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OFFON

BALLY'S CORPORATION

(BALY)
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BALLY'S CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/09/2021 | 04:29pm EST

Cautionary Note Regarding Forward-Looking Statements


This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of the securities laws. Forward-looking statements are statements as
to matters that are not historical facts, and include statements about our
plans, objectives, expectations and intentions.

Forward-looking statements are not guarantees and are subject to risks and
uncertainties. Forward-looking statements are based on our current expectations
and assumptions. Although we believe that our expectations and assumptions are
reasonable at this time, they should not be regarded as representations that our
expectations will be achieved. Actual results may vary materially.
Forward-looking statements speak only as of the time of this report and we do
not undertake to update or revise them as more information becomes available,
except as required by law.

Important factors beyond those that apply to most businesses, some of which are
beyond our control, that could cause actual results to differ materially from
our expectations and assumptions include, without limitation:
•uncertainties surrounding the COVID-19 pandemic, including limitations on our
operations, increased costs, changes in customer behaviors, impact on our
employees and the ongoing impact of COVID-19 on general economic conditions;
•unexpected costs, difficulties integrating and other events impacting our
recently completed and proposed acquisitions and our ability to realize
anticipated benefits;
•risks associated with our rapid growth, including those affecting customer and
employee retention, integration and controls;
•risks associated with the impact of the digitalization of gaming on our casino
operations, our expansion into iGaming and sports betting and the highly
competitive and rapidly changing aspects of our businesses generally;
•the very substantial regulatory restrictions applicable to us, including costs
of compliance;
•restrictions and limitations in agreements to which we are subject, including
our debt; and
•other risks identified in Part I. Item 1A. "Risk Factors" of Bally's Annual
Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with
the SEC on March 10, 2021 and other filings with the SEC.

The foregoing list of important factors is not exclusive and does not include
matters like changes in general economic conditions that affect substantially
all gaming businesses.

You should not to place undue reliance on our forward-looking statements.

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Overview


We are a global casino-entertainment company with a growing omni-channel
presence of Online Sports Betting and iGaming offerings. We own and manage 14
land-based casinos in ten states in the United States. In 2020, we acquired the
rights to the name "Bally's" as part of our strategy to become the leading U.S.
full-service sports betting/iGaming company with physical casinos and online
gaming solutions united under a single, prominent brand. We took other key steps
to build our iGaming and sports betting business in the past year, including
entering into a strategic partnership with Sinclair Broadcast Group, Inc.
("Sinclair") to leverage the Bally's brand and combine our sports betting
technology with Sinclair's expansive national footprint, which includes 188
local TV stations, 21 regional sports networks (of which 19 have been rebranded
Bally's Sports), the STIRR streaming service, the Tennis Channel and five
stadium digital TV and internet sports networks. On October 1, 2021, we acquired
Gamesys Group, Plc. ("Gamesys"), a leading international online gaming operator
that provides entertainment to a global consumer base. Also in 2021, we have
acquired Bally Interactive, formerly Bet.Works, a sports betting platform
provider, SportsCaller, a leading B2B free-to-play ("FTP") game provider, Monkey
Knife Fight, the third-largest fantasy sports platform in North America, the
Association of Volleyball Professionals ("AVP"), a premier professional beach
volleyball organization, and Telescope Inc. ("Telescope"), the leading provider
of real-time audience engagement solutions for live events, gamified second
screen experiences and interactive livestreams.

Our casino properties on a combined basis have 706,426 square feet of gaming
space, approximately 15,028 slot machines or VLTs, 501 gaming tables, 72 stadium
gaming positions, 71 dining establishments, 37 bars, 3,885 hotel rooms and seven
entertainment venues.

2021 Acquisition Update

We seek to continue to grow our business by actively pursuing the acquisition
and development of new gaming opportunities and reinvesting in our existing
operations. We believe that interactive gaming, including mobile sports betting
and iGaming, represent a significant strategic opportunity for our future
growth. In addition, we seek to increase revenues at our brick and mortar
casinos through enhancing the guest experience by providing popular games,
restaurants, hotel accommodations, entertainment and other amenities in
attractive surroundings with high-quality guest service. We believe that our
recent and pending acquisitions have expanded and will, in the case of the
pending acquisitions, further expand both our operating and digital/interactive
footprints, provide us access to the potentially lucrative interactive mobile
sports betting and iGaming markets, and diversify us from a financial
standpoint, while continuing to mitigate our susceptibility to regional economic
downturns, idiosyncratic regulatory changes and increases in regional
competition.

Gamesys Acquisition


On October 1, 2021, we acquired Gamesys, a leading UK-based global online gaming
operator. In connection with the acquisition, Gamesys shareholders received, in
the aggregate, 9,773,537 shares of our common stock and approximately £1.544
billion in cash. Based on the October 1, 2021 closing price of $53.08 per share
of the Company's common stock, and a foreign exchange rate of 1.354, the
aggregate consideration paid to former Gamesys shareholders was approximately
$2.62 billion, or $518.8 million of the Company's common stock and $2.10 billion
in cash.

We believe that Gamesys' proven technology platform will foster our continued
buildout of our interactive offerings in North America, including real-money
gaming options in online sports betting and iGaming. Additionally, unifying
Bally's and Gamesys' player databases and technologies provides us with one of
the largest portfolios of omni-channel cross-selling opportunities, consisting
of land-based gaming, online sports betting, iCasino, poker, bingo, daily
fantasy sports and free-to-play games. We believe that these offerings, coupled
with our media partnership with Sinclair Broadcast Group, position the Company
to capitalize on significant growth opportunities in the rapidly expanding U.S.
online entertainment and sports betting markets.

Other 2021 Acquisitions


In addition to the Gamesys acquisition, we completed or signed definitive
agreements for the following transactions in 2021:
•SportCaller - On February 5, 2021, we acquired SportCaller, one of the leading
B2B FTP game providers for sports betting and media companies across North
America, the UK, Europe, Asia, Australia, LATAM and Africa, for $24.0 million in
cash and 221,391 shares of our common stock (valued at approximately $12.0
million), subject to adjustment, and up to $12.0 million in value of additional
shares if SportCaller meets certain post-closing performance targets (calculated
based on a $USD to Euro exchange ratio of 0.8334).
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•Monkey Knife Fight - On March 23, 2021, we acquired MKF for immediately
exercisable penny warrants to purchase up to 984,446 of our common shares
(subject to adjustment) at closing and contingent penny warrants to purchase up
to 787,557 additional of our common shares half of which are issuable on each of
the first and second anniversary of closing. The total value of the warrants at
signing was $90.0 million.
•Bally's Lake Tahoe - On April 6, 2021, we acquired Bally's Lake Tahoe Casino
Resort, formally MontBleu Resort Casino & Spa, in Lake Tahoe, Nevada for $14.2
million, payable one year from the closing date, subject to customary
post-closing adjustments.
•Tropicana Las Vegas - On April 13, 2021, we agreed to purchase the Tropicana
Las Vegas Hotel and Casino in Las Vegas, Nevada from GLPI. The purchase price
for the Tropicana property's non-land assets is $150 million. In addition, we
agreed to lease the land underlying the Tropicana property from GLPI for an
initial term of 50 years at annual rent of $10.5 million, subject to increase
over time. We also will enter into a sale-and-leaseback with GLPI relating to
our Bally's Black Hawk, formerly Black Hawk Casinos, properties and the Bally's
Quad Cities property for $150 million. The lease will have initial annual fixed
rent of $12.0 million, subject to increase over time.
•Bally Interactive - On May 28, 2021, we acquired Bally Interactive, formally
Bet.Works Corp., for approximately $71.6 million in cash and 2,084,765 of our
common shares, subject in each case to customary post-closing adjustments.
•Bally's Evansville - On June 3, 2021, we acquired the Bally's Evansville casino
from Caesars Entertainment, Inc. The total purchase price was $139.7 million,
subject to customary post-closing adjustments.
•Bally's Quad Cities - On June 14, 2021, we acquired Bally's Quad Cities Casino
& Hotel in Rock Island, Illinois for $118.9 million in cash, subject to
customary post-closing adjustments.
•Association of Volleyball Professionals ("AVP") - On July 12, 2021, we acquired
AVP, a premier professional beach volleyball organization and host of the
longest-running domestic beach volleyball tour in the United States.
•Telescope Inc. ("Telescope") - On August 12, 2021 we acquired Telescope, the
leading provider of real-time audience engagement solutions for live events,
gamified second screen experiences and interactive livestreams.
•Degree 53 Limited ("Degree 53") - On October 25, 2021 we acquired Degree 53, a
UK-based creative agency that specializes in multi-channel website and
personalized mobile app and software development for the online gambling and
sports industries.

Operating Structure

As of September 30, 2021, the Company had four operating segments; East, West,
Bally Interactive and Bally's Arapahoe Park. In the second quarter of 2021, we
changed our management structure to better align with our strategic growth
initiatives in light of recent and pending acquisitions, which resulted in the
re-alignment of our operating and reportable segments. The properties included
within the East and West reportable segments, are as follows:
•East - includes Bally's Twin River, Bally's Tiverton, Dover Downs, Bally's
Atlantic City, and Bally's Evansville
•West - includes Hard Rock Biloxi, Bally's Vicksburg, Bally's Kansas City,
Bally's Shreveport, Bally's Black Hawk, Bally's Lake Tahoe, and Bally's Quad
Cities

Bally Interactive, which includes SportCaller, MKF, Bally Interactive, AVP,
Telescope, our online and mobile sports betting operations, and Bally's Arapahoe
Park, were determined to be immaterial operating segments and are therefore,
included in the "Other" category along with shared services provided by Twin
River Management Group (our management subsidiary).

We are currently evaluating the acquisition of Gamesys for segment reporting purposes, but it is expected that it will be reported as International Interactive and our existing operating segment Bally Interactive, will be reported as North America Interactive. It is expected that the pending acquisition of Tropicana Las Vegas will be reported in the West and the Pennsylvania development project will be included in the East (explained below).

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Strategic Partnership - Sinclair Broadcast Group


Our agreements with Sinclair provide for a long-term strategic partnership that
combines our vertically integrated, proprietary sports betting technology and
expansive market access footprint with Sinclair's premier portfolio of local
broadcast stations and live regional sports networks ("RSNs"), STIRR streaming
service, its popular Tennis Channel, and digital and over-the-air television
network, Stadium. Bally's and Sinclair will partner to create unrivaled sports
gamification content on a national scale, positioning Bally's as a leading
omni-channel gaming company with physical casinos and online sports betting and
iGaming solutions united under a single brand.

Commencing April 1, 2021, Sinclair rebranded its 19 former Fox Sports RSNs to Bally Sports.


On April 12, 2021, we announced that we had entered into a memorandum of
understanding with Sinclair to work collectively to facilitate the production
and broadcast of Bally's produced content during non-game windows. Together, we
will also explore opportunities to include Bally's programming in Sinclair-owned
media platforms and affiliates other than the Bally Sports RSNs, which may
include Sinclair's Tennis Channel and Stadium network assets.

Enabling Legislation and proposed Joint Venture with IGT in Rhode Island


On June 11, 2021, the Governor of Rhode Island signed into law the Marc A.
Crisafulli Economic Development Act, which among other things, authorizes and
directs the state to enter into and amend contracts with the Company and results
in changes to our Regulatory Agreement in Rhode Island, including an increase in
the ratios applicable to us and greater flexibility to complete sale-leaseback
transactions. In addition, our master contract with Rhode Island will be
extended on existing terms until June 30, 2043, and we have committed to
investing $100 million in Rhode Island over this extended term, including an
expansion and the addition of new amenities at Bally's Twin River. This
legislation authorizes a joint venture with International Gaming Technology PLC
("IGT") to become a licensed technology provider and supply the State of Rhode
Island with all VLTs at both Bally's Twin River and Bally's Tiverton for a
20-year period starting July 1, 2023. IGT would own 60% of the joint venture. As
of July 1, 2021, until the joint venture is operating, we will supply 23% of all
VLTs in return for 7% net terminal income from the machines.

COVID-19 Pandemic


The COVID-19 pandemic has significantly impacted, and is likely to continue to
impact, our business in a material manner. As of March 16, 2020, all of our
properties at the time were temporarily closed as a result of the COVID-19
pandemic. Our properties began to reopen in mid-2020 in some capacity and
remained open for the rest of 2020, with the exception of Bally's Twin River and
Bally's Tiverton which closed again from November 29, 2020 through December 20,
2020. All of our properties have reopened with minimal restrictions. Our
revenues have begun to recover due to the recent increase in consumer
confidence, reduction in travel restrictions, and faster than anticipated
vaccine roll-out, and our operations are increasingly operating with less and
less restrictions.
While we are working closely with government officials on operational aspects of
our re-opened properties and our desire to get additional amenities online, we
cannot predict the duration of any limitations the government or we may impose
on our operations. Continuing restrictions on our operations, the economic
uncertainty that COVID-19 continues to cause and the personal risk tolerances of
our customers have caused, and may continue to cause, our business to be
negatively impacted. In light of the foregoing, we are unable to determine when,
or if, all our properties will return to pre-pandemic demand.

Key Performance Indicator


The main key performance indicator used in managing our business is adjusted
earnings before interest, taxes, depreciation and amortization ("Adjusted
EBITDA"), a non-GAAP measure. Adjusted EBITDA is defined as earnings for the
Company, or where noted our reporting segments, before, in each case, interest
expense, net of interest income, provision (benefit) for income taxes,
depreciation and amortization, non-operating income, 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.

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We use Adjusted EBITDA to analyze the performance of our business and it is used
as a determining factor for performance based compensation for members of our
management team. We have historically used Adjusted EBITDA when evaluating
operating performance because we believe that the inclusion or exclusion of
certain recurring and non-recurring items is necessary to provide a full
understanding of our core operating results and as a means to evaluate
period-to-period performance. Also, we present Adjusted EBITDA because it is
used by some investors and creditors as an indicator of the strength and
performance of ongoing business operations, including our ability to service
debt, and to fund capital expenditures, acquisitions and operations. These
calculations are commonly used as a basis for investors, analysts and credit
rating agencies to evaluate and compare operating performance and value
companies within our industry. Adjusted EBITDA information is presented because
management believes that it is a commonly used measure of performance in the
gaming industry and that it is considered by many to be a key indicator of our
operating results. Management believes that while certain items excluded from
Adjusted EBITDA may be recurring in nature and should not be disregarded in
evaluating our earnings performance, it is useful to exclude such items when
comparing current performance to prior periods because these items can vary
significantly depending on specific underlying transactions or events that may
not be comparable between the periods presented or they may not relate
specifically to current operating trends or be indicative of future results.
Adjusted EBITDA should not be construed as an alternative to GAAP net income,
its most directly comparable GAAP measure, as an indicator of our performance.
In addition, Adjusted EBITDA as used by us may not be defined in the same manner
as other companies in our industry, and, as a result, may not be comparable to
similarly titled non-GAAP financial measures of other companies.

Third Quarter and First Nine Months 2021 Results


We reported revenue and income from operations of $314.8 million and $27.7
million, respectively, for the three months ended September 30, 2021, compared
to revenue and loss from operations of $116.6 million and $23.4 million,
respectively, for the same period last year. We reported revenue and income from
operations of $774.8 million and $137.7 million, respectively, for the nine
months ended September 30, 2021, compared to revenue and loss from operations of
$254.7 million and $0.7 million, respectively for the same period last year. As
of the third quarter of 2021, our properties have returned to full capacity and
are operating under minimal restrictions. In the prior year, our properties were
closed from mid-March into June 2020.

Other notable factors affecting our results for the three and nine months ended September 30, 2021 compared to the prior year comparable periods are as follows:


•$150.6 million of aggregate revenue from acquisitions in the fourth quarter of
2020, including Bally's Atlantic City ($46.8 million) and Bally's Shreveport
($28.7 million), and acquisitions in the first nine months of 2021, including
Bally's Evansville ($40.1 million), Bally's Quad Cities ($12.3 million), Bally's
Lake Tahoe ($11.3 million), and those in the Bally Interactive operating segment
($11.4 million);
•$304.4 million of aggregate revenue from acquisitions completed in the fourth
quarter of 2020, including Bally's Atlantic City ($108.4 million) and Bally's
Shreveport ($90.6 million), and acquisitions in the first nine months of 2021,
including Bally's Evansville ($51.8 million), Bally's Lake Tahoe ($21.0 million)
and Bally's Quad Cities ($14.6 million), and those in the Bally Interactive
operating segment ($18.0 million).
•$53.4 million gain on sale-leaseback in connection with our sale of the Dover
Downs property to GLPI during the second quarter of 2021;
•$23.1 million gain on bargain purchases during the nine months ended September
30, 2021 related to the acquisitions of Bally's Evansville and Bally's Lake
Tahoe;
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Results of Operations

The following table presents, for the periods indicated, certain revenue and income items:

                                       Three Months Ended September 30,                 Nine Months Ended September 30,
(In millions)                              2021                    2020                    2021                    2020
Total revenue                      $           314.8          $     116.6          $           774.8          $      254.7
Income (loss) from operations                   27.7                 23.4                      137.7                  (0.7)
Net (loss) income                              (14.7)                 6.7                       43.5                 (25.7)

The following table presents, for the periods indicated, certain income and expense items expressed as a percentage of total revenue:

                                                       Three Months Ended September 30,                 Nine Months Ended September 30,
                                                         2021                    2020                     2021                    2020
Total revenue                                               100.0  %                100.0  %                 100.0  %                100.0  %
Gaming, racing, hotel, food and beverage, and
other expenses                                               36.7  %                 31.4  %                  35.1  %                 37.4  %
Advertising, general and administrative                      45.4  %                 37.7  %                  41.9  %                 46.2  %
Goodwill and asset impairment                                   -  %                    -  %                   0.6  %                  3.4  %
Gain on sale-leaseback                                          -  %                    -  %                  (6.9) %                    -  %
Other operating costs and expenses                           (0.2) %                  2.3  %                   2.8  %                  2.3  %
Depreciation and amortization                                 9.2  %                  8.5  %                   8.7  %                 11.0  %
Total operating costs and expenses                           91.2  %                 80.0  %                  82.2  %                100.3  %
Income (loss) from operations                                 8.8  %                 20.0  %                  17.8  %                 (0.3) %
Other income (expense)
Interest income                                               0.2  %                    -  %                   0.2  %                  0.1  %
Interest expense                                            (10.1) %                (14.5) %                  (9.6) %                (17.2) %
Change in value of naming rights liabilities                  2.2  %                    -  %                  (0.2) %                    -  %
Gain (adjustment) on bargain purchases                       (0.3) %                    -  %                   3.0  %                    -  %
Loss on extinguishment of debt                               (6.2) %                    -  %                  (2.5) %                    -  %
Other, net                                                   (1.0) %                    -  %                  (0.9) %                    -  %
Total other expense, net                                    (15.2) %                (14.5) %                 (10.0) %                (17.0) %
(Loss) income before provision for income taxes              (6.4) %                  5.6  %                   7.8  %                (17.3) %
(Benefit) provision for income taxes                         (1.7) %                 (0.2) %                   2.2  %                 (7.2) %
Net (loss) income                                            (4.7) %                  5.8  %                   5.6  %                (10.1) %

____________________________________________________________________________

Note: Amounts in table may not subtotal due to rounding.

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Segment Performance


The following table sets forth certain financial information associated with
results of operations for the three and nine months ended September 30, 2021 and
2020. Non-gaming revenue includes hotel, food and beverage and other revenue.
Non-gaming expenses include hotel, food and beverage and other expenses. All
amounts are before any allocation of corporate costs.
(In thousands, except
percentages)                                        Three Months Ended September 30,                                                     Nine Months Ended September 30,
                                    2021                2020            $ Change              % Change                2021                2020             $ Change              % Change

Revenue:

Gaming and Racing revenue
East                          $    131,644           $ 50,318          $ 81,326                    161.6  %       $  310,186          $ 115,894          $ 194,292                     167.6  %
West                                95,674             46,338            49,336                    106.5  %          275,928             81,412            194,516                     238.9  %

Other                                2,298              1,616               682                     42.2  %            6,270              3,702              2,568                      69.4  %
Total Gaming and Racing
revenue                            229,616             98,272           131,344                    133.7  %          592,384            201,008            391,376                     194.7  %
Non-gaming revenue
East                                45,331              8,747            36,584                    418.2  %           98,272             30,954             67,318                     217.5  %
West                                28,929              9,562            19,367                    202.5  %           67,262             22,627             44,635                     197.3  %

Other                               10,903                 43            10,860                 25,255.8  %           16,860                107             16,753                  15,657.0  %
Total Non-gaming revenue            85,163             18,352            66,811                    364.1  %          182,394             53,688            128,706                     239.7  %
Total revenue                      314,779            116,624           198,155                    169.9  %          774,778            254,696            520,082                     204.2  %
Operating costs and expenses:
Gaming and Racing expenses
East                          $     37,686           $ 11,233          $ 26,453                    235.5  %       $   83,460          $  32,835          $  50,625                     154.2  %
West                                37,780             15,010            22,770                    151.7  %          100,356             27,817             72,539                     260.8  %

Other                                1,704              1,434               270                     18.8  %            3,958              3,305                653                      19.8  %
Total Gaming and Racing
expenses                            77,170             27,677            49,493                    178.8  %          187,774             63,957            123,817                     193.6  %
Non-gaming expenses
East                                21,485              4,616            16,869                    365.4  %           50,273             20,195             30,078                     148.9  %
West                                12,065              4,290             7,775                    181.2  %           28,069             11,140             16,929                     152.0  %

Other                                4,906                  -             4,906                        -  %            5,800                  3              5,797                 193,233.3  %
Total Non-gaming expenses           38,456              8,906            29,550                    331.8  %           84,142             31,338             52,804                     168.5  %
Advertising, general and
administrative
East                                65,654             20,476            45,178                    220.6  %          154,809             57,999             96,810                     166.9  %
West                                35,039             15,344            19,695                    128.4  %           87,459             32,633             54,826                     168.0  %

Other                               42,212              8,176            34,036                    416.3  %           82,347             26,962             55,385                     205.4  %
Total Advertising, general
and administrative                 142,905             43,996            98,909                    224.8  %          324,615            117,594            207,021                     176.0  %

Margins:

Gaming and Racing expenses as
a percentage of Gaming and
Racing revenue                          34   %             28  %                                       6  %               32  %              32  %                                         -  %
Non-gaming expenses as a
percentage of Non-gaming
revenue                                 45   %             49  %                                      (4) %               46  %              58  %                                       (12) %
Advertising, general and
administrative as a
percentage of Total revenue             45   %             38  %                                       7  %               42  %              46  %                                        (4) %



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Three and Nine Months Ended September 30, 2021 Compared to Three and Nine Months Ended September 30, 2020


Revenue

As noted above, revenue for the three months ended September 30, 2021 increased
169.9%, or $198.2 million, to $314.8 million, from $116.6 million in the same
period last year. Revenue for the nine months ended September 30, 2021 increased
204.2%, or $520.1 million, to $774.8 million, from $254.7 million in the same
period last year. Gaming and racing revenue for the three months ended September
30, 2021 increased 133.7%, or $131.3 million, to $229.6 million from $98.3
million in the same period last year. Gaming and racing revenue for the nine
months ended September 30, 2021 increased 194.7%, or $391.4 million, from $201.0
million in the same period last year. With less operating restrictions across
our properties resulting from developments in the COVID-19 pandemic and an
increase in consumer confidence and visitation, we saw gaming revenue grow, and
exceed in some cases, pre-pandemic levels.

Incremental revenues from our recent acquisitions also contributed to the
increase in revenue for the three and nine months ended September 30, 2021.
Revenue from acquisitions which closed in the fourth quarter of 2020, including
Bally's Atlantic City and Bally's Shreveport, coupled with those that closed in
the first nine months of 2021, including SportCaller, MKF, Bally Interactive,
Bally's Lake Tahoe, Bally's Evansville, Bally's Quad Cities, AVP and Telescope,
contributed, in the aggregate, $150.6 million and $304.4 million to total
revenue in the three and nine months ended September 30, 2021, respectively.
Refer to Note 5 "Acquisitions" for further information on our recent
acquisitions.

Operating costs and expenses


Gaming and racing expenses for the three months ended September 30, 2021
increased $49.5 million, or 178.8%, to $77.2 million from $27.7 million in the
prior year comparable period and increased $123.8 million, or 193.6%, to $187.8
million for the nine months ended September 30, 2021 from $64.0 million in the
prior year comparable period. This increase was primarily attributable to the
inclusion of Bally's Atlantic City and Bally's Shreveport, acquired in the
fourth quarter of 2020, and Bally's Quad Cities, Bally's Evansville and Bally's
Lake Tahoe, acquired during the second quarter of 2021, which in the aggregate
contributed incremental gaming expenses of $38.4 million and $81.5 million for
the third quarter and first nine months of 2021.

Non-gaming expenses for the three months ended September 30, 2021 increased
$29.6 million, or 331.8%, to $38.5 million from $8.9 million in the same period
last year. Non-gaming expenses for the nine months ended September 30, 2021
increased $52.8 million, or 168.5%, to $84.1 million from $31.3 million in the
same period last year. This increase was primarily attributable to the inclusion
of Bally's Atlantic City and Bally's Shreveport, acquired in the fourth quarter
of 2020, and acquisitions of Bally's Quad Cities, Bally's Evansville and Bally's
Lake Tahoe, acquired during the second quarter of 2021, which in the aggregate
contributed incremental non-gaming expenses of $21.2 million and $44.0 million
for the third quarter and first nine months of 2021.

Advertising, general and administrative


Advertising, general and administrative expenses for the three months ended
September 30, 2021 increased $98.9 million, or 224.8%, to $142.9 million from
$44.0 million in the same period last year. Advertising, general and
administrative expenses for the nine months ended September 30, 2021 increased
$207.0 million, or 176.0%, to $324.6 million from $117.6 million in the same
period last year. This increase year-over-year is primarily due to the additions
of Bally's Atlantic City and Bally's Shreveport, acquired in the fourth quarter
of 2020, and year-to-date 2021 acquisitions of Bally's Quad Cities, Bally's
Evansville, Bally's Lake Tahoe, Bally Interactive, MKF, Telescope, AVP and
SportCaller which in the aggregate contributed $77.5 million and $143.8 million
to advertising, general and administrative expenses for the third quarter and
first nine months of 2021.

Acquisition, integration and restructuring expense


We incurred $6.8 million and $37.5 million of acquisition, integration and
restructuring expenses during the three and nine months ended September 30,
2021, respectively, compared to $2.7 million and $7.0 million in the prior year
three and nine month periods, respectively. This increase was driven by costs
incurred in connection with our acquisition of Gamesys, $3.7 million and $17.3
million for the three and nine months ended September 30, 2021, respectively,
and acquisitions completed in 2021 which amounted to $1.4 million and $14.0
million for the three and nine months ended September 30, 2021, respectively.
Refer to Note 10 "Acquisition, Integration and Restructuring" for further
information.
                                       52
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Other operating (income), costs and expenses


During the third quarter and first nine months of 2021, we recorded gains of
$7.9 million, and $19.2 million, respectively, primarily attributable to
insurance proceeds received due to the effects of Hurricane Zeta which made
landfall in Louisiana shutting down our Hard Rock Biloxi property for three days
during the fourth quarter of 2020. We also recorded rebranding expense of $0.4
million and $1.7 million during the third quarter and first nine months of 2021,
respectively, in connection with our corporate name change to Bally's
Corporation in November 2020. During the second quarter of 2021, we sold our
Dover Downs property to GLPI and recorded a gain on sale-leaseback of $53.4
million and recorded asset impairment charges of $4.7 million related to the
Dover Downs and Bally's Black Hawk tradenames in connection with our rebranding.

Depreciation and amortization


Depreciation and amortization for the three months ended September 30, 2021 was
$29.0 million, an increase of $19.1 million, and $67.5 million for the nine
months ended September 30, 2021, an increase of $39.4 million, each compared to
the same period last year. The increase in depreciation and amortization is
attributable to the additional properties acquired in 2020 and 2021, including
fixed asset additions attributable to our Bally Interactive operating segment.

Income (loss) from operations


Income from operations was $27.7 million for the three months ended September
30, 2021 compared to $23.4 million in the comparable period in 2020. Income from
operations was $137.7 million for the nine months ended September 30, 2021
compared to a loss from operations of $0.7 million in 2020.

The three and nine month comparable periods in 2020 were both impacted negatively by the COVID-19 pandemic with the shut-down of our properties from mid-March into June. As noted above, during the three and nine months ended September 30, 2021, we experienced strong revenue growth and a return in visitation to our properties as restrictions were lifted.

Total other income (expense), net


Total other expense, net for the three months ended September 30, 2021 increased
$31.0 million to $47.9 million from $16.9 million the same period last year.
This increase was driven by a loss on extinguishment of debt of $19.4 million in
connection with the redemption of $210 million of the 6.75% senior notes due
2027, coupled with a $14.9 million increase in interest expense. Refer to Note
11 "Long-Term Debt" for further information. Offsetting these increases was $7.0
million of income recorded to adjust the naming rights liability associated with
our contracts with Sinclair Broadcast group to fair value as of September 30,
2021.

Total other expense, net for the nine months ended September 30, 2021 increased
$34.1 million to $77.5 million compared to $43.4 million in the same period last
year. This was due to an increase in interest expense of $30.8 million
year-over-year due to the timing of borrowings and the loss on extinguishment of
debt of $19.4 million noted above, partially offset by a gain on bargain
purchases of $23.1 million in connection with the acquisitions of Tropicana
Evansville and Bally's Lake Tahoe.

Provision (benefit) for income taxes


Benefit for income taxes for the three months ended September 30, 2021 was $5.4
million compared to $0.2 million for the three months ended September 30, 2020.
The effective tax rate for the quarter was 26.8% compared to 3.8% for the three
months ended September 30, 2020. Provision for income taxes for the nine months
ended September 30, 2021 was $16.8 million compared to a benefit from income
taxes of $18.4 million for the nine months ended September 30, 2020. The
effective tax rate for the nine months ended September 30, 2021 was 27.8%
compared to 41.8% for the nine months ended September 30, 2020. The increase in
the year to date provision for income taxes in 2021 is mostly attributable to
the increase in net income in the current year and the removal of the favorable
carryback rate available during 2020 as a result of the CARES Act.

                                       53
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Net income (loss) and earnings (loss) per share


Net loss for the three months ended September 30, 2021 was $14.7 million, or
($0.30) per diluted share, a decrease of $21.5 million, or 319.4%, from net
income of $6.7 million, or $0.22 per diluted share, in the same period last
year. As a percentage of revenue, net income decreased from 5.8% for the three
months ended September 30, 2020 to net loss of 4.7% for the three months ended
September 30, 2021.

Net income for the nine months ended September 30, 2021 was $43.5 million, an
increase of $69.2 million, or 269.2%, from a net loss of $25.7 million, or
($0.83) per diluted share, in the same period last year. As a percentage of
revenue, net income increased to 5.6% for the nine months ended September 30,
2021 from a net loss of 10.1% for the nine months ended September 30, 2020.

These changes were impacted by the factors noted above.

Adjusted EBITDA by Segment


Consolidated Adjusted EBITDA was $78.0 million for the three months ended
September 30, 2021, up $40.0 million, or 105.2%, from $38.0 million in the same
period last year. Consolidated Adjusted EBITDA was $214.2 million for the nine
months ended September 30, 2021, up $164.9 million, or 334.1%, from $49.3
million in the same period last year.

Adjusted EBITDA for the East segment for the third quarter of 2021 increased
$30.9 million, or 137.9%, to $53.3 million and increased $87.6 million, or
261.8%, to $121.0 million for the nine months ended September 30, 2021, each
compared to the same prior year periods. The third quarter and year to date
increases year over year were driven by the inclusion of Bally's Evansville,
which was acquired in the second quarter of 2021, coupled with strong results at
our Rhode Island and Dover Downs properties.

Adjusted EBITDA for the West segment for the third quarter of 2021 increased
$20.7 million to $41.8 million and increased $97.9 million, or 310.8%, to $129.4
million for the nine months ended September 30, 2021, each compared to the same
prior year periods. The third quarter increase year over year was driven by the
acquisition of Bally's Shreveport, which was acquired in the fourth quarter of
2020, and Bally's Quad Cities and Bally's Lake Tahoe which were acquired in the
second quarter of 2021. The year to date increase year over year was driven by
Shreveport, which was acquired in the fourth quarter of 2020, and strong results
at our Hard Rock Biloxi and Bally's Kansas City properties.


                                       54
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The following tables reconcile Adjusted EBITDA, a non-GAAP measure, to net income (loss), as derived from our financial statements (in thousands):

                                                          Three Months 

Ended September 30, 2021

                                                     East                 West                    Other              Total
Revenue                                        $     176,975          $ 124,603                $  13,201          $ 314,779

Net income (loss)                              $      25,386          $  24,001                $ (64,134)         $ (14,747)
Interest expense, net of interest income                   6                 (1)                  31,301             31,306
Provision (benefit) for income taxes                   9,077              7,217                  (21,694)            (5,400)
Depreciation and amortization                          5,763              8,279                   14,958             29,000
Non-operating (income) expense (1)                         -                  -                   16,575             16,575
Acquisition, integration and restructuring                 -                  -                    6,797              6,797
Share-based compensation                                   -                  -                    5,449              5,449

Other (2)                                              1,397             (5,853)                  13,453              8,997
Allocation of corporate costs                         11,686              8,165                  (19,851)                 -
Adjusted EBITDA                                $      53,315          $  41,808                $ (17,146)         $  77,977

__________________________________

(1) Non-operating (income) expense includes: (i) change in value of naming
rights liabilities, (ii) loss on extinguishment of debt and (iii) other expense,
net.
(2) Other includes the following non-recurring items: (i) Goodwill and asset
impairments, (ii) deal-related, rebranding, expansion and pre-opening expenses,
(iii) Employee Retention Credits related to COVID-19, (iv) Credit Agreement
amendment related expenses, (v) costs related to pursuing sports betting,
iGaming and lottery access in various jurisdictions, (vi) non-routine legal
expenses, and (vii) net gains related to insurance recoveries.

                                                          Three Months 

Ended September 30, 2020

                                                     East                West                    Other              Total
Revenue                                        $      59,065          $ 55,900                $   1,659          $ 116,624

Net income (loss)                              $      10,702          $ 11,381                $ (15,360)         $   6,723
Interest expense, net of interest income                  30               (12)                  16,890             16,908
Provision (benefit) for income taxes                   3,846             3,155                   (7,249)              (248)
Depreciation and amortization                          5,571             4,279                       82              9,932

Acquisition, integration and restructuring                 -                 -                    2,740              2,740
Share-based compensation                                   -                 -                    1,799              1,799
Other (1)                                               (330)             (154)                     635                151
Allocation of corporate costs                          2,591            
2,453                   (5,044)                 -
Adjusted EBITDA                                $      22,410          $ 21,102                $  (5,507)         $  38,005

__________________________________

(1) Other includes the following non-recurring items: (i) Expansion and
pre-opening expenses, (ii) Employee Retention Credit under the CARES Act which
provides the Company with a refundable tax credit of 50% of up to $10,000 in
wages paid by an eligible employer whose business has been financially impacted
by COVID-19, (iii) Credit Agreement amendment expenses include costs associated
with amendments made to the Company's Credit Agreement, (iv) gain related to
insurance recovery proceeds received for a damaged roof at the Company's
Arapahoe Park racetrack, (v) expenses incurred associated with the Rhode Island
State Police investigation into a tenant in the Lincoln property and a former
employee of the Company, (vi) expenses incurred associated with the campaign
attempting to create an open bid process for the Rhode Island Lottery Contract
and (vii) non-routine legal expenses incurred in connection with certain
litigation matters (net of insurance reimbursements).


                                       55
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                                                            Nine Months 

Ended September 30, 2021

                                                      East                 West                     Other              Total
Revenue                                         $     408,458          $ 343,190                $   23,130          $ 774,778

Net income (loss)                               $      90,353          $  77,397                $ (124,260)         $  43,490
Interest expense, net of interest income                   38                (14)                   72,855             72,879
Provision (benefit) for income taxes                   34,434             23,310                   (40,993)            16,751
Depreciation and amortization                          17,275             21,695                    28,533             67,503
Non-operating (income) expense(1)                           -                  -                     4,620              4,620
Acquisition, integration and restructuring                  -                  -                    37,457             37,457
Share-based compensation                                    -                  -                    13,833             13,833
Gain on sale-leaseback                                (53,425)                 -                         -            (53,425)
Other(2)                                                5,784            (15,329)                   20,651             11,106
Allocated corporate costs                              26,544            
22,365                   (48,909)                 -
Adjusted EBITDA                                 $     121,003          $ 129,424                $  (36,213)         $ 214,214

__________________________________

(1) Non-operating (income) expense includes: (i) change in value of naming
rights liabilities, (ii) gain on bargain purchases (iii) loss on extinguishment
of debt and (iv) other expense, net.
(2) Other includes the following non-recurring items: (i) Goodwill and asset
impairments, (ii) deal-related, rebranding, expansion and pre-opening expenses,
(iii) Employee Retention Credits related to COVID-19, (iv) Credit Agreement
amendment related expenses, (v) costs related to pursuing sports betting,
iGaming and lottery access in various jurisdictions, (vi) non-routine legal
expenses, and (vii) net gains related to insurance recoveries.

                                                           Nine Months 

Ended September 30, 2020

                                                     East                 West                    Other              Total
Revenue                                        $     146,848          $ 104,039                $   3,809          $ 254,696

Net income (loss)                              $       6,602          $   7,710                $ (40,022)         $ (25,710)
Interest expense, net of interest income                  51                (25)                  43,365             43,391
Provision (benefit) for income taxes                   2,443                610                  (21,483)           (18,430)
Depreciation and amortization                         18,022              9,805                      227             28,054

Acquisition, integration and restructuring                20                  -                    6,964              6,984
Share-based compensation                                   -                  -                    9,468              9,468

Other(1)                                              (2,379)             7,614                      351              5,586
Allocated corporate costs                              8,683              5,794                  (14,477)                 -
Adjusted EBITDA                                $      33,442          $  31,508                $ (15,607)         $  49,343

__________________________________

(1) Other includes the following non-recurring items: (i) Goodwill and asset
impairment, (ii) Expansion and pre-opening expenses, (iii) Employee Retention
Credit under the CARES Act which provides the Company with a refundable tax
credit of 50% of up to $10,000 in wages paid by an eligible employer whose
business has been financially impacted by COVID-19, (iv) Credit Agreement
amendment expenses include costs associated with amendments made to the
Company's Credit Agreement, (v) gain related to insurance recovery proceeds
received for a damaged roof at the Company's Arapahoe Park racetrack, (vi)
expenses incurred associated with the Rhode Island State Police investigation
into a tenant in the Lincoln property and a former employee of the Company,
(vii) expenses incurred associated with the campaign attempting to create an
open bid process for the Rhode Island Lottery Contract, (viii) non-routine legal
expenses incurred in connection with certain litigation matters (net of
insurance reimbursements), and (ix) costs incurred in connection with the
implementation of a new human resources information system.

Critical Accounting Policies and Estimates


There were no material changes in critical accounting policies and estimates
during the period covered by this Quarterly Report on Form 10-Q. Refer to Item
7. of the Company's Annual Report on Form 10-K for the year ended December 31,
2020 for a complete list of our Critical Accounting Policies and Estimates.

                                       56
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Recent Accounting Pronouncements

Refer to Note 3. "Recently Adopted and Issued Accounting Pronouncements" in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that affect us.

Liquidity and Capital Resources


We are a holding company. Our ability to fund our obligations depends on
existing cash on hand, cash flow from our subsidiaries and our ability to raise
capital. Our primary sources of liquidity and capital resources have been cash
on hand, cash flow from operations, borrowings under our revolving credit
facility and proceeds from the issuance of debt and equity securities.

Our strategy has been to maintain moderate leverage and substantial capital resources in order to take advantage of opportunities, to invest in our businesses and acquire properties at what we believe to be attractive valuations. As such, we continued to invest in our land-based casino business and began to build on our interactive/iGaming gaming business despite the COVID-19 pandemic.


On April 20, 2021, we completed a public offering of 12,650,000 common shares at
a price to the public of $55.00 per share and the sale of warrants to purchase
909,090 shares to affiliates of Sinclair Broadcast Group, Inc. at the same
offering price. The net proceeds from the offering and the warrant sale, after
deducting underwriting discounts and estimated expenses, of £485 million or $671
million were placed in escrow and were included in restricted cash as of
September 30, 2021.

On August 20, 2021, we issued $750.0 million aggregate principal amount of
senior notes due 2029 and $750.0 million aggregate principal amount of Senior
Notes due 2031 (together, the "New Senior Notes"). Certain of the net proceeds
from the New Senior Notes offering are included within restricted cash as of
September 30, 2021. On October 1, 2021, upon the closing of the Gamesys
Acquisition, the Company assumed the issuer obligation under the New Senior
Notes.

On October 1, 2021, we entered into a credit agreement (the "New Credit
Agreement") providing for a senior secured term loan facility in an aggregate
principal amount of $1.945 billion (the "New Term Loan Facility"), which will
mature in 2028, and a senior secured revolving credit facility in an aggregate
principal amount of $620.0 million (the "New Revolving Credit Facility"), which
will mature in 2026. The New Revolving Credit Facility was undrawn at closing.

The credit facilities allow the Company to increase the size of the New Term
Loan Facility or request one or more incremental term loan facilities or
increase commitments under the New Revolving Credit Facility or add one or more
incremental revolving facilities in an aggregate amount not to exceed the
greater of $650 million and 100% of the Company's consolidated EBITDA for the
most recent four-quarter period plus or minus certain amounts as specified in
the New Credit Agreement, including an unlimited amount subject to compliance
with a consolidated total secured net leverage ratio.

On October 1, 2021, we acquired Gamesys for 9,773,537 shares of Bally's common
stock and approximately £1.544 billion in cash. The acquisition and refinancing
of our and Gamesys' debt was funded with, among other sources, the proceeds of
the public offering of common shares, the warrant sale, the New Senior Notes and
the New Term Loan Facility.

We expect that our primary capital requirements going forward will relate to the
operation, maintenance and improvement of our properties we acquired along with
debt service, rent and acquisitions. Our capital expenditure requirements are
expected to moderately increase as a result of the properties acquired in the
last 18 months. We have a $40 million planned redevelopment project for the
Bally's Kansas City property that we acquired in 2020 and we plan to invest $100
million in our Atlantic City property over five-years. In addition, we signed an
agreement to jointly design and build a new casino in Centre County,
Pennsylvania, in which we are a 51% owner. We estimate the total cost of the
project, including construction, licensing and sports betting/iGaming
operations, at $120 million. During the third quarter of 2021, we commenced the
expansion and other capital improvements at our Bally's Twin River location
related to our partnership with IGT. We expect to use cash on hand and cash
generated from operations to meet such obligations. Finally, we agreed to
acquire the Tropicana Las Vegas for $150 million, which we expect to finance
through sale-leaseback transactions with GLPI. For the nine months ended
September 30, 2021, capital expenditures were $67.2 million, compared to $8.6
million in the same period last year.

                                       57

--------------------------------------------------------------------------------


We expect that our current liquidity, cash flows from operations and borrowings
under our credit facility will be sufficient to fund our operations, capital
requirements and service our outstanding indebtedness for the next 12 months,
including giving effect to our pending acquisitions.

© Edgar Online, source Glimpses

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