Q2 2023 Bally's Corp Earnings Call
Good day and welcome to the Bally's Corporation second quarter 2023 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 session.
In order to ask a question during the question and answer session. Please press the star key followed by the number one on your telephone.
Please be advised that today's conference is being recorded.
If you require any further assistance. Please press star then zero.
I'd now like to turn the call over to Jeff Shelton VP of corporate development and strategy for Bally's. Please go ahead Sir.
Good morning, and thank you for joining us on today's call the earnings release and presentation that accompany this call are available on our website in the Investor Relations section at Www Dot valleys Dot Com with me on today's call are Chief Executive Officer, Robeson Reeves, George <unk>, Vice President Marcus Glover.
As Chief Financial Officer, Jamie Patel, Kelly's, Vice Chairman and Charlie Dee Valley scheduled.
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.
<unk> 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 protect nonrecurring expenses and one time costs. Today's call is also being broadcast live on our investors website and will be available for replay shortly after the completion of this call. Let me hand, the call over to Robert.
Core casino and resort business produced record setting second quarter revenue and EBITDA results with improving margins.
International Interactive remained solid led by the U K, which also produced record setting second quarter revenue results driven by market share gains.
North America Interactive gaming continues to ramp up positively as we see the benefits of games as technology, taking hold.
We have made significant progress transitioning value pet onto the camby in whiteout technology platforms, which is on track to rollout this summer.
We intend to be live in three states by some event and at least seven states and full retail locations to our already operational by the end of 2023.
With that in mind, we are pleased to reiterate our full year earnings guidance works, we expect somewhat better performance from our core casinos and results in international interactive businesses versus our original expectations slightly offset by an expected additional $10 million in costs in North America contract.
At the midpoint of that range relating to a Pennsylvania gaming notch the transition of Bally Beth and some investments we've made in our omnichannel, including battery life.
So we expect some added development cost outlays in second half 'twenty three.
<unk> is expected to reduce as we grow and scale the North America interactive business.
Our confidence in our guidance is premised on our core business is remaining strong our growth projects coming online and our North America interactive gaming business continuing to ramp up.
Earnings aside once again, we've had a very active quarter in terms of a continued evolution of our company.
We welcomed a new CFO Marcus Glover at a new corporate Treasurer, Charlie Jeff to our management team.
Jamie to tell a long serving valleys board member is also seamlessly stepped into the role of Vice chairman.
Each has been a tremendous addition to bally's and are working vigorously integrating themselves into the company.
Improving our culture and our workflows.
Deeply impressed with that global team and the progress we continue to make integrate some valleys three businesses.
On an operating basis, we've seen several positive catalysts with long term company impact and continue to advance our announced development projects.
As you all know we announced a deal with the opening days of major League baseball and that partners at G. OPI for the Ace to relocate that stadium onto nine acres of our Las Vegas Tropicana site.
We couldnt be more excited regarding this transformational one of our client development project, along with the option value and long term opportunity. This announcement represents and has created for our company.
Well the planning process is only in the beginning phase we will share additional details as they emerge over the next 18 to 24 months.
We closed on the acquisition of Tropicana in late September of 'twenty, two and have already materially increase the value of this asset a testament to our management team's creativity and ingenuity.
Next we have made tremendous progress on the development about temporary casino at the medallion are temporal in Chicago after receiving preliminary suitability from the Iga in early June the project remains on schedule for a September opening which is estimated to generate $50 million to $60 million of EBA.
In 2024.
The feedback we've received from those who have towards the development has been quite positive.
As for the permanent facility, we were successful in negotiating a deal with the Tribune company to vacate the building by mid 2024. So we can begin the development of the casino at that time.
We continue to expect the property to be opened in 2026, we remain confident in the significant pent up consumer demand for this project and eagerly anticipate generating results.
In late April we completed that renovation and expansion of our marquee Twin River this proxy and Lincoln, Rhode Island, and we are progressing towards completion of our Kansas City properties transformation.
Both capital projects should be significant contributors to our organic growth for years to come.
Additionally, the smoking ban that was implemented in Shreveport, Louisiana in 2020 was repealed beginning in June .
We believe this will be an incremental driver of performance for the property.
As its competitors just across the border in Bossier City do not have a smoking back.
When the smoking ban was initially implemented business fell over 20% from its peak and has yet to fully recover.
As for the UK White paper, which was released in late April we continue to review the proposed measures and will work constructively with both the government and gambling commission to find an effective solution, which ensures that reforms are appropriate and guarantee safe and sustainable future.
As we discussed on our last earnings call. We are in a strong position as we've been preparing our business strategy and compliance for some time.
We embrace regulation recognize that gaming is a public private partnership.
The regulatory environment in the UK challenges smaller competitors, causing some to leave.
This allows compliance larger entities to consolidate the market and expand their reach.
Next we launched a gaming in Pennsylvania in early June while it's still quite early we are pleased with the initial results. We believe our early performance in Pi.
As a result of strong brand recognition and database, we are only scratching the surface of our player database omnichannel opportunities.
Yeah.
Further the Rhode Island Legislature passed a bill to legalize gaming in the state naming valleys as sole provider.
This is a very positive development given our foothold in the state and our season database, we think the road, Rhode Island Legislature.
Such great partners.
It is anticipated that will launch in March of 2024.
Heading into 'twenty four we're also excited about the prospect of launching the <unk> brand and online sports betting internationally.
Post our <unk> rollout will be back on a path to diversify our revenues and EBITDA streams with ample cross sell opportunities between our retail and digital businesses.
This in turn will support our vision of becoming a premier full service vertically integrated casinos and resorts high gaming and online sports betting company, allowing us to leverage our valleys brand globally.
Turning to our operating segments quarterly results the casinos and resorts segment continues to trend well, even with certain properties facing incremental competition as a core casinos and results consumer customer remains resilient.
Well, we're keeping a close eye on spending trends and the health of our consumer generally we're pleased with our overall portfolio.
We generated record record <unk> revenues of $333 million.
Up 11% year on year, and adjusted EBITDA of $111 million, that's up 12% year on year as George and his team continue to drive performance.
We are seeing the benefits of the proxy improvement reporting systems centralized procurement and cost controls implemented throughout the portfolio taking hold.
Importantly, as we discussed earlier this year our core portfolio is near term Capex cycle has peaked several of our growth projects have come to or are nearing completion.
We expect to continue delivering consistent operating performance from this call.
International interacted had a strong second quarter.
And it's off to a robust first half of the year with continued algorithmic marketing optimization is taking place.
UK business continues to be the main driver of our performance growing 12% in the second quarter well ahead of the market.
The Formula of Oct grew up Ftes up while CPA is down significantly continues to play apps and drive performance.
In Asia, we continue to look for stabilization. After several months of increased volatility in performance. We've implemented changes and are working diligently to address this.
International interacted margins has settled in the low to mid thirties, and we believe we can sustain margins at or above these levels.
This is inclusive of our plans to reinvest in our core U K and Asia businesses and.
And we continue to see growth opportunities in Europe , Asia, and rest of the world with a focus on Brazil, including launching the <unk> brand.
B in 2024.
Turning back to North America interactive.
Our share in New Jersey continues to creep higher since surpassing 4% in the first quarter and we remain on track to achieving our 6% to 8% longer term share go.
We are working on building our presence in Ontario, and we're excited about the results we've seen thus far in Pennsylvania since launching in early June .
Overall I gaming business is generating positive returns and we are optimistic.
We also look forward to the recently passed gaming legislation in Rhode Island, a potential long term game changer for <unk>.
Gaming business.
In summary, our goals for the remainder of 2023 and into 2024 include opened the Chicago temporary casino in September .
So North America interactive gaming market share profitably.
Rollout Valley, Pat beginning this summer with our new technology partners.
Yes.
Any channel data capabilities.
And grow the <unk> brand globally, including OSB.
In addition to our growth initiatives. It is important to emphasize that our team remains focused on growing our revenues and adjusted EBITDA for our core casinos and results.
National Interactive segments, and again reiterating our guidance for the full year.
Before turning to Marcus and once again welcome him to the company.
Thanks, Rob.
As you all know this was my first quarter as the CFO of valleys after spending nearly two decades in the industry in a variety of leadership positions.
A couple of months into my tenure I review each of our business segments and had the opportunity to meet some of our investors.
As an organization, we remain focused on integrating and improving our operating and financial performance managing our development pipeline and growing our international and domestic gaming businesses.
This summer we will also began rolling out our valley bit OSB business in the United States.
We have several amazing new opportunities ahead of us and our team is centered on executing against these priorities.
For the quarter, we generated record second quarter revenues of $606 million, which is an increase of 10% year on year, adjusted EBITDAR of $161 million and adjusted EBITDA of $130 million after accounting for rent expense of $31 million or.
Our adjusted EBITDA margin of 26, 6% and our adjusted EBITDA margin was 21, 5%.
We are pleased with how our casino and resort portfolio perform with strengthen our Rhode Island in Kansas City properties offset slightly by some headwinds experienced between Atlantic City, Tropicana and Las Vegas, and Evans deal, which we are working through.
Irrespective, we are pleased with the resiliency and performance of the casino and resort segment within the quarter.
Overall casino and resort reported revenues of $333 million, which is an 11% year on year increase and a $111 million of adjusted EBITDAR, which is a 12% year on year increase excluding.
Excluding Atlantic City, and Tropicana, which are lower margin properties EBITDA margins were a solid 39, 4% for the core portfolio, including these properties EBITDA margins were at 33, 3%.
International Interactive generated revenues of $248 million and $84 million of adjusted EBITDA at 33, 9% margin.
Results were driven by impressive strength in the U K, a result of our content and marketing optimizations.
<unk> was up a robust 12% for the quarter in both dollar and British pound international increased 6% overall.
We will continue to invest in the business, while also exploring opportunities in other geographies as we had discussed in the past.
There is opportunity for responsible growth and to expand the <unk> brand in OSB capabilities throughout these markets.
Our long term international interactive adjusted EBITDA margin target remains in excess of 30%.
North America interactive generated revenues of $25 million and negative $18 million of adjusted EBITDA.
We're very happy with our performance in gaming, particularly in New Jersey.
New Jersey gross profit contribution is approximately a little over $1 million a month and growing.
We continue to work on building out our presence in Ontario, and we launched in Pennsylvania in early June .
The initial results that exceeded our expectations and we are highly anticipating the launch of <unk> gaming in Rhode Island in March 24, we will be the sole provider.
Our I gaming business is generating positive contribution margins, which we anticipate will continue to strengthen.
Turning to always be as ropes had mentioned earlier, we incurred additional costs in the quarter of approximately $7 million versus first quarter, including our launch NPA for I gaming.
We look forward to the transition of valley bet in a rollout onto our technology partners platform can be and why it had gaming the rollout schedule will begin three states. This summer and at least seven states and four retail gaming locations by the end of 2023.
Two of which are already live.
We also intend to leverage these partnerships to module OSB in the UK and in Europe in 2024.
Additionally, we made small IP content related investments and minor league baseball and other properties to build out our valley live Omnichannel initiatives.
We believe valley live will prove to be a solid customer acquisition tool and future revenue driver.
Corporate expense for the second quarter came in at $16 million. This remains slightly elevated as we are still managing through some short term cost impact, though we are confident in expense reduction measures moving forward.
On an operating basis with the exception of a few instances mentioned, we haven't seen a significant change in consumer spending patterns at our casino resorts.
That said, we are keeping a close eye on general economic conditions.
As we anticipate changing customer behaviors <unk> spin, we have levers at our disposal in order to maintain our strong margin profile.
With that in mind for the company overall, we are maintaining our guidance for 2023.
Recall, our forecast is for us to generate between $2 5 billion to $2 6 billion in revenues and $665 million to $700 million and adjusted EBITDAR.
This now reflects a loss in North America interactive, a $50 million to $60 million $10 million increase at the midpoint.
We expect some additional development cost outlays in the second half of 2003 <unk>.
Though the spend will reduce as we grow in scale in the North American interactive business are.
Our full year estimates are driven by our growth projects within casino resorts in international interactive businesses remaining strong as we are confident in our global business.
This begins with the Chicago temporary facility opening in September and the completion of our Kansas City expansion project later in the third quarter.
Additionally, we will benefit from a full quarter of our twin river's renovations and expansion as well as recently announced smoking ban reversal in Shreveport, Louisiana.
This also considers our belief that the white paper released by the UK government won't have a material impact on our international inter active financial results in that FX will remain constant.
We are also maintaining our 2023 capital expenditure guidance of $160 million, excluding Chicago with maintenance Capex at casinos of about $50 million and growth Capex eight casinos of about $70 million.
During the quarter, we repurchased approximately 748500 common shares for an aggregate purchase price of $10 7 million at quarter's end shares outstanding were about $45 6 million and we had incremental warrants options and other dilution of approximately $13 1 million shares.
<unk> $58 7 million shares outstanding is the right way to look at our capital structure.
We have more than $184 million of cash on our balance sheet the reduction in cash versus last quarter. As a result of us restricting cash for the Tribune payments and $3 2 billion of net debt.
Lastly, I would like to reiterate my enthusiasm to be part of the <unk> team. The pipeline of projects. We have ahead of us in all three of our operating segments are exciting and align with our strategic direction and focus.
Casino and resort development and expansion anchored by our Chicago project enhance value we have created in Las Vegas regarding the Oakland A's Stadium transaction.
<unk> growth trajectory domestically, particularly in New Jersey, Pennsylvania, Ontario, and now Rhode Island. In addition to the rollout of Valley bet.
The continued consolidation and rationalization within the international interactive, particularly in the U K.
And continued focus on our balance sheet through maximizing our working capital and addressing the untapped real estate value in our portfolio.
Thank you all for listening and let's now open up the call for Q&A operator.
At this time, if you would like to ask a question. Please press the star and one on your Touchtone phone.
You may remove yourself from the queue at any time pressing star two.
Once again that is star one to ask a question.
We will take our first question from Barry Jonas with true Securities. Please go ahead.
Hey, good morning, guys actually maybe I'll start with markets can you talk a little bit about how your transition one quarter ends going do you have a sense what's on track in your head or if there's some things you may want to adjust.
Yes, Thanks, Barry it's been it's been actually a whirlwind and exciting at the same time.
Early early indication is that.
I'm joining a very very impressive team as you can see in the results bolt on CNR side as well as the international <unk> side, we continue to exceed our expectations and perform and the teams are working very hard to not stay static in that performance and so what George and the casino resorts team has been able to do on the C&I side with.
The margin profile that you guys C&I results and continuing to maintain focus on our development pipeline as well as wet roads and the team has done overseas specifically in the U K is quite impressive team and we continue to prove we get the most out of the assets we have to manage and so very impressed and remain excited to join this team.
Yes.
Great. So I guess with that I am curious how you guys are thinking about capital allocation here, specifically the path to deleverage.
You've got the Chicago permanent spend coming up and then I wanted to get your thoughts about how tropicana spend.
Waves in two to that path to deleverage. Thanks.
Yes, I'll start off with that and then anyone can chime in I think right now Barry our focus is on our development pipeline with Chicago anchoring that we feel pretty good about our pathway and some of the early diligence we perform on moving that project forward on apartment on a permanent standpoint.
As it relates to Tropicana.
That pathway is pretty far out and we feel confident as we move forward with the Chicago Perm that we'll be able to solve for Tropicana not just in the proper development, but also in the underwriting of that project as well, but we remain encouraged with the Optionality that that project provides us write their own.
The most visible and most traffic corner in the Las Vegas strip.
Got it and then if I could just squeeze in one more I gaming in Rhode Island.
Really exciting should be interesting to see and frankly, the only land based and online operator in the state, but can you maybe talk about.
How are you thinking about the potential for omni channel driving higher spend levels from customers, but also <unk>.
Potential risks around online cannibalizing lab based thanks.
Yes, I'll take that.
Everywhere, we've launched and we have seen.
Gaming alongside casinos and resorts, it's just a different form of engagement, we've seen spend layering on top of one another this protects us in different times as well.
Biggest growth times, if this call it seasonality big storms or whatever and in bricks and mortar we will definitely see mid to high gaming.
It won't cannibalize its additive people engaged both at home and they socialize more and the retail establishment. So we see this as totally incremental we are the sole operator.
I'm very excited about Rhode Island.
I think it will be material in driving performance and actually North America and attractive business.
Great. Thanks, so much.
Thank you we'll take our next question from Jordan Bender with JMP Securities.
Great. Thanks for taking my question.
In New Jersey, your market share in <unk> in.
Any kind of in that 4% range, maybe year to date can you just kind of bridge as to how you get your targeted 6% to 8% range as it come from the technology side, the product offering or do you need to kind of get a little more promotional within that market. Thank you.
It's going to be driven by how much we can utilize our retail casino database, so more omnichannel, but also significantly its product offering upgrade.
The addition of sports will bring new audience Susanne.
As we know people bet on sports, but they always been gaming too so we see that as the funnel.
As we introduce sports into New Jersey, we will see our share growth.
Yes.
Great and then for my follow up.
A little bit of time in Atlantic City since we've seen what that property Kim can generate just given the capex in COVID-19 and your takeover of that property.
We hit the high season here during this summer like how should we think about that return.
Where do we sit in the timeline of the full return on that property.
Since we relaunched on Memorial day, 2022, and we've had a good we had a good summer in 2022 and.
And we continue to ramp that property through the first half of 2023, beating.
Meeting all our expectations. So we're feeling good to see profitability in 2023 and just in July .
July we it was a record month.
Since the acquisition of.
Ill Atlantic City both.
Both revenue and.
And.
Profitability. So we're feeling good about it.
Great. Thanks, George and thanks for the questions.
Thank you we'll take our next question from Dan <unk> with Wells Fargo. Please go ahead.
Hey, good morning, everyone and thanks for taking my questions.
Firstly I wanted to dive a little bit deeper into North America, and interactive, obviously expenses ticked a little bit higher than that in the second quarter. It looks like you're just flowing that through to your guide, but I guess as we think about the back half of this year into 2024 with the focus on gaming, Rhode Island coming on.
Continued investment in New Jersey, how should we think about I guess, the EBITDA ramp and maybe if you could break out.
Sports betting profitable today versus <unk>.
It would be profitable or do you really look at that more as a funnel for I gaming. Thanks.
<unk> a customer.
Our customer base, but we will be very prudent and optimize marketing expense as we move forward. Obviously, we have some media partnerships and some rev share agreements that take.
Take shape in that.
That segment, but we will be very very prudent as we move forward with a focused keenly on gaming and the upside in those in those markets, specifically, New Jersey, Pennsylvania, and then soon to be Rhode Island.
Got it and then for my follow up if we could touch a little bit on Chicago.
You think about kind of the cash flows this year next year and into the coming years coming leading up to the build out of the permanent facility and I guess on the on the backend of that how you're thinking about the possibility of doing a sale leaseback for that property and maybe bringing back into some of that capital just given that that's something you talk.
What about as it relates to your other other owned properties within the portfolio.
Yes to answer your question, maybe not an order, but obviously sale lease back with our unencumbered real estate remains an option.
Exploring all options.
And so we will continue to engage along that path.
Pretty responsibly in terms of how we think about coming up with a firm decision on that obviously in horror construction done.
Then began until second quarter of next year Tribune doesn't get out of their space until July of next year and so.
As we get a little bit closer to that day, we will have more definitive answer for you around capex and how we how we see that playing out in terms of underwriting.
Thank you just on the on terms of the cash flows this year next year for Chicago.
The kind of way to think about that.
Yes. This is George I'll give I'll give a little a little guidance on that obviously, we are continuing to be very focused on the opening of the temporary casino and that looks like it's going to be in September .
We've actually increased the scope of the original temporary projects that we feel there is nice upside to that.
I think we're out there with about a $50 million run rate, we're increasing that to $50 million to $60 million annually.
And hopefully there is some continued ramping of that as we build towards the opening of a permanent facility.
And right now we have baked Dan obviously.
I think a little delayed from what we communicated to you last time on opening but you could probably for the rest of this year estimate out somewhere between three $5 million to $5 million a month in.
In terms of impact once we open in Chicago.
Got it thanks, so much.
Thank you we'll take our next question from Chad Beynon with Macquarie.
Hi, good morning, Thanks for taking my question.
I wanted to ask about international interactive the strong 12% growth that you posted.
In the UK, you outlined kind of what's going on in the market.
You do have some tough comps in the back half of the year, just how strong the growth was in that region and <unk> 22 can you help us think about seasonality what's going on in the market. If you still have additional tailwind from what you talked about from.
The fragmentation from the White paper, just trying to get a sense. If this can still be.
Mid to high single digit growth market going forward. Thanks.
I have confidence that trends will continue we're still taking share from smaller players and actually some bigger players.
Keith is margin.
The consolidation in the market, we will continue to track on that and we think high volumes of new customers coming into <unk>, which is a great tailwind, which will boost the sport, we don't see that trend going away. The introduction later of sports betting as I described for North America Interactive will widen the funnel of acquisition so I see.
Genuine growth.
Zero market as I've said, we are great mature by tax heavily regulated and competitive market that is true for interactive it's true for bricks and mortar. So I'm very confident in our future in our core markets are very robust and we will build out other growth opportunities.
Okay.
Thank you and then.
Marcus on the.
The Lincoln option I know that you extended it with <unk> from 24 to 2026 can you just help us think about the thinking there.
I guess if.
And maybe it's not the right timing, but just provide a little bit more color there would be helpful. Thanks.
Yes.
Progress with those discussions continue to remain active obviously, we have a great rapport with our.
Regulatory regulatory body here in Rhode Island.
And we're in discussions now with them about timing of when that makes sense and so that remains a viable option for us that we will continue to engage on and at the right time, we'll have something to communicate to you guys about about that transaction.
Great appreciate it thank you very much.
Thank you we'll take our next question from Jeff <unk> with Stifel.
Great. Thanks, Good morning, everyone starting off on the brick and mortar business. Marcus you mentioned, some headwinds for Atlantic City, Tropicana and ebb and fill in the prepared remarks, I think George covered Atlantic City, a bit earlier during the Q&A, but I was hoping you could just expand a bit more on on the trop Evansville, just what's going on at those two properties how much of an EBITDA headwind.
As this program and kind of what are the efforts underway to get those back on track.
Yes, I'll pass to Joe I'll start off with some remarks, and then pass it over to George I think in Evansville is just new competition.
Competition within the hour, so driving a radius of that property and in trop as you guys can probably imagine with the announcement of the Aes option.
A little bit of.
Knock on effect in terms of uncertainty as it relates to customers and employees alike and so the team is doing its best to make sure that we show strength and show certainty as much as we can in that market, but I'll, let George add any more color commentary to that.
Hi, Jeff.
Thanks, Mark is the only thing I'll add to that is in Evansville.
The competition really started arriving in that market about two years ago, we've had some HHR competition and the neighboring state and Churchill Churchill, just recently acquired the Ellis Park.
Some improvements there, but it has just been some erosion around the edges.
We've been working to mitigate that on the expense side of our business. So our margins are actually improving.
So theres a slight slight impact there and we will retool on how we approach the competition in that market Tropicana listen we acquire that towards the end of last year, We're actually ahead.
Coming to our site, which obviously is very positive.
From a valuation perspective, but we're going to focus on.
The timing as it relates to the Ada is actually arriving I think we have one more hurdle. So we're waiting on them to see what their actual timing is and we'll just react to that and and.
And manage the property accordingly up until closure.
Okay, Great. That's helpful. Thanks, Marcus Thanks, George and then.
Stick in for my follow up sticking with the brick and mortar business I was hoping you could just.
A bit more of an update and expand on the work being done around asset integration and cost containment spearheaded by by GAA Man can you just talk through.
If you could also frame out what you see is the eventual upside here that would that would help as well.
Yes, one of the early parts of my assessment is just understanding where the right opportunity is for us.
One of the phenomenon in the industry is this movement towards shared services and centralization.
In my experience have been coming from environments, where that's been somewhat successful in other places, we probably left some opportunity by centralizing too much.
George and team do a phenomenal job on the brick and mortar side of getting maximizing the operational performance at every property. We have is Roche and teed up earlier, we operate in some of the highest tax jurisdictions and some of the most difficult competitive circumstances, and we continue to maintain a very very strong margin profile.
So right now we're balancing what should be shared service and centralized versus what we are allowed to remain at the property and some of that is somewhat fluid right now.
We expect to narrow that down and focus and opportunity, but the biggest the biggest upside is ensuring that the properties are able to maintain his entrepreneurial spirit and its nimbleness as it can take advantage of the opportunity real time by having the right people in place at the properties. We feel good about the cost opportunities are dialing down some.
Our corporate expense and.
We will continue to manage that with a keen eye and be very responsible but make sure that we allow our properties to do its best work by leaving the things that makes sense to leave at the property.
Great. That's helpful. Thank you I'll pass it on.
Thank you we'll take our next question from David Katz with Jefferies.
Hi, good morning, everyone. Thanks for taking my questions.
Wanted to observations on the digital side for sports.
Gaming also is that the U S market has been kind of transitioning from.
Spending being a driver of business two product.
Being a driver of volumes can you just talk about what you see as your key strengths or.
Key competencies that will sort of help you be successful in that context.
If you disagree.
Yes, I totally agree that it's about product right product and the yen went out but what is the product, but it isn't just about having a sports betting offering called the most most games available it's actually about how utilized with data platforms.
And integrate that into our product experience.
That really sets up my follow up question.
How youre thinking about the aspects of the value chain, you ultimately, we'd like to own versus outsourcing.
And where you see the advantages one way or the other.
Yes. My view is before you reach scale a lease model is very sensible have variable costs.
Scale, it makes sense to actually have fixed costs.
I see the greatest value and our offerings around omni data massive believers based so thats my entire background and I know that you can that's how you win in the long term. That's how you get the best margins out of your business.
Absolutely on our data.
Perfect. Thank you very much.
Thank you we'll take our next question from Lance Vitanza with TD Cowen.
Given we've recently had a lot of conversation around.
Outsourcing components of that business, and really restructuring, it and making it leaner and meaner and so I'm just wondering could you help distinguish between where you are investing in an interactive and where you are scaling back in and then again I think someone asked this earlier I don't think I heard you answer but when are you.
<unk> the segment to get back to EBITDA positive.
Our content for our <unk> platform, which we think is very important.
And then making sure that some of the overhang from prior platforms.
Remove from from from our system and so some of that has been write off but content and investment in our I gaming.
With understanding the variable component of our can be white hat platform is where we're focused right now and so in terms of getting to profitability.
We.
Hard to hard to say that we will get there by the end of this year, even if into next year, we expect to reduce our loss significantly.
By the second half by second quarter next year, but the focus is on continuing to build up this platform and our infrastructure. So that we can be strong in the gaming space.
Our strategic partnerships and media partnerships commitment.
Fair enough one one quick second question for me the share repurchase program I noticed they bought some stock presumably you also have flexibility to retire debt early is that the case in your bonds are yielding over 11% and you could capture some meaningful discount there are you able to be in the market.
And repurchased those bonds. If you so choose or does your bank that prohibit that.
Okay.
We are able to but I think right now our priority as it relates to moving forward is our cap <unk>.
We will balance those priorities appropriately, whether it's equity repurchases and or debt retirement, but to answer your question in short yes, we are.
Thank you very much fair enough.
How do you compare to the Covenant and also can you. Please confirm you have restricted payment capacity for the restricted cash that is Alex.
David for the transaction with <unk>.
I think I heard the first part of your question was around I will defer to Charlie down on this question Alright.
Mark Mark is that yes ill be happy to do it.
And so that can you can you hear me.
Yes.
Great.
In terms of regulatory covenant.
Rhode Island were well within the five five times.
Approximately five times.
With respect to we have not.
<unk> ourselves.
The basket.
Our investments in Chicago.
Yes.
Yes, Bob I.
I think that those are the two questions that you asked.
Got it thank you for my follow up.
Given that you guys have mentioned that you could probably go to the market.
To get a loan to fund the construction is it safe to say to assume that you know that something that you guys would do perhaps in the first half of next year or do you guys have any other plans for the loan.
Joseph on these incremental property.
Yes.
Okay.
And given the as Mark has mentioned before the trade business Allo there until July .
Costs.
Dark.
Preparation for maybe.
Second quarter at the earliest and then.
But we have time.
Specific construction clients.
In terms of timing and so forth.
So that's a that's a 2024 ish.
Got it. Thank you so much for taking my questions.
Thank you we'll take our next question from David Hargreaves with Stifel financial.
The.
Directing and influence towards that customer and I got to tell you the early results or a little better than expectations.
We've actually Youll see it in the reports we have actually increased.
<unk> business by a little over 4% since the expansion and table games, which is really our targeted focus were up over 7%.
So were.
We're feeling good about those results and we're looking at this is.
And incremental.
Incremental to what we anticipated earlier.
That sounds great.
Marcus welcome when we first met you were running the MGM property in Detroit.
And all of the Temporaries had done very well and all the permanent has kind of struggled.
That was with a lower threshold of investment and the lower tax rate. So I am just wondering if you could tell us.
What you see with Chicago, that's different or similar from your experience there.
Yeah, sure happy to probably a little bit of correction never never Detroit, you're probably referencing Cleveland when we open there but.
In terms of the penetration opportunity, we will have at our disposal.
And so if I had to separate between what we think will be a very successful temporary casino in how we think our prospects will play out for the Perm.
We feel that we will appropriately right sized the perm such that we can.
Leverage Chicago as an anchor city to generate some tourism and national visitation, but obviously within probably.
50 mile radius, Youre, probably looking at actually much less than that 20 mile radius you have several million dollars.
The temporary facility as well as as we migrate toward operating the permanent facility, we were fairly I think.
Obviously looking at what George and the team has been able to do with properties that don't fit the development model of what we'll build in the Chicago Perm I feel pretty confident that these guys will be able to use that facility and maximize its potential.
Okay, Great and then lastly.
In the presentation. It looks like you guys have changed the format for the international Interactive segment reporting.
I just wanted to say.
The additional <unk>.
Transparency and detail I thought that was very helpful. I Hope you guys will consider putting it in going forward.
Sure.
Yes.
Yes.
Okay.
Thank you at this time, we have no further questions in queue I'll turn the call back to management for any additional or closing remarks.
Thank you all for listening and we will be speaking to you with any major updates very soon.
Thank you. This does conclude today's Bally's Corporation's second quarter 2023 earnings Conference call. You may disconnect. Your lines at this time and have a wonderful day.
Okay.
[music] Goodbye.
Hum.
[music].
Okay.
[music].
Okay.
[music].
Okay.
[music].
Hello, Matt.
Oh.
Hum.