Bally’s cautious as profits thin

November 3, 2022 6:37 PM
Photo: Shutterstock
  • David McKee, CDC Gaming Reports
November 3, 2022 6:37 PM
  • David McKee, CDC Gaming Reports

Third-quarter profits for Bally’s Corp. narrowed substantially, from $61 million last year to $593,000 this year. Even so, CEO Lee Fenton maintained, “The industrial logic remains as powerful as ever” one year after Bally’s absorbed igaming platform Gamesys. “As promised, we continue to deliver free cash flow,” he continued, allowing that some integration remained “unfulfilled.”

Overall, revenue was $578.2 million, cash flow $151 million, and EBITDA (earnings before interest, taxes, depreciation, and amortization) margins were 39.5 percent. The company said it would taking “a hard look” at non-core assets that it characterized as “a drag” on EBITDA.

“Our program in sports betting has taken longer than expected,” Fenton allowed, adding that Bally’s will not support online sports betting-only states with marketing dollars until its product is more developed. Or as CFO Bobby Lavan put it, the interactive division will be better next year, but “We need to make that happen,” rather than “burning money for money’s sake.”

Although Bally’s has expressed strong interest in a New York City casino in the past, in Thursday’s third-quarter earnings call, Fenton was noncommittal. “We remain interested in many opportunities and New York is one of them,” he remarked in response to an analyst query. “Right now, the focus is on Chicago,” Lavan said, “but long-term, we think acquisitions are possible.”

Returning later to the topic of the Windy City, Lavan reassured Wall Street boffins that the financing is in place, adding, “We’re pretty close to a land sale and leaseback in Chicago,” so he’s confident. Bally’s will also be rolling the proceeds of other casino sale-and-leaseback transactions into the Second City. “If the macro [economy] changes hard, the priority is Chicago,” Lavan concluded.

Having recently taken the keys to the Las Vegas Tropicana, Fenton said early results were “encouraging,” but left open the door to demolition in favor of a Major League Baseball stadium for the Oakland Athletics. Saying he was talking to various joint-venture partners, Fenton said they’ve been in discussions about the Tropicana’s fate, although the company remains more focused on Chicago.

Bally’s Atlantic City performed well in the third quarter, producing $9.5 million in positive return on investment. “The property’s really outperformed,” enthused Lavan, as brick-and-mortar results there and in Lincoln, Rhode Island, compensated for disappointments in the digital sphere.

Lavan projected a year-end loss of $75 million in digital investments, driven down by Asian underperformance, among other factors. “We’ve seen dips like this in Asia before and remain confident,” remarked Fenton.

In New Jersey, Bally’s enjoys a 3.5 percent market share in igaming and company leadership aims to up that to six to eight percent by 2024. “Igaming states are our priority,” said Fenton, reiterating a theme heard in Wednesday’s Rush Street Interactive earnings call.

Also problematic from a digital standpoint is the United Kingdom, where the government’s long-expected and long-delayed White Paper on gambling continues to hang fire. (Fenton observed that the gaming portfolio has passed through six different ministers in 12 months.) British marketing expenses, accordingly, have been cut by 30 percent.

Back home, “We will continue to invest with care in North American interactive.” That includes reevaluating money-losing digital assets for their near-term-profitability prospects.