Bally's Corp

11. GOODWILL AND INTANGIBLE ASSETS

2024 Annual Impairment Assessment

As of October 1, 2024, the Company performed its annual impairment assessment of goodwill and long lived assets for all reporting units and asset groups. Each individual property within the Casinos and Resorts operating segment is determined to be its own reporting unit and asset group. The reporting units for the North America Interactive and International Interactive operating segments are the operating segments.

The Company performed a quantitative test of goodwill for its International Interactive reporting unit and one reporting unit within the Casinos and Resorts operating segment and determined that the fair value of the reporting units exceeded their respective carrying amounts and thus, there was no impairment. The estimated fair value of the reporting units were determined through a combination of a discounted cash flow model and market-based approach, which utilized Level 3 inputs including future cash flow projections for the reporting units, terminal growth rates of 3% and discount rates of 15% and 11%. If future results significantly vary from current estimates and related projections, the Company may be required to record impairment charges.

For the North America Interactive reporting unit and all other reporting units within the Casinos and Resorts segment with goodwill, the Company performed a qualitative analysis for the annual assessment of goodwill (commonly referred to as “Step Zero”). From a qualitative perspective, in evaluating whether it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, relevant events and circumstances are taken into account, with greater weight assigned to events and circumstances that most affect the fair value or the carrying amounts of its assets. Items that were considered included, but were not limited to, the following: macroeconomic conditions, industry and market conditions and overall financial performance, and the most recent quantitative assessment performed for the reporting unit. After assessing these and other factors, the Company determined that it was more likely than not that the fair value of the reporting units subject to the qualitative assessment exceeded their carrying amounts as of October 1, 2024. If future results vary significantly from current estimates and related projections, the Company may be required to record impairment charges.

For four indefinite lived gaming licenses in the Casinos & Resorts segment, the Company determined it had an indicator of impairment based on declines in actual or projected results compared to those projected when the gaming licenses were originally valued at acquisition. The Company valued the gaming licenses using the Greenfield Method under the income approach which estimates the fair value of the gaming license using a discounted cash flow model assuming the Company built a new casino with similar utility to that of the existing casino. Level 3 inputs to the valuation include estimating projected revenues and operating cash flows, including terminal growth rates between 2% and 3%, estimated construction costs, and pre-opening expenses and is discounted at a market-based weighted average cost of capital (“WACC”), which was between 10% and 11% for three licenses. The fair values of three of the four gaming licenses were below their respective carrying values and the Company recorded a combined impairment loss of $38.6 million. The fair value of the fourth gaming license exceeded its carrying value.

For all other indefinite lived intangible assets, the Company performed a qualitative assessment of impairment and determined that it was more likely than not that the fair values of all assets exceed their carrying values as of October 1, 2024. If future results vary significantly from current estimates and related projections, the Company may be required to record impairment charges.

2024 Interim Impairment

During the fourth quarter of 2024, the Company divested a component within the International Interactive operating segment (refer to Note 8 “Dispositions” for further information). As a result of this divestiture, the Company allocated goodwill on a relative fair value basis to the divested component which also triggered the need for an interim impairment assessment. The Company estimated the fair value of the reporting units using both income and market-based approaches. Specifically, the Company applied the discounted cash flow (“DCF”) method under the income approach. The Company relied on the present value of expected future cash flows, including terminal value, utilizing a market-based WACC determined separately for the reporting unit as of the valuation date. The determination of fair value under the DCF method involved the use of significant Level 3 inputs and assumptions, including revenue growth rates driven by expected future activity, operating margins, capital expenditures, working capital requirements, tax rates, terminal growth rates of 3%, and a discount rate of 16%. The fair value of the International Interactive reporting unit exceeded its carrying value and thus no impairment was recorded. The Company allocated $20.7 million to the component that was divested, which was subsequently de-recognized.

As a result of this divestiture, the Company identified a triggering event related to a long lived asset group within its International Interactive operating segment. The triggering event was the result of the expected future cash flows of the asset group being below the carrying value of the long lived assets and therefore, a quantitative impairment analysis was performed. The fair value of the intangible assets were determined using a relief from royalty method, which utilized Level 3 inputs and was exceeded by the carrying value, indicating an impairment. Inputs to the valuation included revenue projections derived from the intangible assets, a discount rate of 16% and royalty rates between 3% and 12%. As a result of the analysis, the Company recorded an aggregate $197.5 million impairment charge in its International Interactive operating segment. The Company allocated the loss first to intangible assets, in the amount of $125.9 million, and then the residual of $71.6 million to goodwill. These charges are recorded within “Impairment charges” in the consolidated statements of operations.

2023 Annual Impairment Assessment

In 2023, the Company changed the useful life for one of its indefinite lived trademarks in the International Interactive segment which then required the Company to perform a quantitative test for impairment of the trademark. The fair value of the trademark was determined using a relief from royalty method, which utilized Level 3 inputs and was exceeded by the carrying value, indicating an impairment. Inputs to the valuation included revenue projections derived from the trademark, a discount rate of 15% and a royalty rate of 3%. As such, the Company recorded an impairment loss within the International Interactive segment of $54.0 million related to this trademark intangible asset. The decline in value of the trademark was primarily driven by the change in useful life and the de-emphasis of the trademark for other newer brands in Asia and Rest of World, resulting in a decline in actual and projected revenues attributable to the trademark as compared to when the fair value was determined during the purchase price allocation of the Gamesys acquisition. These charges are recorded within “Impairment charges” in the consolidated statements of operations.

Forthree indefinite lived gaming licenses in the Casinos & Resorts segment, the Company determined it had an indicator of impairment based on declines in results compared to those projected when the gaming licenses were originally valued at acquisition. The Company valued the gaming licenses using the Greenfield Method under the income approach which estimates the fair value of the gaming license using a discounted cash flow model with level 3 inputs assuming the Company built a new casino with similar utility to that of the existing casino. Level 3 inputs to the valuation include estimating projected revenues and operating cash flows, including terminal growth rates of 3%, estimated construction costs, and pre-opening expenses and is discounted at a rate that reflects the level of risk associated with receiving cash flows attributable to the license, which was 12.5% for these three licenses. The fair values of these gaming licenses were below their respective carrying values and the Company recorded an impairment loss of $76.7 million.

For all other indefinite lived intangible assets, the Company performed a qualitative assessment of impairment and determined that it was more likely than not that the fair values of all assets exceed their carrying values as of October 1, 2023. If future results vary significantly from current estimates and related projections, the Company may be required to record impairment charges.

In connection with the expansion of the Company’s restructuring plan announced on October 20, 2023 targeted at reshaping the technology utilized by its Interactive segments (refer to Note 16 “Restructuring Expense”), the Company recorded impairment charges of $5.7 million, related to certain technology intangible assets which will no longer be utilized.

2023 Interim Impairment

During the third quarter of 2023, the Company divested a component within the North America Interactive reporting unit. This divestiture required a relative fair value goodwill allocation to the divested component and a quantitative test for impairment of the remaining North America Interactive reporting unit. For the quantitative goodwill impairment test, the Company estimated the fair value of the reporting unit and asset group using both income and market-based approaches. Specifically, the Company applied the DCF method under the income approach and the guideline company under the market approach and weighted the results of the two valuation methodologies based on the facts and circumstances surrounding the reporting unit. For the DCF method, the Company relied on the present value of expected future cash flows, including terminal value, utilizing a market-based WACC determined separately for the reporting unit as of the valuation date. The determination of fair value under the DCF method involved the use of significant estimates and assumptions, including revenue growth rates driven by future gaming activity, operating margins, capital expenditures, working capital requirements, tax rates, terminal growth rates, and discount rates. For the market approach, the Company utilized a comparison of the reporting unit to comparable publicly-traded companies and transactions and, based on the observed earnings multiples, ultimately selected multiples to apply to the reporting unit. The fair value of the North America Interactive reporting unit exceeded its carrying value and thus no impairment was recorded. The Company allocated $4.2 million to the component that was divested, which was subsequently de-recognized.

2022 Impairment Assessment

For the North America Interactive reporting unit and asset group, primarily due to a decline in actual and projected revenues, the Company determined that it was more likely than not that the fair value of the reporting unit was less than its carrying value and therefore, a quantitative impairment analysis was performed. As a result of the analysis, the Company recorded an aggregate $390.7 million non-cash impairment charge in its North America Interactive reporting unit. The Company allocated the loss first to intangible assets, in the amount of $159.1 million, and then the residual of $231.6 million to goodwill.

The Company recorded an impairment loss within the International Interactive segment of $73.3 million related to a long-standing indefinite lived trademark acquired as part of the Gamesys acquisition. The fair value of the trademark was determined using a relief from royalty method, which utilized Level 3 inputs and included revenue projections derived from the trademark, a discount rate of 14.5%, royalty rate of 3%, and a terminal growth rate of 3%. These charges are recorded within “Impairment charges” in the consolidated statements of operations.

The change in carrying value of goodwill by reportable segment for the years ended December 31, 2024 and 2023 is as follows:

(1) Amounts are shown net of accumulated goodwill impairment charges of $5.4 million and $140.4 million for Casinos & Resorts and North America Interactive, respectively.

(2) Amounts are shown net of accumulated goodwill impairment charges of $5.4 million, $71.6 million, and $140.4 million, for Casinos & Resorts, International Interactive and North America Interactive, respectively.

(3) As of December 31, 2024 and 2023, amounts shown include $59.2 million and $50.4 million of goodwill associated with reporting units with negative carrying value, respectively.

The change in intangible assets, net for the years ended December 31, 2024 and 2023 is as follows (in thousands):

(1) Includes gaming license fees of $135.3 million paid to the Illinois Gaming Board upon commencement of operations at Bally’s Chicago temporary casino. Refer to Note 22 “Commitments and Contingencies” for further information.

The Company’s identifiable intangible assets consist of the following:

(1) Commercial rights intangible asset in connection with Framework Agreement15 “Strategic Partnership - Sinclair Broadcast Group” for further information.

Amortization of intangible assets was approximately $221.5 million, $231.7 million and $228.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Refer to Note 7 “Business Combinations” for further information about the goodwill and intangible balances added from business combinations. Refer to Note 15 “Strategic Partnership - Sinclair Broadcast Group” for intangible assets added through the Framework Agreement.

The following table shows the remaining amortization expense associated with finite lived intangible assets as of December 31, 2024: