Bally's Chicago Inc.

05/18/2026 | Press release | Distributed by Public on 05/18/2026 14:59

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
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:
•various construction and development risks in connection with our Permanent Facility;
•risks associated with any delay between the closing of our Temporary Facility and the opening of our Permanent Facility;
•our ability to finance development, expansion and renovation projects;
•risks associated with leased properties;
•risks associated with reductions in discretionary consumer spending;
•our ability to compete with companies that are currently in, or may in the future enter, the gaming industry in which we operate;
•the substantial regulatory restrictions applicable to us, including costs of compliance;
•our reliance on effective payment processing services from a limited number of providers;
•the dependence of our profitability on return to players;
•our ability to collect gaming receivables from our credit customers;
•risks associated with any decline in the popularity of games and changes in device preferences of players;
•our ability to invest in or acquire other businesses and to successfully integrate acquired businesses into the Company or otherwise manage the growth associated with multiple acquisitions;
•risks associated with natural disasters or other catastrophic events, including war, terrorism and public health crises;
•our ability to comply with the Host Community Agreement;
•risks associated with any failures, errors, defects or disruptions in our systems or platforms;
•risks associated with any cybersecurity incidents;
•our ability to service our indebtedness and fund our other obligations; and
•other risks identified in Part I. Item 1A. "Risk Factors" of the Bally's Chicago Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the SEC on March 31, 2026 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 place undue reliance on our forward-looking statements.
Overview
Our Company is a majority owned subsidiary of Bally's Chicago Holding Company, LLC (the "Holding Company"), a wholly owned subsidiary of Bally's Corporation ("Bally's" or the "Parent"). We are a gaming, hospitality and entertainment company with the singular focus of building and operating a world-class entertainment destination resort in Chicago, Illinois. We intend to provide both Chicago residents and business and leisure travelers visiting Chicago with physical and interactive entertainment and gaming experiences
Strategy and Business Developments
We are building a destination casino, hotel and entertainment venue that will showcase "The Best of Chicago" arts and culture, food and sports, and curated dining and entertainment experiences. Our permanent resort and casino in Chicago will be located on the 30-acre property which previously hosted the Chicago Tribune Publishing Center, at the intersection of Chicago Avenue and Halsted Street in downtown Chicago, and will look to transform this currently underutilized site into a major economic driver for the city. Our permanent resort and casino will be in close proximity to a wide range of hotels, theaters, bars, restaurants, major shopping districts and the McCormick Place Convention Center, the proximity to which will help drive traffic to our permanent resort and casino, primarily due to our differentiated gaming attractions in comparison to other offerings in this geographic location.
In developing the entertainment destination resort, we intend to adhere to Bally's community-first policy, which is a fundamental and defining element of who we are as a company. We believe that in every community in which Bally's operates, it has built strong, lasting partnerships with local residents and businesses. Chicago will be no different. With this project, we are committed to ensuring that our permanent resort and casino generates significant economic stimulus and creates a wealth of employment opportunities for the greater Chicago community.
Operating Structure
Our business is organized into two reportable segments: (i) Temporary Casino and (ii) Permanent Casino. The ''Other adjustments" include certain unallocated corporate operating expenses and other adjustments to reconcile to the Company's consolidated results including, among other expenses, compensation for certain executives and other transaction costs. Refer to Note 13 "Segment Reporting" in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on our segment reporting structure.
Key Performance Indicators
The key performance indicators used in managing our business is Income (loss) from operations for our Permanent Casino reportable segment and Adjusted EBITDAR for our Temporary Casino reportable segment. Temporary Casino Adjusted EBITDAR is a measure of the Company's segment profitability disclosed in accordance with the requirements of ASC 280, Segment Reporting, and is our reportable segment GAAP measure. Temporary Casino Adjusted EBITDAR is defined as earnings, or loss, for the Temporary Casino before interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating (income) expense, expansion costs, management fees to Bally's Corporation, rent expense from triple net operating leases, and certain other gains or losses. Refer to Note 13 "Segment Reporting" in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.
First Quarter 2026 Results
Our operating results for the three months ended March 31, 2026 (Successor), the period from February 8 to March 31, 2025 (Successor), and the period from January 1 to February 7, 2025 (Predecessor) are not indicative of future operating results because we have dedicated the first several years of our corporate existence to the design, development and construction of our Permanent Facility in Chicago.
Segment Performance
The following table presents, for the periods indicated, certain revenue and income items:
Successor Predecessor
(in millions)
Three Months Ended March 31, 2026 Period from February 8 to March 31, 2025 Period from January 1 to February 7, 2025
Total Revenue $ 33.1 $ 17.8 $ 11.5
Loss from operations (25.1) (15.7) (12.9)
Net loss (27.7) (16.0) (12.9)
The following table presents, for the periods indicated, condensed consolidated statements of operations data:
Successor Predecessor
(in thousands) Three Months Ended March 31, 2026 Period from February 8 to March 31, 2025 Period from January 1 to February 7, 2025
Revenue:
Gaming revenue
Temporary Casino 30,045 15,935 $ 10,353
Permanent Casino - - -
30,045 15,935 10,353
Non-gaming revenue
Temporary Casino 3,072 1,861 1,134
Permanent Casino - - -
3,072 1,861 1,134
Total revenue 33,117 17,796 $ 11,487
Operating costs and expenses:
Gaming expenses
Temporary Casino 16,617 8,157 $ 6,039
Permanent Casino - - -
16,617 8,157 6,039
Non-gaming expenses
Temporary Casino 3,331 1,462 1,260
Permanent Casino - - -
3,331 1,462 1,260
Total gaming and non-gaming expenses $ 19,948 $ 9,619 $ 7,299
General and administrative
Temporary Casino 11,717 6,543 5,105
Permanent Casino 2,428 3,284 3,527
Other 906 369 314
Total general and administrative $ 15,051 $ 10,196 $ 8,946
Revenue
Total revenue for the three months ended March 31, 2026 (Successor) compared to the period from February 8 to March 31, 2025 (Successor) and period from January 1 to February 7, 2025 (Predecessor), increased $3.8 million due to increased gaming revenues at the Temporary Casino. Once our Permanent Facility is operational, we expect our revenues will be primarily generated by gaming and entertainment offerings, with remaining revenues from other non-gaming operations, including hotel, food and beverage, and retail, entertainment and other.
Gaming and non-gaming expenses
Gaming and non-gaming expenses for the three months ended March 31, 2026 (Successor) compared to the period from February 8 to March 31, 2025 (Successor) and period from January 1 to February 7, 2025 (Predecessor) increased relative to an increase in gaming revenues at our Temporary Casino.
General and administrative
General and administrative expenses for the three months ended March 31, 2026 (Successor) compared to the period from February 8 to March 31, 2025 (Successor) and period from January 1 to February 7, 2025 (Predecessor) decreased by $4.1 million. The decrease was primarily attributable to a change in the accounting treatment of lease costs related to the Permanent Casino project following the execution of the Chicago MLA in the third quarter of 2025, coupled with a decrease in non-capitalizable costs associated with the Company's equity offerings in 2025.
Depreciation and amortization
Depreciation and amortization expense for the three months ended March 31, 2026 (Successor) compared to the period from February 8 to March 31, 2025 (Successor) and period from January 1 to February 7, 2025 (Predecessor) increased $1.4 million. The increase was primarily driven by the amortization of the Company's gaming license, which commenced during the Successor period beginning February 8, 2025. In connection with the Merger, the gaming license was determined to be a finite-lived intangible asset with an estimated useful life of 18 years.
Other income (expense), net
The change in total other income (expense), net, when comparing the three months ended March 31, 2026 (Successor) to the period from February 8 to March 31, 2025 (Successor) and period from January 1 to February 7, 2025 (Predecessor) is directly attributable to the interest expense related to the subordinated loans and promissory notes issued in connection with the Company's initial public offering and private placements in 2025.
Benefit for income taxes
There was $0.2 million benefit for income tax recorded during the three months ended March 31, 2026 (Successor), reflecting a discrete benefit for the reduction in its valuation allowance in the quarter. There was no provision expense or benefit for income tax recorded during the period from February 8 to March 31, 2025 (Successor) and period from January 1 to February 7, 2025 (Predecessor). This was due to the Company's establishment of a full valuation allowance against its net deferred tax asset position.
KEY PERFORMANCE INDICATORS
Temporary Casino Adjusted EBITDAR for the three months ended March 31, 2026 (Successor) compared to the period from February 8 to March 31, 2025 (Successor) and period from January 1 to February 7, 2025 (Predecessor) increased year over year primarily due to increased gaming revenues in the current period.
Permanent Casino loss from operations for the three months ended March 31, 2026 (Successor) compared to the period from February 8 to March 31, 2025 (Successor) and period from January 1 to February 7, 2025 (Predecessor) decreased year over year primarily due to to a change in the accounting treatment of lease costs related to the Permanent Casino project following the execution of the Chicago MLA in the third quarter of 2025, coupled with a decrease in non-capitalizable costs associated with the Company's equity offerings in 2025.
The following table sets forth the measures of segment performance for the Company's two reportable segments, reconciled to total net loss on a consolidated basis. The Other adjustments category is included in the following table in order to reconcile the segment information to the Company's unaudited condensed consolidated financial statements.
Successor Predecessor
(in thousands) Three Months Ended March 31, 2026 Period from February 8 to March 31, 2025 Period from January 1 to February 7, 2025
Revenue
Temporary Casino $ 33,117 $ 17,796 $ 11,487
Permanent Casino - - -
Total revenue $ 33,117 $ 17,796 $ 11,487
Permanent Casino loss from operations
$ (6,531) $ (5,806) $ (3,536)
Temporary Casino adjusted EBITDAR(1)
$ 1,452 $ 1,634 $ (917)
Reconciliation of segment performance measures to net loss:
Temporary Casino operating costs and expenses
Depreciation and amortization (4,152) (2,320) (1,976)
Management fees to Bally's Corporation (15,000) (8,871) (6,129)
Total Temporary Casino operating costs and expenses
(17,700) (9,557) (9,022)
Other expenses
Total other expense, net(2)
(2,737) (248) -
Other adjustments (906) (369) (314)
Loss before provision for income taxes (27,874) (15,980) (12,872)
(Provision) benefit for income taxes (182) - -
Net loss $ (27,692) $ (15,980) $ (12,872)
__________________________________
(1) Adjusted EBITDAR is defined as earnings, or net loss, for the Temporary Casino before interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating (income) expense, expansion costs, management fees to Bally's Corporation, rent expense from triple net operating leases, and certain other gains or losses.
(2) Total other expense, net includes primarily interest expense.
Critical Accounting Estimates
There were no material changes to other critical accounting 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, 2025 for a complete list of our Critical Accounting Estimates.
Recent Accounting Pronouncements
Refer to Note 4 "Recently 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
Cash Flows Summary
Successor Predecessor
(in thousands) Three Months Ended March 31, 2026 Period from February 8 to March 31, 2025 Period from January 1 to February 7, 2025
Net cash used in operating activities $ (64,530) $ (11,031) $ (6,136)
Net cash used in investing activities (672) (22,941) (10,969)
Net cash provided by financing activities 66,309 30,985 21,170
Net change in cash 1,107 (2,987) 4,065
Cash, beginning of period 12,009 18,584 14,519
Cash, end of period $ 13,116 $ 15,597 $ 18,584
Operating Activities
Net cash used in operating activities was $64.5 million for the three months ended March 31, 2026 (Successor), $11.0 million for the period from February 8 to March 31, 2025 (Successor), and $6.1 million for the period from January 1 to February 7, 2025 (Predecessor). All periods presented were impacted by net loss positions and changes in working capital associated with the Company's expansion. Cash used in operating activities for the three months ended March 31, 2026 was driven by an increase in the construction receivable due from GLP, described below.
Investing Activities
Net cash used in investing activities for the three months ended March 31, 2026 (Successor) was $0.7 million driven by capital expenditures at our temporary casino. Accounting treatment of capital spending changed in 2026 as compared to the prior periods resulting from the GLP reimbursement arrangement, described below. For the period from February 8 to March 31, 2025 and the period from February 8 to March 31, 2025 (Successor) of $22.9 million and $11.0 million, respectively, capital expenditures were mainly related to our Permanent Facility.
Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2026 (Successor) was $66.3 million and net cash provided by financing activities for the period from February 8 to March 31, 2025 (Successor) and the period from January 1 to February 7, 2025 (Predecessor) were $31.0 million and $21.2 million, respectively. Cash provided by financing activities during the periods presented is primarily attributable to the financing provided by Bally's Corporation, combined with the Private Placement proceeds during the Successor period from February 8 to March 31, 2025.
Contractual Obligations and Commitments
Host Community Agreement
On June 9, 2022, Bally's Chicago Operating Company, LLC (the "Operating Company") signed a host community agreement (the "HCA") with the City of Chicago to develop a destination casino resort (the "Permanent Facility"), with the exclusive right to operate a temporary casino (the "Temporary Facility"), while the Permanent Facility is constructed. The HCA establishes a minimum capital investment of $1.34 billion on the design, construction and equipping of our Temporary Facility and our Permanent Facility. As of March 31, 2026 (Successor), approximately $600.0 million of this commitment remains. The actual cost of the development may exceed this minimum capital investment amount. In addition, land acquisition costs and financing costs, among other types of costs, are not counted toward meeting this minimum capital investment amount.
Per the HCA, the Company is required to pay annual fixed host community impact fees of $4.0 million. Additionally, Bally's Corporation provided the City of Chicago with a performance guaranty whereby Bally's Corporation agreed to have and maintain available financial resources in an amount reasonably sufficient to allow the Company to complete its obligations under the HCA. Upon notice from the City of Chicago that the Company has failed to perform various obligations under the HCA, Bally's Corporation has indemnified the City of Chicago against any and all liability, claim or reasonable and documented expense the City of Chicago may suffer or incur by reason of any nonperformance of any of the Company's obligations. The guaranty will terminate two years after the later of (i) the date on which the Permanent Facility commences operations or (ii) the date on which Bally's Chicago achieves final completion as defined in the HCA.
Casino Fees
Under the Illinois Gambling Act, the Company will be required to pay the Illinois Gaming Board a reconciliation fee payment three years after the date operations commenced (in a temporary or permanent facility) in an amount equal to 75% of the adjusted gross receipt ("AGR") for the most lucrative 12-month period of operations, minus the amount equal to the initial payment per gaming position paid.
Temporary Services Agreement
The Operating Company has a Corporate Services Agreement with Bally's Corporation requiring a fixed monthly payment of $5.0 million. The Corporate Services Agreement provides the Company with certain administrative and corporate services from Bally's Management Group, LLC ("BMG"), a subsidiary of Bally's Corporation. These fixed payments are in addition to certain expenses such as direct attributable costs allocated and invoiced to the Operating Company, based on an estimated percentages of time spent on the Company's activities by corporate employees. The Temporary Services Agreement shall automatically terminate when our Temporary Facility permanently closes and the Permanent Facility opens to the public.
Permanent Services Agreement
Once the Permanent Facility opens to the public, the Operating Company will participate in the Permanent Services Agreement with BMG, pursuant to which BMG has agreed to provide us with general business support services, including services relating to external reporting obligations, internal audit, regulatory filings, design and construction, business development, human resources, tax, accounting, treasury and capital related, risk management, legal, finance and marketing. This agreement requires us to pay BMG an annual fee equal to the salaries, burden, overhead and other operating costs for providing such services based on our share of those costs calculated by reference to an appropriate common-size metric plus 6%. The Permanent Services Agreement will be automatically renewed for successive one-year terms, unless either party serves on the other a written notice of termination.
Bally's Chicago Service Agreements
The Company is party to various agreements relating to the operations of certain services at its casino facilities (the "Bally's Chicago Services Agreements"), including a long-term management agreement with a provider to operate and manage certain hospitality services at its Permanent Facility upon opening. The Company expects to receive $50.0 million towards the construction and build out of certain casino facilities related to such services, payable in installments over 2 years subject to certain conditions precedent (the "Bally's Chicago Construction Investments").
As of March 31, 2026, the Company has received a total of $12.2 million of Bally's Chicago Construction Investments under the aforementioned hospitality services agreement. These amounts are recorded in "Other long-term liabilities" and will be amortized as a reduction of Non-gaming operating costs and expenses over the contract term upon commencement of operations at the Permanent Facility. Upon commencement of the management services, the Company will pay a management fee and a share of net receipts to the providers, as applicable, which will be recognized as Non-gaming operating costs and expenses as incurred.
GLP Lease Agreement and GLP Development Agreement
On July 11, 2024, the Company entered into a Binding Term Sheet to form a strategic construction and financing arrangement with GLP which includes the funding to complete the construction of the Permanent Facility under a new master lease agreement with the Company ("Chicago MLA").
On July 17, 2025, the Company entered into the Chicago MLA, as described in Note 11 "Leases," with GLP, that amended the existing ground lease for the property on which the Company plans to develop its Permanent Facility and a development agreement with GLP (the "Chicago Development Agreement") pursuant to which GLP has committed to advance up to $940 million (the "GLP Development Advances") for the payment of hard costs used to construct the Permanent Facility in exchange for increasing the amount of rent payable to GLP under the Chicago MLA.
The Chicago MLA has an initial term of 15 years and includes four, five year options to renew and is subject to annual escalation. Annual rent under the Chicago MLA is $20.0 million, with additional rent equal to 8.5% of the GLP Development Advances that are granted to the Company. Under the Chicago Development Agreement, as construction occurs, the Company will recognize a construction receivable on the condensed consolidated balance sheets due from the GLP. To the extent costs exceed the amount to be reimbursed by GLP, such costs are considered prepaid rent, which will be added to the associated operating lease right of use asset once the lease commences. As of March 31, 2026 (Successor) and December 31, 2025 (Successor), the prepaid rent balance was $193.2 million and $175.8 million, respectively classified within Other assets.
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