Bally's (NYSE:BALY) Reports Sales Below Analyst Estimates In Q4 Earnings

Max Juang /
2024/02/21 4:17 pm EST

Gaming, betting and entertainment company Bally's Corporation (NYSE:BALY) missed analysts' expectations in Q4 FY2023, with revenue up 6.1% year on year to $611.7 million. The company's full-year revenue guidance of $2.6 billion at the midpoint also came in 2.3% below analysts' estimates. It made a GAAP loss of $5.11 per share, improving from its loss of $5.65 per share in the same quarter last year.

Is now the time to buy Bally's? Find out by accessing our full research report, it's free.

Bally's (BALY) Q4 FY2023 Highlights:

  • Revenue: $611.7 million vs analyst estimates of $623.1 million (1.8% miss)
  • EPS: -$5.11 vs analyst estimates of -$0.54 (-$4.57 miss)
  • Management's revenue guidance for the upcoming financial year 2024 is $2.6 billion at the midpoint, missing analyst estimates by 2.3% and implying 6.2% growth (vs 8.6% in FY2023)
  • Free Cash Flow of $45.25 million is up from -$50.04 million in the previous quarter
  • Gross Margin (GAAP): 54.7%, down from 57% in the same quarter last year
  • Market Capitalization: $481.8 million

Robeson Reeves, Bally’s Chief Executive Officer, commented, “Bally’s completed a successful 2023 with healthy results across all our business segments. Revenues in the fourth quarter grew 6.1% year-over-year to $611.7 million reflecting continued growth in our Casinos & Resorts, International Interactive and North America Interactive segments. For the full year, revenues grew 8.6% versus 2022”.

Headquartered in Providence, Rhode Island, Bally's Corporation (NYSE:BALY) is a diversified global casino-entertainment company that owns and manages casinos, resorts, and online gaming platforms.

Casinos and Gaming

Casino and gaming companies that offer slot machines, Texas Hold ‘Em, Blackjack and the like can enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits-have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casino and gaming companies may face stroke-of-the-pen risk that suddenly limits what they do or where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing casino and gaming companies to adapt to keep up with changing consumer preferences such as being able to wager anywhere on demand.

Sales Growth

A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one may grow for years. Bally's annualized revenue growth rate of 41.1% over the last five years was incredible for a consumer discretionary business. Bally's Total RevenueWithin consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Bally's recent history shows its momentum has slowed as its annualized revenue growth of 36.1% over the last two years is below its five-year trend.

This quarter, Bally's revenue grew 6.1% year on year to $611.7 million, missing Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 8.2% over the next 12 months, an acceleration from this quarter.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

Over the last two years, Bally's has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 1.8%, subpar for a consumer discretionary business.

Bally's Free Cash Flow Margin

Bally's free cash flow came in at $45.25 million in Q4, equivalent to a 7.4% margin and up 179% year on year. Over the next year, analysts predict Bally's cash burn will increase. Their consensus estimates imply its LTM free cash flow margin of negative 1.3% will fall to negative 2.9%.

Key Takeaways from Bally's Q4 Results

We struggled to find many strong positives in these results. Its revenue missed analysts' estimates due to worse-than-expected performance within its International Interactive (digital gaming) segment. Its operating margin and EPS also fell short of Wall Street's estimates.

Looking ahead, Bally announced in January that it would close the Tropicana Las Vegas on April 2nd. The reason behind the close is to make space for the A's, a Major League Baseball team that is relocating to Las Vegas.

Overall, the results could have been better. The stock is flat after reporting and currently trades at $10.3 per share.

So should you invest in Bally's right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.