Ballys Corp

18. SEGMENT REPORTING

The Company hasthree operating and reportable segments: Casinos & Resorts, International Interactive and North America Interactive. The “Other” category includes interest expense for the Company and certain unallocated corporate operating expenses and other adjustments, including eliminations of transactions among segments to reconcile to the Company’s consolidated results including, among other expenses, share-based compensation, acquisition and other transaction costs and certain non-recurring charges.

The Company’sthree reportable segments as of September 30, 2024 are:

Casinos & Resorts - Includes the Company’s 15 casino and resort properties, one horse racetrack andone golf course.

International Interactive - Gamesys’ European and Asian operations.

North America Interactive - A portfolio of sports betting, iGaming, and free-to-play gaming brands, and the North American operations of Gamesys.

As of September 30, 2024, the Company’s operations were predominately in the US, Europe and Asia with a less substantive footprint in other countries world-wide. For geographical reporting purposes, revenue generated outside of the US has been aggregated into the International Interactive reporting segment, and consists primarily of revenue from the UK and Japan. Revenue generated from the UK and Japan represented approximately 28% and 6% of total revenue, respectively, for the three months ended September 30, 2024, approximately 25% and 11%, respectively, for the three months ended September 30, 2023, approximately 27% and 8%, respectively, for the nine months ended September 30, 2024, and approximately 25% and 11%, respectively, for the nine months ended September 30, 2023. The Company does not have any revenues from any individual customers that exceed 10% of total reported revenues.

Beginning in the third quarter of 2023, the Company updated its measure of segment performance to Adjusted EBITDAR (defined below) from Adjusted EBITDA. The prior year results presented below were reclassified to conform to the new segment presentation. Management believes segment Adjusted EBITDAR is representative of its ongoing business operations including its ability to service debt and to fund capital expenditures, acquisitions and operations, in addition to it being a commonly used measure of performance in the gaming industry and used by industry analysts to evaluate operations and operating performance.

The following table sets forth revenue and Adjusted EBITDAR for the Company’sthree reportable segments and reconciles Adjusted EBITDAR on a consolidated basis to net (loss) income. The Other category is included in the following tables in order to reconcile the segment information to the Company’s condensed consolidated financial statements.

(1) Adjusted EBITDAR is defined as earnings, or loss, for the Company before interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating (income) expense, acquisition, integration and restructuring expense, share-based compensation, and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments, plus rent expense associated with triple net operating leases. Adjusted EBITDAR should not be construed as an alternative to GAAP net income, its most directly comparable GAAP measure, nor is it directly comparable to similarly titled measures presented by other companies.

(2) Consists primarily of the operating lease components contained within certain triple net leases with GLPI. Refer to Note 15 “Leases” for further information.

(3) Costs incurred in connection with the Merger Agreement discussed in Note 1 “General Information.”

(4) In the third quarter, the Company recorded a $6.3 million charge to reduce amounts due from payment service providers (“PSP”) due to a circumstance whereby the payment processer for certain online sports wagering deposits failed to capture and settle funds with patrons of the Company. The Company was not able to recover the full amount due from the payment service provider, resulting in a write down to the recoverable amount. In addition to amounts recovered, the Company received $5.1 million from the PSP as a signing bonus for entering into an extension agreement.

(1) Includes $70.3 million and $108.3 million related to our future Bally’s Chicago permanent facility during the three and nine months ended September 30, 2024, respectively.

Total assets are not regularly reviewed for each operating segment when assessing segment performance or allocating resources and accordingly, are not presented.

As of September 30, 2024 and December 31, 2023, carrying values of goodwill by reportable segment are as follows:

(1) Net of accumulated goodwill impairment charges of $5.4 million.

(2) Net of accumulated goodwill impairment charges of $140.4 million

(3) The effect of foreign exchange on the change in total goodwill from December 31, 2023 was $58.2 million.

19. EARNINGS (LOSS) PER SHARE

Diluted earnings per share includes the determinants of basic earnings per share and, in addition, reflects the dilutive effect of the common stock deliverable for stock options, using the treasury stock method, and for RSUs, RSAs and PSUs for which future service is required as a condition to the delivery of the underlying common stock.

There were 4,927,900 and 5,152,994 share-based awards that were considered anti-dilutive for the three months ended September 30, 2024 and 2023, respectively, and 5,108,453 and 5,235,978 share-based awards that were considered anti-dilutive for the nine months ended September 30, 2024 and 2023, respectively.

On November 18, 2020, the Company issued Penny Warrants, Performance Warrants and Options which participate in dividends with the Company’s common stock subject to certain contingencies. In the period in which the contingencies are met, those instruments are participating securities to which income will be allocated using the two-class method. The Performance Warrants and Options do not participate in net losses. The Penny Warrants were considered exercisable for little to no consideration and are therefore included in basic shares outstanding at their issuance date. For the three and nine months ended September 30, 2024 and 2023, the shares underlying the Performance Warrants were anti-dilutive as certain contingencies were not met. Refer to Note 2 “Summary of Significant Accounting Policies” for further information regarding the Framework Agreement.

20. SUBSEQUENT EVENTS

On October 31, 2024, the Company entered into an agreement to carve-out components of its interactive business in Asia and certain other international markets in its International Interactive reportable segment (the “Carved-Out Business”) to a company (the “Buyer”) formed by members of the management of the Carved-Out Business. The Buyer is acquiring the net-assets, predominantly working capital, of the Carved-Out Business, in exchange for aseven-year term note in the principal amount of €30 million, subject to applicable interest. Certain intellectual property used in the Carved-Out Business has been placed in trust, with royalty licensing fees paid to the trust by the Buyer for a term offive years (subject to extension). All royalty licensing fees, net of trustee administrative expenses, are paid to the Company by the trust and are expected to be reported by the Company as licensing revenues. The Company will also provide the Carved-Out Business with certain transition services. In connection with the separation transaction, the Company will acquire penny warrants that represent a 19.9% fully-diluted interest in the Buyer, which is expected to result in the deconsolidation of the Carved-Out Business. Bally’s will have no role in the management or operational governance of the Carved-Out Business.

The gain or loss on sale of the Carved-Out Business has not yet been determined as it is subject to valuation procedures and associated Goodwill allocation, the release of accumulated currency translation adjustments for the disposed entities, and other post-closing adjustments.