Bally's Corporation is anxiously courting potential buyers for its sagging Monkey Knife Fight unit.
This news was reported by the Earnings + More substack site after it managed to sneak a peak at an investment deck that indicated that the legal sports betting operator was intent on unloading its unproductive fantasy sports asset.
On Monday, Bally's announced preliminary Full Year 2022 earnings figures that saw its North American Interactive Division post a staggering net loss of $428 million. This result has sent the global gaming giant scrambling to chop underperforming assets, with MKF now at the top of that list.
Bally's originally acquired MKF in January 2021 when it ranked as the third-leading daily sports fantasy (DSF) site in the U.S. The purchase was part of the global gaming giant's self-proclaimed "long-term growth and diversification strategy to become the first truly vertically integrated online sports betting site and online casino company in the United States.
But that optimism has since given way to utter despair, and the Providence-based global casino and gaming giant is now praying that it can find a buyer for its troubled DFS unit. When Bally's announces final figures later this month, the company expects that MKF will register net gaming revenue of only $4.7 million for 2022. That would be a disappointing 36% year-over-year decline, with gross profit sinking to $2.7 million.
In its preliminary Q4 earnings report released on Monday, Bally revealed that it was effectively writing off its entire investment in MKF as part of a massive $390.7 million "impairment charge" that also applied to its other U.S. online gaming acquisition, Bet.Works Corp.
Bally's incoming CEO Robeson Reeves was announced as a replacement for the departing CEO Lee Fenton on Monday. He was quick to signal that the operator is ready to divest itself of non-performing North American assets as part of a broad restructuring effort.
"Simply put, our North America Interactive results in 2022 were unacceptable," said Reeves. "In response, through our announced restructuring plan of the Interactive business in January, we are taking a deep dive in our approach to North America to ensure that investments we make in sports have a near-term path to profitability."
MKF sale part of Bally's attempt to stem losses
The prospective divestiture of Monkey Knife Fight is merely the first major step in Bally's determination to stop the hemorrhaging at its North American Interactive unit which includes the sports betting arm Bally Bet, the Bally Casino digital outfit, and MKF.
This strategic pivot from diversification to core asset consolidation will see the Rhode Island-based global casino and gaming giant reduce its U.S. Interactive workforce by 15%.
As part of Bally's Q3 earnings report released in November, Fenton may have anticipated his own downfall by first identifying the need to eliminate underperforming, non-core assets such as MKF and Bet.Works Corp.
"We pulled together a fairly large number of assets in a small space of time, we’ve now had 12 months of looking at that and knitting that picture together. The assets that are not showing us a near-term path to profitability will of course be under the microscope, as they should be," said Fenton.
In January, Fenton addressed a letter to Bally's Corp employees warning of impending workforce reductions.
Bally's incoming CEO reaffirms commitment to sports betting
Meanwhile, Bally's new CEO, who officially assumes his duties on March 31, has expressed his determination to support Bally's money-losing online sportsbook in the hope that it can ultimately turn a profit.
"We are in for the long haul," said Reeves in comments following Monday's earnings preview. "We believe in having a global business."
This will take a Herculean effort, however, as Bally Bet has struggled to gain traction in the increasingly competitive U.S. legal sports betting market.
In New York, Bally Bet has only registered a paltry $338,000 in revenue since launching on July 7 of last year. On the brighter side, Bally's iGaming operation was able to gain a stronger foothold in New Jersey on the strength of its Ballys.com platform which grabbed a 3.5% market share in the Garden State during the third quarter.
In November, Bally's CFO Bobby Lavan suggested that the surest means by which the company's North American Interactive Division could reach profitability was to target those states where its iGaming operations were most successful.
During Monday's earnings call, Reeves seemed to agree.
"In iCasino states, we continue to take share in New Jersey and Ontario as we integrate this business in a scalable way," said Reeves. "As part of the restructuring, we are evaluating multiple options, including leasing technology structures that integrate quickly and effectively with our world-class iCasino and Marketing tech stacks. We also expect our restructuring efforts to drive benefits in our International Interactive segment."
