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  • Bally’s US online business “outperforms” in Q1 as cost-cutting takes effect

Bally’s has reported a 9% increase in Q1 2023 revenue as North America Interactive losses were reduced to $10.6m.

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.”

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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.

Bally’s Corporation has hired Marcus Glover as the company’s new executive vice president (EVP) and chief financial officer (CFO).

Bally’s current CFO, Bobby Lavan, is leaving the business to pursue other projects. The operator said he will be available to management to ensure a seamless transition.

Glover – who is due to arrive from Quality Packaging Specialists International – boasts more than two decades of experience in both hospitality and gaming.

He climbed the ranks at Caesars Entertainment for 11 years between 2004 and 2015, culminating in the position of senior vice president and general manager for Northeast Ohio.

He then spent nearly five years at MGM Resorts International, initially as president and COO of the Beau Rivage Resort and Casino before switching to the Borgata Hotel Casino and Spa.

Bally’s CEO Robeson Reeves paid tribute to outgoing CFO Lavan and thanked him for taking the lead on the transformative acquisition and integration of Gamesys.

Soo Kim, chairman of Bally’s board of directors, said: “Marcus is a highly accomplished leader with a proven track record of driving transformational business strategies and demonstrated expertise in leading large, integrated resorts and casino gaming operations.

“I am confident that his experience and strong financial acumen make him the right leader to help Bally’s grow and achieve its long-term financial goals.”

“These appointments add substantial financial depth and global gaming management experience to our team as we execute on the exciting growth opportunities.”

Bally’s chairman Soo Kim

Bally’s has added further depth to the senior finance team with the appointment of H.C Charles Diao as corporate treasurer and SVP of finance.

Elsewhere, Jaymin Patel has become vice chairman of the board after serving as a board member at Bally’s since January 2021.

Patel will chair the newly created operational integration committee, to oversee the operator’s global process for streamlining operations and reducing costs, as well as the creation of a global corporate centre.

Mr. Patel has over 25 years of global experience in the gaming business having served in several public company executive and governance roles.

“These appointments add substantial financial depth and global gaming management experience to our team as we execute on the exciting growth opportunities,” added Bally’s chairman Kim.

The operator is due to report its Q1 2023 financial results later today.