Bally's Corporation

11/08/2024 | Press release | Distributed by Public on 11/08/2024 05:01

Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

baly-20240930
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-38850
Bally's Corporation
(Exact name of registrant as specified in its charter)
Delaware 20-0904604
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
100 Westminster Street
Providence, RI 02903
(Address of principal executive offices) (Zip Code)
(401) 475-8474
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common stock, $0.01 par value BALY New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ Accelerated filer ☒
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 25, 2024, the number of shares of the registrant's $0.01 par value common stock outstanding was 40,666,844.
For additional information regarding the Company's shares outstanding, refer to Note 16 "Stockholders' Equity."
BALLY'S CORPORATION
TABLE OF CONTENTS
Page No.
PART I - FINANCIAL INFORMATION
ITEM 1.
Financial Statements
3
Condensed Consolidated Balance Sheets (unaudited)
3
Condensed Consolidated Statements of Operations (unaudited)
4
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)
5
Condensed Consolidated Statements of Stockholders' Equity (unaudited)
6
Condensed Consolidated Statements of Cash Flows (unaudited)
8
Notes to Condensed Consolidated Financial Statements (unaudited)
10
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
44
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk
59
ITEM 4.
Controls and Procedures
60
PART II - OTHER INFORMATION
ITEM 1.
Legal Proceedings
62
ITEM 1A.
Risk Factors
62
ITEM 5.
Other Information
62
ITEM 6.
Exhibits
63
Signatures
64
2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
BALLY'S CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands, except share data)
September 30,
2024 		December 31,
2023
Assets
Cash and cash equivalents $ 190,975 $ 163,194
Restricted cash 89,564 152,068
Accounts receivable, net 60,973 70,328
Inventory 18,212 14,629
Tax receivable 21,975 62,215
Prepaid expenses and other current assets 107,241 108,096
Assets held for sale - 1,815
Total current assets 488,940 572,345
Property and equipment, net 795,491 1,174,888
Right of use assets, net 1,262,322 1,160,288
Goodwill 1,993,809 1,935,803
Intangible assets, net 1,760,261 1,871,428
Deferred tax asset 6,866 36,034
Other assets 98,222 110,317
Total assets $ 6,405,911 $ 6,861,103
Liabilities and Stockholders' Equity
Current portion of long-term debt $ 19,450 $ 19,450
Current portion of lease liabilities 60,178 54,842
Accounts payable 72,558 69,161
Accrued income taxes 12,805 78,301
Accrued and other current liabilities 711,905 651,719
Liabilities related to assets held for sale - 1,307
Total current liabilities 876,896 874,780
Long-term debt, net 3,651,488 3,643,185
Long-term portion of financing obligation - 200,000
Long-term portion of lease liabilities 1,308,056 1,148,407
Deferred tax liability 91,802 125,590
Commercial rights liabilities 74,132 113,626
Other long-term liabilities 169,694 119,661
Total liabilities 6,172,068 6,225,249
Commitments and contingencies (Note 17)
Stockholders' equity:
Common stock ($0.01 par value, 200,000,000 shares authorized; 40,653,346 and 39,973,202 shares issued; 40,653,346 and 39,973,202 shares outstanding)
406 400
Preferred stock ($0.01 par value; 10,000,000 shares authorized; no shares outstanding)
- -
Additional paid-in-capital 1,411,114 1,400,479
Treasury stock, at cost, no shares outstanding as of September 30, 2024 and December 31, 2023
- -
Accumulated deficit (1,037,860) (555,895)
Accumulated other comprehensive loss (140,245) (209,558)
Total Bally's Corporation stockholders' equity 233,415 635,426
Non-controlling interest 428 428
Total stockholders' equity 233,843 635,854
Total liabilities and stockholders' equity $ 6,405,911 $ 6,861,103
See accompanying notes to condensed consolidated financial statements.
3
BALLY'S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
Revenue:
Gaming $ 523,906 $ 508,895 $ 1,564,714 $ 1,489,086
Non-gaming 106,068 123,582 305,399 348,317
Total revenue 629,974 632,477 1,870,113 1,837,403
Operating (income) costs and expenses:
Gaming 234,908 229,131 707,222 665,731
Non-gaming 51,328 58,041 148,152 162,661
General and administrative 273,593 230,582 774,448 732,147
Loss (gain) on sale-leaseback, net 150,000 - 150,000 (374,321)
Depreciation and amortization 77,800 77,487 316,328 231,235
Total operating costs and expenses 787,629 595,241 2,096,150 1,417,453
(Loss) income from operations (157,655) 37,236 (226,037) 419,950
Other (expense) income:
Interest expense, net (73,975) (70,630) (221,306) (200,987)
Other non-operating (expense) income, net (49,854) 15,528 (38,370) 24,949
Total other expense, net (123,829) (55,102) (259,676) (176,038)
(Loss) income before income taxes (281,484) (17,866) (485,713) 243,912
(Benefit) provision for income taxes (33,629) 43,936 (3,748) 153,029
Net (loss) income $ (247,855) $ (61,802) $ (481,965) $ 90,883
Basic (loss) earnings per share $ (5.10) $ (1.15) $ (9.96) $ 1.68
Weighted average common shares outstanding - basic 48,596 53,580 48,405 53,961
Diluted (loss) earnings per share $ (5.10) $ (1.15) $ (9.96) $ 1.67
Weighted average common shares outstanding - diluted 48,596 53,580 48,405 54,276
See accompanying notes to condensed consolidated financial statements.
4
BALLY'S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (unaudited)
(In thousands)
Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
Net (loss) income $ (247,855) $ (61,802) $ (481,965) $ 90,883
Other comprehensive income (loss):
Foreign currency translation adjustments 150,021 (89,166) 103,342 1,532
Net unrealized derivative (loss) gain on cash flow hedges, net of tax (41,967) 2,593 (27,380) 2,593
Net unrealized derivative (loss) gain on net investment hedges, net of tax (23,903) 211 (6,649) 211
Other comprehensive income (loss) 84,151 (86,362) 69,313 4,336
Total comprehensive (loss) income $ (163,704) $ (148,164) $ (412,652) $ 95,219
See accompanying notes to condensed consolidated financial statements.
5
BALLY'S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited)
(In thousands, except share data)
Common Stock Additional
Paid-in Capital 		Treasury
Stock 		Accumulated Deficit Accumulated Other Comprehensive Loss Non-controlling Interest Total Stockholders'
Equity
Shares Outstanding Amount
Balance as of December 31, 2023 39,973,202 $ 400 $ 1,400,479 $ - $ (555,895) $ (209,558) $ 428 $ 635,854
Issuance of restricted stock and other stock awards 423,805 4 (2,778) - - - - (2,774)
Share-based compensation - - 3,058 - - - - 3,058
Settlement of consideration 86,368 1 (125) - - - - (124)
Other - - 1,750 - - - - 1,750
Other comprehensive loss - - - - - (14,045) - (14,045)
Net loss - - - - (173,914) - - (173,914)
Balance as of March 31, 2024 40,483,375 $ 405 $ 1,402,384 $ - $ (729,809) $ (223,603) $ 428 $ 449,805
Issuance of restricted stock and other stock awards 135,981 1 262 - - - - 263
Share-based compensation - - 4,472 - - - - 4,472
Other comprehensive loss - - - - - (793) - (793)
Net loss - - - - (60,196) - - (60,196)
Balance as of June 30, 2024 40,619,356 $ 406 $ 1,407,118 $ - $ (790,005) $ (224,396) $ 428 $ 393,551
Issuance of restricted stock and other stock awards 33,990 - (103) - - - - (103)
Share-based compensation - - 4,099 - - - - 4,099
Other comprehensive income - - - - - 84,151 - 84,151
Net loss - - - - (247,855) - - (247,855)
Balance as of September 30, 2024 40,653,346 $ 406 $ 1,411,114 $ - $ (1,037,860) $ (140,245) $ 428 $ 233,843
6
BALLY'S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited)
(In thousands, except share data)
Common Stock Additional
Paid-in Capital 		Treasury
Stock 		Accumulated Deficit Accumulated Other Comprehensive Loss Non-controlling Interest Total Stockholders'
Equity
Shares Outstanding Amount
Balance as of December 31, 2022 46,670,057 $ 466 $ 1,636,366 $ - $ (535,373) $ (295,640) $ 428 $ 806,247
Issuance of restricted stock and other stock awards 124,050 1 (1,332) - - - - (1,331)
Share-based compensation - - 6,040 - - - - 6,040
Retirement of treasury shares - (10) (35,987) 19,753 16,244 - - -
Share repurchases (1,026,343) - - (19,753) - - - (19,753)
Other comprehensive income - - - - - 52,073 - 52,073
Net income - - - - 178,336 - - 178,336
Balance as of March 31, 2023 45,767,764 $ 457 $ 1,605,087 $ - $ (340,793) $ (243,567) $ 428 $ 1,021,612
Issuance of restricted stock and other stock awards 125,842 1 (495) 529 - - - 35
Share-based compensation - - 6,290 - - - - 6,290
Retirement of treasury shares - (7) (25,279) 10,176 14,805 - - (305)
Share repurchases (748,502) - - (10,705) - - - (10,705)
Issuance of MKF penny warrants - - 7,371 - - - - 7,371
Penny warrants exercised 377,253 4 - - - - - 4
Settlement of consideration to SportCaller 103,656 1 1,883 - - - - 1,884
Other comprehensive income - - - - - 38,625 - 38,625
Net loss - - - - (25,651) - - (25,651)
Balance as of June 30, 2023 45,626,013 $ 456 $ 1,594,857 $ - $ (351,639) $ (204,942) $ 428 $ 1,039,160
Issuance of restricted stock and other stock awards 31,065 - (180) - - - - (180)
Share-based compensation - - 6,257 - - - - 6,257
Retirement of treasury shares - - (1,420) 601 813 - - (6)
Settlement of consideration - Bally's Interactive (40,451) - 601 (601) - - - -
Other comprehensive loss - - - - - (86,362) - (86,362)
Net loss - - - - (61,802) - - (61,802)
Balance as of September 30, 2023 45,616,627 $ 456 $ 1,600,115 $ - $ (412,628) $ (291,304) $ 428 $ 897,067
See accompanying notes to condensed consolidated financial statements.
7
BALLY'S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended September 30,
(in thousands) 2024 2023
Cash flows from operating activities:
Net (loss) income $ (481,965) $ 90,883
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 316,328 231,235
Non-cash lease expense 43,546 42,835
Share-based compensation 11,629 18,587
Impairment charges 12,757 9,653
Amortization of debt discount and debt issuance costs 8,730 8,482
Loss (gain) on sale-leaseback 150,000 (374,321)
Gain on extinguishment of debt - (4,044)
Deferred income taxes (9,401) 59,774
Net (gain) loss on assets and liabilities measured at fair value (12,474) 12
Loss (gain) on equity method investments 284 (5,344)
Change in value of commercial rights liabilities 10,615 (11,967)
Change in contingent consideration payable 264 1,024
Foreign exchange loss (gain) 26,447 (2,512)
Proceeds from interest rate contracts 11,042 -
Other operating activities 14,061 8,021
Changes in operating assets and liabilities (25,685) 46,041
Net cash provided by operating activities 76,178 118,359
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired 208 (93,451)
Proceeds from sale-leaseback - 411,000
Proceeds from net investment hedges 3,274 -
Capital expenditures (155,757) (266,231)
Cash paid for capitalized software (36,134) (35,903)
Acquisition of gaming licenses (1,657) (10,150)
Other investing activities (1,015) (7,512)
Net cash used in investing activities (191,081) (2,247)
Cash flows from financing activities:
Issuance of long-term debt 310,000 198,000
Repayments of long-term debt (309,588) (245,208)
Deferred payables 81,666 -
Share repurchases - (30,458)
Other financing activities (6,370) (1,894)
Net cash provided by (used in) financing activities 75,708 (79,560)
Effect of foreign currency on cash and cash equivalents 4,472 (2,251)
Change in cash and cash equivalents and restricted cash held for sale - (1,648)
Net change in cash and cash equivalents and restricted cash (34,723) 32,653
Cash and cash equivalents and restricted cash, beginning of period 315,262 265,184
Cash and cash equivalents and restricted cash, end of period $ 280,539 $ 297,837
8
BALLY'S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended September 30,
(in thousands) 2024 2023
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized $ 256,161 $ 196,975
Income taxes paid, net of refunds 9,342 15,842
Non-cash investing and financing activities:
Unpaid property and equipment $ 23,083 $ 24,608
Unpaid internally developed software 2,040 1,769
Bally's Chicago - gaming license payable - 135,250
Bally's Chicago - land development liability - 46,802
Investment in GLP Capital, L.P. - 14,412
Investment in RI Joint Venture - 17,832
Net purchase consideration for acquisitions - 55,933
September 30, December 31,
Reconciliation of cash and cash equivalents and restricted cash: 2024 2023
Cash and cash equivalents $ 190,975 $ 163,194
Restricted cash 89,564 152,068
Total cash and cash equivalents and restricted cash $ 280,539 $ 315,262
See accompanying notes to condensed consolidated financial statements.
9
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. GENERAL INFORMATION
Description of Business
Bally's Corporation (the "Company," or "Bally's") is a global gaming, hospitality and entertainment company with casinos and resorts and online gaming ("iGaming") businesses. The Company owns and manages the following properties within its Casinos & Resorts reportable segment:
Casinos & Resorts Location Type Built/Acquired
Bally's Twin River Lincoln Casino Resort ("Bally's Twin River")
Lincoln, Rhode Island Casino and Resort 2004
Bally's Arapahoe Park
Aurora, Colorado Racetrack/OTB Site 2004
Hard Rock Hotel & Casino Biloxi ("Hard Rock Biloxi")(2)
Biloxi, Mississippi Casino and Resort 2014
Bally's Tiverton Casino & Hotel ("Bally's Tiverton")(2)
Tiverton, Rhode Island Casino and Hotel 2018
Bally's Dover Casino Resort ("Bally's Dover")(2)
Dover, Delaware Casino, Resort and Raceway 2019
Bally's Black Hawk(1)(2)
Black Hawk, Colorado Three Casinos 2020
Bally's Kansas City Casino ("Bally's Kansas City")
Kansas City, Missouri Casino 2020
Bally's Vicksburg Casino ("Bally's Vicksburg")
Vicksburg, Mississippi Casino and Hotel 2020
Bally's Atlantic City Casino Resort ("Bally's Atlantic City")
Atlantic City, New Jersey Casino and Resort 2020
Bally's Shreveport Casino & Hotel ("Bally's Shreveport")
Shreveport, Louisiana Casino and Hotel 2020
Bally's Lake Tahoe Casino Resort ("Bally's Lake Tahoe")
Lake Tahoe, Nevada Casino and Resort 2021
Bally's Evansville Casino & Hotel ("Bally's Evansville")(2)
Evansville, Indiana Casino and Hotel 2021
Bally's Quad Cities Casino & Hotel ("Bally's Quad Cities")(2)
Rock Island, Illinois Casino and Hotel 2021
Bally's Chicago Casino ("Bally's Chicago")(3)
Chicago, Illinois Casino 2023
Bally's Golf Links at Ferry Point ("Bally's Golf Links") Bronx, New York Golf Course 2023
__________________________________
(1) Includes Bally's Black Hawk North Casino, Bally's Black Hawk West Casino and Bally's Black Hawk East Casino.
(2) Properties leased from Gaming and Leisure Properties, Inc. ("GLPI"). Refer to Note 15 "Leases" for further information.
(3) Temporary casino facility as permanent casino resort is constructed. Site of future permanent casino resort is leased from GLPI.
The Company's International Interactive reportable segment primarily includes the interactive activities in Europe and Asia of Gamesys Group Ltd. ("Gamesys"), an iCasino and online bingo platform provider and operator.
The North America Interactive reportable segment includes a portfolio of sports betting, iGaming, and free-to-play gaming brands, and the North American operations of Gamesys.
Refer to Note 18 "Segment Reporting" for further information.
Agreement and Plan of Merger
On July 25, 2024, the Company entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") with SG Parent LLC, a Delaware limited liability company ("Parent"), The Queen Casino & Entertainment, Inc., a Delaware corporation and affiliate of Parent ("Queen"), Epsilon Sub I, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("Merger Sub I"), Epsilon Sub II, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("Merger Sub II", and together with the Company and Merger Sub I, the "Company Parties"), and, solely for purposes of specified provisions thereof, SG CQ Gaming LLC, a Delaware limited liability company ("SG Gaming" and together with Parent and Queen, the "Buyer Parties").
10
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The Merger Agreement provides, among other things and on the terms and subject to the conditions therein, in connection with the closing of the transaction, (i) SG Gaming will contribute to the Company all shares of common stock of Queen that it owns (the "Queen Share Contribution") in exchange for 26,909,895 shares of common stock of the Company ("Company Common Stock") based on a 2.45368905950 share exchange ratio, (ii) the Company will issue approximately 3,542,205 shares of Company Common Stock to the other stockholders of Queen, (iii) immediately thereafter, Merger Sub I will merge into the Company (the "Company Merger"), with the Company surviving the Company Merger and (iv) immediately thereafter, Merger Sub II will merge into Queen (the "Queen Merger," and together with the Company Merger, the "Mergers"), with Queen surviving the Queen Merger as a direct, wholly owned subsidiary of the Company.
The transaction is expected to close in the first calendar quarter of 2025, subject to the satisfaction of closing conditions contained in the Merger Agreement, including approval of the Company Merger by (a) the affirmative vote of the holders of a majority of all of the outstanding shares of Company Common Stock entitled to vote; (b) the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock held by the unaffiliated stockholders of the Company entitled to vote; (c) the expiration of any waiting period applicable to the consummation of the Queen Share Contribution or Mergers under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (which has occurred) and (d) receipt of specified gaming approvals by the Company and Queen (as defined in the Merger Agreement). Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of the Company's Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of common stock owned by (i) the Company or any of its wholly owned subsidiaries, (ii) Parent or any of Parent's affiliates, (iii) by holders exercising statutory appraisal rights; (iv) by SG Gaming following the Queen Share Contribution; or (v) by holders who have elected to have such shares remain issued and outstanding following the Company Merger (a "Rolling Share Election")) will be converted into the right to receive cash consideration equal to $18.25 per share of common stock (the "Per Share Price"). Each holder of shares of Company Common Stock (other than the Company or its subsidiaries) will have the option to make a Rolling Share Election.
The Merger Agreement contains customary representations, warranties and covenants of the Company Parties and the Buyer Parties, including, among others, covenants by each the Company and Queen relating (i) to conduct of their respective business prior to the closing of the Queen Share Contribution and the Mergers in the ordinary course during the period between the execution of the Merger Agreement and consummation of the Merger and (ii) not to engage in certain expressly enumerated transactions during such period. Under the terms of the Merger Agreement, the Company is subject to a customary "no-shop" provision that restricts the Company and its representatives from soliciting an alternative acquisition proposal (as described in the Merger Agreement) from third parties or providing information to or participating in any discussions or negotiations with third parties regarding any alternative acquisition proposal. However, prior to the receipt of the requisite approval of the holders of Company Common Stock, the "no-shop" provision permits the Company, under certain circumstances and in compliance with certain obligations set forth in the Merger Agreement, to provide non-public information and engage in discussions and negotiations with respect to an unsolicited alternative acquisition that would reasonably be expected to lead to a Superior Proposal (as defined in the Merger Agreement).
The Merger Agreement also contains certain termination rights for the Company and Parent, with a termination fee equal to $11,100,000 payable by the Company to Parent under certain circumstances and a termination fee equal to $22,200,000 in cash or stock payable by Parent to the Company under certain circumstances. In addition, the Company or Parent may terminate the Merger Agreement if the Merger is not consummated by July 25, 2025.
The Merger Agreement, the Merger and the transactions contemplated thereby were (i) unanimously recommended by a special committee of the board of directors of the Company (the "Board"), consisting solely of disinterested members of the Board, on July 24, 2024 and (ii) approved by the disinterested members of the Board on July 24, 2025.
The foregoing descriptions of the Merger, the Merger Agreement, and the transactions contemplated thereby are not complete and are subject to and qualified in their entirety by the full text of the Merger Agreement, which is attached as an exhibit to, and described in, the Company's Current Report on Form 8-K filed with the SEC on July 25, 2024, and amendments thereto were attached as an exhibit to, and described in, the Company's Current Reports on Forms 8-K filed with the SEC on August 28, 2024 and October 1, 2024, respectively.
11
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Concurrently with the execution of the Merger Agreement, the Company and Parent entered into support agreements with Standard RI Ltd. ("SRL") (the "SG Support Agreement"), SBG Gaming, LLC, a designated subsidiary of Sinclair ("SBG") (the "SBG Support Agreement"), and Noel Hayden (the "Hayden Support Agreement"), each dated as of July 25, 2024 (collectively, the "Support Agreements"), pursuant to which each of them agreed, among other things, to vote their shares of Company Common Stock to adopt and approve the Merger Agreement and the other transactions contemplated by the Merger Agreement and to make a Rolling Share Election with respect to all shares of Company Common Stock owned or acquired by them, if any, including via the exercise of outstanding options or warrants. In addition, with respect to the SBG Support Agreement, the Company and SBG agreed that SBG would waive the right to receive the Per Share Price as the result of any exercise of performance warrants or options held by SBG. The SBG Support Agreement provides also that, simultaneously with the consummation of the transactions contemplated by the Merger Agreement, SBG will deliver to the Company the options it previously acquired from the Company to purchase 1,639,669 shares of Company Common Stock at prices between $30.00 and $45.00 per share for cancellation and retirement and in exchange therefor, the Company will issue to SBG warrants to purchase 384,536 shares of Company Common Stock containing terms substantially similar to the terms set forth in certain warrants currently held by SBG.
The foregoing descriptions of the Support Agreements are not complete and are subject to and qualified in their entirety by reference to each of the SG Support Agreement, SBG Support Agreement and Hayden Support Agreement, each of which is attached as an exhibit to, and described in, the Company's Current Report on Form 8-K filed with the SEC on July 25, 2024.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, its majority-owned subsidiaries and entities the Company identifies as variable interest entities ("VIEs"), of which the Company is determined to be the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year's presentation. The financial statements of our foreign subsidiaries are translated into US Dollars ("USD") using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from financial statement translations are reflected as a separate component of accumulated other comprehensive loss. Foreign currency transaction gains and losses are included in net loss.
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (the "SEC") for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of the SEC's Regulation S-X. Accordingly, certain information and note disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States ("GAAP") have been condensed or omitted. In the Company's opinion, these condensed consolidated financial statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented.
These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates.
Equity Method Investments
On January 1, 2023, the Company and International Game Technology PLC ("IGT") contributed certain tangible assets and leases to Rhode Island VLT Company, LLC (the "RI Joint Venture") in exchange for equity interests of the RI Joint Venture. The Company contributed video lottery terminals ("VLTs") and player tracking equipment to the joint venture for a 40% equity interest of the RI Joint Venture. The 40% ownership in the joint venture qualifies for equity method accounting. In addition to this joint venture, the Company also has other investments in unconsolidated subsidiaries, which are accounted for using equity method accounting. The Company records its share of net income or loss within "Other non-operating (expense) income, net" in the condensed consolidated statements of operations. For the three months ended September 30, 2024 and 2023, the Company recorded (loss) income from equity method investments of $(1.1) million and $2.3 million, respectively, and for the nine months ended September 30, 2024 and 2023, the Company recorded (loss) income from equity method investments of $(0.3) million and $5.3 million, respectively.
12
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Variable Interest Entities
The Company evaluates entities for which control is achieved through means other than voting rights to determine if it is the primary beneficiary of a VIE. An entity is a VIE if it has any of the following characteristics (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support (ii) equity holders, as a group, lack the characteristics of a controlling financial interest or (iii) the entity is structured with non-substantive voting rights. The primary beneficiary of the VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company consolidates its investment in a VIE when it determines that it is its primary beneficiary.
In determining whether it is the primary beneficiary of the VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE's economic performance and which party controls such activities and significance of the Company's investment and other means of participation in the VIE's expected profits/losses. Significant judgments related to these determinations include estimates about the current and future fair values and performance of assets held by these VIEs and general market conditions.
Management has analyzed and concluded that Breckenridge Curacao B.V. ("Breckenridge") is a VIE because it does not have sufficient equity investment at risk. The Company has determined that it is the primary beneficiary and consolidates the VIE because (a) although the Company does not control all decisions of Breckenridge, the Company has the power to direct the activities of Breckenridge that most significantly impact its economic performance through various contracts with the entity and (b) the nature of these agreements between Breckenridge and the Company provides the Company with the obligation to absorb losses and the right to receive benefits based on fees that are based upon off-market rates and commensurate to the level of services provided. The Company receives significant benefits in the form of fees that are not at market and commensurate to the level of services provided. As a result, the Company consolidates all of the assets, liabilities and results of operations of Breckenridge and its subsidiaries in the accompanying condensed consolidated financial statements. As of September 30, 2024 and December 31, 2023, Breckenridge had total assets of $166.6 million and $161.3 million, respectively, and total liabilities of $96.8 million and $87.7 million, respectively. Breckenridge had revenues of $40.9 million and $71.5 million for the three months ended September 30, 2024 and 2023, respectively, and $149.4 million and $232.0 million for the nine months ended September 30, 2024 and 2023, respectively.
The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity's equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis.
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents includes cash balances and highly liquid investments with an original maturity of three months or less. Restricted cash includes player deposits, payment service provider deposits, cash collateral in connection with amounts previously due to the Chicago Tribune (refer to Note 8 "Property and Equipment"), and VLT and table games related cash payables to certain states where we operate, which are unavailable for the Company's use.
Accounts Receivable, Net
Accounts receivable, net consists of the following:
September 30, December 31,
(in thousands) 2024 2023
Amounts due from Rhode Island and Delaware(1)
$ 14,177 $ 13,028
Gaming receivables 20,810 26,127
Non-gaming receivables 32,263 37,221
Accounts receivable 67,250 76,376
Less: Allowance for credit losses (6,277) (6,048)
Accounts receivable, net $ 60,973 $ 70,328
__________________________________
(1) Represents the Company's share of VLT and table games revenue for Bally's Twin River and Bally's Tiverton due from the State of Rhode Island and for Bally's Dover from the State of Delaware.
13
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Deferred Payables
In order to execute on its strategy of improving working capital efficiency, the Company will, from time to time, participate in trade finance or deferred payable initiatives, including programs that may securitize or accelerate liquidity realized from receivables, or alternatively extend trade terms with certain suppliers or vendors. In certain cases, where the Company is not able to extend payment terms directly with suppliers or vendors, the Company will consider deferred payable solutions that simulate such trade term extensions. These solutions generally involve entering into exchange agreements with intermediary institutions who will make payment to the supplier or vendor within the original terms on behalf of the Company, in exchange for a new bill with terms that conforms to the Company's payment policy of net 90 days. The Company will then pay the new bill to the intermediary institutions, inclusive of any embedded premium, which the Company records as "Interest expense, net," within three months or less.
During the three and nine months ended September 30, 2024, the Company borrowed $82.5 million and $184.8 million, respectively, under these deferred payable arrangements and during the three and nine months ended September 30, 2024 repaid $61.7 million and $103.1 million, respectively. Amounts outstanding under these deferred payable arrangements were $84.1 million as of September 30, 2024 and are included in "Accrued and other current liabilities" on the condensed consolidated balance sheets. For the three and nine months ended September 30, 2024, the Company incurred $1.7 million and $3.9 million of interest expense, respectively, under these arrangements. These arrangements were not utilized by the Company during the three and nine months ended September 30, 2023.
Gaming Expenses
Gaming expenses include, among other things, payroll costs and expenses associated with the operation of VLTs, slots and table games, including gaming taxes payable to jurisdictions in which the Company operates outside of Rhode Island and Delaware, and marketing costs directly associated with the Company's iGaming products and services. These marketing expenses are included within Gaming expenses in the condensed consolidated statements of operations and were $39.4 million and $43.6 million for the three months ended September 30, 2024 and 2023, respectively, and $132.6 million and $137.3 million for the nine months ended September 30, 2024 and 2023, respectively. Gaming expenses also include racing expenses comprised of payroll costs, off track betting ("OTB") commissions and other expenses associated with the operation of live racing and simulcasting.
Advertising Expense
The Company expenses advertising costs as incurred. For the three months ended September 30, 2024 and 2023, advertising expense was $3.5 million and $5.6 million, respectively, and for the nine months ended September 30, 2024 and 2023, advertising expense was $13.2 million and $14.2 million, respectively. Advertising costs are included in "General and administrative" on the condensed consolidated statements of operations.
Share-Based Compensation
The Company recognized total share-based compensation expense of $4.1 million and $6.3 million for the three months ended September 30, 2024 and 2023, respectively, and $11.6 million and $18.6 million for the nine months ended September 30, 2024 and 2023, respectively. The total income tax benefit for share-based compensation arrangements was $1.1 million and $1.7 million for the three months ended September 30, 2024 and 2023, respectively, and $3.0 million and $4.9 million for the nine months ended September 30, 2024 and 2023, respectively.
Strategic Partnership - Sinclair Broadcast Group
In 2020, the Company and Sinclair Broadcast Group, Inc. ("Sinclair") entered into a Framework Agreement (the "Framework Agreement"), which provides for a long-term strategic relationship between Sinclair and the Company. Under the Framework Agreement, the Company issued warrants and options and agreed to share tax benefits and received naming, integration and other rights, including access to Sinclair's Tennis Channel, Stadium Sports Network and STIRR streaming service. Under a Commercial Agreement (the "Commercial Agreement") contemplated by the Framework Agreement, the Company paid annual fees to Diamond Sports Group ("Diamond"), a Sinclair subsidiary, for naming rights over Diamond's regional sports networks ("RSNs") and other consideration.
14
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The Company accounted for this relationship as an asset acquisition in accordance with the "Acquisition of Assets Rather Than a Business" subsections of ASC 805-50, Business Combinations-Related Issues, using a cost accumulation model. The total intangible asset ("Commercial rights intangible asset") represents the present value of the naming rights fees and other consideration, including the fair value of the warrants and options, and an estimate of the tax-sharing payments, each explained below. The Commercial rights intangible asset, net of accumulated amortization, was $202.6 million and $225.9 million as of September 30, 2024 and December 31, 2023, respectively. Amortization was $7.8 million and $7.7 million for the three months ended September 30, 2024 and 2023, respectively, and $23.4 million and $23.2 million for the nine months ended September 30, 2024 and 2023, respectively. Refer to Note 9 "Goodwill and Intangible Assets" for further information.
The present value of the naming rights fees was recorded as part of intangible assets, with a corresponding liability, which was accreted through interest expense. As of December 31, 2023, the total value of the liability was $57.7 million, with $8.0 million recorded within "Accrued and other current liabilities" related to the short-term portion of the liability, and $49.7 million related to the long-term portion of the liability reflected as "Commercial rights liability" in the condensed consolidated balance sheets. Accretion expense reported in "Interest expense, net" in our condensed consolidated statements of operations was $1.1 million and $3.3 million for the three and nine months ended September 30, 2023, respectively. In the first quarter of 2024, the Company's obligation to pay Diamond for the naming rights terminated upon the bankruptcy court's approval of certain settlement terms, which the court approved on March 1, 2024. Refer to Note 17 "Commitments and Contingencies" for further information.
Under the Framework Agreement, the Company issued to SBG (i) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $0.01 per share ("the Penny Warrants"), (ii) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $0.01 per share subject to the achievement of various performance metrics (the "Performance Warrants"), and (iii) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $30.00 to $45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (the "Options"). The exercise and purchase prices and the number of shares issuable upon exercise of the warrants and options are subject to customary anti-dilution adjustments. Refer to Note 1 "General Information" for further information.
The Penny Warrants and Options are equity classified instruments under ASC 815, Derivatives and Hedging("ASC 815"). The fair value of the Penny Warrants approximates the fair value of the underlying shares and was $150.4 million on November 18, 2020 at issuance, and was recorded to "Additional paid-in-capital" in the condensed consolidated balance sheets, with an offset to the Commercial rights intangible asset.
The Performance Warrants are accounted for as a derivative liability because the underlying performance metrics represent an adjustment to the settlement amount that is not indexed to the Company's own stock and thus equity classification is precluded under ASC 815. Refer to Note 11 "Fair Value Measurements" for further information.
Under the Framework Agreement, the Company agreed to share 60% of the tax benefits it realizes from the Penny Warrants, Options, Performance Warrants and other related payments. Changes in the estimate of the tax benefit to be realized and tax rates in effect at the time, among other changes, are treated as an adjustment to the intangible asset. The liability for these obligations was $18.8 million and $19.1 million as of September 30, 2024 and December 31, 2023, respectively, and is reflected in "Commercial rights liabilities" within our condensed consolidated balance sheets.
Provision for Income Taxes
During the nine months ended September 30, 2024 and 2023, the Company recorded a benefit for income tax of $3.7 million, at an effective year to date tax rate of 0.8% and a provision for income tax of $153.0 million, at an effective year to date tax rate of 62.7%, respectively. 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.
15
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
3. CONSOLIDATED FINANCIAL INFORMATION
General and Administrative Expense
Amounts included in General and administrative for the three and nine months ended September 30, 2024 and 2023 were as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Advertising, general and administrative $ 267,342 $ 210,576 $ 725,754 $ 655,341
Acquisition and integration 7,319 19,595 18,016 46,480
Restructuring charges, net (1,068) 411 17,921 20,673
Impairment charges(1)
- - 12,757 9,653
Total general and administrative $ 273,593 $ 230,582 $ 774,448 $ 732,147
__________________________________
(1) Includes impairment charges on long-lived assets within the International Interactive segment in the second quarter of 2024 and impairment charges related to assets held-for-sale within the North America Interactive segment in 2023.
Other Non-Operating (Expense) Income, Net
Amounts included in Other non-operating (expense) income, net for the three and nine months ended September 30, 2024 and 2023 were as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Change in value of commercial rights liabilities $ (16,932) $ 4,676 $ (10,615) $ 11,967
Net (loss) income from equity method investments (1,073) 2,254 (284) 5,344
Gain on extinguishment of debt - - - 4,044
Foreign exchange (loss) gain (30,246) 8,459 (26,447) 2,512
Other, net (1,603) 139 (1,024) 1,082
Total other non-operating (expense) income, net $ (49,854) $ 15,528 $ (38,370) $ 24,949
4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Standards to Be Implemented
In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. The amendments in this update align the requirements in the ASC to the SEC's regulations. The effective date for each amended topic in the ASC is the date on which the SEC's removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective. If by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective. Early adoption is prohibited. The Company is currently in the process of evaluating the impact of this amendment on its condensed consolidated financial statements and related disclosures.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The amendments in this update enhance the disclosures required for significant segment expenses on an annual and interim basis. The guidance will apply retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024. The Company is currently in the process of evaluating the impact of this amendment on its condensed consolidated financial statements and related disclosures.
16
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The amendments in this update enhance the transparency and decision usefulness of income tax disclosures. This update will be effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the impact of this amendment on its condensed consolidated financial statements and related disclosures.
In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements. This amendment to the Codification removes references to various Concepts Statements. This update will be effective for public business entities for fiscal years beginning after December 15, 2024, with early adoption permitted if adopted as of the beginning of the fiscal year that includes that interim period. The Company is currently in the process of evaluating the impact of this amendment on its condensed consolidated financial statements and related disclosures.
5. REVENUE RECOGNITION
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, which requires the revenue to be recognized when a performance obligation is satisfied by transferring the control of promised goods or services and is measured at the transaction price or the amount of consideration that the Company expects to receive through satisfaction of the identified performance obligations.
The Company generates revenue from four principal sources: (1) gaming (which includes retail gaming, online gaming, sports betting and racing), (2) hotel, (3) food and beverage and (4) retail, entertainment and other.
Sales tax and other taxes collected on behalf of governmental authorities are accounted for on a net basis and are not included in revenue or operating expenses.
Gaming Revenue
Performance Obligations
Retail gaming service contracts involving our land-based casinos, each have an obligation to honor the outcome of a wager and to pay out an amount equal to the stated odds, including the return of the initial wager, if the customer receives a winning hand. These elements of honoring the outcome of the hand of play and generating a payout are considered one performance obligation, with an additional performance obligation for those customers earning incentives under the Company's player loyalty program.
Online gaming and sports betting represent a single performance obligation for the Company to operate contests or games and award prizes or payouts to users based on results of the arrangement. Additionally, the use of incentives across the online gaming products create future customer rights and are a separate performance obligation.
Racing revenue is earned through advance deposit wagering, which consists of patrons wagering through an advance deposit account. Each wagering contract contains a single performance obligation.
Transaction Price
The Company applies a practical expedient to account for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the impact on the consolidated financial statements of applying the revenue recognition guidance to the portfolio would not differ materially from the application of an individual wagering contract. The transaction price for a retail gaming, online gaming or sports betting wagering contract is the difference between wins and losses, not the total amount wagered. In addition, in the event of a multi-stage contest, the Company will allocate transaction price ratably from contest start to the contest's final stage.
The transaction price for racing operations, inclusive of live racing events conducted at the Company's racing facilities, is the commission received from the pari-mutuel pool less contractual fees and obligations, primarily consisting of purse funding requirements, simulcasting fees, tote fees and certain pari-mutuel taxes that are directly related to the racing operations.
17
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with incentives earned under loyalty programs, the Company allocates an amount to the loyalty program contract liability based on the stand-alone selling price of the incentive earned. The performance obligation related to loyalty program incentives are deferred and recognized as revenue upon redemption by the customer.
Revenue Recognition
The allocated revenue for retail gaming wagers is recognized when the wagering occurs as all such wagers settle immediately. Online gaming revenue is recognized at the point in time when the player completes a gaming session and payout occurs. Sports betting involves a player wagering money on an outcome or series of outcomes. If a player wins the wager, the Company pays the player a pre-determined amount known as fixed odds, and its revenue is recognized as total wagers net of payouts made and incentives awarded to players. Racing revenue includes several of our casinos and resorts' share of wagering from live racing and the import of simulcast signals, and is recognized upon completion of the wager based upon an established take-out percentage.
The estimated retail value related to goods and services provided to customers without charge or upon redemption under the Company's player loyalty programs included in departmental revenues, and therefore reducing gaming revenues, are as follows for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Hotel $ 22,697 $ 26,367 $ 63,603 $ 72,925
Food and beverage 21,467 21,604 61,982 60,901
Retail, entertainment and other 2,517 3,185 7,387 8,196
$ 46,681 $ 51,156 $ 132,972 $ 142,022
Non-gaming Revenue
Performance Obligations
Hotel, food and beverage, and retail, entertainment and other services have been determined to be separate, stand-alone performance obligations and revenue is recognized as the good or service is transferred at the point in time of the transaction.
Transaction Price
The transaction price for hotel, food and beverage, and retail, entertainment and other, is the net amount collected from the customer for such goods and services. The estimated standalone selling price of hotel rooms is determined based on observable prices. The standalone selling price of these goods and services are determined based upon the actual retail prices charged to customers for those items.
Revenue Recognition
Hotel revenue is recognized when the customer obtains control through occupancy of the room over their stay at the hotel. Advance deposits for hotel rooms are recorded as liabilities until revenue recognition criteria are met. Food, beverage and retail revenues are recognized at the time the goods are sold from Company-operated outlets. Other revenue includes cancellation fees for hotel and meeting space services, which are recognized upon cancellation by the customer, and golf revenues from the Company's operations of Bally's Golf Links, which are recognized at the time of sale. Additionally, other revenue includes market access and business-to-business service revenue generated by the International Interactive and North America Interactive reportable segments, which is recognized at the time the goods are sold or the service is provided, and are included in Non-gaming revenue within our condensed consolidated statements of operations.
18
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following tables provide a disaggregation of revenue by segment (in thousands):
Three Months Ended September 30, 2024 Casinos & Resorts International Interactive North America Interactive Total
Gaming $ 256,234 $ 228,693 $ 38,979 $ 523,906
Non-gaming:
Hotel 41,672 - - 41,672
Food and beverage 35,403 - - 35,403
Retail, entertainment and other 20,049 2,244 6,700 28,993
Total non-gaming revenue 97,124 2,244 6,700 106,068
Total revenue $ 353,358 $ 230,937 $ 45,679 $ 629,974
Three Months Ended September 30, 2023
Gaming $ 245,687 $ 240,577 $ 22,631 $ 508,895
Non-gaming:
Hotel 56,728 - - 56,728
Food and beverage 39,438 - - 39,438
Retail, entertainment and other 17,173 3,307 6,936 27,416
Total non-gaming revenue 113,339 3,307 6,936 123,582
Total revenue $ 359,026 $ 243,884 $ 29,567 $ 632,477
Nine Months Ended September 30, 2024
Gaming $ 762,197 $ 687,109 $ 115,408 $ 1,564,714
Non-gaming:
Hotel 118,026 - - 118,026
Food and beverage 103,478 - - 103,478
Retail, entertainment and other 55,037 7,907 20,951 83,895
Total non-gaming revenue 276,541 7,907 20,951 305,399
Total revenue $ 1,038,738 $ 695,016 $ 136,359 $ 1,870,113
Nine Months Ended September 30, 2023
Gaming $ 709,812 $ 720,925 $ 58,349 $ 1,489,086
Non-gaming:
Hotel 155,451 - - 155,451
Food and beverage 108,270 - - 108,270
Retail, entertainment and other 47,441 16,305 20,850 84,596
Total non-gaming revenue 311,162 16,305 20,850 348,317
Total revenue $ 1,020,974 $ 737,230 $ 79,199 $ 1,837,403
Contract Assets and Contract Related Liabilities
The Company's receivables related to contracts with customers are primarily comprised of marker balances, interactive platform business-to-business service receivables, other amounts due from gaming activities, amounts due for hotel stays and amounts due from tracks and OTB locations. The Company's receivables related to contracts with customers were $30.8 million and $38.5 million as of September 30, 2024 and December 31, 2023, respectively.
The Company has the following liabilities related to contracts with customers: liabilities for loyalty programs, advance deposits made for goods and services yet to be provided and unpaid wagers. All of the contract liabilities are short-term in nature and are included in "Accrued and other current liabilities" in the condensed consolidated balance sheets.
Loyalty program incentives earned by customers are typically redeemed within one year from when they are earned and expire if a customer's account is inactive for more than 12 months; therefore, the majority of these incentives outstanding at the end of a period will either be redeemed or expire within the next 12 months.
19
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Advance deposits are typically interactive player deposits and customer deposits for future banquet events, hotel room reservations, and gift cards. The Company holds restricted cash for interactive player deposits and records a corresponding withdrawal liability. The banquet and hotel reservation deposits are usually received weeks or months in advance of the event or hotel stay.
Unpaid wagers include the Company's outstanding chip liability and unpaid slot, pari-mutuel and sports betting tickets.
Liabilities related to contracts with customers as of September 30, 2024 and December 31, 2023 were as follows:
September 30, December 31,
(in thousands) 2024 2023
Unpaid wagers $ 33,815 $ 20,481
Advanced deposits from customers 30,640 29,052
Loyalty programs 12,726 16,803
Total $ 77,181 $ 66,336
The Company recognized $7.1 million and $10.0 million of revenue related to loyalty program redemptions for the three months ended September 30, 2024 and 2023, respectively, and $22.6 million and $27.7 million of revenue related to loyalty program redemptions for the nine months ended September 30, 2024 and 2023, respectively.
6. BUSINESS COMBINATIONS
Casinos & Resorts Acquisitions
Bally's Golf Links- On September 12, 2023, the Company completed the acquisition of Trump Golf Links at Ferry Point, subsequently renamed Bally's Golf Links at Ferry Point, which includes the assignment of a license agreement to operate an 18-hole links-style golf course located in the Bronx, New York.
The total purchase consideration included cash paid, net of cash acquired and net working capital adjustments, which amounted to $55.0 million. This acquisition continues the Company's strategic objective of developing a diversified portfolio within its Casinos & Resorts segment.
Total purchase consideration also includes contingent consideration valued at $58.6 million, which is the fair value, under GAAP, of expected cash payments totaling up to $125 million to the seller, based upon future events, which are uncertain. The contingent consideration was recorded at fair value, using discounted cash flow analyses with level 3 inputs, and is remeasured quarterly, with fair value adjustments recognized in earnings, until the contingencies are resolved. Inputs to this valuation approach include the Company's estimated probabilities of achieving the conditions for payment, expected terms between 1.5 and 3 Years, and discount rates between 7.2% and 7.8%. The settlement of the contingent consideration liabilities will be due to the seller in the event the license agreement is extended or if the Company is successful in its bid for a casino license.
20
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the Casinos & Resorts acquisition as of September 30, 2024:
Bally's Golf Links
(in thousands)
Final(2)
Total current assets $ 1,108
Property and equipment, net 505
Intangible assets, net(1)
6,500
Other assets 2,000
Goodwill 103,824
Total current liabilities (345)
Total purchase price $ 113,592
__________________________________
(1) Bally's Golf Links' intangible assets include a concessionaire license of $6.5 million, which is being amortized over its estimated useful life of approximately 12 years.
(2) The Company recorded adjustments to the preliminary purchase price allocation during the nine months ended September 30, 2024 which decreased Goodwill and the total purchase price by $0.2 million.
Goodwill recognized is deductible for local tax purposes and has been assigned as of the acquisition date to the Company's Casinos & Resorts reportable segment, which includes the reporting unit expected to benefit from the synergies of the acquisitions. Qualitative factors that contribute to the recognition of goodwill include expected synergies from integrating the business into the Company's casino portfolio and future development of its omni-channel strategy.
The Company incurred $0.2 million of acquisition costs related to the above Casinos & Resorts acquisition during the nine months ended September 30, 2024 and $0.5 million during the three and nine months ended September 30, 2023. These costs are included within "General and administrative" of the condensed consolidated statements of operations.
International Interactive Acquisition
Casino Secret- On January 5, 2023, the Company completed the acquisition of BACA Limited ("Casino Secret"), a European based online casino that offers slots, tables and live dealer games to Asian markets for total consideration of $50.4 million. Cash paid by the Company, net of $8.3 million cash acquired, was $38.7 million, excluding transaction costs.
The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the International Interactive acquisition:
(in thousands)
Casino Secret
Final(2)
Total current assets $ 8,862
Property and equipment, net 50
Intangible assets, net(1)
29,471
Goodwill 18,422
Total current liabilities (6,371)
Total purchase price $ 50,434
__________________________________
(1) Casino Secret intangible assets include player relationships and trade names of $26.0 million and $3.5 million, respectively, which are both being amortized on a straight-line basis over their estimated useful lives of approximately 7 years.
(2) The Company did not record adjustments to the preliminary purchase price allocation during the nine months ended September 30, 2024.
Total goodwill recorded in connection with the above acquisition was $18.4 million, and is not deductible for local tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill, which consist primarily of benefits from acquiring a talented technology workforce and management team experienced in the online gaming industry, and securing buyer-specific synergies expected to contribute to the Company's omni-channel strategy which are expected to increase revenue and profits within the Company's International Interactive reportable segment. The goodwill of the acquisition has been assigned, as of the acquisition date, to the Company's International Interactive reportable segment.
21
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The Company incurred $1.2 million of acquisition costs related to the above International Interactive acquisition during the nine months ended September 30, 2023. There were no acquisition costs related to the International Interactive acquisition during the three months ended September 30, 2023 or three and nine months ended September 30, 2024. These costs are included within "General and administrative" of the condensed consolidated statements of operations.
7. PREPAID EXPENSES AND OTHER CURRENT ASSETS
As of September 30, 2024 and December 31, 2023, prepaid expenses and other current assets was comprised of the following:
September 30, December 31,
(in thousands) 2024 2023
Services and license agreements $ 44,145 $ 32,466
Gaming taxes and licenses 14,216 9,309
Prepaid marketing 12,306 8,685
Purse funds 9,416 6,404
Sales tax 6,375 7,565
Due from payment service providers 6,069 12,662
Short term derivative assets 5,161 9,530
Prepaid insurance 2,009 12,181
Other 7,544 9,294
Total prepaid expenses and other current assets $ 107,241 $ 108,096
8. PROPERTY AND EQUIPMENT
As of September 30, 2024 and December 31, 2023, property and equipment was comprised of the following:
September 30, December 31,
(in thousands) 2024 2023
Land and improvements $ 53,937 $ 401,208
Building and improvements 689,151 673,071
Equipment 289,405 264,398
Furniture and fixtures 69,808 68,746
Construction in process 134,102 73,810
Total property, plant and equipment 1,236,403 1,481,233
Less: Accumulated depreciation (440,912) (306,345)
Property and equipment, net $ 795,491 $ 1,174,888
Depreciation expense relating to property and equipment was $19.3 million and $20.2 million for the three months ended September 30, 2024 and 2023, respectively, and $138.6 million and $57.8 million for the nine months ended September 30, 2024 and 2023, respectively. Depreciation expense during the nine months ended September 30, 2024 included $80.1 million of accelerated depreciation related to the closure of the Tropicana Las Vegas property on April 2, 2024. Refer to Note 13 "Restructuring Expense" for further information. The Company recorded capitalized interest of $1.9 million and $2.9 million during the three months ended September 30, 2024 and 2023, respectively, and $5.9 million and $7.9 million during the nine months ended September 30, 2024 and 2023, respectively.
22
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Bally's Chicago
A wholly-owned indirect subsidiary of the Company, Bally's Chicago Operating Company, LLC entered into a Lease Termination and Short Term License Agreement with Chicago Tribune Company, LLC ("Tribune"), effective March 31, 2023, which, among other things, provided that the Company will have possession of 777 West Chicago Avenue, Chicago, Illinois 60610 on or before July 5, 2024, subject to $150 million in payments by the Company to Tribune payable in full upon Tribune vacating the site on or prior to July 5, 2024 (the "Payment"). $10 million of the Payment was paid upon execution of the Lease Termination and Short Term License Agreement and $90 million of the Payment was paid during the third quarter of 2023. The Company paid the remaining $50 million on July 9, 2024 and gained possession of the property per the agreement with Tribune.
In the third quarter of 2024, as the result of a lease modification event, the Company derecognized $350.0 million of land relating to the site of the future Bally's Chicago permanent facility. Refer to Note 15 "Leases" for further information.
9. GOODWILL AND INTANGIBLE ASSETS
The change in intangible assets, net for the nine months ended September 30, 2024 is as follows (in thousands):
Intangible assets, net as of December 31, 2023
$ 1,871,428
Effect of foreign exchange 28,200
Internally developed software 36,283
Other intangibles acquired 2,127
Less: Amortization of intangible assets (177,777)
Intangible assets, net as of September 30, 2024
$ 1,760,261
The Company's identifiable intangible assets consist of the following:
September 30, 2024
(in thousands) Gross Carrying Amount Accumulated
Amortization 		Net
Amortizable intangible assets:
Commercial rights - Sinclair(1)
$ 315,847 $ (113,275) $ 202,572
Trade names 38,047 (20,938) 17,109
Hard Rock license 8,000 (2,485) 5,515
Customer relationships 1,005,459 (432,885) 572,574
Developed technology 277,147 (118,756) 158,391
Internally developed software 98,864 (22,884) 75,980
Gaming licenses 46,771 (17,983) 28,788
Other 11,591 (4,904) 6,687
Total amortizable intangible assets 1,801,726 (734,110) 1,067,616
Intangible assets not subject to amortization:
Gaming licenses 586,971 - 586,971
Trade names 104,341 - 104,341
Other 1,333 - 1,333
Total unamortizable intangible assets 692,645 - 692,645
Total intangible assets, net $ 2,494,371 $ (734,110) $ 1,760,261
__________________________________
(1) Commercial rights intangible asset in connection with the Framework Agreement. Refer to Note 2 "Summary of Significant Accounting Policies" for further information.
23
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
December 31, 2023
(in thousands) Gross Carrying Amount Accumulated
Amortization 		Net
Amortizable intangible assets:
Commercial rights - Sinclair(2)
$ 315,847 $ (89,901) $ 225,946
Trade names 37,042 (18,125) 18,917
Hard Rock license 8,000 (2,303) 5,697
Customer relationships 974,286 (314,053) 660,233
Developed technology 267,927 (86,119) 181,808
Internally developed software 61,687 (13,091) 48,596
Gaming licenses 45,008 (11,964) 33,044
Other 11,505 (3,621) 7,884
Total amortizable intangible assets 1,721,302 (539,177) 1,182,125
Intangible assets not subject to amortization:
Gaming licenses 586,971 - 586,971
Trade names 100,544 - 100,544
Other 1,788 - 1,788
Total unamortizable intangible assets 689,303 - 689,303
Total intangible assets, net $ 2,410,605 $ (539,177) $ 1,871,428
__________________________________
(2) See note (1) above.
Amortization of intangible assets was approximately $58.5 million and $57.3 million for the three months ended September 30, 2024 and 2023, respectively, and $177.8 million and $173.4 million for the nine months ended September 30, 2024 and 2023, respectively.
The following table reflects the remaining amortization expense associated with the finite-lived intangible assets as of September 30, 2024:
(in thousands)
Remaining 2024
$ 61,246
2025
243,082
2026
241,276
2027
240,385
2028
186,318
Thereafter 95,309
Total $ 1,067,616
10. DERIVATIVE INSTRUMENTS
The Company utilizes derivative instruments in order to mitigate interest rate and currency exchange rate risk in accordance with its financial risk and liability management policy.
In 2023, the Company entered into a series of interest rate contracts and cross currency swap derivative transactions with multiple bank counterparties in order to synthetically convert a notional aggregate amount of $500.0 million of the Company's USD denominated variable rate Term Loan Facility, as disclosed in Note 14 "Long-Term Debt," into fixed rate debt over five years and $200 million of the Term Loan Facility, to an equivalent GBP denominated floating rate instrument over three years. These contracts mature in October, 2028 and 2026, respectively.
24
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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. The fair value on the settlement date is recorded as a component of accumulated other comprehensive income (loss), which will be reclassified into "Interest expense, net" in the condensed consolidated statements of operations in the same period in which the hedged interest payments associated with the Company's borrowings are recorded. 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.
Derivative Instruments Designated as Hedging Instruments
Net Investment Hedges
Cross Currency Swaps- The Company is exposed to fluctuations in foreign exchange rates on investments it holds in its European foreign entities. The Company uses fixed and fixed-cross-currency swaps to hedge its exposure to changes in the foreign exchange rate on its foreign investment in Europe and their exposure to changes in the EUR-GBP exchange rate. Currency forward agreements involve fixing the USD-EUR exchange rate for delivery of a specified amount of foreign currency on a specified date. The currency forward agreements are typically cash settled in USD for their fair value at or close to their settlement date. Cross-currency swaps involve the receipt of functional-currency-fixed-rate amounts from a counterparty in exchange for the Company making foreign-currency-fixed-rate payments over the life of the agreement. These derivative arrangements qualify as net investment hedges under ASC 815, with the gain or loss resulting from changes in the spot value of the derivative reported in other comprehensive income (loss). Amounts are reclassified out of other comprehensive income (loss) into earnings when the hedged net investment is either sold or substantially liquidated. Additionally, the accrual of foreign currency and USD denominated coupons will be recognized in "Interest expense, net" in the condensed consolidated statements of operations. Refer to Note 11 "Fair Value Measurements" and Note 16 "Stockholders' Equity" for further information.
The following tables summarize the Company's net investment hedges as of September 30, 2024 and December 31, 2023 (in thousands):
Net Investment Hedges Notional Sold Notional Purchased
Cross currency swaps € 461,595 £ 387,531
Cross currency swaps £ 546,759 $ 700,000
Cash Flow Hedges
Interest Rate Contracts- The Company's objectives in using interest rate derivatives are to hedge its exposure to variability in cash flows on a portion of its floating-rate debt, to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps and collars as part of its financial risk and liability management policy. The Company's interest rate swaps and collars are designated as cash flow hedges under ASC 815. The changes in the fair value of these instruments are recorded as a component of accumulated other comprehensive income (loss) and reclassified into "Interest expense, net" in the condensed consolidated statements of operations in the same period in which the hedged interest payments associated with the Company's borrowings are recorded. Refer to Note 11 "Fair Value Measurements" and Note 16 "Stockholders' Equity" for further information.
The following table summarizes the Company's cash flow hedges as of September 30, 2024 and December 31, 2023 (in thousands):
September 30, 2024 December 31, 2023
Cash Flow Hedges Index Notional Amount Cap Floor Notional Amount Cap
Floor(1)
Interest rate contracts - swaps US - SOFR $ 1,500,000 - - $ 500,000 - -
Interest rate contracts - collars US - SOFR $ - - - $ 500,000 4.25% 3.22%
__________________________________
(1) Weighted average rate.
25
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
11. FAIR VALUE MEASUREMENTS
The following tables summarize the Company's assets and liabilities measured at fair value on a recurring basis. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
September 30, 2024
(in thousands) Balance Sheet Location Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents Cash and cash equivalents $ 190,975 $ - $ -
Restricted cash Restricted cash 89,564 - -
Convertible loans Other assets - - 4,321
Investments in equity securities Other assets 2,440 - -
Investment in GLPI partnership Other assets - 14,748 -
Derivative assets designated as hedging instruments:
Interest rate contracts Prepaid expenses and other current assets - 95 -
Interest rate contracts Other assets - - -
Cross currency swaps Prepaid expenses and other current assets - 5,066 -
Cross currency swaps Other assets - 3,906 -
Total derivative assets at fair value - 9,067 -
Total assets $ 282,979 $ 23,815 $ 4,321
Liabilities:
Contingent consideration Other long-term liabilities $ - $ - $ 58,844
Derivative liabilities not designated as hedging instruments:
Sinclair Performance Warrants
Commercial rights liabilities - - 55,318
Derivative liabilities designated as hedging instruments:
Interest rate contracts Accrued and other current liabilities - 3,570 -
Interest rate contracts Other long-term liabilities - 52,452 -
Cross currency swaps Accrued and other current liabilities - 4,005 -
Cross currency swaps Other long-term liabilities - 44,429 -
Total derivative liabilities at fair value - 104,456 55,318
Total liabilities $ - $ 104,456 $ 114,162
26
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
December 31, 2023
(in thousands) Balance Sheet Location Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents Cash and cash equivalents $ 163,194 $ - $ -
Restricted cash Restricted cash 152,068 - -
Convertible loans Other assets - - 4,115
Investments in equity securities Other assets 3,409 - -
Investment in GLPI partnership Other assets - 14,146 -
Derivative assets designated as hedging instruments:
Interest rate contracts Prepaid expenses and other current assets - 5,356 -
Cross currency swaps Prepaid expenses and other current assets - 4,174 -
Cross currency swaps Other assets - 6,477 -
Total derivative assets at fair value - 16,007 -
Total assets $ 318,671 $ 30,153 $ 4,115
Liabilities:
Contingent consideration Other long-term liabilities $ - $ - $ 58,580
Derivatives not designated as hedging instruments
Sinclair Performance Warrants Commercial rights liabilities - - 44,703
Derivative liabilities designated as hedging instruments:
Interest rate contracts Other long-term liabilities - 21,492 -
Cross currency swaps Accrued and other current liabilities - 1,225 -
Cross currency swaps Other long-term liabilities - 29,376 -
Total derivative liabilities at fair value - 52,093 44,703
Total liabilities $ - $ 52,093 $ 103,283
The following tables summarize the changes in fair value of the Company's Level 3 assets and liabilities:
(in thousands) Sinclair Performance Warrants Contingent Consideration Convertible Loans
Beginning as of December 31, 2023
$ 44,703 $ 58,580 $ 4,115
Change in fair value - (1,835) (33)
Ending as of March 31, 2024
$ 44,703 $ 56,745 $ 4,082
Change in fair value (6,317) 1,040 4
Ending as of June 30, 2024
$ 38,386 $ 57,785 $ 4,086
Change in fair value 16,932 1,059 235
Ending as of September 30, 2024
$ 55,318 $ 58,844 $ 4,321
27
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands) Sinclair Performance Warrants Contingent Consideration Convertible Loans
Beginning as of December 31, 2022
$ 36,987 $ 8,220 $ 10,212
Additions in the period (acquisition fair value) - - 500
Change in fair value 267 1,241 126
Ending as of March 31, 2023
$ 37,254 $ 9,461 $ 10,838
Additions in the period (acquisition fair value) - - 500
Reductions in the period - (9,292) -
Change in fair value (7,558) (169) 136
Ending as of June 30, 2023
$ 29,696 $ - $ 11,474
Additions in the period (acquisition fair value) - 58,580 500
Change in fair value (4,676) - (1,289)
Ending as of September 30, 2023
$ 25,020 $ 58,580 $ 10,685
The gains (losses) recognized in the condensed consolidated statements of operations for derivative instruments during the three and nine months ended September 30, 2024 and 2023 are as follows:
Condensed Consolidated Statements of Operations Location Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Derivatives not designated as hedging instruments
Sinclair Performance Warrants Other non-operating (expense) income, net $ (16,932) $ 4,676 $ (10,615) $ 11,967
Derivatives designated as hedging instruments
Interest rate contracts Interest expense, net $ (3,983) $ (443) $ (9,678) $ (443)
Cross currency swaps Interest expense, net (634) (388) (3,170) (388)
Interest Rate Contracts and Cross Currency Swaps
The fair values of interest rate contracts and cross currency swap assets and liabilities are classified within Level 2 of the fair value hierarchy as the valuation inputs are based on estimates using currency spot and forward rates and standard pricing models that consider the value of future cash flows as of the balance sheet date, discounted to a present value using discount factors that match both the time to maturity and currency of the underlying instruments. These standard pricing models utilize inputs that are derived from or corroborated by observable market data such as interest rate yield curves as well as currency spot and forward rates. Changes in the fair value of these contracts are reported as a component of other comprehensive income (loss).
Sinclair Performance Warrants
Sinclair Performance Warrants are accounted for as a derivative instrument classified as a liability within Level 3 of the hierarchy as the warrants are not traded in active markets and are subject to certain assumptions and estimates made by management related to the probability of meeting performance milestones. These assumptions and the probability of meeting performance targets may have a significant impact on the value of the warrant. The Performance Warrants are valued using an option pricing model, considering the Company's estimated probabilities of achieving the performance milestones for each tranche. Inputs to this valuation approach include volatility between 40% and 67%, risk free rates between 3.84% and 4.79%, the Company's common stock price for each period and expected terms between 1.5 and 6.3 years. The fair value is recorded within "Commercial rights liabilities" of the condensed consolidated balance sheets.
28
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Contingent Consideration
Contingent consideration related to acquisitions is recorded at fair value as a liability on the acquisition date and subsequently remeasured at each reporting date, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The remeasurements are based primarily on the expected probability of achievement of the contingency targets which are subject to management's estimates. These changes in fair value are recognized within "Other non-operating (expense) income, net" of the condensed consolidated statements of operations.
In connection with the acquisitions of SportCaller and Monkey Knife Fight ("MKF") in the first quarter of 2021, the Company recorded contingent consideration of $58.7 million. During the second quarter of 2023, the Company, in satisfaction of contingencies related to the respective acquisition agreements, settled the remaining contingent consideration of $9.3 million, comprised of 386,926 immediately exercisable penny warrants, 103,656 shares of Bally's Corporation common stock and a de minimis payment in cash.
In connection with the acquisition of Bally's Golf Links on September 12, 2023, the Company recorded contingent consideration, which was valued at $58.8 million as of September 30, 2024. Refer to Note 6 "Business Combinations" for further information.
Convertible Loans
The Company has certain agreements with vendors to provide a portfolio of games to its customers. Pursuant to these agreements, the Company has issued loans to its vendors and has an option to convert the loans to shares of the vendors' equity, exercisable within a specified time period. The Company recorded instruments within "Other assets" at their fair value. The fair value of the loans to vendors have share values based on unobservable inputs and are classified within Level 3 of the hierarchy, with changes to fair value included within "Other non-operating (expense) income, net" of the condensed consolidated statements of operations.
Investments in Equity Securities
The Company has a long-term investment in an unconsolidated entity which it accounts for under the equity method of accounting. The Company has elected the fair value option allowed by ASC 825, Financial Instruments, with respect to this investment. Under the fair value option, the investment is remeasured at fair value at each reporting period through earnings. The Company measures fair value using quoted prices in active markets that are classified within Level 1 of the hierarchy, with changes to fair value included within "Other non-operating (expense) income, net" of the condensed consolidated statements of operations.
Investment in GLPI Partnership
The Company holds a limited partnership interest in GLP Capital, L.P., the operating partnership of GLPI. The investment is reported at fair value based on Level 2 inputs, with changes to fair value included within "Other non-operating (expense) income, net" of the condensed consolidated statements of operations.
Long-Term Debt
The fair value of the Company's Term Loan Facility and senior notes are estimated based on quoted prices in active markets and are classified as Level 1 measurements. The fair value of the Revolving Credit Facility approximates its carrying amount as it is revolving, variable rate debt, and is also classified as a Level 1 measurement. In the table below, the carrying amounts of the Company's long-term debt are net of debt issuance costs and debt discounts. Refer to Note 14 "Long-Term Debt" for further information.
September 30, 2024
December 31, 2023
(in thousands) Carrying Amount Fair Value Carrying Amount Fair Value
Term Loan Facility $ 1,861,903 $ 1,809,739 $ 1,871,330 $ 1,888,100
5.625% Senior Notes due 2029
737,988 559,687 736,447 596,250
5.875% Senior Notes due 2031
721,047 504,394 719,858 570,544
29
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
12. ACCRUED AND OTHER CURRENT LIABILITIES
As of September 30, 2024 and December 31, 2023, accrued and other current liabilities consisted of the following:
(in thousands) September 30,
2024 		December 31,
2023
Diamond Sports Group non-cash liability(1)
$ 202,572 $ 144,883
Gaming liabilities 198,592 177,557
Compensation 74,828 83,112
Interest payable 45,608 66,587
Bally's Chicago - land development liability - 47,739
Other 190,305 131,841
Total accrued and other current liabilities $ 711,905 $ 651,719
__________________________________
(1) Refer to Note 17 "Commitments and Contingencies" for further information.
13. RESTRUCTURING EXPENSE
On January 18, 2023, the Company announced a restructuring plan of the Interactive business intended to reduce operating costs and continue the Company's commitment to achieving profitable operations in its North America Interactive segment which included a reduction of the Company's then current Interactive workforce by up to 15 percent. In furtherance of and as an expansion of the January 2023 restructuring plan, on October 20, 2023, the Company announced further restructuring initiatives targeted at reshaping the technology utilized by its Interactive segments.
On January 29, 2024, the Company announced that it will cease its operations at the Tropicana Las Vegas on April 2, 2024 in order to redevelop the site with a state-of-the-art integrated resort and ballpark. As a result of the closure, the Company incurred restructuring charges representing employee-related severance costs and accelerated depreciation of certain property and equipment.
The components of restructuring charges by segment for the three and nine months ended September 30, 2024 and 2023 are summarized as follows (in thousands):
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2024 2023 2024 2023
Severance and employee related benefits(1)
Casinos & Resorts $ 34 $ - $ 20,037 -
International Interactive (849) 325 (794) 11,252
North America Interactive (253) 86 (1,732) 7,733
Other - - 410 1,688
Total severance and employee related benefits (1,068) 411 17,921 20,673
Accelerated depreciation expense(2)
- - 80,117 -
Total restructuring charges $ (1,068) 411 98,038 20,673
__________________________________
(1) Included within "General and administrative" of the condensed consolidated statements of operations.
(2) Included within "Depreciation and amortization" of the Casinos & Resorts reportable segment within the condensed consolidated statements of operations.
30
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The changes in the Company's restructuring related liabilities for the nine months ended September 30, 2024 is as follows:
(in thousands)
Balance as of December 31, 2023
$ 5,291
Charges, net 17,921
Payments (22,370)
Effect of foreign exchange (842)
Balance as of September 30, 2024
$ -
The restructuring liability as of September 30, 2024 and December 31, 2023 is included within "Accrued and other current liabilities" on the condensed consolidated balance sheets.
14. LONG-TERM DEBT
As of September 30, 2024 and December 31, 2023, long-term debt consisted of the following:
(in thousands) September 30,
2024 		December 31,
2023
Term Loan Facility(1)
$ 1,891,513 $ 1,906,100
Revolving Credit Facility 350,000 335,000
5.625% Senior Notes due 2029
750,000 750,000
5.875% Senior Notes due 2031
735,000 735,000
Less: Unamortized original issue discount (20,778) (23,756)
Less: Unamortized deferred financing fees (34,797) (39,709)
Long-term debt, including current portion 3,670,938 3,662,635
Less: Current portion of Term Loan and Revolving Credit Facility (19,450) (19,450)
Long-term debt, net of discount and deferred financing fees, excluding current portion $ 3,651,488 $ 3,643,185
__________________________________
(1) The Company has a series of interest rate derivatives to synthetically convert $1.0 billion notional of the Company's variable rate Term Loan Facility into fixed rate debt, and a series of cross currency swap derivatives to synthetically convert $500.0 million and $200.0 million notional of the Company's USD denominated Term Loan Facility into fixed rate EUR and GBP denominated debt, respectively, through its maturity in 2028. Refer to Note 10 "Derivative Instruments" for further information.
Senior Notes
On August 20, 2021, two unrestricted subsidiaries (together, the "Escrow Issuers") of the Company issued $750.0 million aggregate principal amount of 5.625% senior notes due 2029 (the "2029 Notes") and $750.0 million aggregate principal amount of 5.875% Senior Notes due 2031 (the "2031 Notes" and, together with the 2029 Notes, the "Senior Notes"). The Senior Notes were issued pursuant to an indenture, dated as of August 20, 2021, among the Escrow Issuers and U.S. Bank National Association, as trustee. Certain of the net proceeds from the Senior Notes offering were placed in escrow accounts for use in connection with the Gamesys acquisition. On October 1, 2021, upon the closing of the Gamesys acquisition, the Company assumed the issuer obligation under the Senior Notes. The Senior Notes are guaranteed, jointly and severally, by each of the Company's restricted subsidiaries that guarantees the Company's obligations under its Credit Agreement (as defined below).
The 2029 Notes mature on September 1, 2029 and the 2031 Notes mature on September 1, 2031. Interest is payable on the Senior Notes in cash semi-annually on March 1 and September 1 of each year, beginning on March 1, 2022.
The Company may redeem some or all of the Senior Notes at any time prior to September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at prices equal to 100% of the principal amount of the Senior Notes to be redeemed plus certain "make-whole" premiums, plus accrued and unpaid interest. In addition, prior to September 1, 2024, the Company may redeem up to 40% of the original principal amount of each series of the Senior Notes with proceeds of certain equity offerings at a redemption price equal to 105.625% of the principal amount, in the case of the 2029 Notes, and 105.875%, in the case of the 2031 Notes, plus accrued and unpaid interest. The Company may redeem some or all of the Senior Notes at any time on or after September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at certain redemption prices set forth in the indenture plus accrued and unpaid interest.
31
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
During the nine months ended September 30, 2023, the Company repurchased and retired $15.0 million of the 2031 Notes at a weighted average price of 70.80% of the principal. In connection with the repurchase of these 2031 Notes, the Company recorded a gain on extinguishment of debt of $4.0 million recorded within "Other non-operating (expense) income, net" in the condensed consolidated statements of operations.
The indenture contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, (1) incur additional indebtedness, (2) pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, (3) enter into certain transactions with affiliates, (4) sell or otherwise dispose of assets, (5) create or incur liens and (6) merge, consolidate or sell all or substantially all of the Company's assets. These covenants are subject to exceptions and qualifications set forth in the indenture.
Credit Facility
On October 1, 2021, the Company and certain of its subsidiaries entered into a credit agreement (the "Credit Agreement") with Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the other lenders party thereto, providing for senior secured financing of up to $2.565 billion, consisting of a senior secured term loan facility in an aggregate principal amount of $1.945 billion (the "Term Loan Facility"), which will mature in 2028, and a senior secured revolving credit facility in an aggregate principal amount of $620.0 million (the "Revolving Credit Facility"), which will mature in 2026.
The credit facilities allow the Company to increase the size of the Term Loan Facility or request one or more incremental term loan facilities or increase commitments under the Revolving Credit Facility or add one or more incremental revolving facilities in an aggregate amount not to exceed the greater of $650 million and 100% of the Company's consolidated EBITDA for the most recent four-quarter period plus or minus certain amounts as specified in the Credit Agreement, including an unlimited amount subject to compliance with a consolidated total secured net leverage ratio as set out in the Credit Agreement.
The credit facilities are guaranteed by the Company's restricted subsidiaries, subject to certain exceptions, and secured by a first-priority lien on substantially all of the Company's and each of the guarantors' assets, subject to certain exceptions.
As of June 30, 2023, with the discontinuation of the LIBOR reference rate, borrowings under the credit facilities bear interest at a rate equal to, at the Company's option, either (1) the term Secured Overnight Financing Rate ("SOFR"), adjusted for certain additional costs and subject to a floor of 0.50% in the case of term loans and 0.00% in the case of revolving loans or (2) a base rate determined by reference to the greatest of (a) the federal funds rate plus 0.50%, (b) the prime rate, (c) the one-month SOFR rate plus 1.00%, (d) solely in the case of term loans, 1.50% and (e) solely in the case of revolving loans, 1.00%, in each case of clauses (1) and (2), plus an applicable margin. In addition, on a quarterly basis, the Company is required to pay each lender under the Revolving Credit Facility a 0.50% or 0.375% commitment fee in respect of commitments under the Revolving Credit Facility, with the applicable commitment fee determined based on the Company's total net leverage ratio.
The credit facilities contain covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, sell assets, make certain investments and grant liens. These covenants are subject to exceptions and qualifications set forth in the Credit Agreement. The Revolving Credit Facility contains a financial covenant regarding a maximum first lien net leverage ratio that applies when borrowings under the Revolving Credit Facility exceed 30% of the total revolving commitment. As of September 30, 2024, the Company was in compliance with all such covenants.
In an effort to mitigate the interest rate risk associated with the Company's variable rate credit facilities, the Company utilizes interest rate and cross currency swap derivative instruments. Refer to Note 10 "Derivative Instruments" for further information.
32
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
15. LEASES
Operating Leases
The Company is committed under various operating lease agreements for real estate and property used in operations. Certain leases include various renewal options which are included in the lease term when the Company has determined it is reasonably certain of exercising the options. Certain of these leases include percentage rent payments based on property revenues and/or rent escalation provisions determined by increases in the consumer price index ("CPI"). These percentage rent and escalation provisions are treated as variable lease payments and recognized as lease expense in the period in which the obligation for those payments are incurred. Discount rates used to determine the present value of the lease payments are based on the Company's incremental borrowing rate commensurate with the term of the lease.
The Company had total operating lease liabilities of $1.37 billion and $1.20 billion as of September 30, 2024 and December 31, 2023, respectively, and right of use assets of $1.26 billion and $1.16 billion as of September 30, 2024 and December 31, 2023, respectively, which were included in the condensed consolidated balance sheets.
GLPI Leases
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 are leased under the terms of a master lease agreement (the "Master Lease") with GLPI. All GLPI leases are accounted for as operating leases within the provisions of ASC 842, Leases("ASC 842"), over the lease term or until a re-assessment event occurs. 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 minimum 1% annual escalation or greater escalation dependent on CPI. The renewal options are not reasonably certain of exercise as of September 30, 2024.
On January 3, 2023, the Company completed a transaction with GLP Capital, L.P ("GLP")., an affiliate of GLPI, related to the land and real estate assets of Bally's Tiverton and Hard Rock Biloxi for total consideration of $625.4 million. The transaction was structured as a tax-free capital contribution and a substantial portion of the proceeds was used to reduce the Company's debt. These properties were added to the Master Lease, increasing minimum annual payments by $48.5 million. During the nine months ended September 30, 2023, the Company recorded a gain of $374.3 million representing the difference in the transaction price and the derecognition of assets. This gain is reflected as "Loss (gain) on sale-leaseback, net" in the condensed consolidated statements of operations.
In addition to the properties under the Master Lease explained above, the Company leases land associated with Tropicana Las Vegas under a ground lease established with GLPI in 2022. This lease has an initial term of 50 years, with the possibility of extending up to 99 years through renewal options. Annual rent under the lease is $10.5 million, subject to minimum 1% annual escalation or greater escalation dependent on CPI. As of September 30, 2024, the renewal options are not considered reasonably certain to be exercised. During the third quarter, the Company modified the lease and GLPI paid $48.6 million to the Company to fund the demolition of the building at the Tropicana Las Vegas site in exchange for an increase in annual rent of $4.1 million, also subject to a minimum 1% annual increase or greater based on CPI. This lease modification did not change the lease classification. The cash received is treated as a lessor incentive, leading to an adjustment in the Right of Use asset for the total funding amount. Upon modification, the Lease Liability and Right of Use asset were adjusted to reflect the present value of the increased future lease payment.
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BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Components of lease expense, included within "General and administrative" in the condensed consolidated statements of operations, for operating leases during the three and nine months ended September 30, 2024 and 2023 are as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Operating leases:
Operating lease cost $ 38,847 $ 37,695 $ 113,135 $ 111,470
Variable lease cost 3,216 2,668 8,825 7,503
Operating lease expense 42,063 40,363 121,960 118,973
Short-term lease expense 5,950 3,642 17,438 9,753
Total lease expense $ 48,013 $ 44,005 $ 139,398 $ 128,726
Supplemental cash flow and other information related to operating leases for the three and nine months ended September 30, 2024 and 2023 are as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Cash paid for amounts included in the lease liability - operating cash flows from operating leases $ 33,686 $ 32,552 $ 98,191 $ 97,544
Right of use assets obtained in exchange for operating lease liabilities $ 192,085 $ 1,748 $ 192,716 $ 405,407
Derecognition of financing obligation $ (200,000) $ - $ (200,000) $ -
September 30, 2024
December 31, 2023
Weighted average remaining lease term 28.7 years 17.6 years
Weighted average discount rate 8.3 % 7.5 %
As of September 30, 2024, future minimum lease payments under noncancelable operating leases are as follows:
(in thousands) September 30, 2024
Remaining 2024 $ 45,280
2025 163,500
2026 163,310
2027 157,982
2028 160,063
Thereafter 3,476,622
Total lease payments 4,166,757
Less: present value discount (2,798,523)
Lease obligations $ 1,368,234
Future minimum lease payments disclosed in the table above include $87.7 million related to extension options that are reasonably certain of being exercised. The table above does not include $6.5 million of payments for leases signed but not yet commenced as of September 30, 2024.
34
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Financing Obligation
Bally's Chicago Operating Company, LLC., an indirect wholly-owned subsidiary of the Company, entered into a ground lease for the land on which Bally's Chicago will be built, which was accounted for as a financing obligation in accordance with ASC 470, Debt,as the transaction did not qualify as a sale under ASC 842. The lease commenced November 18, 2022 and had a 99-year term followed by ten separate 20-year renewals at the Company's option.
The Company recorded land within "Property and equipment, net" of $200.0 million with a corresponding liability within "Long-term portion of financing obligation" of $200.0 million on its condensed consolidated balance sheets as of December 31, 2023. All lease payments were recorded as interest expense and there was no reduction to the financing obligation. Bally's Chicago made cash payments, and recorded corresponding interest expense of $3.1 million and $4.3 million during the three months ended September 30, 2024 and 2023, respectively, and $12.4 million and $13.0 million during the nine months ended September 30, 2024 and 2023, respectively.
In the third quarter of 2024, GLP acquired the real estate underlying the Bally's Chicago project, for which the Company was subject to the financing obligation, and assumed the existing lease. The lease with GLP was amended in the third quarter, creating a lease modification event whereby the land components previously classified as a financing obligation were reassessed and now classified as an operating lease. This change was due to the transfer of control of the land asset from the Company to the lessor, which permitted sale recognition in accordance with ASC 842. As a result of this reassessment, the Company derecognized $350.0 million from "Property and equipment, net" related to the land asset and $200.0 million from the "Long-term portion of financing obligation" within our Condensed Consolidated Balance Sheets. As a result of the lease modification, a $150.0 million offset in "Loss (gain) on sale-leaseback, net" was recorded within the Condensed Consolidated Statements of Operations for the three and nine months ending September 30, 2024.
Pending Lease Transactions
On July 11, 2024, the Company entered into a Binding Term Sheet to form a strategic construction and financing arrangement with GLP, an affiliate of GLPI, which includes the funding to complete the construction of Bally's Chicago's 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 Chicago MLA includes annual rent of $20 million, subject to customary escalation provisions. The Chicago MLA also provides up to $940 million in construction financing, subject to conditions and approvals. The Company will pay additional rent under the Chicago MLA based on a 8.5% capitalization rate on funded amounts. The initial lease term for the Chicago MLA is 15 years with renewal options to be agreed upon by the parties.
The Company will also sell and lease back from GLP its properties in Kansas City and Shreveport for $395 million, with initial annual rent of $32.2 million, subject to escalation. In addition, the Company plans to sell and lease back its Bally's Twin River property to GLP by the end of 2026 for $735 million, with initial annual rent of $58.8 million. GLP has the right to call this transaction starting October 2026. All such transactions are subject to required regulatory approvals.
Lessor
The Company leases its hotel rooms to patrons and records the corresponding lessor revenue in Non-gaming revenuewithin our condensed consolidated statements of operations. The Company had lessor revenues related to the rental of hotel rooms of $41.7 million and $56.7 million for the three months ended September 30, 2024 and 2023, respectively, and $118.0 million and $155.5 million for the nine months ended September 30, 2024 and 2023, respectively. Hotel leasing arrangements vary in duration, but are short-term in nature.
35
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
16. STOCKHOLDERS' EQUITY
Capital Return Program
The Company has a Board of Directors approved capital return program under which the Company may expend a total of up to $700 million for share repurchases and payment of dividends. 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. The amount, timing and terms of any return of capital transaction will be determined based on prevailing market conditions and other factors. There is no fixed time period to complete share repurchases. As of September 30, 2024 and December 31, 2023, $95.5 million was available for use under the capital return program.
There was no share repurchase activity during the three and nine months ended September 30, 2024 and the three months ended September 30, 2023. Total share repurchase activity during the nine months ended September 30, 2023 was as follows:
(in thousands, except share and per share data) Nine Months Ended
September 30, 2023
Number of common shares repurchased 1,774,845
Total cost $ 30,458
Average cost per share, including commissions $ 17.16
All shares repurchased during the nine months ended September 30, 2023 were transferred to treasury stock and 40,451 and 1,778,916 shares were retired during those same periods, respectively. The shares were returned to the status of authorized but unissued. As of September 30, 2024, there were no shares remaining in treasury.
There were no cash dividends paid during the three and nine months ended September 30, 2024 and 2023.
Common Stock Offering
On April 20, 2021, the Company issued a total of 12,650,000 shares of Bally's common stock in an underwritten public offering at a price to the public of $55.00 per share. Net proceeds from the offering were approximately $671.4 million, after deducting underwriting discounts, but before expenses.
On April 20, 2021, the Company issued to affiliates of Sinclair a warrant to purchase 909,090 common shares for an aggregate purchase price of $50.0 million, or $55.00 per share. The net proceeds were used to finance a portion of the purchase price of the Gamesys acquisition. The exercise price of the warrant is nominal and its exercise is subject to, among other conditions, requisite gaming authority approvals. Sinclair agreed not to acquire more than 4.9% of Bally's outstanding common shares without such approvals. In addition, in accordance with the agreements that Bally's and Sinclair entered into in November 2020, Sinclair exchanged 2,086,908 common shares for substantially identical warrants.
Preferred Stock
The Company has authorized the issuance of up to 10 million shares of $0.01 par value preferred stock. As of September 30, 2024 and December 31, 2023, no shares of preferred stock have been issued.
36
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Shares Outstanding
As of September 30, 2024, the Company had 40,653,346 common shares issued and outstanding. The Company issued warrants, options and other contingent consideration in acquisitions and strategic partnerships that are expected to result in the issuance of common shares in future periods resulting from the exercise of warrants and options or the achievement of certain performance targets. These incremental shares are summarized below:
Sinclair Penny Warrants (Note 2)
7,911,724
Sinclair Performance Warrants (Note 2)
3,279,337
Sinclair Options(1)(Note 2)
1,639,669
MKF penny warrants (Note 11)
44,128
Telescope contingent shares (Note 11)
8,626
Outstanding awards under Equity Incentive Plans 1,594,249
14,477,733
__________________________________
(1) Consists of four equal tranches to purchase shares with exercise prices ranging from $30.00 to $45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing of the Framework Agreement.
37
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Accumulated Other Comprehensive Income (Loss)
The following tables reflect the changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2024 and 2023, respectively:
(in thousands) Foreign Currency Translation Adjustment Benefit Plans
Cash Flow Hedges(1)
Net Investment Hedges Total
Accumulated other comprehensive (loss) income at December 31, 2023
$ (177,203) $ 886 $ (11,246) $ (21,995) $ (209,558)
Other comprehensive income (loss) before reclassifications 103,342 - (26,507) (16,153) 60,682
Reclassifications from accumulated other comprehensive income (loss) to earnings - - (9,678) (3,170) (12,848)
Tax effect - - 8,805 12,674 21,479
Accumulated other comprehensive (loss) income at September 30, 2024
$ (73,861) $ 886 $ (38,626) $ (28,644) $ (140,245)
__________________________________
(1) As of September 30, 2024, approximately $6.8 million of existing gains and losses are estimated to be reclassified into earnings within the next 12 months.
(in thousands) Foreign Currency Translation Adjustment Benefit Plans Cash Flow Hedges Net Investment Hedges Total
Accumulated other comprehensive (loss) income at December 31, 2022
$ (295,984) $ 344 $ - $ - $ (295,640)
Other comprehensive income (loss) before reclassifications 1,532 - 3,970 675 6,177
Reclassifications from accumulated other comprehensive income (loss) to earnings - - (443) (388) (831)
Tax effect - - (934) (76) (1,010)
Accumulated other comprehensive (loss) income at September 30, 2023
$ (294,452) $ 344 $ 2,593 $ 211 $ (291,304)
17. COMMITMENTS AND CONTINGENCIES
Litigation
Diamond commenced reorganization proceedings under Chapter 11 of the Bankruptcy Code in March 2023. In July 2023, Diamond commenced litigation against Sinclair, Bally's and others as part of its bankruptcy proceedings, challenging a series of transactions between Sinclair and Diamond. One of the 19 counts in the complaint includes Bally's as a defendant, alleging that the Commercial Agreement with Sinclair involved fraudulent transfers and unlawful distributions. In the first quarter of 2024, Diamond agreed to settle these claims against all defendants, including Bally's. Under the settlement terms, Diamond would receive payments from Sinclair and would reject the Commercial Agreement. Bally's would continue to have naming rights on Diamond's RSNs through the 2024 major league baseball season at no cost to either party (unless Diamond agrees with a new counterparty that will pay for such naming rights). Bally's, in turn, would receive a release of all claims Diamond may have against it. Bally's obligation to pay Diamond for the naming rights terminated upon the bankruptcy court's approval of the settlement terms, which the court approved on March 1, 2024, and the Company derecognized the rights fees liability against the non-cash liability established at December 31, 2023. Bally's has recorded a $202.6 million non-cash liability to reflect the effect of the termination of naming rights on its remaining commercial rights intangible asset originally recorded at the time that the arrangement was agreed, which will occur in the fourth quarter of 2024.
38
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The Company is a party to other various legal and administrative proceedings which have arisen in the ordinary course of its business. Estimated losses are accrued for these proceedings when the loss is probable and can be estimated. The current liability for the estimated losses associated with these proceedings is not material to the Company's consolidated financial condition and those estimated losses are not expected to have a material impact on results of operations. Although the Company maintains what it believes is adequate insurance coverage to mitigate the risk of loss pertaining to covered matters, legal and administrative proceedings can be costly, time-consuming and unpredictable.
Although no assurance can be given, the Company does not believe that the final outcome of these matters, including costs to defend itself in such matters, will have a material adverse effect on the company's condensed consolidated financial statements. Further, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters.
Capital Expenditure Commitments
Bally's Atlantic City- As part of the regulatory approval process with the State of New Jersey, the Company committed to spend $100 million in capital expenditures over a five year period to invest in and improve the property. The commitment calls for expenditures of no less than $85 million in aggregate by 2023. The remaining $15 million of committed capital must be spent over 2024 and 2025. From 2021 through 2025, no less than $35 million must be invested in the hotel and no less than $65 million must be invested in non-hotel projects. As of September 30, 2024, all investment requirements had been met and no commitment to invest in non-hotel projects remains.
Bally's Twin River- Pursuant to the terms of the Regulatory Agreement in Rhode Island, the Company is committed to invest $100 million in its Rhode Island properties over the term of the master contract through June 30, 2043, including an expansion and the addition of new amenities at Bally's Twin River. As of September 30, 2024, approximately $48.2 million of the commitment remains.
Bally's Chicago- Pursuant to the Host Community Agreement with the City of Chicago, the Company's indirect subsidiary is required to spend at least $1.34 billion on the design, construction and outfitting of the temporary casino and the permanent resort and casino. The actual cost of the development may exceed this minimum capital investment requirement. In addition, land acquisition costs and financing costs, among other types of costs, are not counted toward meeting this requirement.
City of Chicago Guaranty
In connection with the Host Community Agreement, entered into by Bally's Chicago Operating Company, LLC (the "Developer"), a wholly-owned indirect subsidiary of the Company, the Company provided the City of Chicago with a performance guaranty whereby the Company agreed to have and maintain available financial resources in an amount reasonably sufficient to allow the Developer to complete its obligations under the host community agreement. In addition, upon notice from the City of Chicago that the Developer has failed to perform various obligations under the host community agreement, the Company has agreed to indemnify the City of Chicago against any and all liability, claim or reasonable and documented expense the City of Chicago may suffer or incur by reason of any nonperformance of any of the Developer's obligations.
Bally's Chicago Casino Fees
Under the Illinois Gambling Act, the Company will be responsible to pay the Illinois Gaming Board a reconciliation fee payment three years after the date operations commenced (in a temporary or permanent facility) in an amount equal to 75% of the adjusted gross receipt ("AGR") for the most lucrative 12-month period of operations, minus the amount equal to the initial payment per gaming position paid.
Sponsorship Commitments
As of September 30, 2024, the Company has entered into multiple sponsorship agreements with various professional sports leagues and teams. These agreements commit a total of $129.8 million through 2037 and grant the Company rights to use official league marks for branding and promotions, among other benefits.
39
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Interactive Technology Commitments
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 September 30, 2024, the cumulative minimum obligation committed in these agreements is approximately $54.7 million through 2029.
18. SEGMENT REPORTING
The Company has three operating and reportable segments: Casinos & Resorts, International Interactive and North America Interactive. The "Other" category includes interest expense for the Company and certain unallocated corporate operating expenses and other adjustments, including eliminations of transactions among segments to reconcile to the Company's consolidated results including, among other expenses, share-based compensation, acquisition and other transaction costs and certain non-recurring charges.
The Company's three reportable segments as of September 30, 2024 are:
Casinos & Resorts- Includes the Company's 15 casino and resort properties, one horse racetrack and one golf course.
International Interactive- Gamesys' European and Asian operations.
North America Interactive- A portfolio of sports betting, iGaming, and free-to-play gaming brands, and the North American operations of Gamesys.
As of September 30, 2024, the Company's operations were predominately in the US, Europe and Asia with a less substantive footprint in other countries world-wide. For geographical reporting purposes, revenue generated outside of the US has been aggregated into the International Interactive reporting segment, and consists primarily of revenue from the UK and Japan. Revenue generated from the UK and Japan represented approximately 28% and 6% of total revenue, respectively, for the three months ended September 30, 2024, approximately 25% and 11%, respectively, for the three months ended September 30, 2023, approximately 27% and 8%, respectively, for the nine months ended September 30, 2024, and approximately 25% and 11%, respectively, for the nine months ended September 30, 2023. The Company does not have any revenues from any individual customers that exceed 10% of total reported revenues.
Beginning in the third quarter of 2023, the Company updated its measure of segment performance to Adjusted EBITDAR (defined below) from Adjusted EBITDA. The prior year results presented below were reclassified to conform to the new segment presentation. Management believes segment Adjusted EBITDAR is representative of its ongoing business operations including its ability to service debt and to fund capital expenditures, acquisitions and operations, in addition to it being a commonly used measure of performance in the gaming industry and used by industry analysts to evaluate operations and operating performance.
The following table sets forth revenue and Adjusted EBITDAR for the Company's three reportable segments and reconciles Adjusted EBITDAR on a consolidated basis to net (loss) income. The Other category is included in the following tables in order to reconcile the segment information to the Company's condensed consolidated financial statements.
40
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Revenue
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(1)
Casinos & Resorts $ 100,442 $ 118,184 $ 289,661 $ 334,312
International Interactive 90,030 85,477 254,854 250,352
North America Interactive (10,976) (17,561) (27,891) (45,809)
Other (13,163) (12,883) (40,377) (46,687)
Total 166,333 173,217 476,247 492,168
Operating (expense) income
Rent expense associated with triple net operating leases(2)
(28,602) (31,594) (88,575) (94,152)
Depreciation and amortization (77,800) (77,487) (316,328) (231,235)
Transaction costs (19,788) (20,953) (39,123) (59,405)
Restructuring 1,068 (411) (17,921) (20,673)
Tropicana Las Vegas demolition costs (19,643) - (31,904) -
Share-based compensation (4,099) (6,257) (11,629) (18,587)
(Loss) gain on sale-leaseback, net (150,000) - (150,000) 374,321
Impairment charges - - (12,757) (9,653)
Merger Agreement costs(3)
(9,802) - (11,791) -
Payment Service Provider write-off(4)
(6,333) - (6,333) -
Other (8,989) 721 (15,923) (12,834)
Income (loss) from operations (157,655) 37,236 (226,037) 419,950
Other (expense) income
Interest expense, net of interest income (73,975) (70,630) (221,306) (200,987)
Other (49,854) 15,528 (38,370) 24,949
Total other expense, net (123,829) (55,102) (259,676) (176,038)
(Loss) income before income taxes (281,484) (17,866) (485,713) 243,912
(Benefit) provision for income taxes 33,629 (43,936) 3,748 (153,029)
Net (loss) income $ (247,855) $ (61,802) $ (481,965) $ 90,883
__________________________________
(1) Adjusted EBITDAR is defined as earnings, or loss, for the Company before interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating (income) expense, acquisition, integration and restructuring expense, share-based compensation, and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments, plus rent expense associated with triple net operating leases. Adjusted EBITDAR should not be construed as an alternative to GAAP net income, its most directly comparable GAAP measure, nor is it directly comparable to similarly titled measures presented by other companies.
(2) Consists primarily of the operating lease components contained within certain triple net leases with GLPI. Refer to Note 15 "Leases" for further information.
(3) Costs incurred in connection with the Merger Agreement discussed in Note 1 "General Information."
(4) 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.
41
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2024 2023 2024 2023
Capital Expenditures
Casinos & Resorts $ 20,768 $ 40,206 $ 44,973 $ 99,908
International Interactive 86 457 444 2,114
North America Interactive 886 79 1,575 1,637
Other(1)
70,576 105,943 108,765 162,572
Total $ 92,316 $ 146,685 $ 155,757 $ 266,231
__________________________________
(1) Includes $70.3 million and $108.3 million related to our future Bally's Chicago permanent facility during the three and nine months ended September 30, 2024, respectively.
Total assets are not regularly reviewed for each operating segment when assessing segment performance or allocating resources and accordingly, are not presented.
As of September 30, 2024 and December 31, 2023, carrying values of goodwill by reportable segment are as follows:
(in thousands) September 30, 2024 December 31, 2023
Goodwill
Casinos & Resorts(1)
$ 313,285 $ 313,493
International Interactive 1,644,774 1,586,590
North America Interactive(2)
35,750 35,720
Total(3)
$ 1,993,809 $ 1,935,803
__________________________________
(1) Net of accumulated goodwill impairment charges of $5.4 million.
(2) Net of accumulated goodwill impairment charges of $140.4 million
(3) The effect of foreign exchange on the change in total goodwill from December 31, 2023 was $58.2 million.
19. EARNINGS (LOSS) PER SHARE
Diluted earnings per share includes the determinants of basic earnings per share and, in addition, reflects the dilutive effect of the common stock deliverable for stock options, using the treasury stock method, and for RSUs, RSAs and PSUs for which future service is required as a condition to the delivery of the underlying common stock.
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands, except per share data) 2024 2023 2024 2023
Net (loss) income applicable to common stockholders
$ (247,855) $ (61,802) $ (481,965) $ 90,883
Weighted average common shares outstanding, basic 48,596 53,580 48,405 53,961
Weighted average effect of dilutive securities - - - 315
Weighted average common shares outstanding, diluted 48,596 53,580 48,405 54,276
Basic (loss) earnings per share $ (5.10) $ (1.15) $ (9.96) $ 1.68
Diluted (loss) earnings per share $ (5.10) $ (1.15) $ (9.96) $ 1.67
There were 4,927,900 and 5,152,994 share-based awards that were considered anti-dilutive for the three months ended September 30, 2024 and 2023, respectively, and 5,108,453 and 5,235,978 share-based awards that were considered anti-dilutive for the nine months ended September 30, 2024 and 2023, respectively.
42
BALLY'S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
On November 18, 2020, the Company issued Penny Warrants, Performance Warrants and Options which participate in dividends with the Company's common stock subject to certain contingencies. In the period in which the contingencies are met, those instruments are participating securities to which income will be allocated using the two-class method. The Performance Warrants and Options do not participate in net losses. The Penny Warrants were considered exercisable for little to no consideration and are therefore included in basic shares outstanding at their issuance date. For the three and nine months ended September 30, 2024 and 2023, the shares underlying the Performance Warrants were anti-dilutive as certain contingencies were not met. Refer to Note 2 "Summary of Significant Accounting Policies" for further information regarding the Framework Agreement.
20. SUBSEQUENT EVENTS
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 gain or loss on sale 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the securities laws. Forward-looking statements are statements as to matters that are not historical facts, and include statements about our plans, objectives, expectations and intentions.
Forward-looking statements are not guarantees and are subject to risks and uncertainties. Forward-looking statements are based on our current expectations and assumptions. Although we believe that our expectations and assumptions are reasonable at this time, they should not be regarded as representations that our expectations will be achieved. Actual results may vary materially. Forward-looking statements speak only as of the time of this report and we do not undertake to update or revise them as more information becomes available, except as required by law.
Important factors beyond those that apply to most businesses, some of which are beyond our control, that could cause actual results to differ materially from our expectations and assumptions include:
•risks related to the Mergers, including:
◦the timing, receipt and terms and conditions of any required governmental or regulatory approvals of the Mergers;
◦the ability of the parties to satisfy the conditions precedent and consummate the proposed Mergers;
◦the timing of the consummation of the proposed Mergers;
◦the ability of the parties to secure any required stockholder approval in a timely manner or on the terms desired or anticipated;
◦failure of the parties to obtain the financing required to consummate the company merger;
◦the ability to achieve anticipated benefits and savings expected from the proposed Mergers;
◦risks related to the potential disruption of management's attention from our ongoing business operations due to the pending Mergers; and
◦the outcome of any legal proceedings related to the proposed Mergers.
•unexpected costs, difficulties integrating and other events impacting our completed acquisitions and our ability to realize anticipated benefits;
•risks associated with our rapid growth, including those affecting customer and employee retention, integration and controls;
•risks associated with the impact of the digitalization of gaming on our casino operations, our expansion into sports betting and iGaming and the highly competitive and rapidly changing aspects of our businesses generally;
•the very substantial regulatory restrictions applicable to us, including costs of compliance;
•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; and
•other risks identified in Part I. Item 1A. "Risk Factors" of Bally's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on March 15, 2024 and other filings with the SEC.
The foregoing list of important factors is not exclusive and does not include matters like changes in general economic conditions that affect substantially all gaming businesses.
You should not place undue reliance on our forward-looking statements.
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Overview
We are a global gaming, hospitality and entertainment company with a portfolio of casinos and resorts and online gaming businesses. 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 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. In 2021, we acquired London-based Gamesys Group Ltd. ("Gamesys") to expand our geographical and product footprints to include an iGaming business with well-known brands providing iCasino and online bingo experiences to our global online customer base with concentrations in Europe and Asia and a growing presence in North America. Our revenues are primarily generated by these gaming and entertainment offerings. Our proprietary software and technology stack is designed to allow us to provide consumers with differentiated offerings and exclusive content.
Our Strategy and Business Developments
We seek to continue to grow our business by actively pursuing the acquisition and development of new gaming opportunities and reinvesting in our existing operations. We believe that interactive gaming represents a significant strategic opportunity for the future growth of Bally's and we will continue to actively focus resources in markets that we believe will regulate iGaming. We seek to increase revenues at our casinos and resorts through enhancing the guest experience by providing popular games, restaurants, hotel accommodations, entertainment and other amenities in attractive surroundings with high-quality guest service. We believe that our recent acquisitions have expanded and diversified us from financial and market exposure perspectives, while continuing to mitigate our susceptibility to regional economic downturns, idiosyncratic regulatory changes and increases in regional competition.
We continue to make progress on the integration of our acquired assets and deploying capital on our strategic growth projects. These steps have positioned us as a prominent, full-service, vertically integrated iGaming company, with physical casinos and online gaming solutions united under a single, leading brand.
Agreement and Plan of 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.
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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
Our business is organized into three reportable segments: (i) Casinos & Resorts, (ii) International Interactive, and (iii) North America Interactive.
Casinos & Resorts- includes our 15 land-based casino properties, one horse racetrack and one golf course:
Property Name Location
Bally's Atlantic City Casino Resort ("Bally's Atlantic City") Atlantic City, New Jersey
Bally's Black Hawk(1)(2)
Black Hawk, Colorado
Bally's Chicago Casino ("Bally's Chicago")(2)(3)
Chicago, Illinois
Bally's Dover Casino Resort ("Bally's Dover")(2)
Dover, Delaware
Bally's Evansville Casino & Hotel ("Bally's Evansville")(2)
Evansville, Indiana
Bally's Kansas City Casino ("Bally's Kansas City")
Kansas City, Missouri
Bally's Lake Tahoe Casino Resort ("Bally's Lake Tahoe") Lake Tahoe, Nevada
Bally's Quad Cities Casino & Hotel ("Bally's Quad Cities")(2)
Rock Island, Illinois
Bally's Shreveport Casino & Hotel ("Bally's Shreveport") Shreveport, Louisiana
Bally's Tiverton Casino & Hotel ("Bally's Tiverton")(2)
Tiverton, Rhode Island
Bally's Twin River Lincoln Casino Resort ("Bally's Twin River") Lincoln, Rhode Island
Bally's Vicksburg Casino ("Bally's Vicksburg") Vicksburg, Mississippi
Hard Rock Hotel & Casino Biloxi ("Hard Rock Biloxi")(2)
Biloxi, Mississippi
Bally's Arapahoe Park Aurora, Colorado
Bally's Golf Links at Ferry Point ("Bally's Golf Links") Bronx, New York
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(1) Consists of three casino properties: Bally's Black Hawk North Casino, Bally's Black Hawk West Casino and Bally's Black Hawk East Casino.
(2) Properties leased from Gaming and Leisure Properties, Inc. ("GLPI"). Refer to Note 15 "Leases" for further information.
(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.
North America Interactive- includes the following North America businesses:
•Bally's Interactive, primarily a B2C online iGaming and online sportsbook operator; and
•Consumer facing service and marketing engines, including SportCaller, a business-to-business ("B2B") and F2P game provider for sports betting companies; Live at the Bike, an online subscription streaming service featuring livestream and on-demand poker videos and podcasts; an investment in the Association of Volleyball Professionals ("AVP"), a professional beach volleyball organization and host of the longest-running domestic beach volleyball tour; and an investment in Watch Stadium, a content distribution channel focused on sporting events.
The North America Interactive reportable segment also includes the North American operations of Gamesys.
Refer to Note 18 "Segment Reporting" to our condensed consolidated financial statements for additional information on our segment reporting structure.
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Rhode Island Regulatory Agreement
We are party to an Amended and Restated Regulatory Agreement (the "Regulatory Agreement"), with the Rhode Island Department of Business Regulation ("DBR") and the State Lottery Division of the Rhode Island Department of Revenue ("DoL"). The Regulatory Agreement contains financial and other covenants that, among other things, (i) restrict the acquisition of stock and other financial interests in us, (ii) relate to the licensing and composition of members of our management and Board of Directors (the "Board"), (iii) prohibit certain competitive activities and related-party transactions and (iv) restrict our ability to declare or make restricted payments (including dividends), incur additional indebtedness or take certain other actions, if our leverage ratio exceeds 5.50 to 1.00 (in general being gross debt divided by Adjusted EBITDA, each as defined in the Regulatory Agreement).
The Regulatory Agreement also provides affirmative obligations, including setting a minimum number of employees that we must employ in Rhode Island and providing the DBR and DoL with periodic information updates about us. Among other things, the Regulatory Agreement prohibits us and our subsidiaries from owning, operating, managing or providing gaming specific goods and services to any properties in Rhode Island (other than Bally's Twin River and Bally's Tiverton), Massachusetts, Connecticut or New Hampshire. A failure to comply with the Regulatory Agreement could subject us to injunctive or monetary relief, payments to the Rhode Island regulatory agencies and ultimately the revocation or suspension of our licenses to operate in Rhode Island.
In addition, our master contracts with Rhode Island extended through June 30, 2043, and allow for consolidation of promotional points between Bally's Twin River and Bally's Tiverton, obligate Bally's Twin River to build a 50,000 square foot expansion, obligate Bally's to lease at least 20,000 square feet of commercial space in Providence, and commit us to invest $100 million in Rhode Island over the term, including an expansion and the addition of new amenities at Bally's Twin River. As a licensed Technology Provider since July 1, 2021, Bally's Twin River is entitled to an additional share of net terminal income on Video Lottery Terminals ("VLTs") which they owned or leased. June 2021 legislation in Rhode Island also authorized a joint venture between Bally's and IGT Global Solutions Corporation ("IGT") to become a licensed technology provider and supply the State of Rhode Island with all VLTs at both Bally's Twin River and Bally's Tiverton for a 20.5-year period starting January 1, 2023. The joint venture was organized as the Rhode Island VLT Company, LLC, with IGT owning 60% of the membership interests and Bally's or its affiliates owning 40% of the membership interests ("RI Joint Venture"). On December 30, 2022, Bally's Twin River and Bally's Tiverton purchased additional machines directly from IGT to effectively own 40% of the machines. On January 1, 2023, Bally's Twin River and Bally's Tiverton contributed all of their machines to the RI Joint Venture in return for an aggregate 40% membership interest, and IGT contributed all of their machines at Bally's Twin River and Bally's Tiverton to the RI Joint Venture in return for a 60% membership interest.
Macroeconomic and Other Factors
Our business is subject to risks caused by global economic challenges, including those caused by public health crises such as the COVID-19 pandemic, the impact of global and regional conflicts, rising inflation, rising interest rates and supply-chain disruptions, that can cause economic uncertainty and volatility. These challenges can negatively impact discretionary consumer spending and could result in a reduction in visitors to our properties, including those that stay in our hotels, or discretionary spending by our customers on entertainment and leisure activities. In addition, inflation generally affects our business by increasing our cost of labor. In periods of sustained inflation, it may be difficult to effectively control such increases to our costs and retain key personnel.
Key Performance Indicators
The key performance indicator used in managing our business is consolidated Adjusted EBITDA and segment Adjusted EBITDAR which are non-GAAP measures. Adjusted EBITDA is defined as earnings, or loss, for the Company, or where noted its reporting segments, before, in each case, interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating (income) expense, acquisition and other transaction related costs, share-based compensation and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments. Segment Adjusted EBITDAR is Adjusted EBITDA (as defined above) for the Company's reportable segments, plus rent expense associated with triple net operating leases with GLPI for the real estate assets used in the operation of the Bally's casinos and the assumption of the lease for real estate and land underlying the operations of the Bally's Lake Tahoe property.
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We use consolidated Adjusted EBITDA and segment Adjusted EBITDAR to analyze the performance of our business and they are used as determining factors for performance-based compensation for members of our management team. We use consolidated Adjusted EBITDA and segment Adjusted EBITDAR when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a more fulsome understanding of our core operating results and as a means to evaluate period-to-period performance. Also, we present consolidated Adjusted EBITDA and segment Adjusted EBITDAR because they are used by some investors and creditors as indicators of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations. These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare operating performance and value companies within our industry. Consolidated Adjusted EBITDA and segment Adjusted EBITDAR information is presented because management believes that they are commonly used measures of performance in the gaming industry and that they are considered by many to be key indicators of our operating results.
Consolidated Adjusted EBITDAR is used outside of our financial statements solely as a valuation metric. Consolidated Adjusted EBITDAR is defined as consolidated Adjusted EBITDA plus rent expense associated with triple net operating leases. Consolidated Adjusted EBITDAR is an additional metric used by analysts in valuing gaming companies subject to triple net leases since it eliminates the effects of variability in leasing methods and capital structures. This metric is included as supplemental disclosure because (i) we believe Consolidated Adjusted EBITDAR is used by gaming operator analysts and investors to determine the equity value of gaming operators and (ii) financial analysts refer to Consolidated Adjusted EBITDAR when valuing our business. We believe Consolidated Adjusted EBITDAR is useful for equity valuation purposes because (i) its calculation isolates the effects of financing real estate, and (ii) using a multiple of Consolidated Adjusted EBITDAR to calculate enterprise value allows for an adjustment to the balance sheet to recognize estimated liabilities arising from operating leases related to real estate.
Consolidated Adjusted EBITDA and segment Adjusted EBITDAR should not be construed as alternatives to net income, the most directly comparable GAAP measure, as indicators of our performance. In addition, consolidated Adjusted EBITDA and segment Adjusted EBITDAR as used by us may not be defined in the same manner as other companies in our industry, and, as a result, may not be comparable to similarly titled non-GAAP financial measures of other companies. 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.
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 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
(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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The following table presents, for the periods indicated, certain income and expense items expressed as a percentage of total revenue:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2024 2023 2024 2023
Total revenue 100.0 % 100.0 % 100.0 % 100.0 %
Gaming and non-gaming expenses 45.4 % 45.4 % 45.7 % 45.1 %
General and administrative 43.4 % 36.5 % 41.4 % 39.8 %
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 %
(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 (expense) income, net (7.9) % 2.5 % (2.1) % 1.4 %
Total other expense, net (19.7) % (8.7) % (13.9) % (9.6) %
(Loss) income before income taxes (44.7) % (2.8) % (26.0) % 13.3 %
(Benefit) provision for income taxes (5.3) % 6.9 % (0.2) % 8.3 %
Net (loss) income (39.3) % (9.8) % (25.8) % 4.9 %
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Note: Amounts in table may not subtotal due to rounding.
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Segment Performance
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
Revenue:
Gaming
Casinos & Resorts $ 256,234 $ 245,687 $ 10,547 $ 762,197 $ 709,812 $ 52,385
International Interactive 228,693 240,577 (11,884) 687,109 720,925 (33,816)
North America Interactive 38,979 22,631 16,348 115,408 58,349 57,059
Total Gaming revenue 523,906 508,895 15,011 1,564,714 1,489,086 75,628
Non-gaming
Casinos & Resorts 97,124 113,339 (16,215) 276,541 311,162 (34,621)
International Interactive 2,244 3,307 (1,063) 7,907 16,305 (8,398)
North America Interactive 6,700 6,936 (236) 20,951 20,850 101
Total Non-gaming revenue 106,068 123,582 (17,514) 305,399 348,317 (42,918)
Total revenue $ 629,974 $ 632,477 $ (2,503) $ 1,870,113 $ 1,837,403 $ 32,710
Operating costs and expenses:
Gaming
Casinos & Resorts $ 95,453 $ 84,715 $ 10,738 $ 284,695 $ 247,065 $ 37,630
International Interactive 100,700 115,751 (15,051) 312,039 352,229 (40,190)
North America Interactive 38,755 28,665 10,090 110,488 66,437 44,051
Total Gaming expenses 234,908 229,131 5,777 707,222 665,731 41,491
Non-gaming
Casinos & Resorts 46,088 52,011 (5,923) 134,674 144,556 (9,882)
International Interactive 1,393 2,483 (1,090) 5,095 9,393 (4,298)
North America Interactive 3,847 3,547 300 8,383 8,712 (329)
Total Non-gaming expenses 51,328 58,041 (6,713) 148,152 162,661 (14,509)
General and administrative
Casinos & Resorts 167,281 133,620 33,661 489,372 391,620 97,752
International Interactive 40,419 40,584 (165) 136,903 146,981 (10,078)
North America Interactive 20,786 16,470 4,316 51,795 76,867 (25,072)
Other 45,107 39,908 5,199 96,378 116,679 (20,301)
Total General and administrative $ 273,593 $ 230,582 $ 43,011 $ 774,448 $ 732,147 $ 42,301
Margins:
Gaming expenses as a percentage of Gaming revenue 45 % 45 % 45 % 45 %
Non-gaming expenses as a percentage of Non-gaming revenue 48 % 47 % 49 % 47 %
General and administrative as a percentage of Total revenue 43 % 36 % 41 % 40 %
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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 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
Gaming $ 523,906 $ 508,895 $ 15,011 2.9 % $ 1,564,714 $ 1,489,086 $ 75,628 5.1 %
Hotel 41,672 56,728 (15,056) (26.5) % 118,026 155,451 (37,425) (24.1) %
Food and beverage 35,403 39,438 (4,035) (10.2) % 103,478 108,270 (4,792) (4.4) %
Retail, entertainment and other 28,993 27,416 1,577 5.8 % 83,895 84,596 (701) (0.8) %
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 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 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 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 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.
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Income (Loss) From Operations
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 $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 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. The EU effective dates are January 1, 2024 and January 1, 2025, for different aspects of the directive. A significant number of other countries are also implementing similar legislation. The estimated impact of this directive is immaterial to the Company's consolidated financial statements in the current year.
Net Income (Loss) and Earnings (Loss) Per Share
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 $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.
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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.
The following table presents segment Adjusted EBITDAR, which is our reportable segment GAAP measure and our primary measure for profit or loss for our reportable segments, and consolidated Adjusted EBITDA. The following table reconciles consolidated Adjusted EBITDA, which is a non-GAAP measure, to net income (loss), as derived from our financial statements (in thousands):
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Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Revenue
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
Casinos & Resorts $ 100,442 $ 118,184 $ 289,661 $ 334,312
International Interactive 90,030 85,477 254,854 250,352
North America Interactive (10,976) (17,561) (27,891) (45,809)
Other (13,163) (12,883) (40,377) (46,687)
Total 166,333 173,217 476,247 492,168
Rent expense associated with triple net operating leases(1)
(28,602) (31,594) (88,575) (94,152)
Adjusted EBITDA 137,731 141,623 387,672 398,016
Interest expense, net of interest income (73,975) (70,630) (221,306) (200,987)
Benefit (provision) for income taxes 33,629 (43,936) 3,748 (153,029)
Depreciation and amortization (77,800) (77,487) (316,328) (231,235)
Non-operating (income) expense(2)
(22,122) 4,276 (19,992) 13,528
Foreign exchange (loss) gain (30,246) 8,459 (26,447) 2,512
Transaction costs(3)
(19,788) (20,953) (39,123) (59,405)
Restructuring charges(4)
1,068 (411) (17,921) (20,673)
Tropicana Las Vegas demolition costs(5)
(19,643) - (31,904) -
Decommissioning costs(6)
- - - (2,343)
Share-based compensation (4,099) (6,257) (11,629) (18,587)
(Loss) gain on sale-leaseback, net(7)
(150,000) - (150,000) 374,321
Planned business divestiture(8)
- (35) - (2,089)
Impairment charges(9)
- - (12,757) (9,653)
Merger Agreement costs(10)
(9,802) - (11,791) -
Payment Service Provider write-off (11)
(6,333) - (6,333) -
Other(12)
(6,475) 3,549 (7,854) 507
Net (loss) income $ (247,855) $ (61,802) $ (481,965) $ 90,883
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(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, 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.
(5) Demolition costs associated with the Tropicana Las Vegas property which is part of the plan to redevelop the site with a state-of-the-art integrated resort and ballpark. 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.
(6) Costs related to the decommissioning of the Company's sports betting platform in favor of outsourcing the platform solution to third parties.
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(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: (i) non-routine legal expenses and settlement charges for matters outside the normal course of business, (ii) insurance and business interruption recoveries, and (iii) other individually de minimis expenses.
Critical Accounting Estimates
There were no material changes in critical accounting estimates during the period covered by this Quarterly Report on Form 10-Q. Refer to Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for a complete list of our Critical Accounting Estimates.
Recent Accounting Pronouncements
Refer to Note 4 "Recently Issued Accounting Pronouncements" in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that affect us.
Liquidity and Capital Resources
Overview
We are a holding company. Our ability to fund our obligations depends on existing cash on hand, cash flow from our subsidiaries and our ability to raise capital. Our primary sources of liquidity and capital resources have been cash on hand, cash flow from operations, borrowings under our Revolving Credit Facility (as defined herein) and proceeds from the issuance of debt and equity securities. We assess liquidity in terms of the ability to generate cash or obtain financing in order to fund operating, investing and debt service requirements. Our primary ongoing cash requirements include the funding of operations, capital expenditures, acquisitions and other investments in line with our business strategy and debt repayment obligations and interest payments. Our strategy has been to maintain moderate leverage and substantial capital resources in order to take advantage of opportunities, to invest in our businesses and acquire properties at what we believe to be attractive valuations. As such, we have continued to invest in our land-based casino business and build on our interactive/iGaming gaming business. We believe that existing cash balances, operating cash flows and availability under our Revolving Credit Facility, as explained below, will be sufficient to meet funding needs for operating, capital expenditure and debt service purposes.
Cash Flows Summary
Nine Months Ended September 30,
(in thousands) 2024 2023
Net cash provided by operating activities $ 76,178 $ 118,359
Net cash used in investing activities (191,081) (2,247)
Net cash provided by (used in) financing activities 75,708 (79,560)
Effect of foreign currency on cash and cash equivalents 4,472 (2,251)
Change in cash and cash equivalents and restricted cash held for sale - (1,648)
Net change in cash and cash equivalents and restricted cash (34,723) 32,653
Cash and cash equivalents and restricted cash, beginning of period 315,262 265,184
Cash and cash equivalents and restricted cash, end of period $ 280,539 $ 297,837
Operating Activities
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.
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Investing Activities
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 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 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. The amount, timing and terms of any return of capital transaction will be determined based on prevailing market conditions and other factors. There is no fixed time period to complete share repurchases.
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.
Debt and Lease Obligations
Senior Notes
On August 20, 2021, we issued $750.0 million aggregate principal amount of 5.625% senior notes due 2029 and $750.0 million aggregate principal amount of 5.875% Senior Notes due 2031 (together, the "Senior Notes").
The indenture governing the Senior Notes contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, (i) incur additional indebtedness, (ii) pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, (iii) enter into certain transactions with affiliates, (iv) sell or otherwise dispose of assets, (v) create or incur liens and (vi) merge, consolidate or sell all or substantially all of the Company's assets. These covenants are subject to exceptions and qualifications set forth in the indenture.
Credit Facility
On October 1, 2021, we entered into the Credit Agreement providing for a senior secured term loan facility in an aggregate principal amount of $1.945 billion (the "Term Loan Facility"), which will mature in 2028, and a senior secured revolving credit facility in an aggregate principal amount of $620.0 million (the "Revolving Credit Facility"), which will mature in 2026.
The credit facilities allow us to increase the size of the Term Loan Facility or request one or more incremental term loan facilities or increase commitments under the Revolving Credit Facility or add one or more incremental revolving facilities in an aggregate amount not to exceed the greater of $650 million and 100% of the Company's consolidated EBITDA for the most recent four-quarter period plus or minus certain amounts as specified in the Credit Agreement, including an unlimited amount subject to compliance with a consolidated total secured net leverage ratio.
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The credit facilities contain covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, sell assets, make certain investments, and grant liens. These covenants are subject to exceptions and qualifications set forth in the Credit Agreement. The Revolving Credit Facility also includes certain financial covenants the Company is required to maintain throughout the term of the credit facility. 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 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. The Company also entered into additional currency swaps to synthetically convert $200 million, notional, of its floating rate Term Loan Facility, to an equivalent GBP-denominated floating rate instrument, due October 2026. 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.
Operating Leases
The Company is committed under various operating lease agreements for real estate and property used in operations. 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.
GLPI Leases
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.
During 2023, the Company's Bally's Tiverton and Hard Rock Biloxi properties were added to the Master Lease on January 3, 2023, as a result of a transaction with GLP Capital, L.P. ("GLP"), an affiliate of GLPI, related to the land and real estate assets for a total consideration of $625.4 million. The transaction was structured as a tax-free capital contribution and a substantial portion of the proceeds were used to reduce the Company's debt. These properties increased the minimum annual payments under the Master Lease by $48.5 million.
In addition to the properties under the Master Lease, the Company leases the land associated with Tropicana Las Vegas. 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. 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.
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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 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. The Company will pay additional rent under the Chicago MLA based on a 8.5% capitalization rate on funded amounts. The initial lease term for the Chicago MLA is 15 years with renewal options to be agreed upon by the parties.
The Company will also sell and lease back from GLP its properties in Kansas City and Shreveport for $395 million, with initial annual rent of $32.2 million, subject to escalation. In addition, the Company plans to sell and lease back its Bally's Twin River property to GLP by 2026 for $735 million, with initial annual rent of $58.8 million. GLP has the right to call this transaction starting October 2026. All such transactions are subject to required regulatory approvals.
Capital Expenditures
Capital expenditures are accounted for as either project, maintenance or capitalized software expenditures. Project capital expenditures are for fixed asset additions that expand an existing facility or create a new facility. Maintenance capital expenditures are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost effective to repair, along with spending on other small projects that do not fit into the project category. Capitalized software expenditures relate to the creation, production and preparation of software for use in our online gaming operations.
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 $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 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.
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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. The project also provides the Company with the exclusive right to operate a temporary casino for up to three years while the permanent casino resort is constructed. The temporary casino commenced operations on September 9, 2023 at the Medinah Temple and includes approximately 800 gaming positions and 3 food and beverage venues. The Company currently estimates the permanent casino construction to be completed by the end of 2026. In 2024, we estimate spending of approximately $190.2 million primarily dedicated to demolition and site preparation. We expect future funding of the permanent casino construction to be financed through the GPLI agreement noted above.
In connection with the entry into the host community agreement with the City of Chicago, the Company will be required to pay annual fixed host community impact fees of $4.0 million. Additionally, in connection with the host community agreement, the Company provided the City of Chicago with a performance guaranty whereby the Company agreed to have and maintain available financial resources in an amount reasonably sufficient to allow the Developer to complete its obligations under the host community agreement. In addition, upon notice from the City of Chicago that the Developer has failed to perform various obligations under the host community agreement, the Company has indemnified the City of Chicago against any and all liability, claim or reasonable and documented expense the City of Chicago may suffer or incur by reason of any nonperformance of any of the Developer's obligations.
In furtherance of these obligations, the host community agreement requires us to spend at least $1.34 billion on the design, construction and outfitting of our temporary casino and our permanent resort and casino. The actual cost of the development may exceed this minimum capital investment requirement. In addition, land acquisition costs and financing costs, among other types of costs, do not count towards satisfying such minimum expenditure.
Other Contractual Obligations
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 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 September 30, 2024, the cumulative minimum obligation committed in these agreements is approximately $54.7 million, extending through 2029.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. We are exposed to changes in interest rates primarily from variable rate long-term debt arrangements and foreign currency risk attributable to our operations outside of the US. Inflation generally affects us by increasing our cost of labor. Bally's does not believe that inflation had a material effect on our business, financial condition or results of operations during the three months ended September 30, 2024 and 2023.
Interest Rate Risk
As of September 30, 2024, interest on borrowings under our credit facility was subject to fluctuation based on changes in short-term interest rates. On September 30, 2024, we had $2.24 billion of variable rate debt outstanding under our Term Loan and Revolving Credit Facilities and $1.49 billion of unsecured senior notes. Based upon a sensitivity analysis of our debt levels on September 30, 2024, a hypothetical increase of 1% in the effective interest rate would cause an increase in interest expense of approximately $22.4 million over the next twelve months while a decrease of 1% in the effective interest rate, not to exceed the interest rate floor, would cause a decrease in interest expense of approximately $22.4 million over the same period.
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We evaluate our exposure to market risk by monitoring interest rates in the marketplace and we have utilized derivative financial instruments to help manage this risk. As part of the Company's risk management and hedging program, the Company utilizes interest rate swaps and collars used to hedge and offset, respectively, the variable interest rates on the credit facility as described in Note 10, "Derivative Instruments" to our condensed consolidated financial statements presented in Part I, Item 1 of this Quarterly Report on Form 10-Q.
We have not historically utilized derivative financial instruments for trading purposes. We do not believe that fluctuations in interest rates had a material effect on our business, financial condition or results of operations during the three months ended September 30, 2024 and 2023.
Foreign Currency Risk
We are exposed to fluctuations in currency exchange rates as a result of our net investments and operations in countries other than the US. A vast majority of our revenues are from the UK market and are conducted in British Pound Sterling ("GBP") and are therefore susceptible to any movements in exchange rates between the GBP and US Dollar. Foreign currency transaction losses for the three and nine months ended September 30, 2024 were $30.2 million and $26.4 million, respectively, while foreign currency transaction gains for the three and nine months ended September 30, 2023 were $8.5 million and $2.5 million, respectively. Movements in currency exchange rates could impact the translation of assets and liabilities of these foreign operations which are translated at the exchange rate in effect on the balance sheet date. We have utilized operational hedges or forward currency exchange rate contracts, as well as derivative financial instruments, such as cross currency swaps, to manage the impact of currency exchange rate fluctuations on earnings and cash flows.
ITEM 4. CONTROLS AND PROCEDURES
Management's Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer (principal executive officer) and chief financial officer (principal financial officer), conducted an evaluation of the effectiveness of our disclosure controls and procedures for the reporting period ended September 30, 2024 as such terms is defined in Rule 13a-15(f) under the Exchange Act. Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were not effective due to material weaknesses in the Company's internal control over financial reporting as previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
Ongoing Remediation of Previously Identified Material Weaknesses
The Company's management is in the process of designing and implementing effective measures to improve our internal controls over financial reporting and remediate the material weaknesses. These remediation actions are ongoing and include:
•Realigning resources and, where applicable, hiring qualified staff or using third-party subject matter experts with the appropriate level of experience and training to segregate key functions within our financial processes in order to support the review of significant and complex accounting matters, including appropriately analyzing, recording and disclosing accounting matters timely and accurately, specifically around assumptions used in certain estimates.
•Educating control owners within our International Interactive reportable segment of the appropriate design elements of journal entry controls and enhancing our monitoring control to ensure that these control activities are performed and that journal entries have a separate preparer and independent reviewer.
•Strengthening controls over account reconciliations and account analyses within our International Interactive reportable segment to support financial reporting requirements. Specifically, controls will address the timeliness of the review and the quality of information used in the review to ensure completeness and accuracy.
•Implementing a new enterprise resource planning ("ERP") system, which we believe will enhance the flow of financial information, improve data management and control and provide timely information to our management team will enable us to remediate segregation of duties over journal entries. As the implementation of the new ERP system progresses, we may change our processes and procedures which, in turn, could result in further changes to our internal control over financial reporting. As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting.
While we believe our remediation efforts above will improve the effectiveness of our internal control over financial reporting, we cannot assure that the measures will be sufficient to remediate the material weaknesses we have identified or will prevent
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potential future material weaknesses. The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Accordingly, we will continue to monitor and evaluate the effectiveness of our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the third quarter of 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II
ITEM 1. LEGAL PROCEEDINGS
We are party to various legal proceedings that have arisen in the normal course of our business. Such proceedings can be costly, time consuming and unpredictable and, therefore, no assurance can be given that the final outcome of such proceedings will not materially impact our consolidated financial condition or results of operations. While we maintain insurance coverage that we believe is adequate to mitigate the risks of such proceedings, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters. Estimated losses are accrued for these proceedings when the loss is probable and can be estimated. The current liability for the estimated losses associated with these proceedings is not material to our consolidated financial condition and those estimated losses are not expected to have a material impact on our results of operations.
ITEM 1A. RISK FACTORS
There have been no material changes to our risk factors contained in Part I. Item IA. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2024, none of our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement," as defined in Item 408(a) of Regulation S-K.
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ITEM 6. EXHIBITS
EXHIBIT INDEX
Exhibit No. Description
10.1
10.2
10.3
10.4
10.5
10.6
10.7
31.1*
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document - the instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 The cover page from Bally's Corporation's Quarterly report on Form 10-Q for the quarter ended September 30, 2024, formatted in inline XBRL contained in Exhibit 101
______________________________________________
* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on November 7, 2024.
BALLY'S CORPORATION
By: /s/ MARCUS GLOVER
Marcus Glover
Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ ROBESON M. REEVES
Robeson M. Reeves
Chief Executive Officer
(Principal Executive Officer)
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