Besieged by inadequacies with its sports betting tech platform and outsized losses in its North American interactive unit, Bally’s initiated a comprehensive restructuring plan for the division at the start of the year.
On Thursday, incoming CEO Robeson Reeves pledged to institute dramatic changes to jumpstart the fledging unit. Reeves, who previously served as president of Bally’s interactive division, will replace Lee Fenton as CEO of the company on March 31. Reeves fielded questions Thursday about how his leadership style will differ from his predecessor.
“I’ll be analytical in our approach to decision-making to deliver customer-centric profitable solutions,” Reeves said. “I believe that the most valuable asset to deploy is focus.”
Reeves reiterated that Bally’s is on track to complete the construction of a $1.7 billion Chicago casino by 2026, a project which he described as “game-changing” for the company. Bally’s is also working on a proposed bid to open a casino in the Bronx next to the Trump Organization’s golf course at Ferry Point. If it enters the casino competition, Bally’s will join a crowded field in New York, where the state plans to award three downstate casino licenses later this year.
Bally’s Corporation has named Robeson Reeves its new CEO, replacing Lee Fenton, who is stepping down after one and a half years on the job; Reeves will oversee efforts to win a license for a Bronx casino.
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Bally’s is coming off a challenging period in which it recorded an impairment charge of approximately $390 million, primarily related to write-downs with online gaming acquisitions of Bet.Works and fantasy sports operator Monkey Knife Fight. As part of its restructuring, Bally’s plans to replace Bet.Works, which provided the infrastructure for Bally Bet’s in-house online sports betting tech platform.
Addressing Wall Street analysts on Thursday’s call, Reeves admitted that the acquisition of Bet.Works did not provide Bally Bet with a platform that could enable the operator to “develop a competitive product.”
“We didn’t act fast enough. This will not happen again,” he said.
The search for a new tech platform
The pivot away from Bet.Works leaves an opening for Bally’s to enlist a third-party provider to minimize expenses and integrate quickly as the interactive unit attempts to attain profitability over the next year.
Kambi, which received a buyout for its impending split with PENN Entertainment last October, has been rumored as a potential suitor. Other sports betting tech providers, such as OpenBet and GAN Sports, may also be considered.
“We are confident there are more economic and nimble solutions,” Reeves added. “We have spent the past five months analyzing them.”
Reeves did not mention any potential replacements by name on Thursday’s call. He also did not set a timetable for inking a deal.
Bally’s is feeling pressure to erase losses within its North American online unit in the coming months. In total, the casino corporation generated revenue of $576.7 million in the fourth quarter of last year, narrowly topping analysts’ consensus estimates of $575.8 million. But Bally’s also reported a net loss of $487.5 million for the quarter, more than quadrupling losses from the previous year’s quarter.
While Bally’s reported a loss per share of $8.87, losses adjusted for asset impairment costs amounted to just 43 cents per share. The adjustments illustrate how the decision to move away from Bet.Works and Monkey Knife Fight represent the bulk of the losses on the quarter.
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Bally’s purchased Bet.Works in November 2020 in a cash-and-stock deal valued at about $150 million. The casino company then acquired Monkey Knife Fight in January 2021 for approximately $90 million. There are indications that if Bally’s divests Monkey Knife Fight it will sell the fantasy sports unit at a fraction of that price.
Moving forward, Bally’s projects adjusted EBITDA losses in the range of $40 million to $50 million in full-year 2023 from its North American unit. The online division consists of Bally’s sports betting and iGaming segments. Bally’s now expects the division to be profitable in 2024.
Bally’s opened the year by announcing job cuts within its digital division that could reduce the unit by as much as 15%. The reduced headcount is expected to result in $35 million in cost savings this year. Despite these broad changes, Bally’s management has seen strong trends to begin a potentially transformative year, Truist Securities analyst Barry Jonas wrote in a research note.
Diamond Sports Group’s escalating debt
Complicating matters, Bally’s is dealing with uncertainty related to the future of Diamond Sports Group (DSG), the nation’s largest owner of cable TV sports channels.
Diamond Sports Group, which owns the Bally Sports Regional Sports Networks (RSNs) and operates 19 RSNs that comprise about one-third of the nation’s MLB, NBA, and NHL broadcasts, skipped a $140 million interest payment earlier this month. The decision to not repay the debt in a timely fashion fueled speculation that DSG may be headed toward an $8.6 billion restructuring in U.S. Bankruptcy Court. The potential bankruptcy of Diamond Sports Group might “change the economics of baseball forever,” Five Thirty Eight wrote earlier this week.
Bally’s has no liability related to Diamond’s debt, Bally’s CFO Bobby Lavan noted in a statement.
“Diamond holds no equity or other ownership rights in Bally’s,” Lavan said in the statement. “We continue to monitor the Diamond situation closely and look forward to working with the new management team.”
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Among its portfolio of regional sports networks, Diamond Sports Group owns Bally Sports Arizona, Bally Sports Great Lakes, and Bally Sports Ohio, encompassing regions that offer legal sports betting. Diamond Sports Group also owns a minority stake in the YES Network, which televises local broadcasts of the New York Yankees, Brooklyn Nets, and New York City FC of Major League Soccer.
Bally Bet received New York online sports betting market access in November 2021 when the state’s gaming commission issued licenses to nine sportsbook operators. Bally Bet joined BetMGM, DraftKings, and FanDuel as part of a so-called “super bid” to gain entry into the New York market. While the others occupy three of the top four spots in the Empire State, Bally Bet ranks last with a handle of $7.35 million since its launch last year.
The performance is not what the company envisioned 18 months ago, when Bally’s unveiled an ambitious plan to create a unique viewing experience for sports fans by integrating its media and gambling assets. Described as a next-generation, 3.0 version of sports betting, Bally’s has contemplated the addition of various microbets, such as the distance of an Aaron Judge home run that could be offered through a broadcast.
“Given the fact that we have relationships with these major sports providers and have the exclusive rights to integrate these sports, I think it’s ours to mess up here,” Bally’s Chairman Soo Kim told Sports Handle in a September 2021 interview. “We just have to execute.”
Though Bally’s may still entertain the initiative down the road, the plans will ostensibly face a setback if Diamond Sports Group enters bankruptcy. The overhaul of Bally’s Interactive prompted Macquarie analysts to suggest that Bally’s “moon shot” of becoming a vertically integrated sports betting operator may be nearing an end.
“While this was a difficult decision, we believe the investment story moves back to a value story, with reasonable/predictable near-term growth,” Macquarie analyst Chad Beynon wrote in a research note.
Bally’s shares fell 7% on Friday to around $18 a share. Bally’s is down about 8% since opening the year at $19.75.
Chris Altruda contributed to this story