Back on Jan. 25, we wrote that Bally’s Corp. CEO Lee Fenton was “possibly laying the groundwork for his own exit,” when he said, The pandemic boosted our business and we continued to hire at full pelt. I now can see that we may have over-hired in some areas and I take full responsibility for that.” This coincided with the sacking of 15% of Bally’s staff, followed today by Fenton falling on his sword. Although he’s technically CEO until March 31, Fenton wasn’t even allowed a voice in the official press release, his role being usurped by CEO-to-be Robeson Reeves. The latter comes from the company’s interactive side, which is where the problems are concentrated. Brick-and-mortar prexy George Papanier‘s job is safe.
To cover its retreat, Bally’s pre-announced 4Q22 and full-year revenues, stressing overseas (United Kingdom and Asia) growth upfront. Continued Reeves, “Simply put, our North America Interactive results in 2022 were unacceptable. In response, through our announced restructuring plan of the Interactive business in January, we are taking a deep dive in our approach to North America to ensure that investments we make in sports have a near-term path to profitability.” He took solace in increased market share in New Jersey and Ontario, thanks to Internet casino play. The interactive division will be subject to a restructuring, with leasing of “technology structures” to complement in-house infrastructure.
Aside for excellent spa business in Lincoln, Rhode Island, Papanier did not have much standout success to tout, although he expects Bally’s Atlantic City to turn profitable this year. 2023 capex will be curbed “as we focus on generating cash flows to invest in long-term growth opportunities for the entire Bally’s portfolio.” (Read: Chicago and New York City.) At least the economy continues to provide consolation, with “no slowdown in the consumer.”
Buried deep in the press release was a $391 million write-off of value ascribed to DFS provider Monkey Knife Fight and Bet.Works, purchased at the cost of $310.5 million. There was an additional, $73 million impairment “related to a long-standing indefinite lived trademark acquired as part of the Gamesys acquisition that is being deemphasized” in the Pacific Rim. All in all, a costly quarter, if a fitting conclusion to Fenton’s shambolic reign. He always seemed like a perfectly nice Englishman who was out of his depth in the U.S. marketplace.
CFO Bobby Lavan was at pains to put distance between Bally’s and financially troubled Sinclair Broadcasting. “Bally’s has no liability related to Diamond’s debt and Diamond [Group] holds no equity or other ownership rights in Bally’s. We continue to monitor the Diamond situation closely and look forward to working with the new management team,” he said, alluding to the consortium of banks holding Sinclair’s notes.
Fortunately for Bally’s the 4Q numbers were good enough to put Wall Street analysts in a merry mood. The company brought in net revenue of $577 million where Deutsche Bank boffin Carlo Santarelli had expected $549 million and cash flow of $164 million, $17 million higher than forecast. “Relative to our forecasts, net revenue came in nicely above, led by outperformance in Rhode Island, Indiana, Louisiana, and Missouri,” overachievement that Santarelli attributed to Papanier’s division. Truist Securities analyst Barry Jonas was unfazed by the announcement of Fenton’s sooner-than-expected departure and stuck with his “Buy” rating despite what he allowed was “mixed sentiment.”
Perhaps to create a diversion, Bally’s let it be known over the weekend that it was making a play for the Bronx as a megaresort site, specifically on 17 acres of a pricey golf course owned by the convicted felon Trump Organization. (The regulators should have a field day with that.) The plan is for Bally’s to eventually engulf the course’s entire 300 acres, perhaps as a resort amenity. Atop the former garbage dump would arise 10 acres of resort, plus seven acres of green space and residences for casino workers. Excavating that site is going to be fun. But we digress. Bally’s is pitching the prospect of 15,000 construction jobs and 3,500 permanents, with starting pay of $70K/year. Trump Golf Links is not a popular neighbor in the area, so the Bally’s proposition is being well-received at first blush.
Of course, for cash-poor Bally’s the question presents itself: Using what for money? Does Bally’s intend to trade Trump’s remaining 283 acres for equity participation? That would be the speediest—if dodgiest—way to underwrite the project. Bally’s is deeply in hock at this point, so Chairman Soo Kim is going to have to rattle his tin cup pretty fiercely, especially with deep-pocketed competitors like Las Vegas Sands and Wynn Resorts on the scene, vying for that casino concession. His best hope is for the Chicago temporary casino at Medinah Temple (above) to start churning money furiously at the start of 3Q23. That project got a provisional go-ahead last week for renovation to begin, although Bally’s execs somewhat overstated the matter, saying they had ‘broken ground’ at the site. At any rate, it looks like Kim will be robbing Chicago (so much for ‘flagship’ status) to pay for the Big Apple.
Opponents of smoking in casinos are getting their day before the New Jersey Lege today. The state senate Health, Human Services & Senior Citizens Committee is holding hearings on a bill to close the state’s loophole that permits toxic smoke and nicotine in Garden State gambling halls. Expect those in favor of the bill to turn out in force—and forcefully. Their star witness is leading slot-player advocate Brian Christopher. Rather than editorialize further on the subject, we’ll give you a snippet of Christopher’s prepared testimony, the perspective of an avid player.
“I love New Jersey. In fact I’ve worked with numerous properties in Atlantic City, and I was the first streamer at the opening of Hard Rock. I am also a longtime proponent of smoke-free casinos and the worker-led movement that CEASE has started right here in New Jersey. But as of this year, I am only partnering with smoke-free casinos. I do not promote smoking [on] casino floors, period.”
Think about that. The casino lobby is prepared to kiss off millions upon millions of online views of the properties, all for the sake of keeping alive an unhealthy practice of a minority of Americans. It’s their funeral.
It’s only appropriate that New York State should choose Super Bowl weekend to release OSB numbers for January. Operators made (before taxes) $149.5 million on handle of $1.8 billion. The bottom line is that FanDuel is gaining market share (+7%) at the expense of the other three first movers. FanDuel led operators in both handle and in revenue ($82 million), trailed by DraftKings ($50 million), Caesars Sportsbook ($15 million), BetMGM ($7 million), PointsBet ($3 million) and BetRivers ($2 million). WynnBet and Resorts World fell far below our cutoff point, as did BallyBet, which brought up the rear with $49,000 after taxes.
While on the subject of sports betting and the nascent federal backlash, it’s worth mentioning two companies that supplied the bluenoses with ammunition in the last few days. It took less than a week of legal sports wagering in Massachusetts for both Encore Boston Harbor and Plainridge Park to take unlawful bets on Bay State college teams. Both casinos self-reported the infraction but, regardless of whether or not they get fined, everyone at both—from bottom to top—needs a remedial education in the parameters of regulated sports betting in Massachusetts, particularly the Penn Entertainment personnel, who don’t seem to understand the term “temporary license.” Even then the damage has been done. Mobile wagering is set for a March 10 kickoff but a pause might be appropriate under the circumstances, until everyone knows the rules.
Jottings: You might want to visit Lake Tahoe, especially if you’re a gambler, but you wouldn’t want to live there. Neither would the locals. Caught between the pincer of escalating home prices and incomes that can’t keep pace, it’s a residential nightmare … That Cordish Cos. casino proposed for Petersburg is experiencing a tough time in the Virginia Lege. The lower house seems set to approve it but the upper chamber is a different and more difficult story. Cordish is prepared to commit $1.4 billion to Petersburg if the bill should be approved … Sports betting is on the legislative docket again in Minnesota. In one bill, seemingly modeled upon Arizona, sports franchises, tribes and horse tracks would all be juiced into licenses … Cretinous Dave Portnoy is now 100% Penn Entertainment‘s problem child, the casino company having closed the purchase of Barstool Sports. Given Penn CEO Jay Snowden‘s dewy man-crush on Portnoy, we foresee further regulatory issues …
Why is this man smiling? Because he’s MGM Resorts International CEO Bill Hornbuckle and he’s expecting MGM’s “best hotel revenue month” in its history this March, thanks to March Madness taking place partially in Las Vegas. And for lagniappe, there will be Formula One racing in November … We’ll miss the airborne Wine Angels of Aureole. MGM is scrapping the iconic restaurant, a Strip fixture for two decades, for a one-year stand by the Voltaggio Brothers, who will radically remake the space into Retro, a throwback restaurant—an awfully drastic move unless the change becomes permanent … Why hasn’t Boyd Gaming joined the Great REIT Sellout? Because it doesn’t need the money, says CEO Keith Smith. Vegas landlord Vici Properties is openly shopping for locals casinos but Boyd’s not interested … Kudos to Mohegan Gaming Entertainment for being ahead of schedule on Inspire, its megaresort in South Korea. The tribal gaming entity will be “making additional equity investments to fund a variety of items related to the project,” which sounds an awful lot like a cheery euphemism for ‘cost overruns.’