Bally’s Corp. (NYSE:BALY) announced it will reduce headcount at its digital gaming unit by up to 15% as the operator aims for profitability in the North American market.
The Rhode Island-based casino operator made the announcement in a Form 8-K filing with the Securities and Exchange Commission (SEC) late Wednesday. Shares of Bally’s ticked higher by 0.36% in after-hours trading after sliding 3.58% during standard market hours. The small-cap gaming stock is down 41.53% over the past 12 months.
Decisions regarding the elimination of positions are subject to local law and consultation requirements in certain countries, as well as the company’s business needs,” according to the filing. “The Company estimates that 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.”
Bally’s acknowledged it may have hired too many digital staffers when the online gaming craze gained momentum during the early days of the coronavirus pandemic in 2020.
As noted in the regulatory document, there are no assurances the charges related to the headcount reduction will be limited to $15 million and there’s no guarantee the company won’t “ incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the plan.”
Bally’s Banked on Digital
In recent years, Bally’s has been one of the most acquisitive companies in the gaming industries, with many of the operator’s deals related to online gaming and sports wagering.
In 2021, Bally’s offered $2.7 billion to purchase British online gaming firm Gamesys in the suitor’s largest acquisition to date. The company also purchased Bet.Works for $125 million, daily fantasy sports (DFS) firm Monkey Knife Fight (MKF) and free-to-play games provider SportCaller, among other related assets.
Still, the operator is struggling to achieve a foothold in the ultra-competitive US sports wagering market. For now, Bally’s a bit player in many of the states in which it offers online gaming and hasn’t yet amassed the scale of rivals such as BetMGM and FanDuel. While the operators remains bullish on North American iGaming and sports betting, CEO Lee Fenton acknowledges it will take time for those efforts to pay dividends.
“We’ve reflected hard as a business to come to this conclusion. Everyone put in so much effort last year, and I am proud of what we achieved together,” Fenton wrote in a letter to the digital unit’s employees. “However, we didn’t manage to achieve everything we had hoped for. Our mature businesses continue to grow but are facing into macro uncertainties. Our North America business remains an investment market, where the returns will be reaped but we can now see that this will take some time to come to fruition, so we need to manage our cost base appropriately. The pandemic boosted our business and we continued to hire at full pelt. I now can see that we may have over hired in some areas, and I take full responsibility for that.”
Bally’s Eyes Cost Savings
Assuming Bally’s limits charges related to the layoffs to $15 million, that’s not a massive dollar amount, but it could signal to analysts and investors that the company is minding costs.
Some Wall Street analysts voiced concern about the company’s spending plans, which include a $1.7 billion integrated resort project in Chicago.
Still, making efforts to reach online wagering profitability is crucial at a time when rivals are already there or getting closer to halting money-losing ways.
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