Ballys Corp
For the period ended Dec 31, 2023. Filed Mar 15, 2024.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2023 · Filed Mar 15, 2024
Extracted filing text, with the paragraph anchors used by the comparison.
See the whole filing, with its images and exhibitsContents
Business Combinations
6 . BUSINESS COMBINATIONS
Casinos & Resorts Acquisitions
Bally’s Golf Links - On September 12, 2023, the Company completed the acquisition of Trump Golf Links at Ferry Point, subsequently renamed Bally’s Golf Links at Ferry Point, which includes the assignment of a license agreement to operate an 18-hole links-style golf course located in the Bronx, New York.
The total purchase consideration included cash paid, net of cash acquired and net working capital adjustments, which amounted to $55.2 million. This acquisition continues the Company’s strategic objective of developing a diversified portfolio within its Casinos & Resorts segment.
Total purchase consideration also includes contingent consideration valued at $58.6 million, which is the fair value, under GAAP, of expected cash payments totaling up to $125 million to the seller, based upon future events, which are uncertain. The contingent consideration was recorded at fair value, using discounted cash flow analyses, and will be remeasured quarterly, with fair value adjustments recognized in earnings, until the contingencies are resolved. The settlement of the contingent consideration liabilities will be due to the seller in the event the license agreement is extended or if the Company is successful in its bid for a casino license.
Tropicana Las Vegas -On September 26, 2022, the Company completed its acquisition of Tropicana Las Vegas for $148.2 million. Cash paid by the Company at closing net of $1.7 million cash acquired, was $146.5 million, excluding transaction costs. In connection with the acquisition of Tropicana Las Vegas, the Company entered into a lease arrangement with GLPI to lease the land underlying the Tropicana Las Vegas property for an initial term of 50 years at annual rent of $10.5 million.
Bally’s Quad Cities -On June 14, 2021, the Company completed its acquisition of Bally’s Quad Cities. Pursuant to the terms of the Equity Purchase Agreement, the Company acquired all of the outstanding equity securities of The Rock Island Boatworks, Inc., for $118.9 million in cash. Cash paid by the Company, net of $2.9 million cash acquired and the $4.0 million deposit paid in the third quarter of 2020, was $112.0 million, excluding transaction costs.
Bally’s Evansville -On June 3, 2021, the Company completed its acquisition of Bally’s Evansville for $139.7 million. Cash paid by the Company at closing, net of $9.4 million cash acquired, was $130.4 million, excluding transaction costs. In connection with the acquisition of the Bally’s Evansville casino operations, the Company entered into a sale-leaseback arrangement with an affiliate of GLPI for the Bally’s Dover property. Refer to Note 17 “Leases” for further information.
Bally’s Lake Tahoe - On April 6, 2021, the Company completed its acquisition of Bally’s Lake Tahoe for $14.2 million. The deferred purchase price is included within “Accrued liabilities” of the consolidated balance sheet as of December 31, 2021 and was paid in April 2022.
The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the Casinos & Resorts acquisitions as of December 31, 2023:
| Acquired during the year ended December 31, | 2023 | 2022 | 2021 | 2021 | 2021 |
|---|---|---|---|---|---|
| (in thousands) | Bally’s Golf Links | Tropicana Las Vegas | Bally’s Quad Cities | Bally’s Evansville | Bally’s Lake Tahoe |
| Preliminary(6) | Final(7) | Final(8) | Final(8) | Final(8) | |
| Total current assets | $1,108 | $7,924 | $6,717 | $12,031 | $4,683 |
| Property and equipment, net | 505 | 136,116 | 73,135 | 12,325 | 6,361 |
| Right of use assets, net | — | 164,884 | — | 285,772 | 57,017 |
| Goodwill | 104,032 | 8,794 | 13,308 | — | — |
| Intangible assets, net(1) to (5) | 6,500 | 5,140 | 31,180 | 154,210 | 5,430 |
| Other assets | 2,000 | 766 | — | 468 | — |
| Total current liabilities | (345) | (10,129) | (5,412) | (10,927) | (3,546) |
| Lease liabilities | — | (164,884) | — | (285,772) | (52,927) |
| Other long-term liabilities | — | (395) | — | (7,543) | (904) |
| Net assets acquired | 113,800 | 148,216 | 118,928 | 160,564 | 16,114 |
| Bargain purchase gain | — | — | — | (20,856) | (1,942) |
| Total purchase price | $113,800 | $148,216 | $118,928 | $139,708 | $14,172 |
(1) Bally’s Golf Links’ intangible assets include a concessionaire license of $6.5 million, which is being amortized over its estimated useful life of approximately 12 years.
(2) Tropicana Las Vegas intangible assets include rated player relationships, a trade name and pre-bookings of $2.6 million, $1.7 million and $0.8 million, respectively, which are being amortized on a straight-line basis over their estimated useful lives of approximately 9 years,3 years and 2 years, respectively.
(3) Bally’s Quad Cities’ intangible assets include gaming licenses of $30.3 million with an indefinite life, as well as rated player relationships and a trade name of $0.7 million and $0.2 million, respectively, which are being amortized on a straight-line basis over their estimated useful lives of approximately nine years andfour months, respectively.
(4) Bally’s Evansville’s intangible assets include gaming licenses of $153.6 million with an indefinite life and rated player relationships of $0.6 million which are being amortized on a straight-line basis over an estimated useful life of approximately eight years.
(5) Bally’s Lake Tahoe’s intangible assets include gaming licenses of $5.2 million with an indefinite life and a trade name of $0.2 million, which are being amortized on a straight-line basis over its estimated useful life of approximatelysix months.
(6) The Company recorded adjustments to the preliminary purchase price allocation during the year ended December 31, 2023 which increased goodwill and the total purchase price by $2.6 million.
(7) The Company recorded adjustments to the preliminary purchase price allocation during the year ended December 31, 2023 which decreased total current assets by $0.2 million, increased goodwill by $0.2 million, decreased total current liabilities by $0.1 million and increased the total purchase price by $0.1 million.
(8) The Company recorded immaterial adjustments to purchase price allocations for 2021 acquisitions during the year ended December 31, 2022.
Goodwill recognized is deductible for local tax purposes and has been assigned as of the acquisition date to the Company’s Casinos & Resorts reportable segment, which includes the reporting unit expected to benefit from the synergies of the acquisitions. Qualitative factors that contribute to the recognition of goodwill include an organized workforce and expected synergies from integrating the properties into the Company’s casino portfolio and future development of its omni-channel strategy.
During the year ended December 31, 2021, the Company recorded bargain purchase gains related to Bally’s Evansville and Bally’s Lake Tahoe of $20.9 million and $2.0 million, respectively. During the year ended December 31, 2022, based on the final purchase price allocation for Bally’s Lake Tahoe, an adjustment of $0.1 million was recorded reducing the bargain purchase gain to $1.9 million.
The Company incurred $1.1 million, $4.0 million and $10.4 million of acquisition costs related to the above Casinos & Resorts acquisitions during the years ended December 31, 2023, 2022 and 2021, respectively. These costs are included within “General and administrative” of the consolidated statements of operations.
International Interactive Acquisition
Casino Secret - On January 5, 2023, the Company completed the acquisition of BACA Limited (“Casino Secret”), a European based online casino that offers slots, tables and live dealer games to Asian markets for total consideration of $50.4 million. Cash paid by the Company, net of $8.3 million cash acquired, was $38.7 million, excluding transaction costs.
The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the International Interactive acquisition:
| (in thousands) | Casino Secret |
|---|---|
| Preliminary(2) | |
| Total current assets | $8,862 |
| Property and equipment, net | 50 |
| Intangible assets, net(1) | 29,471 |
| Goodwill | 18,422 |
| Total current liabilities | (6,371) |
| Total purchase price | $50,434 |
(1) Casino Secret intangible assets include player relationships and trade names of $26.0 million and $3.5 million, respectively, which are both being amortized on a straight-line basis over their estimated useful lives of approximately 7 years.
(2) The Company recorded adjustments to the preliminary purchase price allocation during the year ended December 31, 2023 which decreased right of use assets and corresponding lease liabilities by$0.4 million, increased goodwill by$0.3 million, decreased total current liabilities by$0.8 million, and increased the total purchase price by$1.1 million.
Total goodwill recorded in connection with the above acquisition was $18.4 million, and is not deductible for local tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill, which consist primarily of benefits from acquiring a talented technology workforce and management team experienced in the online gaming industry, and securing buyer-specific synergies expected to contribute to the Company’s omni-channel strategy which are expected to increase revenue and profits within the Company’s International Interactive reportable segment. The goodwill of the acquisition has been assigned, as of the acquisition date, to the Company’s International Interactive reportable segment.
The Company incurred $1.2 million of acquisition costs related to the above International Interactive acquisition during the year ended December 31, 2023. These costs are included within “General and administrative” of the consolidated statements of operations.
North America Interactive Acquisitions
During 2021, the Company completed six acquisitions within its North America Interactive segment for an aggregate net investment of $400.3 million. The Company paid cash $128.8 million, net of cash acquired. Total non-cash consideration was $255.7 million, which included $58.7 million of the fair value of contingent consideration representing the issuance of Company shares if certain post-closing performance targets are met and contingent penny warrants to purchase additional Company common shares based on future operations in certain jurisdictions.
In connection with one of the North America Interactive acquisitions, the Company recorded a 15.84% non-controlling interest representing shares convertible into shares of Bally’s common stock based on a fixed exchange ratio share-settlement feature, valued using the Company’s common stock price, classified as permanent equity. During the year ended December 31, 2022, certain selling shareholders exercised their right to convert to Bally’s common stock reducing the non-controlling interest. Earnings attributable to the non-controlling interest are not material for the years ended December 31, 2023, 2022 and 2021.
The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the North America Interactive Acquisitions:
| (in thousands) | Final(2) |
|---|---|
| Cash and cash equivalents | $8,689 |
| Accounts receivable, net | 4,498 |
| Prepaid expenses and other current assets | 3,104 |
| Property and equipment, net | 596 |
| Intangible assets, net(1) | 167,075 |
| Goodwill | 250,730 |
| Total current liabilities | (14,787) |
| Deferred tax liability | (15,811) |
| Acquired non-controlling interest | (3,760) |
| Net investment in North America Interactive Acquisitions | $400,334 |
(1) Include customer relationships of $41.5 million, which are being amortized over estimated useful lives between three andten years, developed software of $122.4 million, which is being amortized over estimated useful lives between three andten years, and trade names of $3.1 million, which are being amortized over estimated useful lives between 10 and 15 years.
(2) The Company recorded immaterial adjustments to the purchase price allocation during the year ended December 31, 2022.
Total goodwill recorded in connection with the North America Interactive Acquisitions was $250.7 million, of which $102.9 million is deductible for local tax purposes. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill, which consist primarily of benefits from acquiring a talented technology workforce and management team experienced in the online gaming industry, and securing buyer-specific synergies expected to contribute to the Company’s omni-channel strategy which are expected to increase revenue and profits within the Company’s North America Interactive reportable segment. The goodwill of the North America Interactive Acquisitions has been assigned, as of the acquisition date, to the Company’s North America Interactive reportable segment.
The Company incurred $3.9 million and $5.3 million of transaction costs related to the North America Interactive Acquisitions in the years ended December 31, 2022 and 2021, respectively. The Company did not incur any costs related to the North America Interactive Acquisitions in the year ended December 31, 2023. These costs are included within “General and administrative” of the consolidated statements of operations.
Gamesys Acquisition
On October 1, 2021, the Company completed the acquisition of Gamesys. Total consideration was $2.60 billion, which consisted of $2.08 billion paid in cash and 9,773,537 shares of Bally’s common stock. Cash paid by the Company at closing, net of cash received of $183.3 million and a $10.3 million post-acquisition expense, explained below, was $1.90 billion, excluding transaction costs. During the year ended December 31, 2022, the Company incurred $6.3 million of transaction costs related to the acquisition of Gamesys compared to $43.5 million during the year ended December 31, 2021. These costs are included within “General and administrative” expense in the consolidated statements of operations.
Certain unvested and outstanding equity options held by Gamesys employees were discretionarily accelerated and vested by the Gamesys Board of Directors, requiring allocation of the fair value of post-acquisition service to purchase consideration, with the remainder allocated to non-recurring post-acquisition expense. The fair value of $36.4 million was attributed to pre-acquisition service and included in consideration transferred. In the fourth quarter of 2021, the fair value of $10.3 million, attributable to post-acquisition expense was recorded within “General and administrative” expense in the consolidated statements of operations.
The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the acquisition of Gamesys as of October 1, 2021:
| (in thousands) | Final(2) |
|---|---|
| Cash and cash equivalents and restricted cash | $183,306 |
| Accounts receivable, net | 35,851 |
| Prepaid expenses and other current assets | 28,418 |
| Property and equipment, net | 15,230 |
| Right of use assets, net | 14,185 |
| Goodwill | 1,683,762 |
| Intangible assets, net(1) | 1,510,323 |
| Other assets | 17,668 |
| Accounts payable | (47,881) |
| Accrued income taxes | (40,250) |
| Accrued liabilities | (180,237) |
| Long-term debt, net | (456,469) |
| Lease liabilities | (14,185) |
| Deferred tax liability | (143,924) |
| Other long-term liabilities | (6,680) |
| Total purchase price | $2,599,117 |
(1) Intangible assets include customer relationships of $980.2 million and developed technology of $282.0 million, both of which are being amortized over seven years, and trade names of $247.1 million, which have indefinite lives.
(2) During the year ended December 31, 2022, the Company recorded adjustments to the purchase price allocation including a $0.5 million increase to prepaid expenses and other current assets, a $5.3 million increase to goodwill, a $2.7 million decrease to intangible assets, net and a $3.1 million increase to accrued liabilities.
Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill, which consist primarily of benefits from acquiring a talented technology workforce and management team experienced in the online gaming industry. Goodwill associated with the Gamesys acquisition is assigned as of the acquisition date to the Company’s International Interactive and North America Interactive reportable segments in the amounts of $1.65 billion and $33.3 million, respectively, which include the reporting units expected to benefit from the synergies arising from the acquisition. Goodwill recognized is not deductible for local tax purposes.
Revenue and net income included in operations from Gamesys reported in the Company’s International Interactive and North America Interactive reportable segments for the year ended December 31, 2021 was $257.1 million and $18.2 million, respectively.
Supplemental Pro Forma Consolidated Information
The following unaudited pro forma consolidated financial information for the twelve months ended December 31, 2021 combines the results of the Company for the year ended December 31, 2021 and the unaudited results of Bally’s Lake Tahoe, Bally’s Evansville and Gamesys for each period subsequent to their respective acquisition dates through December 31, 2021. The revenue, earnings and pro forma effects of the Bally’s Interactive Acquisitions and Bally’s Quad Cities completed during the year ended December 31, 2021, and the acquisitions completed during the years ended December 31, 2023 and 2022 are not material to results of operations, individually or in the aggregate.
These unaudited pro forma financial results are presented for informational purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the acquisitions actually taken place on January 1, 2021. In addition, these results are not intended to be a projection of future results and do not reflect events that may occur, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the acquisitions.
| (in thousands, except per share data) | Years Ended December 31, 2021 |
|---|---|
| Revenue | $2,221,870 |
| Net income | $46,048 |
7 . ASSETS AND LIABILITIES HELD FOR SALE
The Company applies a criteria that must be met before an asset is classified as held for sale, including that management, with the appropriate authority, commits to a plan to sell the asset at a reasonable price in relation to its fair value and is actively seeking a buyer. The Company recognizes assets held for sale at the lower of carrying value or fair market value less costs to sell, as estimated based on comparable asset sales, offers received, or a discounted cash flow model. The Company then compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows do not exceed the carrying value, then an impairment charge is recorded for any difference between fair value and the carrying value. Due to an evaluation of the expected fair value less costs to sell during the year ended December 31, 2023, the Company recognized impairment charges of $9.4 million and $4.0 million on goodwill and intangible assets held for sale, respectively. These charges have been accounted for within “Impairment charges” in the consolidated statements of operations.
As of December 31, 2022, one of the Company’s North America Interactive businesses met the criteria to be classified as assets held for sale but did not qualify as discontinued operations as it did not represent a strategic shift having a major effect on the Company’s operations and financial results. As of December 31, 2023, the Company is still pursuing the plan to sell the business, however, it does not expect it will be completed within one year.
The major classes of assets and liabilities classified as held for sale as of December 31, 2023 and 2022 are as follows:
| (in thousands) | December 31, 2023 | December 31, 2022 |
|---|---|---|
| Assets: | ||
| Restricted cash, prepaid expenses and other current assets | $1,815 | $3,756 |
| Goodwill | — | 9,399 |
| Intangible assets, net | — | 4,022 |
| Assets held for sale(1) | $1,815 | $17,177 |
| Liabilities related to assets held for sale(1)(2) | $1,307 | $3,409 |
(1) All assets and liabilities held for sale were classified as current as of December 31, 2023 and 2022.
(2) Liabilities related to assets held for sale were made up of accounts payable and accrued liabilities.
The revenues and net loss attributable to the business classified as held for sale were not significant for the years ended December 31, 2023 and 2022.
- PREPAID EXPENSES AND OTHER CURRENT ASSETS
As of December 31, 2023 and 2022, prepaid expenses and other assets was comprised of the following:
| December 31, | ||
|---|---|---|
| (in thousands) | 2023 | 2022 |
| Services and license agreements | $32,466 | $31,396 |
| Due from payment service providers | 12,662 | 30,621 |
| Prepaid insurance | 12,181 | 6,374 |
| Short term derivative assets | 9,530 | — |
| Gaming taxes and licenses | 9,309 | 4,644 |
| Prepaid marketing | 8,685 | 8,042 |
| Sales tax | 7,565 | 5,900 |
| Purse funds | 6,404 | 8,093 |
| Other | 9,294 | 5,647 |
| Total prepaid expenses and other current assets | $108,096 | $100,717 |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.