Bally's Considering the Sale of Tropicana Las Vegas Lease, Reduces 300 Digital Positions
As part of its third-quarter financial update, Bally's (NYSE: BALY) revealed plans to lay off 300 employees. Executives also suggested they might be willing to sell the lease for their Tropicana Las Vegas property if the offer is enticing enough.
In the opening months of this year, the casino operator indicated they could potentially lay off up to 15% of their workers at their interactive unit to reduce expenses. At the time, this news contributed to a downward spiral for the share price.
Bally's revealed they generated a $1.15 loss per share and earned $632.5 million in revenue for the September quarter. This fell short of the expected loss of 15 cents and $634.54 million in sales.
In addition to the job cuts, a disappointing performance in their EBITDAR and revenue guidance for 2023 further contributed to the slump in share value.
Bally's projected revenue for the rest of the year to range from $2.4 billion to $2.5 billion - a reduction from the $2.6 billion to $2.7 billion estimate they announced in May. Their adjusted EBITDAR forecast now stands between $640 million and $655 million.
The postponement of their temporary casino in Chicago and other unspecified delays were the main reasons behind the revised guidance.
The Tropicana Holds Its Ground in Vegas
The only casino Bally's owns in Las Vegas is Tropicana Las Vegas. But at the moment, its future is uncertain due to the upcoming MLB owners meeting, which will determine whether the Oakland Athletics (A’s) can relocate to the city and construct a new stadium on the existing land.
During a call with investors, Bally's executives acknowledged the uncertainty surrounding Tropicana's future influenced the third-quarter performance at the venue. The CFO, Marcus Glover, said they'd be open to selling their lease on the property if the price is right. The CEO, Robeson Reeves, pointed out that Bally's acquired the lease for a mere $150 million, and the property's value has since increased.
Given the current circumstances, Bally's CFO said, "Although we have some short-term pain, this is an extremely valuable asset."
The Tangled Web of Bally's Q3 Results
Factors such as reduced spending at Tropicana and regulatory setbacks that stalled the opening of the Chicago temporary casino were not the only elements negatively impacting Bally's third-quarter performance. Sluggish sales at Bally's venues in Atlantic City, N.J. and Evansville, Ind., also contributed to the lackluster results.
Details on the reasons behind the weakened performance in Atlantic City were scarce. However, the company shared that the opening of more historical horse racing machines in neighboring Kentucky affected their casino in Evansville, Indiana.
Stifel analyst Jeffrey Stantial highlighted these issues in a report today, writing, "We sense investors may have expected sequential improvement as BALY transitions to a variable-cost tech strategy. FY23 guidance was revised lower on Chicago timing & curtailing of Tropicana operations ahead of a potential A's relocation, with implied Q4E Adj. EBITDAR ~$20M below Consensus at midpoint. Overall, we see more negatives than positives in BALY’s Q3 results, though the bar felt low heading into earnings." He ranked Bally's as a "hold" with a projected price of $10.
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Source: www.casino.org
