What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-02 compared with 2024-05-03 · 110 added, 66 removed, 289 unchanged (38% of the section changed)

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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:

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:

• risks related to the Mergers, including:

◦ the timing, receipt and terms and conditions of any required governmental or regulatory approvals of the Mergers;

◦ the ability of the parties to satisfy the conditions precedent and consummate the proposed Mergers;

◦ the timing of the consummation of the proposed Mergers;

◦ the ability of the parties to secure any required stockholder approval in a timely manner or on the terms desired or anticipated;

◦ failure of the parties to obtain the financing required to consummate the company merger;

◦ the ability to achieve anticipated benefits and savings expected from the proposed Mergers;

◦ risks related to the potential disruption of management’s attention from our ongoing business operations due to the pending Mergers;

◦ the outcome of any legal proceedings related to the proposed Mergers.

• unexpected costs, difficulties integrating and other events impacting our completed acquisitions and our ability to realize anticipated benefits;

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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.

As of June 30, 2024, we own and manage 15 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 14,800 slot machines, 600 table games and 4,000 hotel rooms, along with various restaurants, entertainment venues and other amenities.

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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.

Agreement and Plan of Merger

On July 25, 2024, we entered into the Merger Agreement with SG Parent, LLC, the Queen Casino & Entertainment, Inc., Epsilon Sub I, Epsilon Sub II and SG Gaming .

Subject to the terms and conditions set forth in the Merger Agreement, in connection with the closing of the transaction, SG Gaming will contribute to the Company all shares of common stock of Queen that it owns in exchange for shares of common stock of the Company, immediately thereafter, Merger Sub I will merge into the Company with the Company surviving the Company Merger and immediately thereafter, Merger Sub II will merge into Queen with Queen surviving the Queen Merger as a direct, wholly owned subsidiary of the Company.

Refer to Note 20 “Subsequent Events” in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on the Merger Agreement and the Merger.

Operating Structure

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Biloxi, Mississippi

Tropicana Las Vegas Casino and Resort (“Tropicana Las Vegas”) (2)(4)

Las Vegas, Nevada

Bally’s Arapahoe Park Aurora, Colorado

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(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.

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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.

First Quarter 2024 Results

Second Quarter 2024 and First Six Months 2024 Results

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in millions) 2024 2023 2024 2023

Total revenue $ 621.7 $ 606.2 $ 1,240.1 $ 1,204.9

(Loss) income from operations (74.0) 376.7

Income (loss) from operations 5.6 6.0 (68.4) 382.7

Net (loss) income (60.2) (25.7) (234.1) 152.7

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Total revenue 100.0 % 100.0 % 100.0 % 100.0 %

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Total operating costs and expenses 99.1 % 99.0 % 105.5 % 68.2 %

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

Other income (expense):

Income (loss) from operations 0.9 % 1.0 % (5.5) % 31.8 %

Other (expense) income:

Interest expense, net (11.9) % (11.1) % (11.9) % (10.8) %

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(Loss) income before income taxes (9.9) % (9.0) % (16.5) % 21.7 %

Provision for income taxes 5.1 % 23.0 %

(Benefit) provision for income taxes (0.2) % (4.7) % 2.4 % 9.1 %

Net (loss) income (9.7) % (4.2) % (18.9) % 12.7 %

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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,

The following table sets forth certain financial information associated with results of operations for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, Six Months Ended June 30,

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

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General and administrative as a percentage of Total revenue 41 % 41 % 40 % 42 %

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

Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 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

Total revenue for the three and six months ended June 30, 2024 and 2023 consisted of the following (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Gaming $ 524,751 $ 493,296 $ 31,455 6.4 % $ 1,040,808 $ 980,191 $ 60,617 6.2 %

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Total revenue $ 621,657 $ 606,206 $ 15,451 2.5 % $ 1,240,139 $ 1,204,926 $ 35,213 2.9 %

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.

Total revenue for the three months ended June 30, 2024 increased 2.5% to $621.7 million, from $606.2 million in the same period last year and total revenue for the six months ended June 30, 2024 increased 2.9% to $1.24 billion, from $1.20 billion in the same period last year.

We saw total revenue increase in our Casinos & Resorts reporting segment, mainly due to the inclusion of our Bally’s Chicago temporary casino property, which contributed approximately $32.6 million and $64.2 million during the three and six months ended June 30, 2024, respectfully, partially offset by the incremental decrease in revenue associated with the closure of our Tropicana Las Vegas property during the second quarter of 2024 of approximately $24.9 million.

Additionally, the expanded operating jurisdictions within our North America Interactive reporting segment contributed incremental revenue of approximately $16.3 million and $26.1 million for the three and six months ended June 30, 2024, respectively, compared to the prior 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.

Gaming and non-gaming expenses for the three months ended June 30, 2024 increased $13.7 million, from $271.2 million in 2023, and for the six months ended June 30, 2024 increased $27.9 million, from $541.2 million in 2023.

The increase in gaming and non-gaming expenses from the prior year was mainly attributable to the inclusion of expenses from our recently opened Bally’s Chicago temporary casino which contributed approximately $16.6 million and $33.0 million to the increase in both gaming and non-gaming expenses during the three and six months ended June 30, 2024, respectively, partially offset by the incremental decrease in expense associated with the closure of our Tropicana Las Vegas property of $12.8 million.

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.

General and administrative expense for the three months ended June 30, 2024 increased $2.5 million from $250.0 million in the same period last year, and for the six months ended June 30, 2024 decreased $0.7 million from $501.6 million in the same period last year.

The year to date fluctuation in general and administrative expense is primarily attributable to higher operating expenses associated with the opening of our Bally’s Chicago property, offset by decreased acquisition and integration costs and severance and employee related restructuring costs compared to prior year.

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.

Depreciation and amortization for the three months ended June 30, 2024 was $78.8 million, a decrease of $0.4 million compared to the same period last year, and for the six months ended June 30, 2024 was $238.5 million, an increase of $84.8 million compared to the same period last year.

The year to date increase was primarily driven by our Tropicana Las Vegas property, where we recorded accelerated depreciation of $80.1 million on assets as a result of the recent closure of the property on April 2, 2024.

Income (Loss) From Operations

Income from operations was $5.6 million for the three months ended June 30, 2024 compared to income from operations of $6.0 million in the same period last year.

Loss from operations was $68.4 million for the six months ended June 30, 2024 compared to income from operations of $382.7 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 of $374.3 million 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.

Total other expense increased $7.0 million to $67.3 million for the three months ended June 30, 2024 from $60.3 million, and increased $14.9 million to $135.8 million for the six months ended June 30, 2024 from $120.9 million, each compared to the same periods 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.

Provision (Benefit) for Income Taxes

Benefit for income taxes for the three months ended June 30, 2024 was $1.5 million compared to $28.6 million, and provision for income taxes for the six months ended June 30, 2024 was $29.9 million compared to $109.1 million, each compared to the prior year.

The effective tax rate for the second quarter of 2024 was 2.4% compared to 52.8% 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.

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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.

Net Income (Loss) and Earnings (Loss) Per Share

Net loss for the three months ended June 30, 2024 was $60.2 million, or $(1.24) per diluted share, compared to $25.7 million, or $0.48 per diluted share, for the three months ended June 30, 2023.

Net loss for the six months ended June 30, 2024 was $234.1 million, or $(4.85) per diluted share, compared to net income of $152.7 million, or $2.80 per diluted share, for the six months ended June 30, 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.

Consolidated Adjusted EBITDA was $130.1 million for the three months ended June 30, 2024 compared to $130.0 million for the same period last year.

Consolidated Adjusted EBITDA was $246.5 million for the six months ended June 30, 2024, a decrease of $9.9 million, or 3.8%, from $256.4 million in the same period last year.

Adjusted EBITDAR for the Casinos & Resorts segment for the three months ended June 30, 2024 decreased $11.2 million to $99.8 million and for the six months ended June 30, 2024 decreased $26.9 million to $189.2 million, each compared to the same prior year periods.

These decreases were primarily attributable to winter weather impacts across multiple properties in the first quarter and the closure of the Tropicana Las Vegas in the second quarter, partially offset by the inclusion of Bally’s Chicago that opened in the third quarter of 2023.

Adjusted EBITDAR for the International Interactive segment for the three months ended June 30, 2024 decreased $3.3 million to $81.3 million and for the six months ended June 30, 2024 decreased $0.1 million to $164.8 million, each compared to the same prior year periods, driven by softness in our non-UK operations year-over-year.

Adjusted EBITDAR loss for the North America Interactive segment for the three months ended June 30, 2024 was $(6.8) million compared to an adjusted EBITDAR loss of $(17.7) million for the three months ended June 30, 2023.

For the six months ended June 30, 2024, adjusted EBITDAR loss was $(16.9) million compared to an adjusted EBITDAR loss of $(28.2) million for the six months ended June 30, 2023.

The decrease in adjusted EBITDAR losses is largely driven by expanded operating jurisdictions and 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

June 30, Six Months Ended

(in thousands) 2024 2023 2024 2023

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Non-operating (income) expense (2)

3,127 5,395 2,130 9,252

Foreign exchange (gain)/loss 983 (1,639) 3,799 (5,947)

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(376) (3,440) (18,989) (20,262)

Tropicana Las Vegas demolition costs (5)

(12,261) — (12,261) —

Decommissioning costs (6)

— (2,343) — (2,343)

Share-based compensation (4,472) (6,290) (7,530) (12,330)

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Planned business divestiture (7)

— (190) — (2,054)

Impairment charges (8)

(12,757) (9,653) (12,757) (9,653)

(1,902) (3,599) (1,379) (3,042)

Net (loss) income $ (60,196) $ (25,651) $ (234,110) $ 152,685

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(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.

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

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

(5) Demolition costs associated with the Tropicana Las Vegas property which is part of the plan to redevelop the site with a state-of-the-art integrated resort and ballpark.

As part of the binding term sheet, GLPI has agreed to reimburse the Company for such expenses and will increase rent to reflect the additional funding.

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

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

(8) Includes impairment charges on long-lived assets in the second quarter of 2024 and impairment charges related to assets held-for-sale in 2023.

(9) 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.

(i) non-routine legal expenses and settlement charges for matters outside the normal course of business, (ii) insurance and business interruption recoveries, and (iii) other individually de minimis expenses.

Critical Accounting Estimates

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Cash Flows Summary

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2024 2023

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

Net cash provided by operating activities $ 39,699 $ 64,050

Net cash (used in) provided by investing activities (87,602) 223,976

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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.

Net cash provided by operating activities for the six months ended June 30, 2024 was $39.7 million, compared to $64.1 million for the six months ended June 30, 2023.

The decrease in cash provided by operating activities was primarily driven by the $374.3 million gain on sale-leaseback in the first half 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.

Net cash used in investing activities for the six months ended June 30, 2024 was $87.6 million, an increase of $311.6 million compared to net cash provided by investing activities of $224.0 million for the six months ended June 30, 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.

Net cash provided by financing activities for the six months ended June 30, 2024 was $59.8 million compared to net cash used in financing activities of $174.5 million for the six months ended June 30, 2023.

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

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.

As of June 30, 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.

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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.

We did not pay cash dividends during the six months ended June 30, 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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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.

As of June 30, 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.

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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 $2.28 billion as of March 31, 2024, of which $105.8 million is due within the current year.

Minimum rent payable under operating leases was $2.24 billion as of June 30, 2024, of which $72.2 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 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.

As of June 30, 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.

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.

(“GLP”), an affiliate 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.

In addition to the properties under the Master Lease, the Company leases the land associated with Tropicana Las Vegas.

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.

On July 11, 2024, the Company entered into a Binding Term Sheet to form a strategic construction and financing arrangement with GLP, which includes the funding to complete the construction of Bally’s Chicago permanent casino.

GLP has agreed to acquire the real estate underlying the Bally’s Chicago project, for which the Company is currently subject to a financing obligation with an unrelated party.

GLP will amend the existing land lease through a new master lease agreement with Bally’s Chicago Operating Company, LLC (“Chicago MLA”).

The new land lease sets annual rent at $20 million, subject to customary escalation provisions.

The Chicago MLA will also provide up to $940 million in construction financing, subject to conditions and approvals.

The Company will pay additional rent under the Chicago MLA based on a 8.5% capitalization rate on funded amounts.

The initial lease term for the Chicago MLA is 15 years with renewal options to be agreed upon by the parties.

The Company will also sell and lease back from GLP its properties in Kansas City and Shreveport for $395 million, with initial annual rent of $32.2 million, subject to escalation.

In addition, the Company plans to sell and lease back its Bally’s Twin River property to GLP by 2026 for $735 million, with initial annual rent of $58.8 million.

GLP has the right to call this transaction starting October 2026.

All such transactions are subject to required regulatory approvals.

Financing Obligation

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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.

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.

The Company recorded this lease with a corresponding long-term financing obligation of $200.0 million as of June 30, 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 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.

For the six months ended June 30, 2024, capital expenditures were $63.8 million compared to $119.5 million in the same period last year.

During the six months ended June 30, 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.

Approximately $55.9 million of the committed investment remains as of June 30, 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.

As of June 30, 2024, all investment requirements had been met and no 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.

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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 2024, we estimate spending of approximately $190.2 million primarily dedicated to demolition and site preparation.

We expect future funding of the permanent casino construction to be financed through the GPLI agreement noted above.

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.

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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.

As of June 30, 2024, obligations related to these agreements were $139.0 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.

As of June 30, 2024, the cumulative minimum obligation committed in these agreements is approximately $44.8 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