In what has historically been a challenging area for Bally’s, US online gaming emerged as a rare highlight in an otherwise underwhelming second quarter for the company.
On Wednesday, Bally’s Corporation reported North American Interactive revenue of $49.2 million for Q2, a 95% increase compared to the previous year. That was primarily fueled by Bally Casino in Rhode Island, where the app launched in March.
Bally’s off to strong start in Rhode Island
In the company’s accompanying earnings call, CEO Robeson Reeves highlighted that its Rhode Island iGaming monopoly generated $6.7 million in revenue in its first full quarter.
Now on its third strategic shift, Bally’s repositioned Bally Bet last Summer to complement to its iGaming business. The strategy prioritizes using sports betting to channel customers into iGaming rather than attempting to compete head-to-head with more established sportsbooks.
Rhode Island was an essential part of that plan, given Bally’s existing presence with two casinos in the state and the monopoly it enjoys. Bally’s launched its sports betting app in Massachusetts during Q2 as well, aiming to capture potential customers who might cross over into the neighboring state to transition them to iGaming users.
Bally Bet coming to four new markets
Bally’s plans to introduce the Bally Bet sportsbook in four additional states by the end of the year.
Later in the call, Reeves identified three of those as Illinois, New Jersey, and Tennessee and said Bally’s also plans to launch online sports betting in Ontario.
“With the ongoing successful rollouts of Bally Bet across our markets, we’re generating improved volumes and profitability, particularly as the transition onto Kambi and White Hat platforms has [gotten] good customer feedback and helped us differentiate our offering,” Reeves said.
Trimming US losses
The North American digital segment reported adjusted EBITDAR losses of $7 million.
Reeves expressed optimism that these losses will narrow as the year progresses, particularly as Bally’s expands its iGaming presence in New Jersey, Pennsylvania, and Rhode Island. The segment will also benefit from reduced costs as Bally Bet and Bally Casino continue their transition onto third-party technology from Kambi and White Hat Games, he added.
While Bally’s still holds a smaller market share in online sports betting and iGaming, its second-quarter results mark a significant change from this time last year, when the app was inactive in many states as it began transitioning off Bet.Works technology for which Bally’s paid $125 million.
Bally’s misses on most estimates
The remainder of Bally’s operations fell short of Wall Street’s expectations. The company reported quarterly revenue of $621.7 million, a 2.5% increase year-over-year but 3.2% below analyst estimates. Earnings per share were -$1.24, missing estimates by 1.8%.
Adjusted EBITDAR came in at $162 million, 6% below estimates, which management attributed largely to market-specific challenges affecting its casinos. Bally’s now anticipates full-year revenues and adjusted EBITDAR to hit the lower end of prior guidance, which was between $2.5 billion to $2.7 billion and $655 million to $695 million, respectively.
Management did not comment on or field questions regarding Standard General’s recent acquisition or plans for integrating Queen Casino & Entertainment, another operator owned by Standard General.
UK softens international interactive declines
The international interactive segment saw a 7% decline, which management attributed to “ongoing player engagement issues” in Asia.
“While we had seen signs that the region was beginning to stabilize, it now appears likely that challenges will remain for the foreseeable future. It is our view that over time, Asia will stabilize and return to growth,” Reeves said. “Across Europe, we’ve seen some growing traction for our offerings, including improvement in Spain following the lifting of advertising restrictions.”
The UK market was a bright spot, with a 9% year-over-year increase in iGaming revenue driven by market share gains. CFO Marcus Glover referred to the UK as the “crown jewel” of the segment, noting a 1.3 percentage point increase in interactive margins despite revenue challenges.
Investors lukewarm on Bally’s results
The stock market response was lukewarm.
BALY opened at $17.25 on Thursday, up 0.06% on about one-and-a-half times its daily average volume.
In a note issued shortly after the call, Barry Jonas of Truist Securities maintained his “hold” rating and $18.25 price target, citing the pending takeover offer as a reason for the conservative stance.
