Topline numbers
The operator reported Q1 2023 revenue of $598.7m, up 9.2% on last year.The bulk of revenue was derived from Bally’s Casino & Resorts division at $328.8m, while the International Interactive segment supplied an additional $245.6m.
The 7.2% rise in Q1 International Interactive revenue was attributed to increased activity in the UK, with the market up 9.6% on a constant currency basis. The Bally’s brand is now being touted for a UK launch.
Bally’s said the record Q4 margin of 39% for the International Interactive segment had come down to the low-mid 30s, but was confident it could sustain a margin either at, or above, that level due to structural changes that have been implemented.
Bally’s North America Interactive (US online) division contributed just $24.4m, however, and made an adjusted EBITDA loss of $10.6m in the quarter, compared with $19.3m last year.
Despite the losses, the division “significantly” outperformed according to CEO Robeson Reeves, as recent cost cuts made an impact faster than anticipated.
Reeves said this was proven by the fact that Bally’s online market share in New Jersey had recently surpassed 4%. The state is contributing more than $1m in profit per month, according to CFO Bobby Lavan.
With that said, the restructuring is ongoing and this cost-cutting process led to a Q1 expense of $16.8m.
Group adjusted EBITDA rose by 10.2% to $126.4m on an adjusted EBITDA margin of 21.1%.
Adjusted EBITDAR, which is adjusted EBITDA plus rent expense, reached $157.6m. Bally’s felt compelled to include this figure as the Q1 results were impacted by a net gain from sale-leaseback of $374.2m.
News nugget
The most significant news from Bally’s came out in pre-trading as the operator confirmed the departure of influential CFO Bobby Lavan.
Lavan, who played a leading role in both the acquisition and integration of the Gamesys business in 2021, is moving on to a new challenge after two years with Bally’s and will be replaced by hospitality veteran Marcus Glover.Glover boasts significant industry experience at both Caesars Entertainment and MGM Resorts International.
“I’ve spent a considerable amount of time in the industry working with some of the larger companies,” said Glover after being introduced to analysts on today’s earnings call.
“Looking at the Bally’s story and the entrepreneurial spirit of the company, we’re still a speedboat right now. We can take advantage of opportunities by being a little more nimble.”
Best quote
“The regulatory framework in the UK has created a dynamic where smaller players are unable to compete, leading some to exit, and allowing larger players – who are already highly compliant – to consolidate the market and gain share.”
Best question
The North America Interactive division was once again under the microscope in Q1.
With EBITDA losses of between $40m and $50m forecast for full-year 2023, Stifel’s Jeff Stantial asked whether that number was likely to improve next year with cuts progressing well and the business set to move to a variable cost structure after onboarding Kambi and White Hat as third-party suppliers.
“In 2024, we will close the gap,” said CFO Lavan. “iCasino is moving faster than we thought. It will really come down to how much we are prepared to spend on customer acquisition in sports, which as of right now, we are looking at on a very conservative basis,” he added.
Current trading and outlook
Bally’s has raised the low end of its full-year 2023 adjusted EBITDAR guidance to a new range of between $665m and $700m.
Crucially, this includes full-year adjusted EBITDA losses of between $40m and $50m from the North America Interactive division.
Revenue estimates for 2023 remain between $2.5bn and $2.6bn, while capital expenditure guidance has been reduced from $170m to $160m.Looking ahead to the operator’s new Chicago casino, Bally’s president George Papanier said a temporary venue would open in late summer 2023.
The permanent project, which is scheduled for opening in summer 2026 and has an estimated EBITDA run rate of $250m, is slightly ahead of schedule and on budget, he added.
“There is significant consumer demand for this project, and we couldn’t be more excited to begin producing results,” said Papanier.