Bally’s hails “strong” start as revenue rises 3.3% in Q1

On the whole, Q1 proved a successful quarter for Bally’s. CEO Robeson Reeves says that the results show a “strong” start to the year, with growth across two of its three core segments.

The North America Interactive posted the most growth, with revenue up 70.2% year-on-year. This was helped by the launch of legal online casino in Rhode Island, with Bally’s the only licensed operator in the state.

Bally’s noted a drop within its International Interactive business. However, it says this is only part of the story, with core operations in the UK continuing to herald solid results for the group. It adds that activities outside the UK were the main reason for the decline here.

Elsewhere, Casinos & Resorts revenue was also higher inclusive of the contribution from the Chicago Temporary Casino and the winding down of the Tropicana Las Vegas. Bally’s says the Tropicana, which closed last April, will be demolished in October to make way for a new stadium for Major League Baseball franchise Oakland Athletics.

“This step is crucial for keeping to our expected timeline, which includes the start of construction of their new stadium in the second half of 2025,” Reeves said. “Simultaneously, we are actively assessing our options for the highly valuable land next to the stadium and we’ll provide updates as our plans further develop.”

Gaming revenue surpasses $516.0m in Q1

Taking a closer look at revenue performance in Q1, some $516.1m of group revenue came from gaming operations. This is 6.0% higher than in the previous year, The other $102.4m was generated by non-gaming activities, down 8.4% year-on-year.

The Casinos & Resorts business was responsible for the majority of revenue. In Q1, revenue here hit $342.3m, up 4.1% from last year. This is despite construction work on Providence Bridge in Rhode Island impacting access to its Twin River location, as well as the continued de-leveraging of operations after announcing the pending shut-down of Tropicana. 

Bally’s sees mixed results for interactive

Turning to International Interactive, revenue slipped 7.8% to $264.7m, with Reeves putting this down to operations outside the UK. He also talks up growth plans in the core UK market, as well as further afield in Spain.

“This reflects our strategic shift initiated last year, where we focused on maximising profit yield instead of pursuing uneconomic growth, resulting in challenging year-over-year revenue comparisons,” Reeves said.

“As the year progresses, we look forward to the launch of online sports betting in the UK to complement our igaming offering and add another customer acquisition funnel. Outside the UK, we believe our operations in Spain are well positioned to benefit from the recent removal of advertising restrictions, which will enable us to increase our investment in faster growth.

“We also anticipate the further stabilisation of our operations in Asia with an enhanced online sports betting offering to complement our existing portfolio.”

As for North America Interactive, revenue jumped 70.1% to $41.5m. This, Reeves says, is in line with expectations and reflect our guidance for 2024for segment performance targets. 

“Importantly, our igaming operations in New Jersey and Pennsylvania continue to gain market share,” Reeves said. “We also successfully launched igaming in Rhode Island in early March. 

“Igaming revenues in Rhode Island have ramped nicely through April in accordance with expectations. We believe this momentum will continue to build through the balance of 2024.”

Net profit falls after 2023 sale leaseback deal

Spending-wise, net operating costs were 211.9% higher at $692.4m. However, Bally’s notes that Q1 2023 benefitted from a net $374.2m gain on a sale-leaseback deal. This relates to an agreement with GLPI for land and real estate assets at Bally’s Tiverton in Rhode Island and Bally’s Hard Rock Hotel & Casino Biloxi in Mississippi.

Bally’s reported a further $68.6m in non-operating costs, meaning it was left with a pre-tax loss of $142.5m. This is in contrast to a $316.1m profit in 2023 on the back of the sale-leaseback agreement.

The group paid $31.4m in income tax, leaving a net loss of $173.9m, compared to last year’s $178.3m net profit. 

However, there was better new in terms of adjusted EBITDAR, which reached $148.1m. This included $31.6m from triple net operating leases with GLPI. Last year, adjusted EBITDA, without the rent aspect, amounted to $126.4m.

“Our financial results for Q1 of 2024 demonstrate the strength of our diversified business segments,” chief financial officer Marcus Glover said. “Our operating teams remain focused on reducing expenses and enhancing operating efficiency. 

“We are evaluating all business areas and implementing initiatives to streamline or centralise operations where it makes sense. 

“Overall, we made progress on several of these initiatives in Q1 and are looking forward to the promising opportunities that lie ahead.”

Standard General proposal remains on the table for Bally’s 

In the background, Bally’s continues to consider the takeover proposal from Standard General. The hedge fund, which already holds a 25% stake in Bally’s, delivered a non-binding letter to acquire the remainder of the business in March. 

The $15-per-share offer is a 41% premium to Bally’s closing price on the final day of trading on the NYSE prior to the proposal. In total the company holds a market capitalisation of more than $600m.

Bally’s has formed a special committee to evaluate the offer. However, rival shareholder K&F Growth Capital has hit out at the proposal, saying it “woefully” undervalues the group. In a proposal set out last month, it is instead advocating for selling off Bally’s online assets.

Bally’s did not issue any update on the process during its Q1 presentation.

Analysts unconcerned by Bally’s one-time headwinds

Bally’s Q1 EBITDA fell 3% short of consensus expectations. This was in spite of the company’s international interactive sector’s EBITDA exceeding Wall Street estimates.

Despite the EBITDA miss, Bally’s reiterated its guidance for the year of revenues between $2.5-2.7bn, implying 6% year-on-year growth. Bally’s also stated it would maintain its EBITDA guidance of $655-696m, or a 3% year-on-year increase.

With the company looking to maximise costs, Bally’s cut back its marketing outside of the UK. International interactive revenues were down 4% year-on-year, though UK revenues were up 12% when compared to the same quarter last year.

Bally’s reported a 4% year-on-year rise in casino revenue, though EBITDA was down 15%. However, Bally’s attributed the drop in EBITDA to one-time headwinds, including adverse weather in January that impacted land-based venues and the winding down of the Tropicana Las Vegas, as well as the bridge disruption relating to its Twin River location in Rhode Island.

Bally’s shares were down 6% year-to-date, though analysts from Macquarie Group attributed this to ongoing leverage and free cash flow (FCF) concerns.

Macquarie expects most of Bally’s capital expenditure to be spent over 2025 and 2026, though it believes $6 FCF per share could be possible in 2027.

In response to Bally’s Q1 earnings, Macquarie altered its EBITDA estimates over Bally’s 2024-2026 to $663m from $660m previously, stating this reflected current trends.

Macquarie also noted that due to research restrictions, it couldn’t advise on a valuation of Bally’s.

Macquarie did however point to Bally’s ability to execute its project and the deterioration of consumer spending in the US as potential risks to its Bally’s investment thesis.