What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-02 · 112 added, 77 removed, 322 unchanged (37% of the section changed)

23 unchanged sentences

• restrictions and limitations in agreements to which we are subject, including our debt;

• our asset impairment analyses and our intangible asset and goodwill impairment tests;

• other risks identified in Part I.

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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 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.

As of September 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 14,900 slot machines, 550 table games and 3,800 hotel rooms, along with various restaurants, entertainment venues and other amenities.

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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.

On July 25, 2024, we entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with SG Parent, LLC, The Queen Casino & Entertainment, Inc.

(“Queen”), Epsilon Sub I, Inc.

(“Merger Sub I”), Epsilon Sub II, Inc.

(“Merger Sub II”)and, solely for purposes of specified sections thereof, SG CQ Gaming LLC (“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 such merger and immediately thereafter, Merger Sub II will merge into Queen with Queen surviving such merger as a direct, wholly owned subsidiary of the Company.

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

Carved-Out Business

On October 31, 2024, the Company entered into an agreement to carve-out components of its interactive business in Asia and certain other international markets in its International Interactive reportable segment (the “Carved-Out Business”) to a company (the “Buyer”) formed by members of the management of the Carved-Out Business.

The Buyer is acquiring the net-assets, predominantly working capital, of the Carved-Out Business, in exchange for a seven-year term note in the principal amount of €30 million, subject to applicable interest.

Certain intellectual property used in the Carved-Out Business has been placed in trust, with royalty licensing fees paid to the trust by the Buyer for a term of five years (subject to extension).

All royalty licensing fees, net of trustee administrative expenses, are paid to the Company by the trust and are expected to be reported by the Company as licensing revenues.

The Company will also provide the Carved-Out Business with certain transition services.

In connection with the separation transaction, the Company will acquire penny warrants that represent a 19.9% fully-diluted interest in the Buyer, which is expected to result in the deconsolidation of the Carved-Out Business.

Bally’s will have no role in the management or operational governance of the Carved-Out Business.

The separation transaction is intended to allow Bally’s to focus its capital and resource allocation on North American and European business, and the Carved-Out Business will benefit from focused management attention and aligned ownership.

Post transaction, the financial statements of the Company will only reflect licensing and royalty revenues received from a trust that it licenses to the Buyer, which are expected to be lower than revenues recorded under the current accounting treatment.

However, the licensing and royalty revenues received from the Buyer are expected to be at higher profitability margins, leading to a modest decrease in Income from operations on an annualized basis after giving effect to the transaction.

The gain or loss on sale of the net-assets of the Carved-Out Business has not yet been determined as it is subject to valuation procedures and associated goodwill allocation, the release of accumulated currency translation adjustments for the disposed entities, and other post-closing adjustments.

The goodwill allocation, as well as the completion of a re-assessment of the Company’s goodwill reporting units and long-lived asset groups upon completion of the separation transaction, could result in material impairment charges.

Long-lived assets, predominantly intellectual property (including those to be held in trust), subject to the cash flows of the Carved-Out Business are $332.0 million as of September 30, 2024.

Operating Structure

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

Site of future permanent casino resort is leased from GLPI.

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.

Second Quarter 2024 and First Six Months 2024 Results

Third Quarter 2024 and First Nine Months 2024 Results

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

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

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

(in millions) 2024 2023 2024 2023

Total revenue $ 630.0 $ 632.5 $ 1,870.1 $ 1,837.4

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

(Loss) income from operations (157.7) 37.2 (226.0) 420.0

Net (loss) income (247.9) (61.8) (482.0) 90.9

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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General and administrative 43.4 % 36.5 % 41.4 % 39.8 %

Gain from sale-leaseback, net — % — % — % (31.1) %

Loss (gain) on sale-leaseback, net 23.8 % — % 8.0 % (20.4) %

Depreciation and amortization 12.3 % 12.3 % 16.9 % 12.6 %

Total operating costs and expenses 125.0 % 94.1 % 112.1 % 77.1 %

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

(Loss) income from operations (25.0) % 5.9 % (12.1) % 22.9 %

Other (expense) income:

Interest expense, net (11.7) % (11.2) % (11.8) % (10.9) %

Other non-operating income, net 1.1 % 1.1 % 0.9 % 0.8 %

Other non-operating (expense) income, net (7.9) % 2.5 % (2.1) % 1.4 %

Total other expense, net (19.7) % (8.7) % (13.9) % (9.6) %

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Segment Performance

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,

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

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

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

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General and administrative as a percentage of Total revenue 43 % 36 % 41 % 40 %

Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023

Three and Nine Months Ended September 30, 2024 Compared to Three and Nine Months Ended September 30, 2023

Total Revenue

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,

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

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

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

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Total revenue $ 629,974 $ 632,477 $ (2,503) (0.4) % $ 1,870,113 $ 1,837,403 $ 32,710 1.8 %

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.

Total revenue for the three months ended September 30, 2024 decreased 0.4% to $630.0 million, from $632.5 million in the same period last year and total revenue for the nine months ended September 30, 2024 increased 1.8% to $1.87 billion, from $1.84 billion in the same period last year.

We saw total revenue increase in our Casinos & Resorts reportable 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 nine months ended September 30, 2024, respectively, 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 $25.0 million and $32.1 million, respectively.

Additionally, the expanded operating jurisdictions within our North America Interactive reportable segment contributed incremental revenue of approximately $7.8 million and $33.9 million for the three and nine months ended September 30, 2024, respectively, compared to the prior year.

Gaming and Non-gaming Expenses

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.

Gaming and non-gaming expenses for the three months ended September 30, 2024 decreased $0.9 million, from $287.2 million in 2023, and for the nine months ended September 30, 2024 increased $27.0 million, from $828.4 million in 2023.

The overall 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 $13.9 million and $46.9 million to the increase in both gaming and non-gaming expenses during the three and nine months ended September 30, 2024, respectively, partially offset by the incremental decrease in expense associated with the closure of our Tropicana Las Vegas property of $13.8 million and $28.9 million, respectively.

General and Administrative

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.

General and administrative expense for the three months ended September 30, 2024 increased $43.0 million from $230.6 million in the same period last year, and for the nine months ended September 30, 2024 increased $42.3 million from $732.1 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 and increased Merger Agreement costs in the current year, 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 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.

Depreciation and amortization for the three months ended September 30, 2024 was $77.8 million, an increase of $0.3 million compared to the same period last year, and for the nine months ended September 30, 2024 was $316.3 million, an increase of $85.1 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.

Loss from operations was $157.7 million for the three months ended September 30, 2024 compared to income from operations of $37.2 million in the same period last year.

Loss from operations was $226.0 million for the nine months ended September 30, 2024 compared to income from operations of $420.0 million in the same period last year.

The change year-over-year was driven by the loss on sale-leaseback of $150.0 million related to the lease modification event involving the real estate underlying the Bally’s Chicago project in the current year, compared to 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, combined with the depreciation at our Tropicana Las Vegas property in the current year, as noted above.

Other Income (Expense)

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.

Total other expense increased $68.7 million to $123.8 million for the three months ended September 30, 2024 from $55.1 million, and increased $83.6 million to $259.7 million for the nine months ended September 30, 2024 from $176.0 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 and increased foreign currency losses, partially offset by increased interest income recognized on our derivative instruments.

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.

Benefit for income taxes for the three and nine months ended September 30, 2024 was $33.6 million and $3.7 million, respectively, compared to provision for income taxes of $43.9 million and $153.0 million for the three and nine months ended September 30, 2023, respectively.

The effective year to date tax rate for 2024 was 0.8% compared to 62.7% in the prior year.

The 2024 year to date effective tax rate differed from the US federal statutory tax rate of 21%, creating a benefit for income tax on the Company’s Loss before income taxes, largely due to an increase in the valuation allowance, entirely offset by discrete tax asset related to the sale-leaseback transaction involving the real estate underlying the Bally’s Chicago project.

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.

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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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.

Net loss for the three months ended September 30, 2024 was $247.9 million, or $(5.10) per diluted share, compared to $61.8 million, or $(1.15) per diluted share, for the three months ended September 30, 2023.

Net loss for the nine months ended September 30, 2024 was $482.0 million, or $(9.96) per diluted share, compared to net income of $90.9 million, or $1.67 per diluted share, for the nine months ended September 30, 2023.

Adjusted EBITDA and Adjusted EBITDAR by Segment

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.

Consolidated Adjusted EBITDA was $137.7 million for the three months ended September 30, 2024 compared to $141.6 million for the same period last year.

Consolidated Adjusted EBITDA was $387.7 million for the nine months ended September 30, 2024, a decrease of $10.3 million, or 2.6%, from $398.0 million in the same period last year.

Adjusted EBITDAR for the Casinos & Resorts segment for the three months ended September 30, 2024 decreased $17.7 million to $100.4 million and for the nine months ended September 30, 2024 decreased $44.7 million to $289.7 million, each compared to the same prior year periods.

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

Adjusted EBITDAR for the International Interactive segment increased $4.6 million to $90.0 million and increased $4.5 million to $254.9 million for the three and nine months ended September 30, 2024, respectively, compared to the same prior year periods, driven by softness in our non-UK operations year-over-year, offset by stronger performance in the United Kingdom in the current year.

Adjusted EBITDAR loss for the North America Interactive segment for the three months ended September 30, 2024 was $(11.0) million compared to an adjusted EBITDAR loss of $(17.6) million for the three months ended September 30, 2023.

For the nine months ended September 30, 2024, adjusted EBITDAR loss was $(27.9) million compared to an adjusted EBITDAR loss of $(45.8) million for the nine months ended September 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.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023 2024 2023

Casinos & Resorts $ 353,358 $ 359,026 $ 1,038,738 $ 1,020,974

International Interactive 230,937 243,884 695,016 737,230

North America Interactive 45,679 29,567 136,359 79,199

Total $ 629,974 $ 632,477 $ 1,870,113 $ 1,837,403

Adjusted EBITDAR

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Interest expense, net of interest income (73,975) (70,630) (221,306) (200,987)

Provision for income taxes 1,501 28,649 (29,881) (109,093)

Benefit (provision) for income taxes 33,629 (43,936) 3,748 (153,029)

Depreciation and amortization (77,800) (77,487) (316,328) (231,235)

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(22,122) 4,276 (19,992) 13,528

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

Foreign exchange (loss) gain (30,246) 8,459 (26,447) 2,512

Transaction costs (3)

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Share-based compensation (4,099) (6,257) (11,629) (18,587)

Gain on sale-leaseback — 135 — 374,321

(Loss) gain on sale-leaseback, net (7)

(150,000) — (150,000) 374,321

Planned business divestiture (8)

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— — (12,757) (9,653)

Merger Agreement costs (10)

(9,802) — (11,791) —

Payment Service Provider write-off (11)

(6,333) — (6,333) —

(6,475) 3,549 (7,854) 507

Net (loss) income $ (247,855) $ (61,802) $ (481,965) $ 90,883

__________________________________

(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.

(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 Tropicana Las Vegas, through its closure in April 2024, 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, including costs incurred to address the Standard General takeover bid and financing costs incurred in connection with the prior year sale lease-back transaction.

(3) Includes acquisition, integration and other transaction related costs, 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.

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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.

(7) Loss on sale-leaseback of $150 million in the third quarter of 2024 related to the lease modification of the real estate underlying the Bally’s Chicago project and gain on sale-leaseback in the prior year related to our Hard Rock Biloxi and Bally’s Tiverton properties.

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

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

(10) Costs incurred in connection with the merger agreement signed July 25, 2024 with Standard General.

(11) In the third quarter, the Company recorded a $6.3 million charge to reduce amounts due from payment service providers (“PSP”) due to a circumstance whereby the payment processer for certain online sports wagering deposits failed to capture and settle funds with patrons of the Company.

The Company was not able to recover the full amount due from the payment service provider, resulting in a write down to the recoverable amount.

In addition to amounts recovered, the Company received $5.1 million from the PSP as a signing bonus for entering into an extension agreement.

(12) Other includes the following items:

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Cash Flows Summary

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2024 2023

Net cash provided by operating activities $ 76,178 $ 118,359

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

Net cash used in investing activities (191,081) (2,247)

Net cash provided by (used in) financing activities 75,708 (79,560)

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Operating Activities

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.

Net cash provided by operating activities for the nine months ended September 30, 2024 was $76.2 million, compared to $118.4 million for the nine months ended September 30, 2023.

The decrease in cash provided by operating activities was primarily driven by the changes in working capital, offset by increased foreign currency losses in the current year.

Investing Activities

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.

Net cash used in investing activities for the nine months ended September 30, 2024 was $191.1 million, an increase of $188.8 million compared to net cash used in investing activities of $2.2 million for the nine months ended September 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 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.

Net cash provided by financing activities for the nine months ended September 30, 2024 was $75.7 million compared to net cash used in financing activities of $79.6 million for the nine months ended September 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 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.

As of September 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 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.

We did not pay cash dividends during the nine months ended September 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 June 30, 2024, the Company was in compliance with all applicable covenants.

As of September 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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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.

In the third quarter of 2024, the Company settled $500.0 million of notional interest rate collars and received $3.9 million in termination payments, reflecting the fair value on the settlement date.

Additionally, the Company simultaneously entered into a series of interest rate contracts in a notional aggregate amount of $1.00 billion, to further manage the Company’s exposure to interest rate movements associated with the Company’s variable rate Term Loan Facility through its synthetic conversion to fixed rate debt.

The tenor of these contracts were matched with the maturity of the Term Loan Facility tranche maturing on October 1, 2028.

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 $2.24 billion as of June 30, 2024, of which $72.2 million is due within the current year.

Minimum rent payable under operating leases was $4.17 billion as of September 30, 2024, of which $45.3 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 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.

As of September 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.

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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.

During the third quarter, the Company entered into a lease modification, whereby GLPI funded $48.6 million to the Company for the demolition of the building at the Tropicana Las Vegas site in exchange for increasing annual rent by $4.1 million.

In the third quarter of 2024, GLP acquired the real estate underlying the Bally’s Chicago project, assuming the existing lease, for which the Company was subject to a $200.0 million financing obligation.

Reclassifying the lease as an operating lease due to the transfer of control of the land asset from the Company to the lessor, permitted sale recognition, resulting in the Company derecognizing the $350.0 million land asset and the $200.0 million the long-term financing obligation, and recording a $150.0 million loss on sale-leaseback.

Additionally, in the third quarter of 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 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 includes annual rent of $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.

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All such transactions are subject to required regulatory approvals.

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 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 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.

For the nine months ended September 30, 2024, capital expenditures were $155.8 million compared to $266.2 million in the same period last year.

During the nine months ended September 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 $55.9 million of the committed investment remains as of June 30, 2024.

Approximately $48.2 million of the committed investment remains as of September 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 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.

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.

As of September 30, 2024, all investment requirements had been met and no commitment to invest in non-hotel projects remains.

Centre County, PA - In September 2024, we issued a termination notice to cancel the framework agreement entered into on December 31, 2020 to design, develop, construct and manage a Category 4 licensed casino in Centre County, Pennsylvania.

We concluded that market circumstances have changed and that such development at this point no longer fits with our strategic objectives.

In accordance with the provisions of the framework agreement, we paid a termination fee of $5 million and the charge is reflected the quarter ending September 30, 2024.

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.

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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 June 30, 2024, obligations related to these agreements were $139.0 million, with contracts extending through 2037.

As of September 30, 2024, obligations related to these agreements were $129.8 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 June 30, 2024, the cumulative minimum obligation committed in these agreements is approximately $44.8 million, extending through 2029.

As of September 30, 2024, the cumulative minimum obligation committed in these agreements is approximately $54.7 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