Chicago Delays and Tropicana Las Vegas Negatively Impact Bally’s Q3 Results

Posted on: November 1, 2023, 04:30h.

Last updated on: November 1, 2023, 08:21h.

Following the release of its third-quarter earnings report, Bally’s (NYSE: BALY) experienced a significant 14.80% loss in stock value on Wednesday. As part of the report, the company revealed plans to reduce its workforce by 300 employees. Additionally, executives mentioned the possibility of selling the lease on the Tropicana Las Vegas casino hotel. However, any sale would be dependent on receiving the right price.

Tropicana Las Vegas
Tropicana Las Vegas operator Bally’s, seen above, cited uncertainty at the venue as one reason for its dismal Q3 results. (Image: AP News)

The decision to reduce headcount follows a previous announcement in January, where Bally’s stated its intention to cut costs by reducing its interactive unit workforce by up to 15%.

The disappointing Q3 earnings, which fell well below analysts’ expectations, were a major catalyst for the decline in Bally’s stock value. The company reported a loss of $1.15 per share on revenue of $632.5 million for the September quarter, while analysts had predicted a loss of just 15 cents per share on sales of $634.54 million.

The updated revenue guidance for 2023 and the earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) further contributed to the drop in share price.

Bally’s is adjusting the revenue guidance provided on May 9, 2023, for the remainder of the year to $2.4 billion to $2.5 billion. The guidance range for Adjusted EBITDAR is now $640 million to $655 million,” according to a statement.

This revised outlook is primarily due to delays in launching the temporary casino in Chicago and other factors as mentioned by the company.

Tropicana Las Vegas in Holding Pattern

As Bally’s sole Las Vegas property, the Tropicana Las Vegas is currently in a holding pattern. Awaiting the outcome of a Major League Baseball (MLB) owners meeting later this month, operator Bally’s and real estate owner Gaming and Leisure Properties (NASDAQ: GLPI) are expecting approval for the Oakland Athletics (A’s) move to Las Vegas. This potential move includes plans to construct a new stadium at the Tropicana site. Bally’s executives attributed uncertainty over the Tropicana’s future as one of the reasons for the disappointing Q3 results.

During a conference call with analysts, Bally’s executives discussed the potential sale of the Tropicana lease. CFO Marcus Glover stated that the current value of Tropicana is “enormous” and that Bally’s would consider selling the lease if the price is attractive. Chairman Soo Kim also noted the increased asset value of the Tropicana.

CEO Robeson Reeves emphasized the long-term value of the Tropicana and expressed confidence in the asset despite the short-term challenges.

Bally’s Q3 Results a Minefield

In addition to the setbacks at Tropicana and the delayed opening of the temporary casino in Chicago, Bally’s faced challenges at its venues on the Atlantic City, N.J. Boardwalk, and in Evansville, Ind. The company did not provide specific details about the issues in Atlantic City, but executives highlighted the impact of increased competition from historical horse racing machines in neighboring Kentucky on the Evansville casino’s performance.

“We sense investors may have expected sequential improvement as BALY transitions to a variable-cost tech strategy,” wrote Stifel analyst Jeffrey Stantial. “Overall, we see more negatives than positives in BALY’s Q3 results, though the bar felt low heading into earnings.”

Stantial rated Bally’s as a “hold” with a price target of $10.

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