Optimism abounded on Bally’s Corporation’s second-quarter earnings call, as company leadership reported record levels of cash flow, $83.8 million.
The company had an “extremely strong performance across the board,” said CEO and President George Papanier.
Papanier emphasized the Biloxi, Shreveport, and Lake Tahoe markets, while saying that the company’s foothold in Atlantic City had “turned the corner in July… The property was neglected by its previous owners [Caesars Entertainment], but will be a major focus of ours.” He said he expected it to swing into profitability in the third quarter, with renovated hotel rooms coming back on line in early 2022, further propelling revenues.
“We are confident that the momentum we have generated in the first half of 2021 will continue to improve, Papanier said. “Our destination properties have outperformed.” Newly obtained Montbleu in Lake Tahoe is “a premier asset” and tourist magnet, in management’s view. It and all other casinos will be rebranded as Bally’s—except for Hard Rock Biloxi, a notable exception.
“We are excited about the long-term potential of our acquisitions,” enthused Papanier.
The company’s flagship Twin Rivers Lincoln in Rhode Island will be the recipient of an expansion funded strictly from free cash flow, one of a series of capex reinvestments throughout the Bally’s chain, including $13 million in new slot machines and video lottery terminals in Rhode Island, where it holds a duopoly over casino and lotteries with International Game Technology.
“From a revenue perspective, improvement over 2019 is sustainable through the end of the year,” said the CEO, although he expects “some retrenchment” in consumer spending during the winter. Bally’s “will be able to operate a lot more efficiently” due to labor cutbacks and the elimination of buffets, a loss leader.
As to further acquisitions, Chief Financial Officer Steve Capp said Bally’s has a “disciplined and focused [merger and acquisition] policy. It’s always a balancing act between deleveraging and where we want to be as a company.” He said the asset-sales market was “a little quieter” at present. But with the free cash flow, “It’s a lot of capital to work with on a going-forward basis.” Papanier added, “We’re going to continue to look at assets. We’ve done a good job of finding properties at seven times cash flow, sometimes less.”
Roughly half the call was devoted to Bally’s Interactive and its upcoming integration of Gamesys, which will be financed by a combination of a term loan and a revolving line of credit.
“We’re running the traps of the U.S. regulatory environment,” Capp said, noting that “We’re really enthusiastic about the combination with Gamesys in the fourth quarter … that will lead to rollout in additional states.” Indeed, the purchase of Jumer’s Casino Rock Island, which enables Bally’s to enter the enormous Illinois sports-betting market, was emphasized.
The integration of Gamesys will enable Bally’s to launch internet gaming in New Jersey near the start of 2022, with Senior Vice President of Strategy and Interactive Ads Dhandhania saying that the company had held back from launching a “1.0 version” of its online-gaming platform in favor of a Gamesys-enhanced “2.0 version.” Bally’s executives also emphasized the importance of acquiring the AVP beach-volleyball league and Sinclair Broadcasting’s sports networks as a way to drive eyeballs to Bally’s Interactive. “And we will continue to invest,” Capp added. “It’s early days on this front.”
Bally’s online sports-betting application is still being beta-tested in Iowa and Colorado. So far, “We don’t have a lot of data,” said Dhandhanian. and the company is testing links from its Bally’s TV network to the online platform in Iowa.
Overall, the company reported $68.9 million in profit for the second quarter on revenue of $267.7 million. Bally’s management credited a mix of improved consumer confidence, minimal COVID-19 capacity restrictions, and fiscal discipline for the results. Debt was just shy of $1.4 billion, up slightly from December of last year.
