Bally's Corp Q2 FY2023 earnings call

Management Statement and Operational Highlights

• Core Business Progress: Core casino and resorts had record second quarter revenue and EBITDA with improving margins. International Interactive, led by the U.K., had strong results with market share gains.
• Project Milestones: Made progress transitioning Bally Bet onto Kambi and White Hat platforms, with plans to be live in three states by summer end and at least seven states and four retail locations by end of 2023. Completed renovation and expansion of Twin River property; Kansas City properties transformation progressing. Shreveport smoking ban repeal expected to boost performance.
• New Additions: Welcomed new CFO Marcus Glover, Treasurer Charlie Diao, and Vice Chairman Jama Patel.
• Development Projects: Announced deal with Oakland A's for stadium relocation on Las Vegas Tropicana site. Chicago temporary casino on track for September opening, estimated to generate $50M-$60M EBITDA in 2024. Successful negotiation with Tribune Company for Medinah Temple permanent casino development. Rhode Island legislature named Bally's sole iGaming provider, launching in March 2024.

Segment Performance

• Casinos & Resorts: Generated record 2Q revenues of $333 million, up 11% year-on-year. Adjusted EBITDA was $111 million, up 12% year-on-year. The core portfolio excluding lower-margin properties had an EBITDA margin of 39.4%.
• International Interactive: Generated revenues of $248 million and adjusted EBITDA of $84 million at a 33.9% margin. The U.K. business was a key driver, growing 12% in the second quarter. Margins settled in the low mid-30s and are expected to be sustained.
• North America Interactive: Generated revenues of $25 million and negative $18 million of adjusted EBITDA. Performance in New Jersey is growing, with initial results in Pennsylvania exceeding expectations, and anticipation of Rhode Island launch in March 2024.

Guidance

• Reiterated full-year earnings guidance with core casinos and resorts and international Interactive expected to perform better than original expectations, offset by $10M in North America Interactive costs related to Pennsylvania iGaming launch and Bally Bet transition.
• Anticipates Bally Bet rollout to diversify revenues and EBITDA streams. Full-year revenue forecast $2.5B-$2.6B, adjusted EBITDA $665M-$700M. Capital expenditure guidance $160M, excluding Chicago.

Risks

• Regulatory Challenges: Uncertainty in the U.K. regulatory environment as the government reviews proposed measures.
• Competition: Some properties facing incremental competition affecting performance.
• Economic Conditions: Impact of general economic conditions on consumer spending patterns.
• Development Uncertainty: Uncertainty around the timeline and financing of Chicago permanent casino development.

Question and Answer

• Q: Barry Jonas asked about transition on quarter end and capital allocation A: Marcus Glover responded that the team is impressive, focused on development pipeline with Chicago anchoring, and remains confident in Tropicana's optionality.
• Q: Jordan Bender asked about New Jersey market share A: Marcus Glover stated market share growth will be driven by omnichannel use of retail casino database and product offering upgrade with sports betting.
• Q: Dan Politzer asked about NA Interactive expenses and Chicago cash flows A: Marcus Glover said investment in content and iGaming infrastructure, with expectation of reduced loss by second quarter next year. George Papanier provided guidance on Chicago temporary casino opening and increased scope.
• Q: Chad Beynon asked about UK growth and Chicago Lincoln option A: Robeson Reeves expressed confidence in UK growth trends continuing, and Marcus Glover mentioned ongoing discussions with Rhode Island on Lincoln option timing.
• Q: Jeff Stanial asked about brick-and-mortar headwinds A: Marcus Glover and George Papanier discussed competition in Evansville and Tropicana, with efforts underway to mitigate impacts and focus on property management.
• Q: David Katz asked about digital product strength A: Marcus Glover emphasized the importance of data-driven product experience, leveraging omnidata for optimized marketing and consumer retention.
• Q: Lance Vitanza asked about NA Interactive investment and EBITDA positivity A: Marcus Glover said investment in content and iGaming infrastructure, with expectation of reduced loss by second quarter next year.
• Q: Ricardo Chinchilla asked about covenants and Chicago financing A: Marcus Glover and Charlie Diao confirmed regulatory covenants were met and discussed financing plans for Chicago.
• Q: David Hargreaves asked about Twin River expansion and Chicago comparison A: George Papanier reported positive early results from Twin River expansion, and Marcus Glover discussed differences in Chicago market size and penetration opportunity compared to past experiences.