BALY - NYSE

Good day, everyone, and welcome to the Bally’s Corporation Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. [Operator Instructions] I’d now like to turn the call over to Mr. Charlie Diao, Senior Vice President and Treasurer for Bally’s. Please go ahead, sir.

Good afternoon, and thank you for joining us on today’s call. The earnings release and presentation that accompanied this call are available in the Investors Relations section of our website at www.ballys.com. With me today are our Chief Executive Officer, Robeson Reeves; our President, George Papanier; and our Chief Financial Officer, Marcus Glover. 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. Financial results may differ materially from the results discussed in these forward-looking statements. In addition, during our 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 non-recurring expenses and one-time costs. As a reminder, given the shareholder proxy process that is outstanding with respect to the Special Shareholders Meeting scheduled for November 19 to consider the Casino Queen merger, we will not be taking questions after the formal comments on this call. This call is also being broadcast live on our investor’s website and will be available for replay shortly after the completion of this call. With that, I will turn the call to Robeson Reeves, our CEO.

Thank you, Charlie. We’re pleased to have you join us today as we discuss Bally’s 2024 third quarter results and provide updates on our long-term growth prospects for our three business segments. Third quarter revenues declined less than 1% year-over-year to 630 million, as our Casinos & Resorts segments saw a 2% decrease in revenue, while revenue from the North America Interactive segment grew 55%. Our UK Interactive business continues to perform very strongly, as it generated a 12% increase in revenues. The full International Interactive segment saw a 5% revenue decline due to our non-UK operations. Adjusted EBITDA margins for the segment improved approximately 400 basis points year-over-year. Today I'll start by sharing key updates on our development pipeline and the latest for our Interactive businesses. I'll then hand the call over to George who will discuss our C&R business, followed by Marcus who will provide a more detailed review of our quarterly financial performance. As you know, during the quarter we announced a significant agreement with our partners at Gaming and Leisure Properties which funds the construction of our flagship permanent casino in Downtown Chicago, positioning Bally's to benefit from a strong blend of our local and destination market appeal. Our development site on the banks of the Chicago River is a hive of activity today as demolition and site prep work proceeds at rapid pace in anticipation of the start of construction next year. We're in active discussions with the City regarding its formal approval of the revised master plan for our single-phase development and believe this process will allow us to adhere to our current construction timeline. George will elaborate on the performance of the Chicago Temporary Casino in a moment, but I want to remind investors that we are fully focused on running the existing property with an eye towards growing our player database, planting Bally's flag in the community and further building the foundation for success once the permanent facility opens. In early October, we hosted a memorable event in Las Vegas to celebrate the legacy of the Tropicana Las Vegas and marked the beginning of an exciting new chapter for this historical site. Significant planning efforts are underway which will put Bally's in a position to begin our own development efforts concurrently with the A’s stadium construction efforts. Given our planning and preparation, our current pursuit is to have initial portions of the casino, hotel and retail offerings ready to go once the A's begin playing in their new stadium in 2028. Turning to New York, the process around awarding the new down state casino licenses remains prolonged. Our current understanding is the State will be accepting bids in late June 2025 and awarding the licenses in early 2026. Our proposal to develop a world-class integrated resort adjacent to Bally's Links at Ferry Point in the Bronx, is positioned to be a very strong contender, as it will be an economic growth engine for the Bronx, New York City and State. Having covered C&R developments, I'll now turn my attention to our International Interactive and North America Interactive segments. International Interactive revenue declined 5% to 231 million but segment level adjusted EBITDA reached 90 million representing a 5% year-over-year increase. Our UK business remains strong driven by continued share gains, cost effective customer acquisition and the ongoing build out of a robust online sports betting operation. The market also benefited from all time high active customer levels and robust average revenue per user metrics. Further, we are driving healthy traction for our recently launched online sports betting offerings including a newly launched Bally's branded product that joins our JackpotJoy offering. During the quarter we acquired Aspers Casino Newcastle in the UK, a small land-based casino in Newcastle upon Tyne. While this acquisition is relatively modest within our broader business, we see it as an opportunity to further plant the Bally's brand in the UK and leverage our online player database to drive engagement at a land-based casino, broadening our overall appeal. Outside the UK, we continue to work with our strategy of maximizing profit yield and reducing unprofitable marketing. In Spain, revenue is up 6% year-over-year in a constant currency, as we return to growth following the reinstatement of an attractive welcome offer and the reversal of the advertising decree in the country. This momentum continued into October where we saw healthy double digit year-over-year growth. Last week, we announced the separation of our team operating to serve Asia and certain other rest of world markets to instead convert to a strictly a licensing royalty model. This allows the business unit to operate entirely independently from Bally's with more agility and nimbleness. We believe this separation will allow our ex-colleagues the license to be more successful in pre-regulated markets, while allowing Bally's to monetize high-margin license revenue streams. More importantly, this allows Bally's to strategically focus our interactive activities in licensed markets such as the UK, Spain and our growing presence in North America. Turning to North America Interactive, we generated strong revenue of 46 million with an adjusted EBITDA loss of 11 million. Our iGaming operations in Rhode Island continued to ramp up impressively contributing 9.7 million in gross gaming revenue while our other iGaming markets remained steady. Profitability at the market level was moderated by Rhode Island indemnity obligations. Regarding our online sports betting rollout, Bally Bet is now live in 10 markets with plans to launch in an additional three states by the end of 2024 with additional expansions expected in 2025. New Jersey will launch sports and MONOPOLY Casino in November marking the introduction of the brand to the United States. The migration towards that platform will also occur on this day. Overall, we continue to make progress towards positioning our North America Interactive business to achieve positive EBITDA. This is in an active and highly productive period for Bally's, as we continue to position the business to capitalize on its substantial long-term growth opportunities. The entire team is excited for the future and we look forward to sharing our progress in the coming quarters. George?

Thanks, Robeson. Our C&R segment saw revenue decline slightly in the quarter driven by general stability across our portfolio offset by ongoing headwinds in Rhode Island and Atlantic City. In Chicago, operations continue to ramp at our temporary facility and monthly revenues have settled into a largely stable cadence, as we focus on expanding our customer database and developing key player relationships. Quarterly admissions grew more than 6% and market share has risen to its highest level to date, while our player database now exceeds 113,000 customers. During the quarter we celebrated the property's one year anniversary and during our first year we welcomed more than 1.3 million people through our doors. As I've emphasized before, with each day spent understanding the Chicago customers, our team becomes better prepared to hit the ground running when our new downtown flagship opens in September 2026. With respect to the permanent facility, the $940 million funding commitment from Gaming & Leisure Properties has allowed demolition and site prep to progress quickly and puts us in a position to begin construction of the new Bally's casino early next year. We continue to work with the city to secure approvals for the new site plan and architectural drawings and believe we remain on schedule to open our destination resort with roughly 3,300 slots, 170 plus table games, a 500 room hotel tower, 3,000 seat theater, six restaurants, cafes, a food court and a 2 acre riverside public park by September 2026. In Rhode Island, the bridge disruption on Interstate 195 remains a key headwind impacting revenue and property level margins, particularly for our Lincoln property. Lane closures on the bridge are disrupting traffic and this is likely to continue for the foreseeable future. We are closely evaluating how to balance iGaming in Rhode Island with the in person play to best maximize touch points with our players during this period. Atlantic City experienced a challenging quarter during its typically high visitation summer months following the departure of a key relationship marketing team earlier this year. We have since reconstituted the team and believe our new team members experience and relationships to start deliver benefits in the coming months with momentum building into next summer. More recently we opened an exceptional new steakhouse at Bally's Atlantic City which enhances the amenities available at our property. Looking at the balance of our portfolio, both our Biloxi and Dover properties were standouts, delivering solid quarterly performances. We believe the investments we are making in our properties alongside the efforts behind the scenes to right size operations, will serve as a tailwind as we enter into 2025. Finally, before turning the call over to Marcus, I want to give a bit of color on how we see the macroeconomic environment. The customer in the mid and upper end segments of our database remain quite healthy with respect to visitation and spend per visit. Like others in our industry, we've seen unrated play in the lower end segments of our database squeezed with these players reducing both their visits and spend. The trend appears to be mirroring what's happening across our peers and the broader consumer discretionary landscape. We remain highly confident in the overall resiliency of our customer and remain excited for the promise the future holds. At the same time, our entire team is looking forward to welcoming the Casino Queen team and property portfolio to the Bally's family once the proposed transaction closes next year. We believe that Bally's has a bright future ahead of it and we are excited to share in that future with our guests and shareholders. With that, let me turn it over to Marcus.

Thanks George. As Robeson and George have highlighted, our 2024 third quarter results were steady, though impacted by a few market specific headwinds that tempered EBITDA flow through. Third quarter revenues on a consolidated basis decreased less than 1% year-on-year to 630 million with a gain in our North American Interactive segment. Casino & Resorts revenue declined 2% to 353 million as strength in many of our markets was offset by ongoing headwinds predominantly in Rhode Island and Atlantic City, in addition to a more measured ramp in Chicago. Adjusted EBITDA for this segment was approximately 100 million, a 15% decrease from previous year. Segment margins were 28% versus 33% a year ago, driven by the aforementioned decline and flow through revenue to the bottom line. We are actively pursuing initiatives across the portfolio to expand margins and enhance profitability. This includes looking at everything from reporting lines to the rationale of centralizing various parts of the business. Having integrated a diverse portfolio of assets in a relatively short period of time, we are now beginning to implement a range of efficiency focused initiatives that we expect will begin to benefit margins in the coming quarters. International Interactive revenue declined 5% to 231 million, while adjusted EBITDA for the segment increased 5% year-on-year. Within this segment, our business in the UK saw 12% revenue growth on a US dollar basis and rose 9% on a constant currency basis. Segment adjusted EBITDA margins expanded approximately 400 basis points to 39% leading to segment adjusted EBITDA of 90 million. As Robeson mentioned earlier, with the carve out of Asia and deconsolidation of its operations, our financial presentation for these markets will be principally in the form of royalty revenues. As a result, revenues related to these markets will be materially lower going forward relative to prior presentation, but the entire cost structure representing approximately 375 of our ex-colleagues including the relevant engineering and development have exited the company. This will dilute EBITDA modestly because the royalty revenue has minimal costs associated with it, but on an operating free cash flow basis. Because all of this offer development investment expense has also been assumed by the independent company, the result is an immaterial impact of between 5% and 10% dilution of operating free cash flow from the separation. The expectation is that an independent company their business can be more nimble and operating more efficiently and cost effectively, but in particular with an owner's mentality we believe that they will find more opportunities for growth, which we will benefit directly via high margin royalty streams that participates in their growth. So the bottom line is that revenues will be reset in presentation but pro forma EBITDA will be only modestly lower and operating free cash flow after the development costs being offloaded will have immaterial impact. North America Interactive generated revenue of 46 million, a 55% year-over-year improvement. The segment generated an adjusted EBITDA loss of approximately 11 million and we expect our loss from this segment to continue narrowing as our iGaming operations in Rhode island and our OSB operations continue to ramp. Turning to our capital structure, we ended the quarter with approximately 40.7 million shares outstanding with incremental warrants, options and other dilution representing an additional 12.8 million shares. On the balance sheet, we exited the third quarter with 191 million of cash and 3.7 billion of long-term debt. In closing, this is an active time for Bally's on many fronts and we are working diligently to capture the opportunities in front of us. Put in place appropriate processes which will allow us to operate more efficiently and prepare for the addition of the Casino Queen assets to our portfolio as part of the proposed merger transaction with Standard General's affiliate. We believe the future is bright for Bally's and we appreciate your support. Operator?

And this does conclude today's program. Thank you for your participation and you may now disconnect.