Bally's Corporation

Good morning and welcome to the Bally's fourth quarter 2020 year-end earnings conference call. All participant lines have been placed in listen-only mode to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question at that time, please press star followed by one on your touchstone phone. I will now turn the call over to Craig Eaton, Executive Vice President and General Counsel. Please go ahead.

Good morning, everyone, and thank you for joining us on today's call. By now, you should have received a copy of our Q4 and full year 2020 earnings release issued earlier this morning. If you haven't, the earnings release and presentation that accompanies this call are available in the investor relations section of our website at www.valleys.com under the news and events and presentations tabs. With me on today's call are George Papinier, our president and CEO, Steve Kapp, our chief financial officer, Mark Crisofoli, our executive vice president of strategy and operations, Phil Giuliano, our marketing officer, Joe McGrail, our chief accounting officer, and Adi Dandania, our vice president of strategic transactions and interactive development. Before we begin, we would like to remind everyone that comments made by management today will contain forward-looking statements. These forward-looking statements include plans, expectations, estimates, and projections that involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC filings. Actual results may differ materially from the results discussed in these forward-looking statements. During today's call, management will refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP financial measures are included in the schedules contained in our earnings release. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project special charges with certain expenses. Today's call is also being broadcast live on our investor site and will be available for replay shortly after the completion of this call. I'll now turn the call over to George. George? Well, thank you, Craig. Good morning, everyone, and thanks very much for joining us. We're extremely excited to take this time to recap the fourth quarter and 2020 as a whole and provide some additional color on several of the recent announcements that we've made. Since our last call, We have continued to make significant progress across our strategic growth initiatives. We have a lot to discuss, so we'll get right into it. I want to start by commenting on an incredible and transformative year 2020 was for our company. Through the various strategic acquisitions and partnerships that we have announced, we continued our evolution from a single property operator in Rhode Island to a leading national player. It seemed to be 15 casino properties across 11 states, and a significant mobile and online presence. Our primary goal is to continue to work to become the premier, truly integrated omnichannel U.S. gaming company with a B2B2C business model, and we feel that we have taken the necessary steps to best position the company to achieve that target. To start, we have continued to adapt and adjust to what are very dynamic and unpredictable market conditions as a result of the COVID-19 pandemic. For a period of time this year, all of our properties were shut down in accordance with CDC guidelines. We took this time to evaluate our operations, and we believe that many of the efficiencies we were able to realize as a result of the shutdown are sustainable over the long term and will result in improved profitability for our properties going forward. While we had been operating at some level of still limited capacity across our entire properties in the third and early fourth quarter, The second wave of COVID restrictions forced us to close our Twin River Casino Hotel and Tiverton Casino Hotel in Rhode Island for three weeks between November and December, impacting our fourth quarter results. Notwithstanding that shutdown, market indications and preliminary results show markedly stronger consumer demand in January and February, but not impacted by weather, including the Rhode Island operations, as both properties in that state are now operating 24-7. At this point in time, we're pleased to have all of our properties across the portfolio open and operating with comprehensive health and safety protocols in close consultation with state regulators, health officials and local jurisdictions. As the reopening process progresses across our brick and mortar locations, coupled with the vaccine rollout, we believe we'll be able to operate at a closer to historical operating levels and we are confident they will continue to benefit from a strong rebound in demand. Now diving deeper into our quarterly results, overall revenue for the fourth quarter of 2020 decreased 9.4% to $118.1 million from $130.4 million in the fourth quarter of 2019. In addition to the impacts from the Rhode Island closures, the various state travel and capacity limitations due to COVID-19, revenue at the Hard Rock Biloxi was negatively impacted, by the effects of the Hurricane Zeta in late October, and we were forced to close that property for three days for damage repairs. The decrease in revenues was partially offset by the incremental revenues generated from the recent acquisitions of Casino KC and Casino Vicksburg, which were acquired in July 1, 2020. The Valley's Atlantic City Hotel and Casino, which was acquired on November 18, 2020, and the El Dorado Resort Casino Shreveport, which was acquired on December 23, 2020. We ended the fourth quarter with adjusted EBITDA of $21.2 million, a decrease of $19.2 million, or 47.6% in the same period in 2019. Despite the impacts from business disruptions already mentioned, there was also very encouraging signs in the fourth quarter. None more than so than Kansas City. We're our second quarter of ownership and our first with our systems fully online and marketing calendar in place. The property had its strongest operating fourth quarter since they began tracking in 2004. This is being driven by our execution of a more aggressive marketing effort focused on player relationships, and the early results are very encouraging. In addition to the marketing campaign, since closing the acquisition in July, we have begun to implement our redevelopment initiatives in Kansas City to recapture customer segments that were lost over the last several years, while enhancing customer offerings and amenities. Once completed, our new land-based facility at KC will house all of our non-gaming activities and include branded restaurants or future sportsbooks and retail outlets, and will link the existing parking structure of the casino to provide a stronger sense of arrival and an overall better customer experience. If you look at the other properties across our portfolio, they have a proven history of transforming locations for the better, and Q4 is proof of this strategy. We're confident that Kansas City residents will see the same type of improvements and impact at Casino KC. At properties where we continue to operate with less COVID restrictions, notably in the Southeast segment and Dover, we continue to mitigate the impact of the revenue reductions by implementing operational efficiencies. The resulting positive impact on margins is a notable and continued trend since reopening from the pandemic. Margin improvements were primarily driven by labor savings, reduced marketing and promotional spend, the reduction in lower margin amenities. Another key impact on Q4 results was Atlantic City. Since closing the acquisition of Bally's Atlantic City Hotel and Casino in late November, operations were impacted by a combination of seasonality, year-over-year revenue impacts due to COVID-19 restrictions, and a very complicated methodical decoupling from the legacy Caesars IT systems and Caesars Reward Program, which was largely completed in mid-February. This negatively impacted fourth quarter adjusted EBITDA by $5.9 million. It should be noted, though, that Q4 and Q1 are traditional loss-making quarters for the property, even without the complicated factors I just mentioned. We believe these impacts will begin to dissipate in the second half of Q1 and see a path to profitability as we move into historically more profitable Q2 and Q3 time periods. Additionally, we continue to execute on our integration and strategic plan for Bally's AC. On a targeted basis, we are greatly improving the property and customer experience, including a phased hotel room refurbishment and the addition of several new amenities, including new and robust food and beverage offers. These CapEx projects will be spaced out over multiple years, starting early this year to minimize any customer disruption. We also successfully opened a temporary sportsbook location within the Valley's Atlantic City property through a previously announced partnership with FanDuel and have begun work on a permanent location. We're very excited to expand our relationship with FanDuel by adding a robust market at Atlantic City. As we have discussed, New Jersey represents extremely attractive market opportunity, and our partnership with FanDuel is just the latest announcement involving sports betting and iGaming in the state. We've acquired three sports betting and five iGaming skins. This builds on our partnership with CleatsBet, eSports, entertainment, sports trade, and the score bet, all of which are accretive to earnings and add unique elements to the cutting-edge New Jersey mobile gaming market. Now I'll briefly comment on some of the other major achievements in 2020. Notwithstanding the impact of COVID-19 pandemic on our industry, we continued to advance our disciplined portfolio diversification strategy, opportunistically expanding our regional presence to accretive transactions. In total, we closed on and announced 10 property acquisitions in 2020, which will expand our presence to 15 properties across 11 states once all pending acquisitions are completed. We closed on the acquisitions of seven casinos, three in Black Hawk, Colorado, KC, Kansas City, Missouri Lady Luck Casino in Vicksburg, Mississippi, Valley's Atlantic City in Atlantic City, New Jersey, and El Dorado Shreveport in Shreveport, Louisiana. In addition, we expect that our previously announced acquisitions of the Mont Bleu Resort, Casino, and Spa in Lake Tahoe, Nevada, Jumers Casino and Hotel in Rock Island, Illinois, and the Tropicana Evansville in Evansville, Indiana, all closed in the first half of 2021, pending regulatory approval. In early November, we acquired the iconic Valley's brand from Cesar's Entertainment, and we then branded the company as Valley's Corporation with the new ticker B-A-L-Y, which became effective on November 9, 2020. As many of you know, the Bally's brand has a rich history of gaming and entertainment that provides immediate and enhanced nationwide recognition. We continue to develop our plans for how best to leverage this prestigious brand to our portfolio. I look forward to providing further updates on the rebranding rollout out over the next several months. We also announced the acquisition of Betworks and its proprietary technology platform. We will power online sports betting and iGaming offerings under the newly formed Valley's Interactive Division, as well as a market access agreement in Iowa with Elite Casino Resorts. At the same time, we formed a long-term media partnership with Sinclair Broadcast Group, which provides us with unrivaled national media and marketing access across Sinclair's linear and digital assets, as well as exciting content integration opportunities. Sinclair, with its broad holdings of stations, channels, and RSNs, provides immediate national plan recognition that will support the development of the Valley supplier database for both our traditional casinos as well as our future online offerings, and ultimately delivers significant shareholder value. When you combine all these elements with our foundational, expanding brick-and-mortar presence, we really feel that we have transformed the company and best positioned ourselves for success in 2021 and beyond. We look forward to capitalizing on evolving industry trends, on online sports betting and iGaming as a premier omnichannel provider of gaming and entertainment in the U.S., as well as pursuing additional market access opportunities in states where Valleys currently does not have a presence as sports betting legislation continues to roll out. I'd also note that 2021 is already off to a great start with our announcement to develop, construct, and manage a Category 4 licensed casino in Center County, Pennsylvania. We also recently submitted a proposal to the City of Richmond to develop the Bally's Richmond Casino Resort, a $615 million world-class destination resort, hotel, and casino in Richmond, Virginia. We also added differentiated arms to our Bally's interactive platform with the acquisition of of Monkey Knife Fight, the fastest-growing daily fantasy sports site in North America, and Sportcaller, a leading global B2B provider of free-to-play games, and entered into our first strategic sports betting partnership with the National Hockey League, providing us with the rights to use the league's official marks, logos, and data as part of our diversified sports betting platform. I am extremely proud of all of the great work that our teams have accomplished, and most importantly, the commitment to keeping our customers and each other safe throughout this challenging environment. I will now turn the call over to Mark.

Thanks, George, and good morning, everyone. Of the many exciting projects and initiatives that George mentioned, I want to focus first on our newly formed Bally's Interactive Division. As we announced on November 18th, in conjunction with our acquisition of BetWorks, Bally's is forming two distinct operating divisions, Bally's Casinos, which will be comprised of our physical gaming and entertainment properties, and Bally's Interactive, which will include new and exciting contracts for sports betting and iGaming. Since this announcement, we have made significant progress towards launching our interactive division, even as we await a regulatory approval for the Betworks acquisition, which we currently expect will be in the second quarter. As George mentioned, on January 18th, we announced the acquisition of Monkey Knife Fight, the fastest-growing daily fantasy sports site in North America, in an all-stock transaction. After the closing of this transaction, which we expect will happen later this month, Monkey Knife Fight will provide our interactive division with market-leading fantasy sports content and a brand whose player database can be developed and leveraged to support the launch of our sports betting and iGaming operations. Daily Fantasy is a high-growth element in what is a rapidly expanding industry and adds another layer of differentiation to our omni-channel approach. Additionally, on February 8th, we completed the acquisition of Sport Caller, a leading global B2B free-to-play game provider. Sportcaller will enable us to launch our own suite of free-to-play games this year and will generate excitement for our BallyBet sports betting app, which we anticipate launching in the second quarter. Sportcaller will also expand our geographic presence internationally as they have more than 100 games in over 20 languages and over 30 sports across 37 countries. The addition of these two platforms serves as the foundation of our interactive division, enabling us to support VetWorks development resources and support accelerated innovation and deployment of new products that are already underway. With each announcement, we are making significant progress towards the goal to become the first omnichannel gaming company operating physical casinos with seamlessly integrated digital solutions. We firmly believe in the digital future and continue to actively position the company to capitalize on opportunities in the fast-growing U.S. online sports betting and iGaming market. We will continue to adapt as sports betting legislation continues to unfold across the country and look forward to pursuing additional market access opportunities in new states. I would also highlight that the recent acquisitions on the interactive side are complemented by our long-term strategic media partnership with Sinclair Broadcast Group. By leveraging the expansive reach of Sinclair's linear and digital assets, which span 88 markets, 190 television stations, and 19 regional sports networks, we will be able to engage sports fans across the country by providing unique and engaging interactive offerings as well as expand our player database in states that currently do not permit sports betting. Our teams are working together to develop this exciting platform, which we expect to begin rolling out next quarter. Now let me take a minute to update you on the status of our other pending transactions. We continue to make progress on regulatory approval in Nevada and believe we are on track to close Mont Bleu in Lake Tahoe later this month. We currently believe Joomers in Illinois and Tropicana Evansville in Indiana will close in the second quarter of 2021. We look forward to working with the local regulatory authorities to receive all of the necessary approvals and complete these acquisitions. Finally, an update on the status of our proposed joint venture with IGT. As we have noted, this proposed agreement requires the Rhode Island legislature to pass a public law authorizing the state to enter into or amend several contracts. The proposed agreements would also result in changes to our regulatory agreement in Rhode Island, including an increase in the maximum leverage ratio to 5.5 times and greater flexibility of sale-respect transactions relating to the Rhode Island assets. We are optimistic that this legislation will be addressed and improved as soon as the second quarter of 2021. We expect this legislation will be accretive to us and position us to compete more effectively in the region, as we feel it will provide us with state-of-the-art VLTs and a mechanism for ensuring we have a competitive slot floor well into the future. The extended agreement also gives us the horizon we need to support additional investment in our facility and amenities, and would deliver a positive financial return for our shareholders, even before taking into account any improved performance driven by our increased competitiveness. The Rhode Island House of Representatives Finance Committee has scheduled a hearing on this legislation for next Tuesday, March 9th. We plan to provide further update as this develops. I will now turn it over to Steve.