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Good day and thank you for standing by. Welcome to the Bally’s Corporation First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers ' presentation, there will be a question-and-answer period. [Operator Instructions] Please be advised that today's conference call is being recorded. [Operator Instructions] I would now like to turn the call over to Bobby Lavan, Chief Financial Officer of Bally's. Please go ahead, sir.

Good morning, everyone and thank you for joining us on today's call. The earnings release that accompany this call is available in the Investor Relations section of our website. With me on today's call are Lee Fenton, Chief Executive Officer; George Papanier, President Retail; and Robeson Reeves, President Interactive. Before we begin, we would like to remind everyone that comments made by management today will contain forward-looking statements. These forward-looking statements; include plans, expectations, estimates and projections that involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC filings. Actual results may differ materially from the results discussed in these forward-looking statements. In addition, during today's call, management will refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP financial measures are included in the schedules contained in our earnings release. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges within certain expenses. Today's call is also being broadcast live on our Investors site and will be available for replay shortly after the completion of the call. Turning it over to, Lee.

Thank you, Bobby. Hello, everyone. Good to be with you today. It has not been that long actually since we last reported. But in that short time there has been some change and we have achieved one very important milestone. The momentum we saw in casinos and resorts in late February continued through April. Atlantic City was positive in March and April, which is an exciting turn for that property. The removal of mass mandates and the return of smoking in Rhode Island drove the highest performance there since early 2019. On the interactive side, on a constant currency basis the business was up 1% year-on-year, which was driven by a balance of some weakness in the UK and continued strength in Asia. In the UK the consumer wallet has shrunk due to inflationary pressure and we need to reset our operating structure to accommodate the change. We've already started to remove some lower performance marketing spend and we will execute on efficiencies from our larger global portfolio. Structurally, we have the tailwind of a long-term pathway on growth in Asia as well as the high-growth opportunity set to invest in North America. During the quarter, North America Interactive was in ramp-up mode. Bally iCasino in New Jersey continues to build and Virgin iCasino transferred to the Bally’s license during this quarter. We launched Live Dealer in New Jersey and additional proprietary games have been deployed including Bally's Blackjack. Bally’s has now overtaken Virgin in terms of activity and revenue. Additionally, we will wind down providing B2B services to Tropicana this quarter and that will free up resources and accelerate our B2C business. The New Jersey business is tracking well and we view that lower cost of acquisition with circa $200 CPA and streamlined infrastructure to be our model as we roll out additional states over the coming months and years. We launched in Arizona yesterday with our foundational 2.0 product and New York will follow later this quarter. This is a significant milestone for us and represents a huge effort by the team and I'm proud of all the work that's been done to bring our technology stacks together. Arizona is a key market for us with our groundbreaking WNBA partnership, marketing spend with the Diamondbacks and our media partnership with Sinclair. In New York, we will be cautious as we keep a keen eye on marketing spend and how to navigate a high-tax environment in sports betting. We are on track to launch in Ontario in the summer. In the second half we will focus on states where there are iCasino opportunities or where we expect there to be iCasino opportunities in the near-term. In April, we signed our partnership with the Cleveland Browns to market access in Ohio, taking our market access footprint to 18 states. Jumping into some of the segment details. Casinos and Resorts reported $85 million EBITDA at 30.4% EBITDA margin. This includes $5.6 million of Atlantic City losses of which more than $3 million were in January. Excluding AC EBITDA was $91 million compared to $89 million in 1Q 2019. 1Q 2019 is pre-Boston Encore opening so our comps get easier as the year progresses. There was approximately $5 million of weather impact in an unusual January. AC delivering positive EBITDA in March is proof that the new rooms and heightened amenities can bring that property back towards historical performance levels. More than 700 rooms will be completed from Memorial Day approximately $60,000 per key. A new lobby bar and outdoor beer hall will revitalize the property. We started in Bally’s AC launch campaign that will bring awareness to the property and our iCasino which will help drive customer acquisition efficiencies for the omnichannel experience. A list of mass mandates and smoking bans drove Lincoln monthly profitability in March to the highest level since early 2019. Now we are currently operating significantly above our long-term forecast and we're cautiously optimistic for the full year potential of our marquee properties. Most of our properties continued their momentum in April, but we're watching the lower-income consumer very carefully and we're aligning resources accordingly. Moving to International Interactive. On a constant currency basis, the overall business was down 1% which includes the wind down in non-core geographies. Our UK business was down 9%, offset by our Asia business, which was ahead 16%. Rest of the World business is flat which on an overall basis is slightly below our expectations. Top line performance in the UK continues to be challenging as we have top comps we delivered a 30% growth in Q1 of 2021. The Q1 slowdown was ARPU rather than actives-driven, as we saw some tightening in consumer spending. A combination of UK consumer weakness, market friction in front of new regulation and a significantly weaker FX, lowered our top line expectations for our business in the UK. We will align and redirect resources accordingly to maintain our earnings levels from the business. As I know FX impacts top line, but actually has a de minimis impact on earnings. Asia continued its double-digit growth path. Our new UGADY [ph] brand continues to take share. Slots consolidated their position as our largest product segment, even when you combine Live and RNG casino and we believe this demonstrates wider adoption of the online gaming in the market. We're a first mover out there can say that the data is pointing us to tremendous opportunities in both short and long-term. We will be launching sports betting in June that offers us another opportunity to accelerate the business. We continue to expect Asia to deliver double-digit growth that throughout the year will help offset any slowdown in the UK. On an EBITDA basis, Spain and rest of world performed in line. We will continue to profitably wind down the non-core markets. Moving on to North America Interactive. We've made good progress in the business leading up to a full launch calendar. New Jersey had $600,000 of revenues in January, jumping to $1.5 million in March which is a great ramp. SportCaller, Telescope and our various B2B businesses continue to provide low-cost acquisition opportunities while we wind down Bet works business with bespoke that will come to an end in July. Our new bespoke front end combined with the Gamesys PAM and data analytics is a big step forward for the business. Throughout the year, we will launch sports integrations with our Sinclair partnership and multiple iterations to our sportsbook products. In the quarter EBITDA loss for North America Interactive was $19 million as we accelerated development costs to make our state-by-state rollout more scalable. Now I will turn you back to Bobby for some more details on financial performance.

Thanks, Lee. The quarter started weak with unusual weather in casinos and resorts and negative momentum in International Interactive that carried over from fourth quarter. To give some context, Casino Resort EBITDA was $19 million in January versus $39 million in March. In the UK on a constant currency basis, UK revenues were minus 11% year-over-year in January versus minus 5% in March. Needless to say, we have some performance to make up for in 2022, but April has been strong. Additionally, we are increasing our cost savings from the Gamesys transaction from $5 million disclosed last quarter to $10 million on an annualized basis. We believe this will continue to grow, particularly once North America Interactive launches ramp. I wanted to take this time to address our foreign exchange currency position. Our February 2022 forecast was set at 1.35 GBP to USD with the volatility in the market in various central bank dynamics GBP to USD has moved 7% since our guidance. While GDP to USD moves impact our UK business top line reporting in dollars, it has very low impact on our EBITDA. Our top line is on International Interactive business is approximately 30% USD, 60% GBP and 10% other currencies. Our costs are 20% USD 55%, GBP and 25% Euro. The FX move tempers our top line guidance, but also moves our interactive EBITDA margins up. We will continue to monitor the situation. Our North America business had minus $19 million of EBITDA driven by developer time on ramping launches for the rest of the year. We expect these investments to subside, as we progress through the year. Software development costs for Interactive were $15 million, which is the right place for the rest of the year.. Corporate was minus $13 million, slightly higher than expected due to front-loading of our charitable donation programs. Length of $11 million was in line. As we announced on April 1, 2022, we closed the first part of the Tropicana acquisition related to the sale leaseback of Quad Cities and Black Hawk. We view these transactions as part of the larger Tropicana project and will report the rent for those project produce as part of transaction costs, until we announce the larger project, more to come on Tropicana in the coming months. For the full year, we expect revenue to be at the low end of our previously announced guidance of $2.4 billion to $2.5 billion due primarily to FX and some slowdown in the U.K. Our EBITDA guidance remains the same in the range of $560 million to $580 million with efficiencies offsetting the slowdown in the U.K. Our capital expenditure guidance remains the same with $180 million of property related CapEx, $60 million of Interactive CapEx and $30 million of one-time corporate integration CapEx. Maintenance CapEx remains in the $100 million range. Thank you I’m turning it back to the operator for Q&A.

[Operator Instructions] Our first question will come from Jeff Stantial with Stifel.

Hey, good morning guys. Thanks for taking my questions.

Good morning.

My first question is going to be on the -- good morning. My first question is going to be on the international Interactive business. You called out the tightening in the U.K., there's some FX headwinds. Just curious how does this play into your prior guidance for this segment, which called for mid single-digit top line growth at about 20% to 29% margins. Just how should we think about those targets in light of some of these headwinds you're calling out?

Yes. Thanks, Jeff. Yes, we have -- I think, it's common across the industry. There's been some slowdown in the U.K. U.K. spending has been tightening inflationary pressures out there. We're -- I'd say, we're now projecting to low single-digit growth in U.K., but we're aligning our cost base to maintain the profitability and the earnings flow from U.K. So I think you'll see margins nudge up from the $29 million maintain our earnings that we're expecting some weakening on the top line.

Okay. Perfect. That's helpful and encouraging. And then maybe if we could hang on that for a second. The inflation pressures, I guess, what are you seeing like what your data gives you comfortable to lead to this conclusion versus maybe the softening being something more of a function of COVID tailwinds just taking more than a year to really come out of the business? What leads you to think it's the inflationary pressures that's really driving the softening? Is it something between the low and the high end of your database? Just kind of what data are you seeing that kind of brings you to that conclusion?

Well, really our retained actives are steady, right? So we continue to see activity which is always the first thing that we look for are people engaged. They are still engaged. But we've just seen a weakening, since January a weakening in ARPU -- so you've got ARPUs, which are off circa 7% to 9% depending on the month, but we've still got the activity, which is a good thing. That's why we think that it is mostly about the contraction of the complete of wallet in the U.K. particularly with the significant rise in energy costs.

Understood. That's helpful. And then if I might just squeeze in one more. On the North America interactive rollout, I think $19 million in losses was a bit more than most folks were expecting, especially with the bulk of the rollout coming in the back half of the year. You previously guided to $60 million in losses for the full year. Is that still intact, or should we think about something more in the $80s million to $100 million range? Thanks.

Thanks Jeff. We are holding to that now. We had a heavy lift in Q1, right. We built the foundational 2.0 and we're now reallocating some of the resources that helped us do that back to International Interactive now that we're out of the door. You combine that with a growing iCasino business and more efficiencies on the B2B side of the business that makes us optimistic to hold to the guidance, but there's always the chance that we could decide to put our foot to the floor and the rollout plan, but we haven't made that call now. So we're sticking with where we were.

Understood. Very helpful. I’ll pass it on. Thanks, Lee.

Thank you.

Thank you. Your next question will come from Barry Jonas with Truist Securities.

Great. Thanks for taking my question. And congrats Bobby on the new role. Maybe just as a first question, can you give any color on the strategic review and the conclusion?

Yes. Good morning, Barry. Obviously, we're limited in what we can say here. But I'll pass this one over to our new CFO, Bobby Lavan, who can give you a bit more color.

Thanks Barry. The committee hired world-class financial and legal experts, who did a lot of analysis had discussions with representatives of Standard General and worked hard to get to what was the best interest of the shareholders. The community worked hard with advisers assessing among other things in terms of Standard General's proposal and the fact that it was financed a significant part from sale-leaseback transaction valued prospects including the synergies that we expect to realize and other opportunities we hope to be available and recent historical trading prices and other factors. So at the conclusion of the review, Standard General and Bally’s cannot reach an agreement, so the committee decided to terminate discussions. And while it is not an alternative, we are pursuing a tender offer to return significant amounts of capital to shareholders.

Great. And then in regards to the proposed tender offer as well as other developments you're pursuing whether that's Vegas or other cities, how are you thinking about financing? And maybe walk us through how you see net leverage progressing for the company?

Yeah. I mean, Barry as you know tender 19:20 rules are very strict. So the commencement of the offer is subject to obtaining committed financing and we are evaluating all the options with our advisers so stay tuned. As it goes to net leverage for the business, right now on a gross debt-to-EBITDA basis, we're at somewhere between 5.25% and 5.5%. We would expect that to be a comfortable position in the short-term as we build out our North American Interactive business and we invest in our growth opportunities. So we're not going to bring that down anytime soon but there is a way to reduce leverage and that is growing the denominator.

What's the max number even in the short run you'd be willing to entertain?

Yeah. So we -- right now we have gross debt-to-EBITDA incurrence covenants with Rhode Island. So that's a focus for us.

Got it. If I could sneak one more in, Lee any updates on the UK regulatory review? I know we're getting close to potentially getting a white paper. But just curious if any updated thoughts that you can share there?

Yeah. So, obviously, delay on delay in terms of getting the white paper out, we actually had the minister in who visited us a couple of weeks ago, which was good. I had the opportunity to delve in with him. Key focus for us on the gambling out review, of course, it covers many different bases, because it covers both retail and online. But our focus is around affordability and any of the affordability measures, because we think that's where any impact has come. The -- I think these growing noises in the UK that we don't want to be requesting documentation from players at relatively modest levels of spend. And I think that that message is getting through. And certainly we felt for the minister took that on board when we met with them a couple of weeks ago. There's a real pushback from fellow conservative MPs not wanting to take -- go down the demanding stage [ph] -- route of requesting documents at low level of the spend. That's the key thing. We're looking to make sure it doesn't happen. I was pleased to see that yes I think it was yesterday what I’d like to call the Gambling Commission reported yet another fall in the problem gambling rates, right? So that will show that we've been going in a positive direction for a long time now and we're hopeful that the changes that are implemented won't be too impactful to what we do. As I've said many times, you'll know Barry that any change in regulation, I think is likely to benefit the scaled players and that we will take share over time of the back.

Yeah, all right. Thank you so much guys. Appreciate it.

Thank you.

Thank you. Our next question will come from Ricardo Chinchilla with Deutsche Bank. Ricardo, your line is open. Please make sure your phone is not on mute.

Hey guys, thanks for taking the question. I was wondering, if you could provide some color on what potential funding mechanisms would you guys have if you were awarded the Chicago project? And -- or if you guys would decided to do a significant renovation at Tropicana, which any color also on that development will be very appreciated?

So, hi Ricardo, morning. We said a long time that we can -- we've got a very substantial land bank that we will pass for significant strategic opportunities for the business. And I think that we can do that for Chicago where we could win that bid. And I think the same would be true for Tropicana, although we've long said that we would do that with an investment partner. So more to come on that as I think Bobby mentioned that we'll be talking much more about both those projects over the coming months.

Great. And just from a timing perspective, when you think about all the bulk in the period [ph] that you guys have at the moment to some extent, we continue to get investor questions on how you're going to manage to do them all at the same time? And if you could provide like a timeline on when would you be potentially starting a project in Tropicana any further development on drivers, what would be sorry on Chicago when would that start then how long you could potentially take even your current plan. So, any timing on those potential developments and on all of your other CapEx projects just for us to have a clear picture of the spend levels would be very helpful.

Sure. So, just one comment from me and then I'll pass it over to George to give a bit more color. From our perspective, obviously, we need to win a bit in Chicago to be able to proceed, but George might be able to give a bit more color on what the timing would be should we do that, depending on the timing of the announcement. And then in terms of Tropicana, we've said that we'll close that in Q3, right? So, anything that we're going to do there, we will give more color on over the next couple of months, but we'll be back to you as soon as we have the details. George do you want to give more color?

Sure. Hi Ricardo. So in Chicago the RFP requires the opening of the temporary facility in approximately one year, but that's after the licensing. So, maybe that's a year a year and half to a year or nine months off. And then three years subsequent to the temporary opening, there will be an opening of the permanent facility.

Got it. One last one for me. Given that you guys reaffirm your guidance, can you just point out if there is any potential impact that you guys are forecasting from the UK regulatory review? And if you could give us some -- based on what your discussions have been with regulators, any range of potential impact even preliminary on what that review could be for your business?

We've already, for the last two years, we would say been operating in line with a lot of policies and practices which are being promoted by the UK Gambling Commission or the review. Obviously, we have to wait and see what the white paper says in terms of where any particular thresholds or levels offset. But we've been adapting our business and adapting our operation to take account of most of what's been coming forward as proposals in the UK. So, we don't -- we're not putting out impact today in terms of how that review might go because we think that most of what will be proposed in the UK we're already operating inside of.

Got it. Thank you so much for taking my questions.

Thank you. Thanks Ricardo.

Thank you. Our next question will come from Dan Politzer with Wells Fargo.

Hey guys. good morning and congrats Bobby on the new position. I wanted to touch on the regionals. Could you talk a little bit about the trends that you're seeing across the database? I know you mentioned you're monitoring the low-end consumer. But to what extent can you maybe opine on the low end, middle end and maybe even the high end, if there's any discernible differences across your database? And also which property should we paying particular attention to as we think about that low end consumer? Thanks.

Yes Dan. So, we are watching really the only kind of headwind that potentially could occur as inflation as we're living through this. But so we're closely watching the impact of inflation. It certainly is on the lower household income segment of our database, but that's currently being offset still by some pent-up demand, especially in our older age demographic there's more comfort that COVID is behind us. And we continue to see growth in the higher worth customer segments. And we're dealing with that through the rightsizing of the cost structure. So, when we came out of COVID, obviously, we came out with a very lean fixed cost structure and we feel from the variable side of our business which is just as business increases or decreases we have, kind of, a clean approach that mitigates any shortfalls in revenue, but it certainly allows us to quickly react to certain revenue opportunities.

Got it. And then just in terms of all the kind of potential projects out there Chicago, New York, Japan are also throwing out to as areas where you're interested. How should we think about the typical cash-on-cash returns for these casinos or potential projects? I think for Chicago the proposed cost is around $1.75 billion. So, I want to get a sense of the return expectations there. And does that -- is that all in including land and licensing fees et cetera? Thanks.

So, Bobby why don't you take that one?

Yes, I mean we always underwrite sort of at least a 15% return unless there is a significant interactive dynamic, but 15% is what we're underwriting on those projects.

Got it. And then just one last one on the Trop Las Vegas. As you think about this project and the possible iterations it could come out. And how do you think about the impact of rising cost inflation, materials cost, economic uncertainty on your plans there?

George, do you want to take that one?

Sure. So obviously, we're monitoring kind of the economic conditions right now. But anything we do there would be really focused on our longer-term development opportunity. As we mentioned a little earlier, we would probably bring in a development partner into that. So that's still to be seen.

Understood. Thanks so much.

Thank you.

Thank you. Our next question will come from David Katz with Jefferies.

Hi, good morning. Thanks for taking my questions. One for you, Lee. I'd love your opinion or your perspective on entering US markets other than day one, right? We've seen players enter on day one, take a certain approach in terms of how much -- how aggressive they are with spending, capturing market share versus entering markets say weeks, months down the road, where it has tended to be a bit less aggressive. I'd love your perspective on sort of those strategies and markets where you're entering.

Good morning, David. First of all, we have reiterated many times in terms of how we look to approach the market and it isn't with a similar, let's say high progressive marketing spend that you've seen from some others. We mentioned also earlier that we're going to lean into a number of launches that really leverage the opportunity set that we believe we've created. So states where there's iGaming opportunities or we think there's going to be pretty near term iGaming opportunities are ones where we will have a particular focus. I think space like Illinois and Indiana et cetera, where we also have physical casinos and we have immediate presence. So we have been -- even though we haven't had 2.0 sports book out there until yesterday, we've been -- it doesn't mean we haven't been active, right? We've been doing a lot in building our top of funnel, both awareness, whether it's through Bally’s force [ph] or through free-to-play opportunities that have been building our data set, so that of course where we continue to focus. We will work very hard of return on investment from our marketing and stay disciplined.

Understood. And just second with respect to the land-based business, you mentioned earlier Lee, a considerable land bank and I want to make sure I interpreted your comment properly. I took it to me that there is real estate value within the land-based properties as it exists today that you could use to fund either Chicago or other improvements or other capital expenditures within the land-based portfolio. Is that how you're thinking about it?

Yes. You understood it correctly.

Okay. Perfect. Thank you.

Thanks, Dave.

Thank you. [Operator Instructions] Our next question comes from Stephen Grambling with Goldman Sachs.

Hi, thanks. Maybe another follow-up just on the tender I guess determined the magnitude the $300 to $500, I guess why was that the appropriate range?

Bobby?

Yes. I mean that was where the Board felt that a good amount was, but we can't comment more than that.

And is the tender offer kind of the ultimate end result of that review, or would you say that there's also other opportunities that you could think about that are still being evaluated.

This is the ultimate end of the review. The Board is always evaluating ways to drive long-term shareholder value.

Great. Thanks. That’s it from me.

Thank you. Our next question comes from Jeff Stantial with Stifel.

Hey, thanks. I just want to circle back. I just want to clarify to be crystal clear on the guide. So it sounds like the biggest impact is FX which is compositional and impacting revenue. Is it fair if revenues are at the low end, but that's all compositional that the prior EBITDA guide is still squarely in line with how you were thinking about things back in Q4.

Yes. That's correct Jeff.

Perfect. Just want to clarify on that. That’s all from me. Thanks guys.

Thank you.