Bally’s posts record first-quarter revenue as profit soars

May 9, 2023 4:16 PM
Photo: Shutterstock
  • David McKee, CDC Gaming Reports
May 9, 2023 4:16 PM
  • David McKee, CDC Gaming Reports

Despite resigning from Bally’s Entertainment earlier in the day, outgoing CFO Bobby Lavan was very much present during the first-quarter earnings call, handling the bulk of the analyst questions. The company reported best-ever revenue of $599 million and a profit of $178.3 million, compared to last year’s $1.9 million.

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Cash flow increased 10 percent to $126.4 million and the company repurchased one million shares for $19.8 million, leading one analyst to criticize the company for buying back stock at $20 per share when it was trading just below $16.

“We will continue to buy back shares as directed by the board,” maintained Lavan, who outlined the company’s three top priorities in order: share repurchases, debt repurchases, and Chicago, where Bally has committed $1.7 billion to a megaresort.

Another key topic of conversation was the rebooting of BallyBet, which will now be supported by Kambi and White Hat on a variable-cost basis. Previously, it was done in-house on a fixed-cost term. “We’ll invest in making sure we become omnichannel, but we won’t be investing in sports,” CEO Robeson Reeves explained.

Some divisions of Bally performed better than others. According to figures published by Deutsche Bank analyst Carlo Santarelli, casino-resort net revenue grew 17.4 percent to $329 million and North American interactive leapt 60 percent to $24.4 million, while international interactive revenue slipped three percent to $245.6 million.

While on the subject of international-online performance, Reeves expressed considerable satisfaction with the recently released White Paper on gaming reform from the British government, which he predicted would have little effect on Bally. “We hope it will bring some clarity to U.K. gambling operators,” he said. “We embrace regulation and recognize that gaming is a private-public partnership.”

As for the Kambi/White Hat pact, Reeves conceded, “The infrastructure we had in America for sports betting was inefficient. I own that.” The new format will “bring further customer engagement with the Bally’s brand.” He anticipates integration within the U.S. by year’s end, setting up Bally’s to go into online sports betting in Europe and Great Britain.

Domestically, casinos “continued to execute on an extraordinary level. We’re starting to see the full benefit of the casinos we acquired last year.” This enthusiasm was in spite of inclement weather that drove down revenues in Lake Tahoe and in Evansville, Indiana. The company’s Twin Rivers casino in Rhode Island recently finished a major overhaul and two other capex projects are nearing completion.

In Chicago, Reeves pushed back the opening of the Medinah Temple temporary casino to late summer, even as he insisted that it was “on schedule.” He projected $50 million in cash flow from the downtown facility next year, adding, “We believe there is unquestionable pent-up demand for this product.” Looking to the larger picture, he said there were no “material” signs of impact from macroeconomic forces.

Reeves thinks igaming legislation has a chance in the Rhode Island Legislature. He said the same for prospects in New Jersey, where he anticipated doubling Bally’s icasino market share to eight percent. He concluded, “We remain heavily focused on growing our revenues and results for our core casinos and resorts and our international interactive business.”

Lavan conceded a $10.5 million negative return on investment from North American interactive operations, but that Ontario “continues to progress” and Pennsylvania will launch BallyBet this month.

As for budget reductions, “The cuts were deeper and faster than anticipated” during the first quarter and will continue, now that Kambi is on board. Lavan revised his EBITDAR guidance upward to a range of $665 million to $700 million and lowered his projected software costs to $49 million.

In addition to carrying $4 billion in debt, Bally’s has $344 million cash on hand and Lavan called it more than sufficient for ongoing projects, adding, “We will invest with care in North America. We’re just going to take a more conservative approach to upgrades early this year. Icasino is moving faster than we thought,” but Bally’s will look at online sports bettor acquisition “on a very conservative basis.”

Such conservatism extended to the Tropicana Las Vegas, on whose future Bally’s would not commit itself. “We feel we have low-hanging fruit,” said casinos president George Papanier, who offered that he was considering “all kinds of development options. We have a long-term view on this project,” including using it as a customer magnet for players from Bally’s regional casinos.

“We view the property on the basis of return rate on cash flow,” Papanier said of the Trop. “We can internally fund the carrying costs on that property,” which he pegged at $20 million.

Papanier was largely dismissive of concerns about slot routes encroaching on the Chicago market and imperiling Bally’s investment. “It would not make sense for the city from a tax perspective,” he opined, “It’s not a jobs creator. It’s not happening overnight,” so it won’t affect Medinah Temple or its database.

Incoming CFO Marcus Glover introduced himself to the gathered Wall Street analysts and stressed his operational experience with large-cap Caesars Entertainment and MGM Resorts International. “We’re still a speedboat,” he said of Bally’s, “so we can take advantage of opportunities by being a little more nimble.”

Said Reeves of Glover, “What I truly admire is his deep understanding of all levels of the casino business.”