What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-03 compared with 2023-11-03 · 103 added, 136 removed, 252 unchanged (49% of the section changed)

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We are a global gaming, hospitality and entertainment company with a portfolio of casinos and resorts and online gaming businesses.

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

As of September 30, 2023, we own and manage 16 land-based casinos in 10 states across the United States (“US”), one golf course in New York, and one horse racetrack in Colorado operating under the Bally’s brand.

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

As of March 31, 2024, we own and manage 16 land-based casinos in 10 states across the United States (“US”), one golf course in New York, and one horse racetrack in Colorado operating under the Bally’s brand.

Our land-based casino operations include approximately 15,300 slot machines, 600 table games and 5,300 hotel rooms, along with various restaurants, entertainment venues and other amenities.

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Our revenues are primarily generated by these gaming and entertainment offerings.

We own and operate our proprietary software and technology stack, which is designed to allow us to provide consumers differentiated offerings and exclusive content.

Our proprietary software and technology stack is designed to allow us to provide consumers with differentiated offerings and exclusive content.

Our Strategy and Business Developments

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

On June 22, 2023, the Governor of Rhode Island signed into law a bill authorizing Bally’s to be the exclusive provider of iGaming to Rhode Island customers for 20 years.

The Company is expected to start offering iGaming services when the bill takes effect as of March 1, 2024.

Operating Structure

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(3) Temporary casino facility while permanent casino resort is constructed.

International Interactive - includes Gamesys, a business-to-consumer (“B2C”) iCasino operator.

(4) This property closed on April 2, 2024 as part of a plan to redevelop the site with a state-of-the-art integrated resort and ballpark.

International Interactive - includes Gamesys, primarily a business-to-consumer (“B2C”) iCasino operator.

North America Interactive - includes the following North America businesses:

• Bally’s Interactive, primarily a B2C online iCasino operator;

• Consumer facing service and marketing engines, including SportCaller, a B2B and F2P game provider for sports betting companies;

• Bally’s Interactive, primarily a B2C online iGaming and online sportsbook operator;

• Consumer facing service and marketing engines, including SportCaller, a business-to-business (“B2B”) and F2P game provider for sports betting companies;

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

and an investment in the Association of Volleyball Professionals (“AVP”), a professional beach volleyball organization and host of the longest-running domestic beach volleyball tour.

an investment in the Association of Volleyball Professionals (“AVP”), a professional beach volleyball organization and host of the longest-running domestic beach volleyball tour;

and an investment in Watch Stadium, a content distribution channel focused on sporting events.

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

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Rhode Island Regulatory Agreement

On February 17, 2022, certain of our subsidiaries, the Rhode Island Department of Business Regulation (“DBR”) and the Division of Lotteries (“DoL”) of the Rhode Island Department of Revenue amended and restated our Regulatory Agreement (the “Regulatory Agreement”).

We are party to an Amended and Restated Regulatory Agreement (the “Regulatory Agreement”), with the Rhode Island Department of Business Regulation (“DBR”) and the State Lottery Division of the Rhode Island Department of Revenue (“DoL”).

The Regulatory Agreement contains financial and other covenants that, among other things, (i) restrict the acquisition of stock and other financial interests in us, (ii) relate to the licensing and composition of members of our management and Board of Directors (the “Board”), (iii) prohibit certain competitive activities and related-party transactions and (iv) restrict our ability to declare or make restricted payments (including dividends), incur additional indebtedness or take certain other actions, if our leverage ratio exceeds 5.50 to 1.00 (in general being gross debt divided by Adjusted EBITDA, each as defined in the Regulatory Agreement).

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A failure to comply with the Regulatory Agreement could subject us to injunctive or monetary relief, payments to the Rhode Island regulatory agencies and ultimately the revocation or suspension of our licenses to operate in Rhode Island.

In addition, our master contracts with Rhode Island were extended through June 30, 2043, and allow for consolidation of promotional points between Bally’s Twin River and Bally’s Tiverton, obligate Bally’s Twin River to build a 50,000 square foot expansion, obligate Bally’s to lease at least 20,000 square feet of commercial space in Providence, and commit us to invest $100 million in Rhode Island over this extended term, including an expansion and the addition of new amenities at Bally’s Twin River.

The June 2021 legislation authorized Bally’s Twin River to become a licensed technology provider, which it did on July 1, 2021.

As a licensed Technology Provider, Bally’s Twin River was entitled to an additional share of net terminal income on Video Lottery Terminals (“VLTs”) which they owned or leased.

This June 2021 legislation also authorized a joint venture between Bally’s and International Gaming Technology PLC (“IGT”) to become a licensed technology provider and supply the State of Rhode Island with all VLTs at both Bally’s Twin River and Bally’s Tiverton for a 20.5-year period starting January 1, 2023.

The joint venture was organized as the Rhode Island VLT Company, LLC, with IGT owning 60% of the membership interests and Bally’s or its affiliates owning 40% of the membership interests.

In addition, our master contracts with Rhode Island extended through June 30, 2043, and allow for consolidation of promotional points between Bally’s Twin River and Bally’s Tiverton, obligate Bally’s Twin River to build a 50,000 square foot expansion, obligate Bally’s to lease at least 20,000 square feet of commercial space in Providence, and commit us to invest $100 million in Rhode Island over the term, including an expansion and the addition of new amenities at Bally’s Twin River.

As a licensed Technology Provider since July 1, 2021, Bally’s Twin River is entitled to an additional share of net terminal income on Video Lottery Terminals (“VLTs”) which they owned or leased.

June 2021 legislation in Rhode Island also authorized a joint venture between Bally’s and IGT Global Solutions Corporation (“IGT”) to become a licensed technology provider and supply the State of Rhode Island with all VLTs at both Bally’s Twin River and Bally’s Tiverton for a 20.5-year period starting January 1, 2023.

The joint venture was organized as the Rhode Island VLT Company, LLC, with IGT owning 60% of the membership interests and Bally’s or its affiliates owning 40% of the membership interests (“RI Joint Venture”).

On December 30, 2022, Bally’s Twin River and Bally’s Tiverton purchased additional machines directly from IGT to effectively own 40% of the machines.

On January 1, 2023 Bally’s Twin River and Bally’s Tiverton contributed all of their machines to Rhode Island VLT Company, LLC in return for an aggregate 40% membership interest, and IGT contributed all of their machines at Bally’s Twin River and Bally’s Tiverton to the Rhode Island VLT Company, LLC in return for a 60% membership interest.

On January 1, 2023, Bally’s Twin River and Bally’s Tiverton contributed all of their machines to the RI Joint Venture in return for an aggregate 40% membership interest, and IGT contributed all of their machines at Bally’s Twin River and Bally’s Tiverton to the RI Joint Venture in return for a 60% membership interest.

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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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.

Third Quarter 2023 and First Nine Months 2023 Results

First Quarter 2024 Results

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

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

Three Months Ended March 31,

(in millions) 2024 2023

Total revenue $ 618.5 $ 598.7

Income from operations 37.2 53.7 420.0 161.5

(Loss) income from operations (74.0) 376.7

Net (loss) income (173.9) 178.3

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Total revenue 100.0 % 100.0 %

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Total operating costs and expenses 112.0 % 37.1 %

Income from operations 5.9 % 9.3 % 22.9 % 9.6 %

(Loss) income from operations (12.0) % 62.9 %

Other income (expense):

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Other non-operating income, net 0.7 % 0.4 %

Total other income (expense), net (8.7) % (9.0) % (9.6) % (5.9) %

Total other expense, net (11.1) % (10.1) %

(Loss) income before income taxes (23.0) % 52.8 %

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Segment Performance

The following table sets forth certain financial information associated with results of operations for the three and nine months ended September 30, 2023 and 2022.

Three Months Ended

September 30, Nine Months Ended

September 30,

The following table sets forth certain financial information associated with results of operations for the three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

(in thousands, except percentages) 2024 2023 $ Change % Change

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General and administrative as a percentage of Total revenue 40 % 42 % (2) %

Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Total Revenue

Total revenue for the three and nine months ended September 30, 2023 and 2022 consisted of the following (in thousands):

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

2023 2022 $ Change % Change 2023 2022 $ Change % Change

Total revenue for the three months ended March 31, 2024 and 2022 consisted of the following (in thousands):

Three Months Ended March 31,

2024 2023 $ Change % Change

Gaming $ 516,057 $ 486,895 $ 29,162 6.0 %

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Total revenue $ 618,482 $ 598,720 $ 19,762 3.3 %

Revenue for the three months ended September 30, 2023 increased $54.2 million, to $632.5 million, from $578.2 million in the same period last year.

Revenue for the nine months ended September 30, 2023 increased $158.4 million, to $1.84 billion, from $1.68 billion in the same period last year.

We saw gaming, hotel, and food and beverage increase, through organic growth throughout the year at several of our casino properties.

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

Total revenue for the three months ended March 31, 2024 increased 3.3% to $618.5 million, from $598.7 million in the same period last year.

We saw total revenue increase in our Casinos & Resorts and North America Interactive reporting segments, mainly due to the inclusion of our Bally’s Chicago temporary casino property in the current year, and the continued growth in our North American iGaming and sportsbook presence with expanded operating jurisdictions in the current year.

Gaming and Non-gaming Expenses

Gaming expenses for the three months ended September 30, 2023 increased $31.9 million to $229.1 million from $197.2 million in the prior year comparable period and increased $45.3 million to $665.7 million for the nine months ended September 30, 2023 from the prior year comparable period.

These increases were primarily attributable to the inclusion of expenses from our recently opened Bally’s Chicago property and the incremental gaming expenses from our Recent Acquisitions.

Non-gaming expenses for the three months ended September 30, 2023 increased $4.5 million from $53.5 million in the same period last year and for the nine months ended September 30, 2023 increased $22.1 million from $140.5 million compared to the same period last year.

These increases were primarily attributable to our Tropicana Las Vegas casino property, which contributed incremental non-gaming expenses of $32.7 million during the nine months ended September 30, 2023, partially offset by the decreased non-gaming expense across the interactive reporting segments.

Gaming and non-gaming expenses for the three months ended March 31, 2024 increased $14.3 million, from $270.0 million in 2023.

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.

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

General and Administrative

General and administrative expenses for the three months ended September 30, 2023 increased $30.5 million to $230.6 million from $200.0 million in the same period last year.

General and administrative expenses for the nine months ended September 30, 2023 increased $152.3 million from $579.8 million in the same period last year.

These increases were primarily attributable to higher operating lease expenses, restructuring charges related to the Interactive business workforce reduction in the current year, increased acquisition and transaction related costs, impairment charges related to the assets held for sale, and general and administrative expenses attributable to our Recent Acquisitions.

General and administrative expense for the three months ended March 31, 2024 decreased $3.2 million from $251.6 million in the same period last year, primarily due to the decrease in acquisition and integration costs from prior year, partially offset by increased severance and employee related benefit costs in connection with restructuring at our Tropicana Las Vegas property, which closed April 2, 2024.

Depreciation and Amortization

Depreciation and amortization for the three months ended September 30, 2023 was $77.5 million, an increase of $3.6 million, and $231.2 million for the nine months ended September 30, 2023, an increase of $3.7 million, each compared to the same period last year.

These increases were mainly attributable to the inclusion of expenses from our Recent Acquisitions, as well as the inclusion of expenses related to our various capital development projects placed into service during 2023.

Income From Operations

Income from operations was $37.2 million for the three months ended September 30, 2023, compared to $53.7 million in the comparable period in 2022.

Income from operations was $420.0 million for the nine months ended September 30, 2023, compared to $161.5 million in the corresponding period 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 property and Recent Acquisitions, and offset by increased general and administrative expenses and impairment charges on assets held for sale.

Depreciation and amortization for the three months ended March 31, 2024 was $159.7 million, an increase of $85.2 million compared to the same period last year.

This increase was largely driven by our Tropicana Las Vegas property where we recorded accelerated depreciation on assets as a result of the recent closure of the property on April 2, 2024.

(Loss) Income From Operations

Loss from operations was $74.0 million for the three months ended March 31, 2024 compared to income from operations of $376.7 million in the same period last year.

The change year-over-year was driven by depreciation at our Tropicana Las Vegas property in the current year, as noted above, combined with the gain on sale-leaseback recorded during the first quarter of 2023 related to our Hard Rock Biloxi and Bally’s Tiverton properties.

Other Income (Expense)

Total other expense increased $3.2 million to $55.1 million for the three months ended September 30, 2023 and $77.5 million to $176.0 million for the nine months ended September 30, 2023, each compared to the same periods last year.

These increases in other expenses were primarily attributable to increased interest expense on our borrowings year-over-year.

Provision (Benefit) for Income Taxes

Provision for income taxes for the three months ended September 30, 2023 was $43.9 million compared to $1.1 million for the three months ended September 30, 2022.

The effective tax rate for the quarter was (245.9)% compared to 65.7% for the three months ended September 30, 2022.

The provision for income taxes for the nine months ended September 30, 2023 was $153.0 million compared to $1.0 million for the nine months ended September 30, 2022.

The effective tax rate for the nine months ended September 30, 2023 was 62.7% compared to 1.6% for the nine months ended September 30, 2022.

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.

Total other expense increased $7.9 million to $68.6 million for the first quarter of 2024 from $60.7 million in the same period last year.

The increase in other expense was primarily attributable to an increase in interest expense due to higher interest rates of our borrowings year-over-year, partially offset by increased interest income recognized on our derivative instruments and increased foreign currency gains.

Provision for Income Taxes

Provision for income taxes for the three months ended March 31, 2024 was $31.4 million compared to $137.7 million in the prior year.

The effective tax rate for the first quarter of 2024 was (22.0)% compared to 43.6% in the prior year.

The 2024 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, coupled with a tax liability for foreign discrete items.

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.

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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 Income (Loss) and Earnings (Loss) Per Share

Net loss for the three months ended September 30, 2023 was $61.8 million, or ($1.15) per diluted share, compared to net income of $0.6 million, or $0.01 per diluted share, in the same period last year.

Net income for the nine months ended September 30, 2023 was $90.9 million, an increase of $28.9 million, or 46.6%, from $62.0 million, or $1.05 per diluted share, in the same period last year.

The estimated impact of this directive is immaterial to the Company’s consolidated financial statements in the current year.

Net Loss and Earnings Per Share

Net loss for the three months ended March 31, 2024 was $173.9 million, or $(3.61) per diluted share, compared to net income of $178.3 million, or $3.24 per diluted share, for the three months ended March 31, 2023.

Adjusted EBITDA and Adjusted EBITDAR by Segment

Consolidated Adjusted EBITDA was $141.6 million for the three months ended September 30, 2023, a decrease of $9.3 million, or 6.2%, from $151.0 million in the same period last year.

Consolidated Adjusted EBITDA was $398.0 million for the nine months ended September 30, 2023, a decrease of $4.7 million, or 1.2%, from $402.7 million in the same period last year.

Adjusted EBITDAR for the Casinos & Resorts segment for the three months ended September 30, 2023 decreased $0.6 million to $118.2 million and increased $30.9 million to $334.3 million for the nine months ended September 30, 2023, each compared to the same prior year period.

These fluctuations from prior year are mainly attributable to the inclusion of our Bally’s Chicago and Tropicana Las Vegas properties in the current year, offset by softening in the market from decreased consumer spend.

Adjusted EBITDAR for the International Interactive segment for the three months ended September 30, 2023 increased $9.2 million to $85.5 million and increased $18.1 million, to $250.4 million for the nine months ended September 30, 2023, each compared to the same prior year period.

These increases were mainly due to stronger performance in the United Kingdom during the current year.

Adjusted EBITDAR losses for the North America Interactive segment for the three and nine months ended September 30, 2023 were $(17.6) million and $(45.8) million, respectively, compared to adjusted EBITDAR losses of $(19.7) million and $(59.9) million for the three and nine months ended September 30, 2022, respectively.

These reductions in adjusted EBITDA losses are largely driven by stronger performance in New Jersey, coupled with cost-savings in connection with the execution of the restructuring plan of our interactive business.

Consolidated Adjusted EBITDA was $116.5 million for the three months ended March 31, 2024, a decrease of $9.9 million, or 7.8%, from $126.4 million in the same period last year.

Adjusted EBITDAR for the Casinos & Resorts segment for the three months ended March 31, 2024 decreased $15.7 million to $89.4 million compared to the same prior year period.

This decrease was primarily attributable to winter weather impacts across multiple properties.

Adjusted EBITDAR for the International Interactive segment for the three months ended March 31, 2024 increased $3.2 million to $83.5 million compared to the same prior year period, mainly due to stronger performance in the United Kingdom year-over-year.

Adjusted EBITDAR loss for the North America Interactive segment for the three months ended March 31, 2024 was $(10.2) million compared to an adjusted EBITDAR loss of $(10.6) million for the three months ended March 31, 2023, respectively.

The decrease in adjusted EBITDAR losses are largely driven by stronger performance in iGaming and sportsbook in the current year.

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 consolidated Adjusted EBITDA.

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Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023

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(31,647) (31,238)

Adjusted EBITDA 116,468 126,355

Interest expense, net of interest income (73,131) (63,264)

Provision (benefit) for income taxes (43,936) (1,137) (153,029) (996)

Provision for income taxes (31,382) (137,742)

Depreciation and amortization (159,746) (74,561)

Non-operating (income) expense (2)

4,276 1,387 13,528 44,315

Foreign exchange (gain)/loss 2,816 (4,308)

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(18,613) (16,822)

Decommissioning costs (5)

— — (2,343) —

Share-based compensation (3,058) (6,040)

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Planned business divestiture (5)

(35) — (2,089) —

Impairment charges — — (9,653) —

3,549 1,314 507 (6,728)

Net income (loss) $ (61,802) $ 593 $ 90,883 $ 61,983

Net (loss) income $ (173,914) $ 178,336

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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.

(1) Consists of the operating lease components contained within our triple net master lease 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 commercial rights liabilities, (ii) gain 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, and (iv) other (income) expense, net.

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

(4) Restructuring costs related to the Interactive business workforce reduction.

(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 September 30, 2023.

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

(4) Restructuring charges representing severance and employee related benefits related to the announced Interactive business restructuring initiatives and the closure of our Tropicana Las Vegas property on April 2, 2024.

(5) Losses related to a North America Interactive business that Bally’s was marketing as held-for-sale in 2023.

(6) Other includes the following items:

(i) non-routine legal expenses and settlement charges for matters outside the normal course of business, (ii) demolition costs related to a failed parking garage structure at our Bally’s Atlantic City property and (iii) 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, and (iii) other individually de minimis expenses.

Critical Accounting Estimates

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Recent Accounting Pronouncements

Refer to Note 4 “ Recently Adopted and Issued Accounting Pronouncements ” in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that affect us.

Refer to Note 4 “ Recently Issued Accounting Pronouncements ” in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that affect us.

Liquidity and Capital Resources

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Cash Flows Summary

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

Net cash provided by operating activities $ 118,359 $ 225,316

Net cash used in investing activities (2,247) (69,455)

Net cash used in financing activities (79,560) (189,948)

Net cash used in operating activities $ (7,854) $ (16,112)

Net cash (used in) provided by investing activities (43,401) 319,636

Net cash provided by (used in) financing activities 51,327 (173,568)

Effect of foreign currency on cash and cash equivalents (4,445) 2,819

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Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2023 was $118.4 million, compared to net cash provided by operating activities of $225.3 million for the nine months ended September 30, 2022.

The decrease in cash provided by operating activities was primarily driven by the $323.6 million increase in gain on sale-leaseback, partially offset by increased deferred income taxes, positive changes in working capital and an increase in net income of $28.9 million from the prior year.

Net cash used in operating activities for the three months ended March 31, 2024 was $7.9 million, compared to $16.1 million for the three months ended March 31, 2023.

The decrease in cash used in operating activities was primarily driven by the $374.2 million gain on sale-leaseback in the first quarter of 2023 coupled with the accelerated depreciation of our Tropicana Las Vegas assets in the current year, offset by decreased deferred income taxes, changes in working capital and our net income position in the prior year compared to a net loss position in 2024.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2023 was $2.2 million, a decrease of $67.2 million compared to net cash used in investing activities of $69.5 million for the nine months ended September 30, 2022.

The increase in cash provided by investing activities was primarily driven by increased proceeds from sale-leaseback transactions and decreased cash paid for acquisitions, offset by the increase in capital expenditures year-over-year.

Net cash used in investing activities for the three months ended March 31, 2024 was $43.4 million, a decrease of $363.0 million compared to net cash provided by investing activities of $319.6 million for the three months ended March 31, 2023.

This change was primarily driven by the proceeds from sale-leaseback transactions in the prior year and a decrease in cash paid for acquisitions and capital expenditures year-over-year.

Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2023 was $79.6 million compared to net cash used in financing activities of $189.9 million for the nine months ended September 30, 2022.

This decrease was mainly attributable to the decrease in stock repurchases coupled with the decrease in repayments of long-term debt compared to prior year, partially offset by a decrease in the issuance of long-term debt year-over-year.

Net cash provided by financing activities for the three months ended March 31, 2024 was $51.3 million compared to net cash used in financing activities of $173.6 million for the three months ended March 31, 2023.

This increase was mainly attributable to an increase in long term debt borrowings offset by lower payments made year-over-year and a decrease in stock repurchases.

Capital Return Program

During the nine months ended September 30, 2023, we repurchased 1,774,845 common shares for an aggregate price of $30.5 million under our previously announced capital return program.

As of September 30, 2023, there was $164.1 million available for use under the capital return program, subject to limitations in our regulatory and debt agreements.

We did not pay cash dividends during the nine months ended September 30, 2023 or 2022, nor do we currently intend to pay any dividends on our common stock in the foreseeable future.

As of March 31, 2024, there was $95.5 million available for use under the capital return program, subject to limitations in our regulatory and debt agreements.

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

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

There is no fixed time period to complete share repurchases.

We did not pay cash dividends during the three months ended March 31, 2024 or 2023, nor do we currently intend to pay any dividends on our common stock in the foreseeable future.

Any future determinations relating to our dividend policies will be made at the discretion of our Board and will depend on conditions then existing, including our financial condition, results of operations, contractual restrictions, capital and regulatory requirements and other factors our Board may deem relevant.

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On August 20, 2021, we issued $750.0 million aggregate principal amount of 5.625% senior notes due 2029 and $750.0 million aggregate principal amount of 5.875% Senior Notes due 2031 (together, the “Senior Notes”).

During the nine months ended September 30, 2023, the Company repurchased and retired $15.0 million of the Senior Notes due 2031 at a weighted average price of 70.80% of the principal.

In connection with the repurchase of these Senior Notes due 2031, the Company recorded a gain on extinguishment of debt of $4.0 million.

The indenture governing the Senior Notes contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, (i) incur additional indebtedness, (ii) pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, (iii) enter into certain transactions with affiliates, (iv) sell or otherwise dispose of assets, (v) create or incur liens and (vi) merge, consolidate or sell all or substantially all of the Company’s assets.

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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.

During the quarter ending September 30, 2023, the Company entered certain currency swaps to synthetically convert $400 million of its Term Loan Facility to an equivalent fixed-rate Euro-denominated instrument due October 2028 paying a fixed-rate coupon of approximately 6.74% per annum.

Such currency swaps as of September 30, 2023, which had an original effective conversion rate of 1.082 and €369.7 million notional amount at inception, reflected a gain of $9.0 million when converted to US dollar as of September 30, 2023, or an equivalent in US dollars of $391.0 million.

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 March 31, 2024, the Company was in compliance with all applicable covenants.

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 10 “ Derivative Instruments ” and Note 14 “ Long-Term Debt ” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

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

Minimum rent payable under operating leases was $2.34 billion as of September 30, 2023.

Minimum rent payable under operating leases was $2.28 billion as of March 31, 2024, of which $105.8 million is due within the current year.

Refer to Note 15 “ Leases ” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

As of September 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 were leased under the terms of a master lease agreement (the “Master Lease”) with GLPI.

As of March 31, 2024, 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.

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.

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 of the Master Lease by $48.5 million.

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 leases the non-land assets of Tropicana Las Vegas, which the Company acquired during the fourth quarter of 2022, from GLPI.

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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 September 30, 2023, 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 March 31, 2024 and December 31, 2023.

Capital Expenditures

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Capitalized software expenditures relate to the creation, production and preparation of software for use in our online gaming operations.

For the nine months ended September 30, 2023, capital expenditures were $266.2 million compared to $167.4 million in the same period last year.

During the nine months ended September 30, 2023, we continued our spending on maintenance and planned projects at our casino properties, the most significant being our Bally’s Chicago temporary facility, which commenced its operations during the third quarter.

Additionally, we made significant progress on our Bally’s Twin River and Bally’s Atlantic City properties.

For the three months ended March 31, 2024, capital expenditures were $28.1 million compared to $43.7 million in the same period last year.

During the three months ended March 31, 2024, we continued our spending on our planned projects and maintenance at our casino properties, the most significant being our future Bally’s Chicago permanent facility.

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 a 40,000 square foot casino expansion, for a combined investment of $60 million.

The spa opened in January 2023 and the expanded casino opened in April 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 $57.4 million of the committed investment remains as of March 31, 2024.

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, outdoor beer hall and lobby bar.

Spending in 2023 is estimated at approximately $20 million.

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

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

Spending on the project during 2023 was approximately $35 million and was completed during the third quarter.

As of March 31, 2024, approximately $5.5 million of the commitment to invest in non-hotel projects remains.

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.

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, a 20,000 square foot exhibition, outdoor music venue, 3,300 parking spaces and an outdoor green space.

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.

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

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.

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 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 equipping of our temporary casino and our permanent resort and casino.

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, are not counted toward meeting this requirement.

Chicago Tribune Lease Termination - 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”).

$90 million of the Payment was paid during the three months ended September 30, 2023.

$50 million of the Payment is secured by cash-collateralized letters of credit, issued by Citizens Bank and are reported as restricted cash as of September 30, 2023.

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.

On September 9, 2023, operations commenced at the Company’s Bally’s Chicago temporary casino facility, which triggered required gaming license fees to be paid to the Illinois Gaming Board.

As of September 30, 2023, the Company recorded such fees totaling $135.3 million within “Intangible assets, net”, as an indefinite lived gaming license, and “Accounts payable” on the condensed consolidated balance sheets.

These fees were paid in October 2023 through borrowings on the Revolving Credit Facility.

Other Commitments

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 September 30, 2023, obligations related to these agreements were $138.4 million, with contracts extending through June 2036.

As of March 31, 2024, obligations related to these agreements were $146.2 million, with contracts extending through 2037.

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.

As of March 31, 2024, the cumulative minimum obligation committed in these agreements is approximately $46.1 million, extending through 2029.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis