Bally's Corp 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the securities laws. Forward-looking statements are statements as to matters that are not historical facts, and include statements about our plans, objectives, expectations and intentions. Forward-looking statements are not guarantees and are subject to risks and uncertainties. Forward-looking statements are based on our current expectations and assumptions. Although we believe that our expectations and assumptions are reasonable at this time, they should not be regarded as representations that our expectations will be achieved. Actual results may vary materially. Forward-looking statements speak only as of the time of this report and we do not undertake to update or revise them as more information becomes available, except as required by law. Important factors beyond those that apply to most businesses, some of which are beyond our control, that could cause actual results to differ materially from our expectations and assumptions include, without limitation: • unexpected costs, difficulties integrating and other events impacting our completed acquisitions and our ability to realize anticipated benefits; • risks associated with our rapid growth, including those affecting customer and employee retention, integration and controls; • risks associated with the impact of the digitalization of gaming on our casino operations, our expansion into sports betting and iGaming and the highly competitive and rapidly changing aspects of our businesses generally; • the very substantial regulatory restrictions applicable to us, including costs of compliance; • restrictions and limitations in agreements to which we are subject, including our debt; and • other risks identified in Part I. Item 1A. “Risk Factors” of Bally’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on March 15, 2024 and other filings with the SEC. The foregoing list of important factors is not exclusive and does not include matters like changes in general economic conditions that affect substantially all gaming businesses. You should not place undue reliance on our forward-looking statements. 40 Overview We are a global gaming, hospitality and entertainment company with a portfolio of casinos and resorts and online gaming businesses. We provide our customers with physical and interactive entertainment and gaming experiences, including traditional casino offerings, 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. In 2021, we acquired London-based Gamesys Group Ltd. (“Gamesys”) to expand our geographical and product footprints to include an iGaming business with well-known brands providing iCasino and online bingo experiences to our global online customer base with concentrations in Europe and Asia and a growing presence in North America. Our revenues are primarily generated by these gaming and entertainment offerings. 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 We seek to continue to grow our business by actively pursuing the acquisition and development of new gaming opportunities and reinvesting in our existing operations. We believe that interactive gaming represents a significant strategic opportunity for the future growth of Bally’s and we will continue to actively focus resources in markets that we believe will regulate iGaming. We seek to increase revenues at our casinos and resorts through enhancing the guest experience by providing popular games, restaurants, hotel accommodations, entertainment and other amenities in attractive surroundings with high-quality guest service. We believe that our recent acquisitions have expanded and diversified us from financial and market exposure perspectives, while continuing to mitigate our susceptibility to regional economic downturns, idiosyncratic regulatory changes and increases in regional competition. We continue to make progress on the integration of our acquired assets and deploying capital on our strategic growth projects. 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. Operating Structure Our business is organized into three reportable segments: (i) Casinos & Resorts, (ii) International Interactive, and (iii) North America Interactive. 41 Casinos & Resorts - includes our 16 land-based casino properties, one horse racetrack and one golf course: Property Name Location Bally’s Atlantic City Casino Resort (“Bally’s Atlantic City”) Atlantic City, New Jersey Bally’s Black Hawk (1)(2) Black Hawk, Colorado Bally’s Chicago Casino (“Bally’s Chicago”) (3) Chicago, Illinois Bally’s Dover Casino Resort (“Bally’s Dover”) (2) Dover, Delaware Bally’s Evansville Casino & Hotel (“Bally’s Evansville”) (2) Evansville, Indiana Bally’s Kansas City Casino (“Bally’s Kansas City”) Kansas City, Missouri Bally’s Lake Tahoe Casino Resort (“Bally’s Lake Tahoe”) Lake Tahoe, Nevada Bally’s Quad Cities Casino & Hotel (“Bally’s Quad Cities”) (2) Rock Island, Illinois Bally’s Shreveport Casino & Hotel (“Bally’s Shreveport”) Shreveport, Louisiana Bally’s Tiverton Casino & Hotel (“Bally’s Tiverton”) (2) Tiverton, Rhode Island Bally’s Twin River Lincoln Casino Resort (“Bally’s Twin River”) Lincoln, Rhode Island Bally’s Vicksburg Casino (“Bally’s Vicksburg”) Vicksburg, Mississippi Hard Rock Hotel & Casino Biloxi (“Hard Rock Biloxi”) (2) Biloxi, Mississippi Tropicana Las Vegas Casino and Resort (“Tropicana Las Vegas”) (2)(4) Las Vegas, Nevada Bally’s Arapahoe Park Aurora, Colorado Bally’s Golf Links at Ferry Point (“Bally’s Golf Links”) Bronx, New York __________________________________ (1) Consists of three casino properties: Bally’s Black Hawk North Casino, Bally’s Black Hawk West Casino and Bally’s Black Hawk East Casino. (2) Properties leased from Gaming and Leisure Properties, Inc. (“GLPI”). Refer to Note 15 “ Leases ” for further information. (3) Temporary casino facility while permanent casino resort is constructed. (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 iGaming and online sportsbook operator; and • 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; 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. Refer to Note 18 “ Segment Reporting ” to our condensed consolidated financial statements for additional information on our segment reporting structure. Rhode Island 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). 42 The Regulatory Agreement also provides affirmative obligations, including setting a minimum number of employees that we must employ in Rhode Island and providing the DBR and DoL with periodic information updates about us. Among other things, the Regulatory Agreement prohibits us and our subsidiaries from owning, operating, managing or providing gaming specific goods and services to any properties in Rhode Island (other than Bally’s Twin River and Bally’s Tiverton), Massachusetts, Connecticut or New Hampshire. 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 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 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 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. In addition, inflation generally affects our business by increasing our cost of labor. In periods of sustained inflation, it may be difficult to effectively control such increases to our costs and retain key personnel. Key Performance Indicators The key performance 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. 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. 43 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. First Quarter 2024 Results The following table presents, for the periods indicated, certain revenue and income items: Three Months Ended March 31, (in millions) 2024 2023 Total revenue $ 618.5 $ 598.7 (Loss) income from operations (74.0) 376.7 Net (loss) income (173.9) 178.3 The following table presents, for the periods indicated, certain income and expense items expressed as a percentage of total revenue: Three Months Ended March 31, 2024 2023 Total revenue 100.0 % 100.0 % Gaming and non-gaming expenses 46.0 % 45.1 % General and administrative 40.2 % 42.0 % Gain from sale-leaseback, net — % (62.5) % Depreciation and amortization 25.8 % 12.5 % Total operating costs and expenses 112.0 % 37.1 % (Loss) income from operations (12.0) % 62.9 % Other income (expense): Interest expense, net (11.8) % (10.6) % Other non-operating income, net 0.7 % 0.4 % Total other expense, net (11.1) % (10.1) % (Loss) income before income taxes (23.0) % 52.8 % Provision for income taxes 5.1 % 23.0 % Net (loss) income (28.1) % 29.8 % __________________________________ Note: Amounts in table may not subtotal due to rounding. 44 Segment Performance 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 Revenue: Gaming Casinos & Resorts $ 250,418 $ 233,107 $ 17,311 7.4 % International Interactive 231,267 237,181 (5,914) (2.5) % North America Interactive 34,372 16,607 17,765 107.0 % Total Gaming revenue 516,057 486,895 29,162 6.0 % Non-gaming Casinos & Resorts 91,911 95,679 (3,768) (3.9) % International Interactive 3,416 8,391 (4,975) (59.3) % North America Interactive 7,098 7,755 (657) (8.5) % Total Non-gaming revenue 102,425 111,825 (9,400) (8.4) % Total revenue $ 618,482 $ 598,720 $ 19,762 3.3 % Operating costs and expenses: Gaming Casinos & Resorts $ 95,203 $ 82,423 $ 12,780 15.5 % International Interactive 105,811 117,929 (12,118) (10.3) % North America Interactive 35,130 17,309 17,821 103.0 % Total Gaming expenses 236,144 217,661 18,483 8.5 % Non-gaming Casinos & Resorts 46,110 45,279 831 1.8 % International Interactive 1,127 4,860 (3,733) (76.8) % North America Interactive 874 2,205 (1,331) (60.4) % Total Non-gaming expenses 48,111 52,344 (4,233) (8.1) % General and administrative Casinos & Resorts 164,819 128,117 36,702 28.6 % International Interactive 43,067 57,927 (14,860) (25.7) % North America Interactive 14,389 24,930 (10,541) (42.3) % Other 26,161 40,634 (14,473) (35.6) % Total General and administrative $ 248,436 $ 251,608 $ (3,172) (1.3) % Margins: Gaming expenses as a percentage of Gaming revenue 46 % 45 % 1 % Non-gaming expenses as a percentage of Non-gaming revenue 47 % 47 % — % General and administrative as a percentage of Total revenue 40 % 42 % (2) % 45 Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 Total Revenue 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 % Hotel 41,090 47,332 (6,242) (13.2) % Food and beverage 34,952 33,608 1,344 4.0 % Retail, entertainment and other 26,383 30,885 (4,502) (14.6) % Total revenue $ 618,482 $ 598,720 $ 19,762 3.3 % 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 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 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 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 $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. 46 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. 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 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 $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. 47 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. The following table reconciles consolidated Adjusted EBITDA, which is a non-GAAP measure, to net income (loss), as derived from our financial statements (in thousands): Three Months Ended March 31, (in thousands) 2024 2023 Adjusted EBITDAR Casinos & Resorts $ 89,418 $ 105,123 International Interactive 83,532 80,301 North America Interactive (10,158) (10,563) Other (14,677) (17,268) Total 148,115 157,593 Rent expense associated with triple net operating leases (1) (31,647) (31,238) Adjusted EBITDA 116,468 126,355 Interest expense, net of interest income (73,131) (63,264) Provision for income taxes (31,382) (137,742) Depreciation and amortization (159,746) (74,561) Non-operating (income) expense (2) (997) 3,857 Foreign exchange (gain)/loss 2,816 (4,308) Transaction costs (3) (6,794) (22,018) Restructuring charges (4) (18,613) (16,822) Share-based compensation (3,058) (6,040) Gain on sale-leaseback — 374,186 Planned business divestiture (5) — (1,864) Other (6) 523 557 Net (loss) income $ (173,914) $ 178,336 __________________________________ (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 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) storm related insurance and business interruption recoveries, and (iii) other individually de minimis expenses. Critical Accounting Estimates There were no material changes in critical accounting estimates during the period covered by this Quarterly Report on Form 10-Q. Refer to Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a complete list of our Critical Accounting Estimates. Recent Accounting Pronouncements 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. 48 Liquidity and Capital Resources Overview We are a holding company. Our ability to fund our obligations depends on existing cash on hand, cash flow from our subsidiaries and our ability to raise capital. Our primary sources of liquidity and capital resources have been cash on hand, cash flow from operations, borrowings under our Revolving Credit Facility (as defined herein) and proceeds from the issuance of debt and equity securities. We assess liquidity in terms of the ability to generate cash or obtain financing in order to fund operating, investing and debt service requirements. Our primary ongoing cash requirements include the funding of operations, capital expenditures, acquisitions and other investments in line with our business strategy and debt repayment obligations and interest payments. Our strategy has been to maintain moderate leverage and substantial capital resources in order to take advantage of opportunities, to invest in our businesses and acquire properties at what we believe to be attractive valuations. As such, we have continued to invest in our land-based casino business and build on our interactive/iGaming gaming business. We believe that existing cash balances, operating cash flows and availability under our Revolving Credit Facility, as explained below, will be sufficient to meet funding needs for operating, capital expenditure and debt service purposes. Cash Flows Summary Three Months Ended March 31, (in thousands) 2024 2023 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 Change in cash and cash equivalents and restricted cash held for sale — (1,097) Net change in cash and cash equivalents and restricted cash (4,373) 131,678 Cash and cash equivalents and restricted cash, beginning of period 315,262 265,184 Cash and cash equivalents and restricted cash, end of period $ 310,889 $ 396,862 Operating Activities 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 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 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. 49 Capital Return Program 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. Debt and Lease Obligations Senior Notes 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”). 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. These covenants are subject to exceptions and qualifications set forth in the indenture. Credit Facility On October 1, 2021, we entered into the Credit Agreement providing for a senior secured term loan facility in an aggregate principal amount of $1.945 billion (the “Term Loan Facility”), which will mature in 2028, and a senior secured revolving credit facility in an aggregate principal amount of $620.0 million (the “Revolving Credit Facility”), which will mature in 2026. The credit facilities allow us to increase the size of the Term Loan Facility or request one or more incremental term loan facilities or increase commitments under the Revolving Credit Facility or add one or more incremental revolving facilities in an aggregate amount not to exceed the greater of $650 million and 100% of the Company’s consolidated EBITDA for the most recent four-quarter period plus or minus certain amounts as specified in the Credit Agreement, including an unlimited amount subject to compliance with a consolidated total secured net leverage ratio. The credit facilities contain covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, sell assets, make certain investments, and grant liens. These covenants are subject to exceptions and qualifications set forth in the Credit Agreement. The Revolving Credit Facility 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. 50 Operating Leases The Company is committed under various operating lease agreements for real estate and property used in operations. Minimum rent payable under operating leases was $2.28 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. GLPI Leases 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. 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 leases the non-land assets of Tropicana Las Vegas, which the Company acquired during the fourth quarter of 2022, from GLPI. This lease has an initial term of 50 years (with a maximum term of 99 years with renewal options) at annual rent of $10.5 million, subject to minimum 1% annual escalation or greater escalation dependent on CPI. Financing Obligation Bally’s Chicago Operating Company, LLC, an indirect wholly-owned subsidiary of the Company, leases the land on which Bally’s Chicago will be built. The lease commenced November 18, 2022 and has a 99-year term followed by ten separate 20-year renewals at the Company’s option. 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 Capital expenditures are accounted for as either project, maintenance or capitalized software expenditures. Project capital expenditures are for fixed asset additions that expand an existing facility or create a new facility. Maintenance capital expenditures are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost effective to repair, along with spending on other small projects that do not fit into the project category. Capitalized software expenditures relate to the creation, production and preparation of software for use in our online gaming operations. 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, 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. As of March 31, 2024, approximately $5.5 million of the commitment to invest in non-hotel projects remains. 51 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, 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. We estimate the total cost of the project, including construction, licensing and iGaming/sports betting operations, to be approximately $120 million. If completed, we will acquire a majority equity interest in the partnership, including 100% of the economic interests of all retail sports betting, online sports betting and iGaming activities associated with the project. Bally’s Chicago - On June 9, 2022, a wholly-owned indirect subsidiary of the Company, Bally’s Chicago Operating Company, LLC (the “Developer”), signed a host community agreement with the City of Chicago to develop a 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 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 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.