Bally's Corporation Q3 FY2023 earnings call

Management Statement and Operational Highlights

• Casino & Resorts: Successfully opened Chicago Temporary Casino, completed Kansas City property transformation. Monitored customer spending, with shifts in behavior in certain markets. Plan to market to higher-tier customers.
• International Interactive: Strong UK performance, launched Bally's branded iCasino app. Focus on growing market share and brand equity.
• North America Interactive: Rolled out Bally Bet OSB app in four states and five retail locations. Anticipate iGaming launch in Rhode Island in March 2024.
• Corporate: Working on centralizing support functions, procurement, and supply chain consolidation to improve efficiencies.

Segment Performance

• Casinos & Resorts: Revenues increased 9.3% year-over-year to $359 million. Adjusted EBITDAR was $180 million, including a full quarter contribution from the Trop and three weeks from the Chicago Temp. Excluding Atlantic City, Tropicana, and Chicago Temp, EBITDAR margins were 38% for the core portfolio.
• International Interactive: Generated revenues of $244 million (7% y-o-y increase) and adjusted EBITDAR of $85 million (12% y-o-y increase) with a 35% margin. UK business was robust, up 13% for the quarter.
• North America Interactive: Revenues of $30 million and negative $18 million of adjusted EBITDAR. Gained incremental market share in New Jersey; Pennsylvania performed well since June launch.

Guidance

• Updated full year 2023 adjusted EBITDAR guidance range to $640 million to $655 million, reflecting delayed Chicago Temp opening, Tropicana reinvestment decision, and FX headwinds.
• Maintaining 2023 capital expenditure guidance of $160 million, excluding Chicago.
• Expect North America Interactive loss to be reduced by half in 2024 and break even in 2025.

Risks

• Competitive pressures in certain markets affecting revenues and margins.
• Uncertainty around MLB's A's relocation decision impacting Tropicana reinvestment plans.
• Foreign exchange headwinds affecting International Interactive's financials.
• Dependence on regulatory approvals for expanding operations in Chicago and other markets.

Question and Answer

Q: Walk through the path or ramp expected in Chicago for the rest of this year and next year?

A: George Papanier mentioned Chicago Temp is in soft opening, operating 20 hours per day, expecting to go to 24 hours pending regulatory approval, with plans to ramp marketing and expects annual adjusted EBITDAR of $50 million plus.

Q: Guidance revision explanation?

A: Marcus Glover discussed FX exposure, competitive pressures, and Tropicana implications as factors in guidance revision, but confident in minimizing impact.

Q: Capital allocation and stock buyback?

A: Marcus Glover stated they assess best use of cash, and market is attractive for stock buyback, but no immediate plans.

Q: Financing for Chicago project?

A: Charlie Diao mentioned $300 million unused from Luval facility, construction financing plans, and potential REIT partners.

Q: Margins and OpEx structure?

A: George Papanier discussed focus on variable costs, careful with fixed costs, and margins improved excluding certain properties.

Q: Regional consumer and sector softness?

A: George Papanier said sector softness exists, but Bally's is up in 10 of 13 markets, focusing on higher customer segments.

Q: Rhode Island iGaming and North America Interactive loss?

A: Marcus Glover said Rhode Island iGaming will be positive, and North America Interactive loss will go to zero by 2025.

Q: Lease value and potential sale of Tropicana lease?

A: Marcus Glover said they'd entertain selling the lease for the right price, as it's a valuable asset.

Q: International Interactive margin and strategy shift?

A: Robeson Reeves said they'll spend where ROI stacks up, aim for mid-30% margins, and may reinvest in Asia and other locales if ROI is favorable.

Q: Chicago project funding and phasing?

A: Charlie Diao discussed funding sources, including Luval facility, REITs, and land bank, with construction ramping in 2025 and 2026.