Bally's Corporation, a global gaming, hospitality, and entertainment powerhouse, has demonstrated its resilience and adaptability in the face of a dynamic industry landscape. With a diverse portfolio of 16 casino and resort properties, a thriving interactive gaming segment, and strategic initiatives underway, Bally's is poised to capitalize on emerging opportunities while navigating through temporary headwinds.
Financials
For the fiscal year 2023, Bally's reported annual revenue of $2,449,073,000, a testament to the strength of its diversified business model. However, the company faced challenges, resulting in a net loss of $187,500,000 for the year. This loss was primarily driven by increased depreciation and amortization expenses, as well as restructuring charges related to the closure of the Tropicana Las Vegas property.
Despite the net loss, Bally's generated positive annual operating cash flow of $188,614,000, showcasing the underlying resilience of its core operations. However, the company's annual free cash flow stood at a negative $313,554,000, reflecting the significant capital investments made to support its growth initiatives, including the development of the Bally's Chicago casino resort.
Quarterly Performance
In the first quarter of 2024, Bally's reported a 3.3% increase in total revenue to $618,482,000, compared to the same period in the prior year. This growth was driven by a strong performance in the Casinos & Resorts and North America Interactive segments, which offset a decline in the International Interactive segment.
The Casinos & Resorts segment saw a 4.1% increase in revenue to $342,329,000, primarily due to the inclusion of the Bally's Chicago temporary casino facility. The North America Interactive segment experienced a substantial 70% growth in revenue to $41,470,000, driven by the successful launch of iGaming operations in Rhode Island and continued market share gains in New Jersey and Pennsylvania.
However, the International Interactive segment faced a 4% decline in revenue to $234,683,000, largely due to strategic reductions in marketing spend outside of the United Kingdom. The UK market, which the company refers to as the "crown jewel" of its International Interactive segment, continued to perform exceptionally well, with a 12% increase in revenue on a US dollar basis and a 7% rise on a constant currency basis.
Business Overview
Bally's has been actively executing on its strategic development pipeline, which is designed to optimize the benefits from its core operations while maintaining flexibility to adapt to market shifts.
In Chicago, the company's temporary casino facility is ramping up operations, providing valuable insights into the market and allowing Bally's to build relationships with customers. The company remains on schedule to access the RiverNorth campus in July 2024 and expects to complete the permanent Bally's Chicago casino resort by September 2026.
In Las Vegas, Bally's has closed the Tropicana property and is preparing for its demolition, which is a crucial step in keeping the timeline for the Las Vegas A's new stadium development on track. Bally's is actively assessing its options for the highly valuable land adjacent to the stadium and will provide updates as its plans further develop.
The company's International Interactive segment has seen strong performance in the UK market, driven by strategic planning ahead of regulatory changes and enhanced marketing strategies. Bally's is also exploring opportunities to expand its presence in the UK and plans to launch online sports betting to further strengthen its market-leading position.
Outside of the UK, Bally's has strategically shifted its focus to maximize profit yield by reducing uneconomic marketing and optimizing its cost structure. This has impacted the segment's year-over-year top-line comparisons but has significantly improved its adjusted EBITDA margin.
In the North America Interactive segment, Bally's has continued to capture a larger share of the iGaming market in New Jersey and Pennsylvania, and successfully launched iGaming operations in Rhode Island in March 2024. The company expects the losses in this segment to decrease in a non-linear fashion as the year progresses, driven by the scaling of its iGaming and sports betting offerings.
Outlook
Bally's has reiterated its 2024 guidance, expecting to generate revenue in the range of $2.5 billion to $2.7 billion and adjusted EBITDAR of $655 million to $695 million. This guidance reflects the closure of the Tropicana Las Vegas, continued growth in the International Interactive business, and approximately $30 million of adjusted EBITDA losses in the North America Interactive segment.
The company remains excited about the opportunities ahead, including the upcoming launch of sports betting in the UK and the takeover of the River North Campus in Chicago, which will allow Bally's to begin preparations for the construction of the permanent casino resort.
Liquidity
As of March 31, 2024, Bally's had $169,356,000 in cash and cash equivalents on its balance sheet and $3,570,000,000 in net debt. The company's capital structure also includes incremental warrants, options, and other dilution, amounting to approximately 13 million shares.
Bally's has a Board of Directors-approved capital return program, under which the company may expend up to $700 million for share repurchases and dividend payments. As of March 31, 2024, $95,500,000 was available for use under this program, subject to limitations in the company's regulatory and debt agreements.
Risks and Challenges
Bally's faces several risks and challenges in its operations, including: - Macroeconomic factors, such as global economic uncertainty, inflation, and supply chain disruptions, which can impact discretionary consumer spending - Regulatory changes and increasing competition in the gaming industry, particularly in the interactive gaming and sports betting markets - Integration and execution risks associated with its ongoing development projects and acquisitions - Potential labor shortages and rising labor costs due to union contract renewals and inflationary pressures
Conclusion
Bally's Corporation has demonstrated its ability to navigate a dynamic industry landscape, leveraging its diversified business model and strategic initiatives to drive growth and profitability. While facing temporary headwinds, the company remains well-positioned to capitalize on emerging opportunities in the gaming and interactive sectors, with a robust development pipeline and a focus on enhancing its market-leading positions. As Bally's continues to execute on its strategic roadmap, investors will closely monitor the company's ability to deliver sustainable long-term value.