Bally's Corp (BALY) 2023 Q1 法說會逐字稿

Good day and thank you for standing by. Welcome to the Bally's Corporation First Quarter 2023 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I'd now like to turn the call over to Jeff Chalson, VP of Corporate Development and Strategy for Bally's. Please go ahead, sir.

Good morning, and thank you for joining us on today's call. The earnings release and presentation that accompany this call are available on our website in the Investor Relations section at www.ballys.com. With me on today's call are Chief Executive Officer, Robeson Reeves; George Papanier, Bally's President; Bobby Lavan, outgoing Chief Financial Officer; and happy to welcome Marcus Glover, incoming Chief Financial Officer, pending regulatory approval. In addition, we are joined by Jaymin Patel, Vice Chairman.

Before we begin, we would like to remind everyone that comments made by management today will contain forward-looking statements. These forward-looking statements include plans, expectations, estimates and projections that involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC filings. Actual results may differ materially from the results discussed in these forward-looking statements.

In addition, during today's call, management will refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP financial measures are included in the schedules contained in our earnings release. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to project nonrecurring expenses and onetime items. Today's call is also being broadcast live on our investors website and will be available for replay shortly after the completion of this call.

Let me hand the call over to Robeson.

Thank you, Jeff, and hello, everyone. Before diving into our quarterly results, I'd like to address this morning's press release announcing a number of changes to our senior management team. Bobby Lavan, our Executive Vice President and CFO is leaving Bally's to explore another opportunity. I would like to thank Bobby for all his contributions you will truly be missed. At the same time, I am pleased to welcome Marcus Glover as Bally's incoming Executive Vice President and Chief Financial Officer, pending regulatory approval. Marcus will lead us in the next stage of our growth, drawing on his deep operational gaming experience and financial acumen.

Marcus, would you like to say a few words?

Yes. Thank you, Robeson. It's a great time to join Bally's. I've spent roughly 2 decades between Caesars and MGM holding leadership roles across all functional areas. We have a great group of professionals at Bally's, and I look forward to leveraging my experience and partnering with our team as we build upon the foundation that is in place.

Thank you, and back to you, Robeson.

Marcus, thank you. I'm excited about what we can do together. Further, Charles Diao will be joining as Senior Vice President, Finance and Corporate Treasurer, reporting into Marcus, also pending regulatory approval. Rounding out these organizational changes, Jaymin Patel, a well-regarded gaming veteran and current board member of Bally's was appointed Vice Chairman and will chair the operational integration committee, which is a newly created board committee that will focus on strengthening global processes for streamlining operations and reducing costs as well as the creation of a global coordinated corporate center. With that said, I am extremely pleased to report a very strong quarter for the company overall and discuss our achievements since I took over as CEO.

As you know, we are now several months into my tenure, and I've had a chance to review each aspect of our business using the data-driven analytical approach I promised when I became CEO. I've also gotten to know our shareholders and stakeholders on a deeper level. While we are never satisfied and can always be stronger, I continue to be wholly impressed with our team globally. My excitement for the progress we have made towards the integration of Bally's internal systems and its 3 operating businesses has never been greater.

Over the past 2 weeks, there have been several positive material changes to our business operations. First, as I'm sure you are all aware, on Thursday, April 27, the U.K. government released its whitepaper review of the 2005 Gambling Act. After 4 years of ongoing consultation, we are pleased this has been released, and we hope it will bring some clarity to U.K. gambling operators. We continue to review these proposed measures and will work constructively with both the government and Gambling Commission to find an effective solution, which ensures the reforms are appropriate and guarantee a safe and sustainable future.

We are in a strong position as we have been preparing our business strategy and compliance. We have already implemented several voluntary changes that are aligned with the white paper, including betting limits and so on. The regulatory framework in the U.K. has created a dynamic where smaller players are unable to compete, leading some to exit, allowing larger players who are already highly compliant to consolidate the market and gain share. A trend we have highlighted before and which we believe will continue into the future.

We embrace regulation and recognize that gaming is a public/private partnership. Secondly, on Tuesday, May 2, we announced partnership agreements with Kambi and White Hat Gaming, fulfilling our promise to partner with best-in-class technology providers to drive our North America sports betting platform. The North America infrastructure we had in place for sports was inefficient. I own that. And with these new partnerships in place, our cash burn and development costs will go down sharply. Our spend will be performance driven.

In the future, as the sports product scales, we have the opportunity to acquire a license to a limited part of Kambi's online and retail technology source scope at our option. We will evaluate this as our North American sports betting business grows. These partnerships will leverage Kambi's and White Hat's proven technology integration and track record of executing quick launches to support the expansion and enhancement of Bally's online and retail sports books driving further customer engagement with the Bally's brand.

Kambi will provide its suite of omnichannel products, trading capabilities, content solutions and liability management to deliver online and retail sports betting entertainment, while White Hat will supply its PAM solution, which includes its proprietary cashier, multiple RGS integrations and its traveling wallet. Bally's intends to derive deal synergies by integrating these technologies with our state-of-the-art data and marketing technology stacks playing to our strengths.

As a result, we will significantly reduce the fixed costs associated with powering Bally Bet's OSB platforms by transitioning to a variable cost model based on a percentage of net gaming revenue generated. These cost savings, coupled with driving further engagement in the Bally's brand will better position the company to deliver near- and long-term results for investors, while simultaneously reducing our economic risk. Importantly, as mentioned above, we have also reserved the right to acquire a license to a limited part of Kambi's online and retail technology source code if certain performance metrics are achieved in the future.

By the end of 2023, Bally's anticipates that these partnerships will provide omnichannel support to power Bally Bet's platform across 7 states and at 4 retail gaming locations. It is our intention to also leverage these partnerships globally as we consider launching OSB in the U.K. and Europe as well. Post our OSB relaunch, we'll be back on a path to diversify our revenues and EBITDA streams with ample cross-sell opportunities between our retail and digital businesses. This, in turn, will support our vision of becoming a premier, full-service, vertically integrated casinos and resorts, online sports betting and iGaming company, allowing us to leverage our Bally's brand globally.

Turning to our operating segments. The casinos and resort segment continues to show its strength despite certain markets being severely impacted by inclement weather, such as Lake Tahoe, which was hurt by unprecedented snowfall and Evansville, which was impacted by tornadoes late in March, as George and his team continue to execute at an extraordinary level. In fact, we generated record 1Q revenues of 329 million. That's up 9.4% year-on-year and EBITDA of 105 million. We are starting to see the full benefits of the casino assets we acquired last year being integrated into our business and property improvements and cost controls we have been implementing throughout the portfolio taking hold.

Importantly, as we discussed earlier this year, our portfolio's near-term CapEx cycle has peaked as several of our growth projects have come to or are nearing completion. This includes our upgrade of our flagship Twin Rivers Casino in Lincoln Rhode Island, which was finished in April. And as our Kansas City expansion spend comes to an end this summer, our progress in Atlantic City should also be noted. We are certainly on our way to delivering consistently strong operating performance for the foreseeable future.

We look forward to the opening of the Chicago temporary casino in late summer 2023, which is on track to generate $50 million plus EBITDA in 2024. We're also advancing the full build of Bally's Chicago permanent facility, which is expected to open in 2026, which has an estimated run rate in excess of $250 million EBITDA. We believe there is unquestionable pent-up consumer demand for this project, and we couldn't be more excited to begin producing results.

Our core casino and resorts customer remains highly resilient despite rising economic headwinds with trends in April remaining consistent with the 1Q results outside of a slight calendar shift. While we're keeping a close eye on spending trends and the health of the consumer generally, we haven't seen any signs of material impact on our business. International Interactive had a strong start to the year with continued content, marketing and jackpot optimizations taking place. The U.K. business has remained strong, growing 9.6% in the first quarter on a constant currency basis, well ahead of the market. The formula of ARPU up, FTDs up while CPA is significantly down, is playing out and will drive performance throughout the rest of the year. April results are up 13% year-on-year.

In Asia, the changes we have implemented over the past several months continue to produce results with trends remaining positive in the quarter despite facing difficult comparisons. Note, comparisons do get easier from here. While International Interactive margins settled in the low mid-30s from the record 39% we generated in 4Q, we believe we can sustain margins at or above these levels as the changes we have implemented are structural. This is inclusive of our plans to reinvest in our core U.K., including launching the Bally's brand and the OSB and Japan businesses. We also seek growth opportunities in rest of Europe, Asia and rest of world, including Brazil.

Turning back to North America Interactive. We continue to be iGaming first. We're executing well in New Jersey, where our share surpassed 4% in February, well on our way to achieving our 6% to 8% longer-term share goal. Ontario continues to progress, and we're excited to launch in Pennsylvania in May. Overall, our iGaming business is generating positive returns, and we are very optimistic about this. We also look forward to potential iGaming legislation in Rhode Island as the bill was recently introduced into the legislature.

In summary, our goals for the remainder of 2023 include opening the Chicago temporary casino on time and on budget this summer, grow North America Interacted in a profitable way, including increasing our iGaming market share. Launch OSB in 7 states and in markets outside of North America. Harness our omnichannel data capabilities and grow the Bally's brand globally. It is important to note that in addition to the above initiatives, we remain keenly focused on growing our revenues and EBITDA for our core casinos and resorts and our International Interactive segments.

Before turning to Bobby, I'd once again like to thank him for his leadership and contributions and wish him well in his next endeavor. Bobby, over to you for a review of our financial results.

Thanks, Robeson. Moving to the segment details. For the quarter, we are pleased to have achieved strong results across all 3 of our segments: casinos and Resorts, International Interactive and North America Interactive. We generated revenues of $598.7 million, plus 9.2% year-over-year, adjusted EBITDA of $126.4 million, plus 10.2% year-over-year despite higher rent in the quarter and adjusted EBITDAR of $157.6 million after accounting for rent expense of $31.2 million.

Our adjusted EBITDAR margin was 21.1% versus 20.9% in 1Q 2022, and our adjusted EBITDAR margin was 26.3%. Casinos & Resorts reported $105.1 million of EBITDAR. This includes negative $800,000 of EBITDA for Atlantic City. Excluding Atlantic City and Tropicana, which are lower-margin properties, EBITDAR margins were 37.8% for the core portfolio. EBITDAR margins were 32% compared to 1Q 2022 EBITDAR margins and 29.1% for all of casinos and resorts.

Additionally, while most of the portfolio performed well, with strength at our Rhode Island properties, Atlantic City and Kansas City, our results were negatively impacted by material weather disruptions in Tahoe. Similarly, towards the end of March, our Evansville property was negatively impacted by tornadoes which struck the area. The cumulative effect of Tahoe and Evansville caused a $3.5 million shortfall at those 2 properties. Including the impact above, we are still pleased with how casinos and resorts segment performed for the quarter.

International Interactive generated $80.2 million of EBITDA and a 32.6% margin. The U.K. was plus 9.6% year-over-year, and international as a whole was up 7.2% on a constant currency basis. Performance was driven by continued revenue strength in the U.K. in addition to content, marketing and jackpot optimizations taking place. As we mentioned on our last earnings call, we continue to invest in the business. This includes launching the Bally's brand across Europe. Inclusive of this incremental spending, our long-term international Interactive EBITDA margin targets remain in excess of 30%.

North America Interactive generated a negative $10.5 million of EBITDA. We continue to be iGaming first and are very pleased with the performance year-to-date in New Jersey. New Jersey is contributing over $1 million of profit contribution a month and growing as we scale into certain variable cost service providers, lots of momentum here. Ontario continues to progress, but we are still tweaking certain aspects of the business, and we'll be launching Pennsylvania in May. Overall, our iGaming business is generating positive contribution margins, which we anticipate will continue to strengthen.

Turning back to sports betting. As we announced on May 2, and as Robeson talked about earlier, we have partnered with Kambi and White Hat Gaming to power our online and retail sports betting business, not bet. Bally intends to integrate these technologies into our proprietary database and marketing technology stacks. By transitioning to a lease-based partnership model, we've reduced our fixed costs and will now operate under a much more economical variable cost structure based on a percentage of net gaming revenue generated. This is a more efficient model and better position the company to manage our risk by limiting our expenses while preserving our upside earnings potential.

Additionally, our restructuring program we announced in January has gone deeper and there are cloud and infrastructure costs that we have not cut yet that we can reduce with the signing of Kambi. Bally Bet is expected to relaunch across 7 states and have 4 retail gaming locations by the end of 2023, beginning in the very near term. We will also leverage these partnerships in the U.K. and Europe as well. We continue to focus on profitability and cost cuts through our business segments, having incurred $16.8 million in restructuring charges in 1Q 2023. The cuts were implemented quicker and deeper than originally anticipated, we announced our restructuring plan for international and North America Interactive businesses earlier this year.

To date, we haven't seen any material change in consumer spending patterns at our casinos and resorts outside of the specific weather impacts called out for 1Q and a slight calendar shift in April. We do begin to witness a material change. We have a handful of levers we can pull to maintain a strong profile.

So turning to guidance. With all the previously spoken, we are upgrading our guidance to tighten the range to $665 million to $700 million of EBITDAR. This reflects FX rates and our confidence in the strength of our business globally. It also considers our belief that the whitepaper released by the U.K. government won't have an impact on our International Interactive financial results.

Corporate expense for the quarter came in $3.5 million higher than our expectations due to onetime costs and some carryovers from 2022. We do not expect this to be the run rate, and you should look at the run rate back down to $13 million to $14 million. We're reducing our 2023 capital expenditure guidance from $170 million to $160 million, with maintenance CapEx at the casinos of $50 million, gross CapEx at the casinos of $70 million, and we are lowering our software development cost projections for the year to $40 million.

We continue to evaluate our software development costs and expect that to continue to shrink throughout the year. During the quarter, we repurchased one million common shares for an aggregate purchase price of $19.8 million. Separately, we also went into the market and repurchased $15 million of our face value 2031 bonds for $10.6 million. At the quarter's end, shares outstanding were 45.8 million, and we have incremental warrants, options and other dilution of 38.8 million shares. 59.5 million shares outstanding is the right way to look at our capital structure. We have more than $344 million of cash on our balance sheet and $3 billion of net debt as of the end of the quarter. We have ample liquidity to fund all of our announced projects, and we'll invest with care in North America. Our long-term commitment is to be sub 5x debt to EBITDA, which we continue to expect to hit in mid-2024.

Lastly, as announced this morning, I'll be moving on for another opportunity. I believe in the value of the Bally story, particularly Chicago, our iCasino growth trajectory and the unique way we look at sports and growth in the International Interactive segment, not to mention the untapped real estate value in our portfolio. Thank you for your time and consideration, and I look forward to supporting Marcus and the rest of the team from the sideline.

Let's open the call up to Q&A, operator.

(Operator Instructions) Our first question comes from Barry Jonas with Truist Securities.

I'm going to start with the management transition. First off, Bobby, it's been a pleasure, best of luck. Welcome Marcus. I guess I'm just curious what was most appealing about this role for you? And with that, Robeson, why was Marcus the right person for the CFO role?

Yes. I'll jump in, Robeson, and share my enthusiasm and excitement and then pass it to you. Look, I think the best way to describe it is I spent a considerable amount of time in the industry, working with some of the larger companies. And looking at the Bally story, the entrepreneurial spirit of the company, we're still a spot right now. And so we can take advantage of opportunities by being a little more nimble.

But I expect to come in and continue build upon the foundation that Bobby has put in place and look to bring the right mix of financial discipline and operational experience as well as corporate leadership during an important juncture for our company. So exciting times and look forward to working with Robeson and the team and George and being a strategic partner as we look to move forward and advance our strategies.

Thanks, Marcus. And in my response, I want to say thank you again to Bobby for everything he's done. Without his support, we wouldn't have been able to make it through the transition and combination of these companies. Very excited about Marcus joining. What I truly value in his abilities is his deep understanding of all the levers that you can pull within a casino operation, which can grow our business. Combining that with his financial acumen and wide-ranging knowledge, I see him as driving our growth across all areas of our business: Casino, Resorts and Interactive. So I'm delighted that he's on board and part of the team.

That's great. And then just as a follow-up, Robeson, I wanted to maybe talk a little bit more about the whitepaper. I think the guidance, the low end of the guidance, improvement to some degree, relates to the white paper, but curious to get your thoughts maybe short term, long term, what you see as the financial implications for value here.

Well, the short term, it's worth thinking about when the consultations will close. So actually, changes are likely to only occur to the propositions that we deploy in the U.K. in 2024. There will be a short-term impact on how players can engage with our offerings. But actually, the wider economic impact on the competitive landscape, we'll keep moving smaller operators away. So I see this as a short-term tiny, tiny impact, low, low single digits, but actually, we're already gaining share by people sentiment from other operators, almost pulling back in the marketplace today.

For long term, this means the biggest operators will continue to grow. And I'm very -- I'm excited about getting the clarity of the whitepaper. I've said many times, the only way you can solve for growth despite knowing all your variables in the formula and having a few constants. We've been provided with those constants, and we have clarity. So I'm excited about what the whitepaper brings for us in the medium and long term.

The next question comes from Jeff Stantial with Stifel.

I'll start by echoing Barry's commentary and extend our congratulations to both Bobby and Marcus on their respective new roles. Maybe starting off on guidance. You talked about some tailwind FX, some greater conviction in kind of the direction business trends are heading in. Can you just frame out a bit more the decision to raise the low end of guidance but leave the high end intact with some of those drivers in mind that you discussed earlier?

Yes. I mean, Jeff, we only gave our full year guidance at the end of February, right? And so it's only May. Trends are moving in the right direction. So we're just going to take a more conservative approach to upgrades early in the year, but we are feeling very good with where things stand.

Understood. That makes sense. And then moving to the North America interactive side of things, restructuring efforts, it sounds like they're pacing quite nicely. You talked to some targets for go-lives under a new partnership with Kambi, 7 states by year-end. With all of this in mind, just curious if you have any thoughts so far on what you think losses might look like next year? Should we expect a pretty significant step down from the $40 million to $50 million guided for this year as you shift more towards variable in labor fixed cost structure? Just any kind of color there on what you're expecting? I think transition to the new strategy would be helpful.

Yes. I mean Jeff -- Sorry, go ahead, Robeson.

No. Bobby, you can close this one.

Yes. As we've said in 2024, we expect to close the gap. So iCasino is moving faster than we thought. It's really going to come down to how much are we willing to invest in customer acquisition on sports, which as of right now, we are looking at it on a very conservative basis.

The next question comes from Chad Beynon with Macquarie.

Best wishes to Bobby, and welcome Marcus. Looking forward to working with you. Firstly, I wanted to ask about Tropicana. Given the news that we've heard about some movement out there with Oakland Athletics, potentially moving to a different site off the strip, given that Formula One, a number of other kind of nongaming things, how does Tropicana fit into your strategy, either from an omnichannel standpoint or just an asset value standpoint?

Sure. I'll take maybe the first part of that question. So Chad, so the age story is going to play itself out. The way we view the property is we feel we have low-hanging fruit that we can execute, and that's going to allow this property to pay for itself. So it kind of gives us the luxury to consider all types of development options, including adding development partners long term. We sit on a 35-acre site. We view it as one of the busiest 4 corners of Las Vegas Strip.

So there's a lot of interest in potential outside investment. We're a disciplined company. So again, we have a long-term view on this investment, and we're going to be patient about looking for the right project with the appropriate returns. And in the meantime, we do view this as a benefit to our regional casinos where there's an opportunity to drive some cross traffic or cross business to the property.

Great. And then from a capital allocation standpoint, so you have essentially higher free cash flow estimates for the year with the higher EBITDA range and the lower CapEx, it sounds like the projects are kind of as expected in terms of cost or maybe even a little bit lighter. So as it relates to the repurchasing of the million shares in the first quarter and the 5-5/8 -- I'm sorry, 5-7/8 bonds, how should we think about further repurchases as we kind of move throughout the year, given where the debt and equity is currently trading?

Yes. I mean we will continue to evaluate the best allocation of capital. Priorities from our perspective are buying back shares, buying back debt and Chicago. -- right? And so right now, we believe that the way that those 3 are set up, we can do all 3 from a balanced approach, but we'll always continue to evaluate the market on a month-to-month basis.

The next question comes from Dan Politzer with Wells Fargo.

Marcus, welcome, and Bobby wish the best of luck in your next endeavor. First question, North America Interactive. I just wanted to delve a little bit deeper there. How do you -- how should we think about the opportunity for labor efficiencies as you transition part of the tech stack to Kambi and White Hat? And maybe in terms of timing or any anecdotes or data points you could provide there?

And then further bridging the 2024, I mean, how should we think about, I guess, I know the guidance is effectively unchanged today. But as we think about rolling through this year and maybe upside in 2024, can you maybe help us think about the revenue upside as well as the cost component of it that could drive higher profitability than where we're thinking today.

Thanks, Dan. So when I look at North America Interactive, we're taking a sort of double end view here. So firstly, I'm going to touch on sports. So we have reduced from a fixed cost model. to really a variable cost model. There are some minimums that, as Bobby indicated earlier, that we are now passing through. So now it's fully variable cost. With the Kambi, White Hat solution, a good way to model it is to think about our cost being in the mid-teens of NGR for sports.

Now in iGaming also, we are throwing off positive gross profits, currently plus a million, and we'll continue to grow. I see us moving significantly forward. And as Bobby said, it's in our gift exactly what our estimates for our losses are in 2023 and then moving into 2024. It's all about getting the balance of revenue and loss. We will make these judgments as we go. Everything is going to be performance-based. If it means that we should be spending more money now to grow the revenues for longer-term profitability, we will do that, and we will analyze this deeply.

I believe that we should constantly be assessing, but our structure is now in the right place so that we can actually rent before we have the option to buy as we made clear with our Kambi deal. We have the option to bring that technology in-house when we reach sufficient scale so we can continuously maintain good margins and convert our revenue into a profitable business. Hopefully, that gives you some of the guidance there, Dan, that you're after?

Let me just maybe put some numbers around it. So Dan, if you look at New Jersey, we've gone from $0 to $5 million of NGR in about 15 months, monthly. Ontario just crossed a million. We launch in Pennsylvania, and so those are kind of the 3 sort of primary iCasino states for us. Those businesses continue to grow. New Jersey is generating more than $1 million of profit a month. And the cost base of that is fairly fixed. On the sports side, right now, we're still burning a million on sort of sports infrastructure before even access.

And so the faster we roll out Kambi, the faster we can shut down 1.0 because 1.0 takes a significant amount of legacy cloud costs. There are some people costs that we haven't restructured yet. There is some just office space, things like that. So the faster that Kambi is rolled out and the faster that the iCasino grows, the gap closes very quickly. And so you can go and do the math where we're at a 4% market share in New Jersey, we're projecting that we'll get to 6% to 8%, apply some of that to Pennsylvania, Ontario, and you can get to our iCasino numbers in 2024.

Got it. That's really helpful. I appreciate the color. And just for a follow-up on Illinois on the brick-and-mortar side, there's been some reports that there could be a possibility of BGTs down the road. I mean, if you can kind of frame out how you think about the likelihood of that legislation or the impact to the temporary versus permit casino? And maybe if there was any kind of provisions in your contract there that would give you a little bit of cushion.

Sure. Dan, I'll take that. It's George. Well, in our opinion, it would not make economic sense for the city from a tax perspective, certainly not a job creator and you could argue would have a negative effect on union jobs. But in any event, it's something the new administration really needs to evaluate. The distinguishing factor is we're building a fully integrated destination casino and they're completely -- they have a completely different experience.

From a Chicago temporary impact, I mean it's not an imminent thing. It's not happening overnight. So we'll be able to ramp up that operation, build significant database in the market. One of the unique differences between casino and BGTs as they're not really allowed to capture or use a database to market. So it's really a completely different type of experience. And we don't think it's the same customer at all.

The next question comes from Lance Vitanza with TD Cowen.

Most of my questions have been addressed, but congratulations on the quarter. I guess just to sort of return to the question of the balance sheet. And you repurchased stock at close to $20 per share, which I appreciate, but the stock is below 16 this morning. You finished the quarter with a lot of cash, and you said you have more than enough liquidity to fund your planned expenditures. You beat on the quarter, you improved your guidance and yet the stock is down again. So the question is, why would Bally's not be in the market this morning buying more shares?

Well, there's a technicality on why we're not in the market this morning, which is you have a blackout window to a certain point in time. But we will continue to buy back shares, buy back debt and invest in Chicago as directed by the Board.

Okay. And then maybe just back on the Tropicana and Las Vegas. How would you describe the status of that property today from the standpoint of cash flow investment, etc.? I know obviously, the future is up in the air, but what's going on there today?

Yes. So this is George, Lance. So I think I touched on that a little bit. We view the property based on the current rate of cash flow, and there's some low-hanging fruit that we've kind of been in a little bit of a suspense state to see how the A story plays out that we can literally fund the carrying cost of that property. So from that perspective, that's where I went back to talking about the luxury of time to really develop this thing right. And we're going to look at the right project with the rate returns.

Could you help us quantify those carrying costs that you mentioned?

Sure. Bobby can correct me if I'm wrong, but it's about $20 million.

The next question comes from Jordan Bender with JMP Securities.

Great. I want to start on the release from last night just on the potential for an IPO in Chicago. Is there anything to kind of share on that [fee] can share? And would that impact the ability to sale leaseback that property or I guess, any other properties within your portfolio?

So I don't want to get in front of -- there's a turn gun jumping. So we'll be quiet on the IPO, but we have said publicly that we would 25% of Bally Chicago. Nothing restricts sale leaseback. We actually -- we already have a sale-leaseback on Chicago. And we do believe once the Chicago project is up and running, we could evaluate a significant sale leaseback to bring the whole balance sheet to finality.

Okay. And then just on the -- on my follow-up, the time line on the 6% to 8% market share in New Jersey, I guess, how should we think about kind of the bridge between your current share in that long-term share?

I think that we should consider the 6% to 8% is where we will get to over the next 12 to 18 months.

The next question comes from Ricardo Chinchilla with Deutsche Bank.

I was wondering if you could provide the regulatory EBITDA and regulatory leverage at quarter end? And if you could please comment a little bit more on your willingness to buy back bonds versus stock, acknowledging that there's finite cash and limited restricted payment capacity and both require the use of restricted payment capacity and cash. You guys previously mentioned that you were spending $100 million in share repurchases. Is that amount going to remain? Do you guys think that it makes more economic sense to buy back that. Any color on your willingness to -- on those buybacks would be very helpful.

The regulatory EBITDA is $673 million against $3.406 million of gross debt. As we said, we continue to evaluate our book regularly. We think that there's a balanced approach to repurchasing shares, repurchasing debt and investing in Chicago.

And moving to the North American Interactive segment. Now do you have in place that deal with Kambi and with White Hat, does this mean that you guys eventually would stop developing your own technology solution? Or is it just you contemplating to the future using, developing, this technology? Any color on what will be the best way going forward would be helpful.

So Kambi and White Hat will provide us with our platform and sports betting solution. There's still a requirement to deliver a fantastic iCasino and marketing data. The biggest opportunity I see is actually harnessing our omni data capabilities across both retail and interactive. So we'll definitely be investing in that space because I see that as the pure accelerant to bring all of our operating businesses together.

So we'll invest in making sure that we become omnichannel. But we won't have to invest in sports when it costs a lot, we should be on a variable cost structure or in the [PAM] to get live into many states before the revenues really start flowing. Yes, we will continue to invest in technology. Technology will allow us to grow in the long term.

It appears we have no further questions at this time. I will now turn the program back over to CEO, Robeson Reeves. Please go ahead.

Thank you, everyone, for your time. We will speak to you all very soon. And all the best, Bobby, and I'm glad we had a strong quarter. So thank you for listening. Bye-bye.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.