Business Overview
Bally's Corporation, a global casino-entertainment company, has been navigating a dynamic landscape marked by both opportunities and obstacles. With a diverse portfolio of casinos and resorts, as well as a growing interactive gaming segment, Bally's has demonstrated resilience and a commitment to strategic expansion.
Bally's Corporation, formerly known as Twin River Worldwide Holdings, Inc., was founded in 2004 when it acquired the Bally's Twin River Lincoln casino resort in Lincoln, Rhode Island. Over the following years, the company expanded its portfolio by acquiring properties in Colorado, Mississippi, Delaware, and New Jersey. In 2018, Bally's further strengthened its presence in Rhode Island by acquiring the Tiverton Casino Hotel in Tiverton. The company continued its expansion in 2019 with the acquisition of the Dover Downs Hotel & Casino in Dover, Delaware.
The year 2020 marked a significant period of growth for Bally's, despite the challenges posed by the COVID-19 pandemic. The company acquired three casinos in Black Hawk, Colorado, the Bally's Kansas City Casino in Missouri, the Bally's Vicksburg Casino in Mississippi, and the Bally's Atlantic City Casino Resort in New Jersey. These strategic moves significantly expanded Bally's casino portfolio and solidified its position as a leading regional gaming operator.
In 2021, Bally's made a transformative acquisition by purchasing Gamesys Group Ltd., a leading global online gaming and bingo operator. This transaction expanded Bally's interactive gaming presence internationally and positioned the company as a vertically integrated gaming and entertainment leader. Today, Bally's operates 15 casinos across 10 states in the United States, in addition to a horse racetrack and a golf course. The company's gaming and hospitality offerings include approximately 14,900 slot machines, 550 table games, and 3,800 hotel rooms, along with various dining, entertainment, and other amenities.
The acquisition of Gamesys Group allowed Bally's to establish a strong presence in the interactive gaming market, particularly in Europe and Asia. The company's interactive segment now includes the North America Interactive and International Interactive business units, which offer a diverse portfolio of sports betting, iGaming, and free-to-play gaming products.
Financial Performance
Bally's has demonstrated a mixed financial performance in recent years. In the fiscal year 2023, the company reported total revenue of $2.45 billion, a 8.8% increase from the previous year. However, the company's net income for the same period was a loss of $187.5 million, compared to a loss of $425.5 million in the prior year. This was largely due to the impact of the COVID-19 pandemic, which affected the company's casino and resort operations, as well as increased costs associated with its acquisition and integration activities.
Financials
Despite these challenges, Bally's has maintained a strong balance sheet, with $163.2 million in cash and cash equivalents and $3.64 billion in long-term debt as of December 31, 2023. The company's current ratio stood at 0.66, and its debt-to-equity ratio was 7.97, indicating a moderately leveraged capital structure.
In the most recent quarter ended September 30, 2024, Bally's reported revenue of $629.97 million, a 2.4% increase year-over-year. However, the company reported a net loss of $247.86 million, primarily due to a $150 million loss on a sale-leaseback transaction related to the Bally's Chicago project. Operating cash flow (OCF) for the quarter was $36.48 million, while free cash flow (FCF) was negative $30.10 million. The decrease in OCF was due to changes in working capital, while the decrease in FCF was driven by higher capital expenditures, partially offset by the proceeds from the sale-leaseback.
Bally's operates primarily in the United States, with a growing presence in Europe through its Gamesys interactive business. In the most recent quarter, revenues from the UK and Japan represented approximately 28% and 6% of total revenue, respectively.
Liquidity
As of September 30, 2024, Bally's had $190.97 million in cash and cash equivalents and $89.56 million in restricted cash. The company has a $620 million revolving credit facility, of which $350 million was drawn as of the end of the quarter. Bally's debt-to-equity ratio stood at 15.64, while its current ratio was 0.56 and quick ratio was 0.54.
Segment Performance
Bally's operates through three main segments: Casinos & Resorts, International Interactive, and North America Interactive.
The Casinos & Resorts segment includes the company's 15 land-based casino properties, one horse racetrack, and one golf course. For the three months ended September 30, 2024, this segment reported revenue of $353.36 million, a slight decrease from $359.03 million in the prior year period. This decline was primarily attributable to the closure of the Tropicana Las Vegas property in the second quarter of 2024, partially offset by the inclusion of the new Bally's Chicago temporary casino property, which contributed approximately $32.60 million in revenue during the quarter. Adjusted EBITDAR for this segment decreased 17.7% to $100.44 million, mainly due to weather impacts across multiple properties and the Tropicana Las Vegas closure.
The International Interactive segment, which includes the interactive activities in Europe and Asia of Gamesys Group Ltd., reported revenue of $230.94 million for the third quarter of 2024, a decrease from $243.88 million in the prior year period. This decline was driven by softness in non-UK operations, partially offset by stronger performance in the United Kingdom market. Adjusted EBITDAR for this segment increased 4.6% to $90.03 million.
The North America Interactive segment, which includes sports betting, iGaming, and free-to-play gaming brands, reported revenue of $45.68 million in the third quarter of 2024, a 54.6% increase from $29.57 million in the prior year period. This growth was driven by the segment's expansion into new regulated markets and the stronger performance of its iGaming and sports betting offerings. The segment reported an Adjusted EBITDAR loss of $11.00 million, an improvement from a $17.56 million loss in the same period last year.
Expansion and Growth Initiatives
Bally's has been actively pursuing strategic initiatives to drive long-term growth and diversification. In 2023, the company secured a $940 million funding commitment from Gaming and Leisure Properties, Inc. (GLPI) to support the construction of its flagship Bally's Chicago casino resort. This project, which is expected to open in September 2026, will feature a 500-room hotel tower, 3,300 slot machines, 170 table games, and various dining and entertainment options.
Additionally, Bally's has been expanding its interactive gaming presence, both domestically and internationally. In the UK, the company's online sports betting and iGaming offerings have continued to gain traction, with revenue from the UK market growing 11.8% year-over-year in the third quarter of 2024. Bally's has also been investing in its North America Interactive segment, which saw a 54.5% increase in revenue during the same period, driven by the ramp-up of its iGaming operations in Rhode Island and the expansion of its Bally Bet online sportsbook.
The company expects to launch Bally Bet sports betting in an additional 3 states by the end of 2024, with further expansions expected in 2025. Bally's is also pursuing opportunities in new markets, such as New York, where it has proposed building an integrated resort in the Bronx. The company expects its proposal to be a strong contender when the new downstate casino licenses are awarded in early 2026.
In Las Vegas, Bally's plans to have initial portions of the casino, hotel, and retail offerings at their Tropicana Las Vegas site ready to open when the A's stadium construction is completed in 2028.
Challenges and Risks
Despite Bally's efforts to diversify its business and capitalize on growth opportunities, the company has faced several challenges in recent years. The COVID-19 pandemic significantly impacted the company's casino and resort operations, leading to temporary closures and reduced visitation. Additionally, the company has grappled with ongoing headwinds in certain regional markets, such as Rhode Island and Atlantic City, where increased competition and infrastructure issues have weighed on performance.
Bally's has also been subject to regulatory scrutiny and potential risks associated with its interactive gaming operations. The company must navigate a complex regulatory landscape across multiple jurisdictions, ensuring compliance with evolving gaming laws and regulations. Additionally, the highly competitive nature of the online gaming industry presents ongoing challenges in terms of customer acquisition and retention.
Outlook and Future Plans
Bally's continues to focus on positioning its North America Interactive business to achieve positive EBITDA. The company is also pursuing strategic initiatives to enhance its global presence, including the separation of its Asia and rest-of-world markets to a licensing royalty model, which is expected to have an immaterial impact of 5-10% dilution on operating free cash flow.
The company's long-term strategy focuses on capitalizing on the ongoing shift towards online and mobile gaming, while also leveraging its physical casino assets to create a seamless omni-channel experience for its customers. Bally's remains committed to strategically expanding its footprint, both through organic growth initiatives and strategic acquisitions, to solidify its position as a leading global gaming and entertainment company.
Conclusion
Bally's Corporation has navigated a complex landscape, facing both challenges and opportunities in recent years. The company's diversified business model, with a focus on both physical and digital gaming, positions it well for long-term growth. However, Bally's must continue to address regional headwinds, regulatory uncertainties, and the competitive dynamics of the gaming industry to fully capitalize on its strategic initiatives. As the company executes its expansion plans and further integrates its interactive gaming operations, investors will closely monitor Bally's ability to deliver consistent financial performance and create value for shareholders.