| Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, its majority-owned subsidiaries and entities the Company identifies as variable interest entities (“VIEs”), of which the Company is determined to be the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year’s presentation. The financial statements of our foreign subsidiaries are translated into US Dollars (“USD”) using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from financial statement translations are reflected as a separate component of accumulated other comprehensive loss. Foreign currency transaction gains and losses are included in net loss. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (the “SEC”) for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of the SEC’s Regulation S-X. Accordingly, certain information and note disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. In the Company’s opinion, these condensed consolidated financial statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates. Equity Method Investments On January 1, 2023, the Company and International Game Technology PLC (“IGT”) contributed certain tangible assets and leases to Rhode Island VLT Company, LLC (the “RI Joint Venture”) in exchange for equity interests of the RI Joint Venture. The Company contributed video lottery terminals (“VLTs”) and player tracking equipment to the joint venture for a 40% equity interest of the RI Joint Venture. The 40% ownership in the joint venture qualifies for equity method accounting. In addition to this joint venture, the Company also has other investments in unconsolidated subsidiaries, which are accounted for using equity method accounting. The Company records its share of net income or loss within “Other non-operating income, net” in the condensed consolidated statements of operations. For the three months ended June 30, 2024 and 2023, the Company recorded income from equity method investments of $0.2 million and $1.0 million, respectively, and for the six months ended June 30, 2024 and 2023, the Company recorded income from equity method investments of $0.8 million and $3.1 million, respectively. Variable Interest Entities The Company evaluates entities for which control is achieved through means other than voting rights to determine if it is the primary beneficiary of a VIE. An entity is a VIE if it has any of the following characteristics (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support (ii) equity holders, as a group, lack the characteristics of a controlling financial interest or (iii) the entity is structured with non-substantive voting rights. The primary beneficiary of the VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company consolidates its investment in a VIE when it determines that it is its primary beneficiary. In determining whether it is the primary beneficiary of the VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities and significance of the Company’s investment and other means of participation in the VIE’s expected profits/losses. Significant judgments related to these determinations include estimates about the current and future fair values and performance of assets held by these VIEs and general market conditions. Management has analyzed and concluded that Breckenridge Curacao B.V. (“Breckenridge”) is a VIE because it does not have sufficient equity investment at risk. The Company has determined that it is the primary beneficiary and consolidates the VIE because (a) although the Company does not control all decisions of Breckenridge, the Company has the power to direct the activities of Breckenridge that most significantly impact its economic performance through various contracts with the entity and (b) the nature of these agreements between Breckenridge and the Company provides the Company with the obligation to absorb losses and the right to receive benefits based on fees that are based upon off-market rates and commensurate to the level of services provided. The Company receives significant benefits in the form of fees that are not at market and commensurate to the level of services provided. As a result, the Company consolidates all of the assets, liabilities and results of operations of Breckenridge and its subsidiaries in the accompanying condensed consolidated financial statements. As of June 30, 2024 and December 31, 2023, Breckenridge had total assets of $147.2 million and $161.3 million, respectively, and total liabilities of $78.2 million and $87.7 million, respectively. Breckenridge had revenues of $46.5 million and $76.5 million for the three months ended June 30, 2024 and 2023, respectively, and $108.4 million and $160.5 million for the six months ended June 30, 2024 and 2023, respectively. The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis. Cash and Cash Equivalents and Restricted Cash Cash and cash equivalents includes cash balances and highly liquid investments with an original maturity of three months or less. Restricted cash includes cash collateral in connection with amounts due to the Chicago Tribune (refer to Note 8 “ Property and Equipment Accounts Receivable, Net Accounts receivable, net consists of the following: June 30, December 31, (in thousands) 2024 2023 Amounts due from Rhode Island and Delaware (1) $ 15,563 $ 13,028 Gaming receivables 23,179 26,127 Non-gaming receivables 33,274 37,221 Accounts receivable 72,016 76,376 Less: Allowance for credit losses (6,193) (6,048) Accounts receivable, net $ 65,823 $ 70,328 __________________________________ (1) Represents the Company’s share of VLT and table games revenue for Bally’s Twin River and Bally’s Tiverton due from the State of Rhode Island and for Bally’s Dover from the State of Delaware. Deferred Payables In order to execute on its strategy of improving working capital efficiency, the Company will, from time to time, participate in trade finance or deferred payable initiatives, including programs that may securitize or accelerate liquidity realized from receivables, or alternatively extend trade terms with certain suppliers or vendors. In certain cases, where the Company is not able to extend payment terms directly with suppliers or vendors, the Company will consider deferred payable solutions that simulate such trade term extensions. These solutions generally involve entering into exchange agreements with intermediary institutions who will make payment to the supplier or vendor within the original terms on behalf of the Company, in exchange for a new bill with terms that conforms to the Company’s payment policy of net 90 days. The Company will then pay the new bill to the intermediary institutions, inclusive of any embedded premium, which the Company records as “Interest expense, net,” within three months or less. During the three and six months ended June 30, 2024, the Company borrowed $60.1 million and $102.3 million, respectively, under these deferred payable arrangements and during the three months ended June 30, 2024 repaid $41.5 million. Amounts outstanding under these deferred payable arrangements were $60.2 million as of June 30, 2024 and are included in “Accrued and other current liabilities” on the condensed consolidated balance sheets. For the three and six months ended June 30, 2024, the Company incurred $1.4 million and $2.2 million of interest expense, respectively, under these arrangements. These arrangements were not utilized by the Company during the three and six months ended June 30, 2023. Gaming Expenses Gaming expenses include, among other things, payroll costs and expenses associated with the operation of VLTs, slots and table games, including gaming taxes payable to jurisdictions in which the Company operates outside of Rhode Island and Delaware, and marketing costs directly associated with the Company’s iGaming products and services. These marketing expenses are included within Gaming expenses in the condensed consolidated statements of operations and were $47.0 million and $47.8 million for the three months ended June 30, 2024 and 2023, respectively, and $93.2 million and $93.7 million for the six months ended June 30, 2024 and 2023, respectively. Gaming expenses also include racing expenses comprised of payroll costs, off track betting (“OTB”) commissions and other expenses associated with the operation of live racing and simulcasting. Advertising Expense The Company expenses advertising costs as incurred. For the three months ended June 30, 2024 and 2023, advertising expense was $4.0 million and $3.2 million, respectively, and for the six months ended June 30, 2024 and 2023, advertising expense was $9.6 million and $8.6 million, respectively. Advertising costs are included in “General and administrative” on the condensed consolidated statements of operations. Share-Based Compensation The Company recognized total share-based compensation expense of $4.5 million and $6.3 million for the three months ended June 30, 2024 and 2023, respectively, and $7.5 million and $12.3 million for the six months ended June 30, 2024 and 2023, respectively. The total income tax benefit for share-based compensation arrangements was $1.2 million and $1.7 million for the three months ended June 30, 2024 and 2023, respectively, and $2.0 million and $3.2 million for the six months ended June 30, 2024 and 2023, respectively. Strategic Partnership - Sinclair Broadcast Group In 2020, the Company and Sinclair Broadcast Group, Inc. (“Sinclair”) entered into a Framework Agreement (the “Framework Agreement”), which provides for a long-term strategic relationship between Sinclair and the Company. Under the Framework Agreement, the Company issued warrants and options and agreed to share tax benefits and received naming, integration and other rights, including access to Sinclair’s Tennis Channel, Stadium Sports Network and STIRR streaming service. Under a Commercial Agreement (the “Commercial Agreement”) contemplated by the Framework Agreement, the Company paid annual fees to Diamond Sports Group (“Diamond”), a Sinclair subsidiary, for naming rights over Diamond’s regional sports networks (“RSNs”) and other consideration. The Company accounted for this relationship as an asset acquisition in accordance with the “Acquisition of Assets Rather Than a Business” subsections of ASC 805-50, Business Combinations—Related Issues , using a cost accumulation model. The total intangible asset (“Commercial rights intangible asset”) represents the present value of the naming rights fees and other consideration, including the fair value of the warrants and options, and an estimate of the tax-sharing payments, each explained below. The Commercial rights intangible asset, net of accumulated amortization, was $210.4 million and $225.9 million as of June 30, 2024 and December 31, 2023, respectively. Amortization was $7.8 million and $7.7 million for the three months ended June 30, 2024 and 2023, respectively, and $15.6 million and $15.5 million for the six months ended June 30, 2024 and 2023, respectively. Refer to Note 9 “ Goodwill and Intangible Assets The present value of the naming rights fees was recorded as part of intangible assets, with a corresponding liability, which was accreted through interest expense. As of December 31, 2023, the total value of the liability was $57.7 million, with $8.0 million recorded within “Accrued and other current liabilities” related to the short-term portion of the liability, and $49.7 million related to the long-term portion of the liability reflected as “Commercial rights liability” in the condensed consolidated balance sheets. Accretion expense reported in “Interest expense, net” in our condensed consolidated statements of operations was $1.1 million and $2.2 million for the three and six months ended June 30, 2023, respectively. In the first quarter of 2024, the Company’s obligation to pay Diamond for the naming rights terminated upon the bankruptcy court’s approval of certain settlement terms, which the court approved on March 1, 2024. Refer to Note 17 “ Commitments and Contingencies Under the Framework Agreement, the Company issued to SBG Gaming, LLC, a designated subsidiary of Sinclair (“SBG”) (i) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $0.01 per share (“the Penny Warrants”), (ii) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $0.01 per share subject to the achievement of various performance metrics (the “Performance Warrants”), and (iii) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $30.00 to $45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (the “Options”). The exercise and purchase prices and the number of shares issuable upon exercise of the warrants and options are subject to customary anti-dilution adjustments. Refer to Note 20 “Subsequent Events” for further information. The Penny Warrants and Options are equity classified instruments under ASC 815. The fair value of the Penny Warrants approximates the fair value of the underlying shares and was $150.4 million on November 18, 2020 at issuance, and was recorded to “Additional paid-in-capital” in the condensed consolidated balance sheets, with an offset to the Commercial rights intangible asset. The Performance Warrants are accounted for as a derivative liability because the underlying performance metrics represent an adjustment to the settlement amount that is not indexed to the Company’s own stock and thus equity classification is precluded under ASC 815. Refer to Note 11 “ Fair Value Measurements Under the Framework Agreement, the Company agreed to share 60% of the tax benefits it realizes from the Penny Warrants, Options, Performance Warrants and other related payments. Changes in the estimate of the tax benefit to be realized and tax rates in effect at the time, among other changes, are treated as an adjustment to the intangible asset. The liability for these obligations was $17.0 million and $19.1 million as of June 30, 2024 and December 31, 2023, respectively, and is reflected in “Commercial rights liabilities” within our condensed consolidated balance sheets. Provision for Income Taxes During the six months ended June 30, 2024 and 2023, the Company recorded a provision for income tax of $29.9 million, at an effective year to date tax rate of (14.6)% and a provision for income tax of $109.1 million, at an effective year to date tax rate of 41.7%, respectively. The 2024 year to date effective tax rate differed from the US federal statutory tax rate of 21%, creating a provision for income tax on the Company’s Loss before income taxes, largely due to an increase in the valuation allowance, coupled with a tax liability for foreign discrete items. The 2023 year to date effective tax rate was higher than the US federal statutory tax rate of 21%, largely due to an increase in the valuation allowance and a tax liability for a discrete item related to the deferred gain on sale leaseback transactions in Mississippi and Rhode Island. |
