Item 1 “ Business ” of this Annual Report on Form 10-K and Note 23 “ Segment Reporting ” to our consolidated financial statements presented in Part II, Item 8 of this Annual Report on Form 10-K for additional information on our segment reporting structure.

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Non-gaming expenses include hotel, food and beverage and retail, entertainment and other expenses.

Years Ended December 31, 2022 over 2021 2021 over 2020

Years Ended December 31, 2023 over 2022

2022 over 2021

(In thousands, except percentages) 2023 2022 2021 $ Change $ Change

Casinos & Resorts $ 954,725 $ 907,431 $ 803,940 $ 47,294 $ 103,491

North America Interactive 38,759 10,442 — 28,317 10,442

International Interactive 952,921 899,934 239,110 52,987 660,824

North America Interactive 84,395 38,759 10,442 45,636 28,317

Total Gaming revenue 1,992,041 1,846,124 1,053,492 145,917 792,632

Casinos & Resorts 408,566 320,132 228,888 88,434 91,244

North America Interactive 42,941 27,910 — 15,031 27,910

International Interactive 20,289 46,508 12,153 (26,219) 34,355

North America Interactive 28,177 42,941 27,910 (14,764) 15,031

Total Non-gaming revenue 457,032 409,581 268,951 47,451 140,630

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Casinos & Resorts $ 337,193 $ 313,569 $ 263,751 $ 23,624 $ 49,818

North America Interactive 48,018 10,721 — 37,297 10,721

International Interactive 457,206 451,331 132,560 5,875 318,771

North America Interactive 94,538 48,018 10,721 46,520 37,297

Total Gaming expenses 888,937 812,918 407,032 76,019 405,886

Casinos & Resorts 194,612 147,575 110,090 47,037 37,485

North America Interactive 14,538 9,299 — 5,239 9,299

International Interactive 11,985 34,205 8,658 (22,220) 25,547

North America Interactive 9,642 14,538 9,299 (4,896) 5,239

Total Non-gaming expenses 216,239 196,318 128,047 19,921 68,271

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Casinos & Resorts 658,021 510,929 397,064 147,092 113,865

North America Interactive 113,913 46,908 — 67,005 46,908

International Interactive 191,358 149,168 43,015 42,190 106,153

North America Interactive 85,203 113,913 46,908 (28,710) 67,005

Other 179,394 51,696 110,959 127,698 (59,263)

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Total revenue $ 2,449,073 $ 2,255,705 $ 193,368 8.6 %

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

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

Revenue for the year ended December 31, 2023 increased 8.6% compared to the year ended December 31, 2022.

We saw gaming revenue increase across all reporting segments year over year through organic growth.

Additionally, we saw incremental revenue from our recent acquisitions of Tropicana Las Vegas, Bally’s Golf Links and Casino Secret (collectively “Recent Acquisitions”), as well as our Bally’s Chicago temporary casino property which commenced operations on September 9, 2023.

Gaming and non-gaming expenses

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

Gaming and non-gaming expenses for the year ended December 31, 2023 increased $76.0 million and $19.9 million.

The increased gaming expense from the prior year was primarily attributable to the expenses related to the launch of our mobile iGaming and Bally Bet sportsbook apps across several North American jurisdictions.

The inclusion of expenses from our recently opened Bally’s Chicago temporary casino property and the incremental gaming expenses from our Recent Acquisitions also contributed to the increase in both gaming and non-gaming expenses compared to prior year.

General and administrative

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

General and administrative expenses for the year ended December 31, 2023 increased $288.3 million from $825.7 million, in 2022.

These increases were primarily attributable to the Diamond Sports Group (“Diamond”) legal reserve, higher operating lease expenses, severance charges in connection with the Interactive restructuring plan, and incremental general and administrative expenses attributable to our Recent Acquisitions and the opening of our Bally’s Chicago temporary casino property.

Impairment charges

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

In 2023, we recorded total impairment charges of $149.8 million which included $54.0 million in the International Interactive segment related to a long-standing indefinite lived trademark acquired as part of the Gamesys acquisition that is being de-emphasized for other newer brands in Asia and Rest of World, impairment charges of $9.4 million and $4.0 million on goodwill and intangible assets held for sale, respectively, $5.7 million of impairment charges related to our interactive restructuring program representing the impairment of certain technology which will no longer be utilized, and $76.7 million of impairment on gaming licenses in connection with our Casinos and Resorts segment.

Depreciation and amortization

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

Depreciation and amortization for the year ended December 31, 2023 was $350.4 million, compared to $300.6 million in 2022.

This increase was largely driven by our Tropicana Las Vegas property where we recorded accelerated depreciation on assets as a result of our recently announced impending closure in April 2024.

These accelerated depreciation charges will extend through the first quarter of 2024.

Income (loss) from operations

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

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

Income from operations was $104.0 million for the year ended December 31, 2023 compared to loss from operations of $293.0 million in 2022.

These changes year-over-year were driven by a gain on sale-leaseback recorded during the current year related to our Hard Rock Biloxi and Bally’s Tiverton properties, organic revenue growth, benefits from our recently opened Bally’s Chicago temporary casino property and Recent Acquisitions, offset by increased general and administrative expenses and impairment charges, as noted above.

Other (income) expense

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

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

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

Benefit for income taxes

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

Total other expense, net increased to $289.7 million for the year ended December 31, 2023 from $161.5 million in 2022.

This increase was driven by increased interest expense on our debt, coupled with an increase in the value of our commercial rights liabilities, and a foreign exchange loss in the current year, compared to a gain in the prior year.

Provision (benefit) for income taxes

Provision for income taxes for the year ended December 31, 2023 was $1.8 million, compared to a benefit for income tax of $28.9 million in 2022.

The effective tax rate for the year ended December 31, 2023 was (0.9)% compared to 6.4% in 2022.

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

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

The 2023 year to date effective tax rate differed from the US federal statutory tax rate of 21%, creating a provision for income tax on the Company’s Loss before income taxes, largely due to an increase in the valuation allowance and the impact of the federal tax on global intangible low-taxed income, partially offset by the rate differential created by our foreign entities.

On December 15, 2022, the European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development Pillar Two Framework that was supported by over 130 countries worldwide.

The EU effective dates are January 1, 2024 and January 1, 2025, for different aspects of the directive.

A significant number of other countries are also implementing similar legislation.

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

Net loss and loss per share

Net loss for the year ended December 31, 2023 was $187.5 million compared to $425.5 million in 2022.

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

As a percentage of revenue, net loss decreased from 18.9% for the year ended December 31, 2022 to a net loss of 7.7% for the year ended December 31, 2023.

Diluted loss per share for the year ended December 31, 2023 and 2022 was $3.51 and $7.32, respectively, and was impacted by the factors noted above.

Adjusted EBITDA and Adjusted EBITDAR by Segment

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

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

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

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

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

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

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

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

Consolidated Adjusted EBITDA was $527.3 million for the year ended December 31, 2023, a decrease of $21.2 million, or 3.9%, from $548.5 million in 2022.

Adjusted EBITDAR for the Casinos & Resorts segment for the year ended December 31, 2023 was $429.0 million, an increase of $30.0 million, or 7.5%, for the year ended December 31, 2023 compared to $398.9 million in 2022.

The increase from the prior year is mainly attributable to the inclusion of our Bally’s Chicago temporary casino and Tropicana Las Vegas properties and strong performance at Bally’s Atlantic City in the current year, partially offset by softening in the market from decreased consumer spend.

Adjusted EBITDAR for the International Interactive segment for the year ended December 31, 2023 was $343.6 million, an increase of $21.9 million, or 6.8%, compared to $321.7 million, mainly due to stronger performance in the United Kingdom year-over-year.

Adjusted EBITDAR loss for the North America Interactive segment for the year ended December 31, 2023 was $55.7 million compared to $65.7 million in 2022.

The reduction in adjusted EBITDAR losses are largely driven by stronger performance in mobile iGaming in New Jersey coupled with cost-savings in connection with the execution of the restructuring plan of our interactive segments.

The following table presents segment Adjusted EBITDAR, which is our reportable segment GAAP measure and our primary measure for profit or loss for our reportable segments, and reconciles Adjusted EBITDAR 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 consolidated financial statements.

Year Ended December 31,

(in thousands) 2023 2022 2021

Casinos & Resorts North America Interactive International Interactive Other Total

Net income (loss) $ 182,574 $ (428,099) $ 69,498 $ (249,519) $ (425,546)

Adjusted EBITDAR

Casinos & Resorts $ 428,968 $ 398,930 $ 345,276

International Interactive 343,559 321,651 69,944

North America Interactive (55,653) (65,729) (12,413)

Other (63,770) (53,024) (45,334)

Total 653,104 601,828 357,473

Rent expense associated with triple net operating leases (1)

(125,775) (53,313) (27,571)

Adjusted EBITDA 527,329 548,515 329,902

Interest expense, net of interest income (277,561) (208,153) (117,924)

Provision (benefit) for income taxes 57,657 (82,788) (3,320) (472) (28,923)

(Benefit) provision for income taxes (1,762) 28,923 4,377

Depreciation and amortization (350,408) (300,559) (144,786)

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(12,688) 46,176 (61,071)

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

Foreign exchange (gain) loss (11,019) 516 (33,461)

Transaction costs (3)

(80,376) (85,604) (84,543)

Restructuring charges (4)

Decommissioning costs (5)

Share-based compensation (24,074) (27,912) (20,143)

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

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

Gain on sale-leaseback, net 374,321 50,766 53,425

Planned business divestiture (6)

(2,089) (5,585) —

Other, net (4)

1,719 4,926 429 1,577 8,651

Allocation of corporate costs 82,329 2,347 — (84,676) —

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

Rent expense associated with triple net operating leases (5)

Adjusted EBITDAR $ 398,930

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

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

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

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

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

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

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

Year Ended December 31, 2021 (in thousands)

Casinos & Resorts North America Interactive International Interactive Other Total

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

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

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

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

Non-operating (income) (1)

Impairment charges (7)

(149,825) (463,978) (4,675)

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

Transaction costs (2)

Diamond Sports Group non-cash liability (8)

(144,883) — —

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

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

Contract termination expense (9)

Impairment charges 4,675 — — — 4,675

Other, net (3)

(868) (8,651) (5,798)

Allocation of corporate costs 70,217 1,629 — (71,846) —

Adjusted EBITDA $ 317,705 $ (12,413) $ 69,944 $ (45,334) $ 329,902

Net loss $ (187,500) $ (425,546) $ (114,697)

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

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

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

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

(i) change in value of commercial rights liabilities, (ii) (gain) loss on extinguishment of debt, (iii) non-operating items of equity method investments including our share of net income or loss on an investment and depreciation expense related to our Rhode Island joint venture, (iv) (gain) adjustment on bargain purchases, and (v) other (income) expense, net.

(3) Includes acquisition, integration and other transaction related costs, financing costs incurred in connection with sale lease-back transactions, the prior year tender offer process, and costs incurred to address the Standard General takeover bid.

(4) Restructuring charges representing the severance and employee related benefits related to the announced Interactive business restructuring initiatives.

(5) Costs related to the decommissioning of the Company’s sports betting platform in favor of outsourcing the platform solution to third parties.

(6) Losses related to a North America Interactive business that Bally’s is marketing as held-for-sale as of December 31, 2023.

(7) Non-cash impairment charges for 2023 included $54.0 million in the International Interactive segment related to a long-standing indefinite lived trademark acquired as part of the Gamesys acquisition, $76.7 million impairment on indefinite-lived gaming licenses in our Casinos & Resorts segment, $5.7 million of impairment charges related to our interactive restructuring program representing the impairment of certain technology which will no longer be utilized, and $9.4 million and $4.0 million of impairment on goodwill and intangible assets, respectively, held for sale.

Non-cash impairment charges for 2022 included $390.7 million related to our North America Interactive segment as part of our annual goodwill and asset impairment analysis and $73.3 million in the International Interactive segment related to a long-standing indefinite lived trademark acquired as part of the Gamesys acquisition.

(8) Non-cash reserve to reflect the remaining Diamond commercial rights intangible asset offset by forgiveness of the liability.

Refer to Note 22 “ Commitments and Contingencies ” to our consolidated financial statements presented in Part II, Item 8 of this Annual Report on Form 10-K.

(9) Contract termination expense related to the early termination of retail and online sportsbook operating agreements with William Hill at certain of our casino properties.

(10) Other includes the following items:

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

Year Ended December 31, 2020 (in thousands)

Casinos & Resorts Other Total

Net income (loss) $ 28,555 $ (34,042) $ (5,487)

Interest expense, net of interest income 34 62,602 62,636

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

Depreciation and amortization 37,786 56 37,842

Non-operating (income) expense (1)

— (6,211) (6,211)

Transaction costs (2)

20 14,030 14,050

Share-based compensation — 17,706 17,706

Impairment charges 8,659 — 8,659

Other, net (2)

10,362 (978) 9,384

Allocation of corporate costs 20,515 (20,515) —

Adjusted EBITDA $ 89,913 $ (20,658) $ 69,255

__________________________________

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

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

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

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

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

(i) non-routine legal expenses and settlement charges for matters outside the normal course of business, (ii) storm related insurance and business interruption recoveries, (iii) rebranding expenses in connection with Bally’s corporate name change, (iv) professional fees and other costs incurred to establish the partnership with Sinclair and acquire Bally Interactive, and (v) other individually de minimis expenses.

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

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

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

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Year ended December 31, 2022 compared to year ended December 31, 2021” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Liquidity and Capital Resources

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A description of changes in cash flows comparing the years ended December 31, 2022 and 2021 can be found in Part II.

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

“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” of our Annual Report on Form 10-K for the year ended December 31, 2022.

Operating Activities

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

The decrease in cash provided by operating activities was primarily attributable to a decrease in net loss increased gains on sale-leaseback transactions, coupled with decreased impairment charges compared to prior year.

These negative effects on cash provided by operating activities were partially offset by a year-over-year decrease in net loss, the increased Diamond legal reserve, and increased in depreciation and amortization.

Investing Activities

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

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

Net cash used in investing activities for 2023 was driven by capital expenditures and $135.3 million of gaming license fees in connection with the opening of our Bally’s Chicago temporary casino and cash paid for acquisitions in the year, offset by proceeds from our Tiverton and Hard Rock Biloxi sale-leaseback transactions.

In 2022, cash used in investing activities was driven by capital expenditures attributable to our expansion and renovation projects at Bally’s Atlantic City, Bally’s Twin River and Bally’s Kansas City and cash paid for acquisitions.

Financing Activities

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

Years Ended December 31,

Revolver proceeds $ 597,000 $ 375,000

Term loan proceeds — 1,925,550

Senior note proceeds — 1,487,003

Issuance of long-term debt $ 597,000 $ 3,787,553

Revolver repayments $ (545,000) $ (325,000)

Term loan repayments (19,450) (569,125)

Senior note repayments — (525,000)

Repayment of Gamesys’ debt — (458,450)

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

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

Cash provided by financing activities increased year-over-year due to a decrease in stock repurchases coupled with the decrease in repayments of long-term debt, partially offset by a decrease in the issuance of long-term debt year-over-year.

Capital Return Program

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

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

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

During the year ended December 31, 2023 we repurchased 7,581,428 common shares for an aggregate purchase price of $99.1 million.

As of December 31, 2023, there was $95.5 million available for use under the Capital Return Program, subject to limitations in our regulatory and debt agreements.

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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.

The Revolving Credit Facility also includes certain financial covenants the Company is required to maintain throughout the term of the credit facility.

These financial covenants include a provision where, in the event borrowings under the Revolving Credit Facility exceed 30% of the total revolving commitment, the Company is required to maintain a first lien secured indebtedness to Adjusted EBITDA ratio of 5.00 to 1.00.

As of December 31, 2023, the Company was in compliance with all applicable covenants and expects to be in compliance for the next twelve months.

During 2023, the Company entered into certain currency swaps to synthetically convert $500 million of its Term Loan Facility to an equivalent fixed-rate Euro-denominated instrument, due October 2028, with a weighted average fixed interest rate of approximately 6.69% per annum.

The Company also entered into additional currency swaps to synthetically convert $200 million, notional, of its floating rate Term Loan Facility, to an equivalent GBP-denominated floating rate instrument, due October 2026.

Additionally, as part of the Company’s risk management program to manage its overall interest rate exposure, the Company entered into a notional aggregate amount of $500 million interest rate collar arrangements maturing in 2028 where the Company’s SOFR floating rate interest under its Term Loan Facility is capped at 4.25%, with a weighted average SOFR floor rate of 3.22%, pursuant to the interest rate collar arrangements.

Refer to Note 16 “ Long-Term Debt ” in Item 8 of this Annual Report on Form 10-K for further information.

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Refer to Note 17 “ Leases ” in Item 8 of this Annual Report on Form 10-K for further information.

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

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

The Master Lease has an initial term of 15 years and includes four, five-year options to renew and requires combined minimum annual payments of $100.5 million, subject to a minimum 1% annual escalation or greater escalation dependent on CPI.

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

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

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

During 2023, the Company’s Bally’s Tiverton and Hard Rock Biloxi properties were added to the master lease on January 3, 2023, as a result of a transaction with GLP Capital, L.P., the operating partnership of GLPI, related to the land and real estate assets for a total consideration of $625.4 million.

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

These properties increased the minimum annual payments under the Master Lease by $48.5 million.

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

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

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

The Company recorded this lease with a corresponding long-term financing obligation of $200.0 million as of December 31, 2023 and 2022.

Capital Expenditures

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For the year ended December 31, 2023, capital expenditures were $311.5 million compared to $212.3 million in 2022.

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

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

In 2023, we continued our spending on our planned projects and maintenance of our casino properties, making significant progress on our Bally’s Chicago, Bally’s Twin River and Bally’s Kansas City properties.

We expect that capital expenditures, outside of our planned development of the Bally’s Chicago permanent facility, will be relatively flat in 2024 compared to 2023 as we continue our focus on generating cash flows to invest in long-term growth opportunities for the entire Bally’s portfolio.

Bally’s Twin River - In connection with our partnership with IGT, we have committed to invest $100 million in Bally’s Twin River over the term of our master contract, ending in 2043, with Rhode Island to expand the property and add additional amenities along with other capital improvements.

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

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

As a major component of this, we have constructed and opened a 14,000 square foot Korean-style spa, and a 40,000 square foot casino expansion, both of which opened in the first half of 2023.

Approximately $64 million of the committed investment remains as of December 31, 2023.

With the addition of the live dealer studio to the property and other customer facing growth initiatives, we expect to apply approximately $5 million of expenditures in 2024 towards the master contract commitment.

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

We are committed to invest approximately $100 million over five years to refurbish and upgrade Bally’s Atlantic City’s facilities and expand its amenities, including renovated hotel rooms and suites, an outdoor beer hall and lobby bar.

Spending in 2023 is estimated at approximately $20 million.

Bally’s Kansas City - We began construction on the planned redevelopment project of Bally’s Kansas City in November 2021.

We believe the redevelopment of the property, which includes a 40,000 square foot land-based building, restaurant, bar and retail space, will improve the property and guest experience and drive growth and return on investment.

Spending on the project is estimated to be approximately $50 million, with a target completion date in the summer of 2023.

Approximately $7.7 million of the committed investment remains as of December 31, 2023.

Bally’s Kansas City - We began construction on the planned redevelopment project of Bally’s Kansas City in November 2021 and completed the project in the third quarter of 2023.

We believe the redevelopment of the property, which includes a 40,000 square foot land-based building, restaurant, bar and retail space, has improved the property and guest experience and will drive growth and our return on investment in the coming years.

Spending on the project during 2023 was approximately $37 million.

Centre County, PA - On December 31, 2020, we signed a framework agreement with entities affiliated with an established developer to design, develop, construct and manage a Category 4 licensed casino in Centre County, Pennsylvania.

Subject to receipt of regulatory approvals, it will house up to 750 slot machines and 30 table games.

Subject to receipt of regulatory approvals, which remain pending, it will house up to 750 slot machines and 30 table games.

The casino will also provide, subject to receipt of separate licenses and certificates, retail sports betting, online sports betting and online gaming.

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If completed, we will acquire a majority equity interest in the partnership, including 100% of the economic interests of all retail sports betting, online sports betting and iGaming activities associated with the project.

Among other features and amenities, Bally’s Chicago will include 3,400 slots, 170 table games, 10 food and beverage venues, a 500-room hotel tower with rooftop bar, a 3,000 seat, 65,000 square foot entertainment center, a 20,000 square foot exhibition and an outdoor green space including an expansive public riverwalk with a water taxi stop.

The project also provides the Developer with the exclusive right to operate a temporary casino for up to three years while the permanent casino resort is constructed.

The temporary casino is expected to open in the second half of 2023, subject to regulatory approval and other customary conditions.

In connection with the entry into the host community agreement with the City of Chicago, the Company made a one-time up-front payment to the City of Chicago equal to $40.0 million, and the Developer will be required to make ongoing payments based on certain performance and time-based thresholds detailed in the host community agreement.

Bally’s Chicago - On June 9, 2022, a wholly-owned indirect subsidiary of the Company, Bally’s Chicago Operating Company, LLC (the “Developer”), signed a host community agreement with the City of Chicago to develop a destination casino resort, to be named Bally’s Chicago, in downtown Chicago, Illinois that will include approximately 3,400 slot machines, 170 table games, 10 food and beverage venues, 500 hotel rooms, a 65,000 square foot entertainment and event center, 20,000 square feet of exhibition space, 3,300 parking spaces and an outdoor green space.

The project also provides the Company with the exclusive right to operate a temporary casino for up to three years while the permanent casino resort is constructed.

The temporary casino commenced operations on September 9, 2023 at the Medinah Temple and includes approximately 800 gaming positions and 3 food and beverage venues.

The Company currently estimates the permanent casino construction to be completed by the end of 2026.

In 2024, we estimate spending of approximately $100 to 200 million primarily dedicated to demolition and site preparation.

In connection with the entry into the host community agreement with the City of Chicago, the Company made a one-time up-front payment to the City of Chicago equal to $40.0 million.

Beginning on the date of operations commencement, the Company will be required to pay annual fixed host community impact fees of $4.0 million.

Additionally, in connection with the host community agreement, the Company provided the City of Chicago with a performance guaranty whereby the Company agreed to have and maintain available financial resources in an amount reasonably sufficient to allow the Developer to complete its obligations under the host community agreement.

In addition, upon notice from the City of Chicago that the Developer has failed to perform various obligations under the host community agreement, the Company has indemnified the City of Chicago against any and all liability, claim or reasonable and documented expense the City of Chicago may suffer or incur by reason of any nonperformance of any of the Developer’s obligations.

In furtherance of these obligations, the host community agreement requires us to spend at least $1.34 billion on the design, construction and outfitting of our temporary casino and our 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, do not count towards satisfying such minimum expenditure.

Other Contractual Obligations

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

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

As of December 31, 2023, obligations related to these agreements were $135.0 million, of which $18.1 million is expected to be paid in 2024, with contracts extending through June 2036

Interactive Technology Partnerships - The Company has certain multi-year agreements with its various market access and content providers, as well as its online sports betting platform partners, that require the Company to pay variable fees based on revenue, with minimum annual guarantees.

The cumulative minimum obligation committed in these agreements is approximately $55.4 million, of which $14.1 million is expected to be paid in 2024, extending through 2028.

Critical Accounting Estimates

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

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

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

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

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

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

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

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

The Company completed its annual assessment for goodwill impairment as of October 1, 2023, which resulted in no impairment charges to goodwill.

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

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

The carrying value of the International Interactive reporting unit was $2.4 billion as of October 1, 2023 and the estimated fair value exceeded this amount by 7%.

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

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

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

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

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

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

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

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

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

Rather, these intangible assets are tested annually for impairment, or more frequently if indicators of impairment exist.

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

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

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

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

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

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

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

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

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

We assess the fair value of our gaming licenses and tradenames using the Greenfield Method and relief-from-royalty method, respectively, both under the income approach.

Based on the annual impairment assessment of intangible assets, the Company recognized an impairment loss of $54.0 million related to one trademark used within the International Interactive segment.

The trademark was determined to no longer have an indefinite life and is being de-emphasized for other newer brands in Asia, resulting in a decline in actual and projected revenues attributable to the trademark as compared to when the fair value was previously determined.

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

To the extent revenues associated with the trademark decline in the near future, discount rates increase significantly, or selected royalty rates decline, we may recognize further impairments.

The selected royalty rate represents the most sensitive input in our estimates and a hypothetical decrease of 50 basis points in the royalty rates would result in additional impairment of approximately $0.4 million.

Additionally, the Company recognized an impairment loss of $76.7 million on three gaming licenses within the Casinos & Resorts segment.

The impairment was triggered by declines in actual revenues and operating cash flows compared to when the licenses were originally valued at acquisition.

The Company valued the gaming licenses using the Greenfield Method under the income approach which estimates the fair value of the gaming license using a discounted cash flow model assuming the Company built a new casino with similar utility to that of the existing casino.

The primary inputs to the valuation involve estimating projected revenues and operating cash flows, estimated construction costs, and pre-opening expenses and is discounted at a rate that reflects the level of risk associated with receiving cash flows attributable to the license.

The most sensitive inputs to the estimated fair value of the licenses are the discount rate and terminal growth rates applied.

A hypothetical 50 basis point increase in the discount rate or a 50 basis point decline in the terminal growth rate would have resulted in incremental impairment charges of $21.3 million or $19.8 million, respectively.

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

Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the rate change is enacted.

A valuation allowance is required when it is “more likely than not” that all or a portion of the deferred taxes will not be realized.

A valuation allowance is required when it is “more likely than not” that all or a portion of the deferred tax assets will not be realized.

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

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

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

Accordingly, the Company’s valuation allowance of $154.9 million reflects an increase of $94.9 million recorded during the year ended December 31, 2023.

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis