Bally’s Corporation announced its plan to reduce its North American digital division workforce by 15%. Bally’s Interactive North America covers iGaming and sports betting in the US and Canada.
The SEC filing shows that Bally’s Corporation plans to lay off up to 15% of division employees, with the exact number still unknown. Still, according to the filing, Bally’s Corporation expects it “will incur between approximately $10 million to $15 million in cash severance costs in connection with the Plan, which the Company expects to incur in the first quarter of 2023.”
In a letter to employees, Bally’s CEO Lee Fenton said the layoffs were a difficult decision and that the company is structured for future success.
However, we always need to be acutely aware of the macro-economic conditions and adjust accordingly to come through what is a challenging environment in the best possible shape. Companies who take tough but decisive steps to effectively manage costs will be stronger and fitter for the future. I am committed to ensuring that Bally’s is one of those that is best placed to flourish in the long term.
Fenton also acknowledged that the company over-hired over the pandemic, similarly to other companies, and it takes full responsibility for it. Also, in recent company conference calls, Fenton has shared that the company must take a cost-cutting approach to become more profitable.
Bally’s Corporation stock (Bally’s Corporation 14,95 -3,92%) dropped 10% after the announcement. In the last year, the company has seen it fall over 30%.
Meanwhile, Fenton is stepping down on March 31 and will be replaced by Robeson Reeves, currently the Bally’s Interactive president.
Bet on Bally’s Interactive North America Didn’t Pay Off
The company invested heavily in the quest to expand its digital presence. In 2021, Bally made several major deals. It first acquired SportsCaller, a software developer of free-to-play games, for an undisclosed fee. Following that, Bally’s purchased Monkey Knife Fight, the third-largest fantasy sports provider in the US, for $90 million.
Later in 2021, Bally acquired Bet.Works for $125 million and finally, in its biggest deal, it bought GameSys Group, a British gaming company, for $2.7 billion. Reeves was its COO.
The purchase of GameSys was a significant move, allowing the launch of Bally Casino in New Jersey, which runs on GameSys’ platform. The company also named GameSys CEO Fenton as Bally’s Corporation CEO, showcasing the direction where it wants to go.
Furthermore, GameSys is the platform provider of Virgin Casino, one of the oldest and top online casinos in New Jersey. After the Bally’s deal, Virgin Casino started using the Bally’s Atlantic City Hotel and Casino license.
As Bally invested heavily in its digital division, the results are slow to appear. According to the last quarterly earnings report, Bally’s Corporation continued its positive performance in 2022, but the Bally’s Interactive North America division was the sore thumb.
In Q3, Bally’s Resorts and Casinos generated $328.5 million in revenue and $51 million in net income, while the International Interactive Division posted $227.6 million in revenue and $38.1 million in net income.
Conversely, Bally’s Interactive North America had $21 million in revenue but recorded a $22.7 million loss in net income.
The US Is a Tough Market For Latecomers
The Bally’s Interactive North America division runs the online casino and online sportsbook, Bally Casino and Bally Bet. Bally Casino has succeeded and even established itself among the best New Jersey online casinos. That’s why, in the November call, Fenton said that iGaming is a priority for the company, and will be looking into possible expansion, including launching a Pennsylvania online casino.
On the other hand, the company’s sportsbook, Bally Bet, has seen slow growth. Online sports betting has seen a tremendous increase in the last few years and has become a very competitive market. Bally Bet entered the online sports betting market relatively later than other major competitors and has seen it hard to crack into the top.
Fenton has been cautious in his last few quarterly calls. He has acknowledged that the growth of Bally Bet has been slower than the company expects, but remains cautiously optimistic.
Fenton also acknowledged that Bally Bet could be further improved before the sportsbook further expands.
In the November call, he said:
Our progress on sports has taken longer than we expected, and we will not support the sports iGaming markets with the marketing dollars until we have got the user experience and the technology where we want it.
Fenton also said that Bally’s Corporation will minimize losses related to sports betting, implying that the business is not performing as expected. That doesn’t mean that Bally Bet won’t expand, but it might change where and how it does so.
Given the opposite performances of the online casino and sportsbook, we can guess that most layoffs will be around the latter.