Bally’s shuns analysts again, reports another 5% revenue drop in Q1
For the third consecutive quarter, officials from Bally’s Corp did not address analysts in releasing first-quarter results on Monday. No calls have been held in the last two quarters and no questions were fielded in the previous call before that.
Each instance has seen little explanation – in Q3 2024, only prepared remarks were given because a shareholder vote to approve the Bally’s buyout from Standard General was to be held two weeks later. In March, the company told iGB that the outright cancellation of the Q4 call was because it had “recently completed” the merger with SG-owned Queen Casino and Entertainment.
Now, the Bally’s annual shareholder meeting is scheduled for Thursday, where more details may be presented. The company did not give any explanation for the lack of an earnings call for its latest quarter.
Bally’s first-quarter revenue was $589.2 million, a decrease of 5% for the second consecutive period. Overall adjusted EBITDAR was flat at $147.7 million. The company’s stock closed at $11.21 on Monday, down more than 42% year-to-date.
Split reporting before and after Queen
Deciphering the data was somewhat complicated by the fact that Bally’s opted to split results into two periods, “predecessor” and “successor”. The predecessor period corresponds to 1 January-7 February, before the merger with Queen took effect. The successor period corresponds to 8 February-31 March.
Overall, casino and resort revenue for the quarter was up 2.6% YoY to $351.2 million, with adjusted EBITDAR increasing 6.3% to $95.1 million. These figures were buoyed by the mid-quarter addition of the four Queen casinos, which “has further expanded our scale and positioned the company for compelling long-term growth”, CEO Robeson Reeves said in a statement.
The addition of the Queen casinos helped offset ongoing challenges for Bally’s properties in Rhode Island, Chicago and Atlantic City. All three had been mentioned as laggards for multiple quarters, but those now appear to be working out. Rhode Island issues have been overcome “through marketing interventions”, Chicago “continues to fine tune its operations” and Atlantic City should turn around “based on recent leadership changes”, Reeves said.
Certain sections from the company’s summary also included pro forma combined charts showing combined results from Bally’s and Queen. This, Bally’s said, provided “a baseline for comparative future results of the combined company”, but the majority of these comparisons still showed YoY declines, including steep drops in overall revenue and adjusted EBITDAR.
Interactive still a mixed bag
Another continuing trend for Bally’s has been its mixed interactive results. Revenue from international interactive was down 18.3% to $191.7 million, despite a 5% increase in UK revenue. Adjusted EBITDAR for the segment was down 7.7% to $77.1 million.
This steep drop was “primarily due to the divestiture of our interactive business in Asia in the fourth quarter of 2024”, Reeves said. The company noted that segment revenue grew 7.7% when excluding the impact of the Asian divestiture.
“Following that divestiture, our International Interactive operations are primarily focused on regulated European markets that continue to demonstrate solid growth characteristics and deliver attractive margins,” Reeves stated.
Conversely, North American interactive saw revenue increase 12.5% to $44.5 million, the third consecutive quarter of double-digit growth. While Bally’s offers iGaming in four states and mobile sports betting in 11, its monopoly in Rhode Island is its biggest growth driver. Reeves said its retail troubles in the state were offset by the digital success, although segment-adjusted EBTIDAR fell to a $16.5 million loss in Q1.
Balance sheet trapeze
As of 31 March, Bally’s had $209.7 million in cash on hand with long-term net debt of $3.43 billion. Debt increased by over $130 million from 31 December without counting any funds from the company’s AU$200 million ($127.5 million) investment in Star Entertainment, announced in April.
Capital expenditures ballooned from $28 million in Q1 2024 to $46.8 million this year. Notably, lease payments increased significantly from $29.9 million to $44.5 million. The company now leases several of its casinos from Gaming and Leisure Properties, as part of the Chicago casino financing agreement between both sides.
In March, Fitch downgraded Bally’s issuer default rating to a B- and changed its rating outlook to negative.
“The downgrade reflects the relatively high leverage exceeding Fitch’s downgrade sensitivities and is expected to remain elevated longer,” analysts said. “There is execution risk in the development of the Chicago projects, as well as other potential development opportunities and a continued drag on EBITDA at the North America Interactive segment.”
Uncertainty in Chicago
Bally’s $1.7 billion permanent Chicago casino, its most important development, was ordered to halt construction on 2 May. Reporters from the Chicago Sun-Times notified the Illinois Gaming Board that dumpsters from D&P Construction were on the site, which prompted the stoppage. D&P was an unapproved contractor and was previously connected to organised crime.
In late April, Bally’s filed a new prospectus for an initial public offering in the casino, geared towards local residents. This was the company’s second attempt, after the first programme geared towards women and minorities was not approved by the US Securities and Exchange Commission. A minority ownership allotment is required under the host agreement with the city. If the IPO attempts continue to fail, it could represent a significant roadblock for Bally’s.
“Construction of the permanent Chicago casino continues with support from Gaming and Leisure Properties, Inc” was the lone reference to the project Monday.
Star acquisition also raising questions
More colour was given on the company’s Star investment, which was originally AU$300 million but lowered to AU$200 million after Star’s biggest shareholder, Bruce Mathieson, contributed AU$100 million. As a result of the change, Bally’s ownership share went from 56% to 38%.
The company has contributed AU$67 million ($42.7 million) of its total commitment so far. Star is expected to host a shareholder vote on the deal sometime in June.
“The opportunity to take a significant equity stake in Star and influence its future is consistent with Bally’s historical operating strategy and we are confident and optimistic that, similar to past situations, we can deploy our disciplined operating and financial practices to strengthen Star and create new value for Bally’s shareholders,” Reeves asserted.