Bally's (US:BALY)2022-08-05 21:39Financial Data and Key Metrics Changes - Bally's Corporation reported $99 million of EBITDAR in the quarter, with Atlantic City contributing negative $3 million, resulting in an EBITDAR margin of 39.2% excluding Atlantic City [17][18] - International Interactive achieved approximately $83 million of EBITDA with a margin of 35.2%, while North America Interactive reported $17 million of negative EBITDA [18][19] - The company updated its 2022 financial forecast, expecting revenue between $2.2 billion to $2.3 billion and adjusted EBITDA of $535 million to $550 million, including $60 million of North America Interactive EBITDA losses [19][21] Business Line Data and Key Metrics Changes - In the Casinos & Resorts segment, Lincoln continued to outperform expectations, while Atlantic City underperformed with negative EBITDA of $3 million against expectations of positive $4 million [8][17] - International Interactive saw a 2% year-over-year increase in the UK on a constant currency basis, despite a 30% reduction in marketing spend [9][18] - North America Interactive is in ramp-up mode, with New Jersey generating nearly $3 million of NGR in June, and the company expects continued growth and profitability for the rest of the year [10][11] Market Data and Key Metrics Changes - The UK market experienced a flat quarter in Asia, with FTDs down due to a large affiliate promotion being moved to Q3 [9][10] - The company anticipates growth from its recently launched sportsbook, benefiting from the World Cup and increased uptake from its refer-a-friend program [10] - The company is targeting a 6% to 8% market share in New Jersey by 2023, with expectations of further growth in Pennsylvania and Ontario [11][45] Company Strategy and Development Direction - Bally's is focused on integrating its casino database to provide a unified wallet and omnichannel rewards, while developing proprietary technologies for unique customer experiences [12] - The company is prioritizing iCasino states and plans to focus resources on live markets, including Pennsylvania and Ontario, while preparing for potential iGaming regulations in other states [11][50] - Bally's Chicago project is a significant strategic initiative, with plans for a temporary facility opening in June 2023 and a permanent facility by June 2026, projected to generate substantial EBITDAR [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged global turbulence but emphasized strong cash flow generation from Casinos & Resorts and International Interactive segments as critical success factors [7] - The company is cautious about inflationary pressures and is closely monitoring costs while expecting improvements in Atlantic City [8][26] - Management expressed confidence in the UK consumer base strengthening and the potential for improved performance in the second half of the year [44][69] Other Important Information - Bally's ended the quarter with $3.4 billion of debt and $176 million of cash, maintaining ample liquidity for announced projects [20] - The company announced a real estate sale to GLPI, expected to bring in $635 million in cash proceeds, with plans for further evaluations of potential sales [21] - Bally's is committed to maintaining a debt-to-EBITDA ratio below five times by mid-2024 [20][78] Q&A Session Summary Question: Update on FX impact on EBITDA - Management indicated a 10% FX impact resulting in a $20 million hit to EBITDA, factoring in Asian currencies [24] Question: Update on consumer trends in brick-and-mortar business - Management noted that trends from Q1 have continued, with some softness in lower-income areas but overall stability [26] Question: Chicago project next steps and risks - Management expressed confidence in the project timeline and budget, addressing inflation and supply chain risks [30][32] Question: Confidence in EBITDA forecasts for Chicago facilities - Management highlighted strong visitation trends and community engagement as key factors supporting their EBITDA forecasts [34][39] Question: International Interactive marketing reduction impact - Management reported a 9% reduction in FTD count despite a 30% decrease in marketing spend, indicating efficiency in marketing strategies [42][44] Question: Market share goals in New Jersey and other states - Management is targeting a 6% to 8% market share in New Jersey by 2023, with plans for expansion in Pennsylvania and Ontario [45][50] Question: Strategy for sale-leaseback transactions - Management discussed the potential for future sale-leaseback transactions, emphasizing the importance of strategic asset management [56] Question: Promotional environment across properties - Management noted stable margins and a focus on higher-end customer segments, with no significant impact from competitors [58][60] Question: Update on New York downstate casino opportunities - Management remains interested in potential opportunities and is exploring sites, awaiting the RFP process [70] Question: Expectations from the new UK prime minister on gambling regulations - Management does not expect significant changes in the regulatory landscape, anticipating a stable trajectory [73] Question: Capital strategy and leverage outlook - Management outlined a focus on maintaining a strategic balance between owned and leased assets, with a goal of sub-five times leverage by mid-2024 [77] Question: Preemptive actions regarding the UK white paper - Management has been preparing for potential regulatory changes and has adjusted strategies accordingly [79]