Q2 2026 PENN Entertainment Inc Earnings Call

August 6, 2026

Speaker #1: Please stand by. Your meeting is about to begin. Greetings, and welcome to the PENN Entertainment second quarter 2026 earnings call. I would now like to turn the conference over to Joe Jaffoni, investor relations.

Operator: Greetings, and welcome to the PENN Entertainment Q2 2026 earnings call. I would now like to turn the conference over to Joe Jaffoni, investor relations. Please go ahead.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Tasha. Good morning, everyone, and thank you for joining PENN Entertainment's 2026 second quarter conference call and webcast. We'll get to management's comments and presentation momentarily, as well as your Q&A.

Joseph Jaffoni: Thank you, Tasha. Good morning, everyone, and thank you for joining PENN Entertainment's 2026 Q2 conference call and webcast. We'll get to management's comments and presentation momentarily, as well as your Q&A. During Q&A, we ask that everyone please limit themselves to one question and one follow-up. I'll briefly review the safe harbor disclosure. Then we'll get right into the call. Please note that today's discussion contains forward-looking statements. Forward-looking statements involve risks, assumptions, and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors. It's now my pleasure to turn the call over to PENN's CEO, Jay Snowden. Jay, please go ahead.

Joe Jaffoni: Thank you, Tasha. Good morning, everyone, and thank you for joining PENN Entertainment's 2026 Q2 conference call and webcast. We'll get to management's comments and presentation momentarily, as well as your Q&A. During Q&A, we ask that everyone please limit themselves to one question and one follow-up. I'll briefly review the safe harbor disclosure. Then we'll get right into the call. Please note that today's discussion contains forward-looking statements. Forward-looking statements involve risks, assumptions, and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors. It's now my pleasure to turn the call over to PENN's CEO, Jay Snowden. Jay, please go ahead.

Speaker #2: And during Q&A, we ask that everyone please limit themselves to one question and one follow-up. I'll briefly review the Safe Harbor disclosure, and then we'll get right into the call.

Speaker #2: Please note that today's discussion contains forward-looking statements, forward-looking statements involve risks, assumptions, and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors.

Speaker #2: It's now my pleasure to turn the call over to PENN's CEO, Jay Snowden. Jay, please go ahead.

Speaker #3: Thanks, Joe, and good morning. I'm joined here by Felicia Hendrix and Aaron LeBerge, as well as other members of the senior management team. As you'll see from our release and investor presentation, we continued to execute against our 2026 strategic priorities during the second quarter.

Jay Snowden: Thanks, Joe, and good morning. I'm joined here by Felicia Hendrix and Aaron LaBerge, as well as other members of the senior management team. As you'll see from our release and investor presentation, we continued to execute against our 2026 strategic priorities during Q2. We're on track to deliver more than 20% year-over-year adjusted EBITDAR growth this year, driven by strong performance across our retail portfolio and significant adjusted EBITDA improvement in our interactive segment. This growth, combined with our corporate overhead optimization, is benefiting cash flow growth, which in turn is enabling us to de-lever our balance sheet this year faster than originally expected. PENN's best-in-class property-level management teams delivered impressive results for the retail segment, achieving record quarterly revenues in Q2. This performance was reflected across the portfolio, with nine properties setting Q2 records for both revenues and adjusted EBITDAR.

Jay Snowden: Thanks, Joe, and good morning. I'm joined here by Felicia Hendrix and Aaron LaBerge, as well as other members of the senior management team. As you'll see from our release and investor presentation, we continued to execute against our 2026 strategic priorities during Q2. We're on track to deliver more than 20% year-over-year adjusted EBITDA growth this year, driven by strong performance across our retail portfolio and significant adjusted EBITDA improvement in our interactive segment. This growth, combined with our corporate overhead optimization, is benefiting cash flow growth, which in turn is enabling us to de-lever our balance sheet this year faster than originally expected. PENN's best-in-class property-level management teams delivered impressive results for the retail segment, achieving record quarterly revenues in Q2. This performance was reflected across the portfolio, with nine properties setting Q2 records for both revenues and adjusted EBITDA.

Speaker #3: We're on track to deliver more than 20% year-over-year adjusted EBITDA growth this year, driven by strong performance across our retail portfolio and significant adjusted EBITDA improvement in our interactive segment.

Speaker #3: This growth, combined with our corporate overhead optimization, is benefiting cash flow growth, which in turn is enabling us to delever our balance sheet this year faster than originally expected.

Speaker #3: PENN's best-in-class property-level management teams delivered impressive results for the retail segment, achieving record quarterly revenues in Q2. This performance was reflected across the portfolio, with nine properties setting Q2 records for both revenues and adjusted EBITDA.

Speaker #3: We also saw another quarter of year-over-year growth in rated revenue, supported by meaningful contributions from mid and high-worth customer segments. As well as growth in unrated revenue, which has now increased in five of the last seven quarters, underscoring broad-based consumer demand.

Jay Snowden: We also saw another quarter of year-over-year growth in rated revenue, supported by meaningful contributions from mid and high worth customer segments, as well as growth in unrated revenue, which has now increased in five of the last seven quarters, underscoring broad-based consumer demand. This momentum continued through July. Slide eight in our investor presentation highlights the combination of internal growth drivers and external market tailwinds that support our longer-term retail growth outlook, including our PENN Play loyalty program and omni-channel strategy, our strategic investments in both gaming and non-gaming amenities, our ongoing retail development project pipeline, limited new competitive supply, and third-party investments that are helping to drive economic growth in a few of our key markets.

Speaker #3: This momentum continued through July. Slide 8 in our investor presentation highlights the combination of internal growth drivers and external market tailwinds that support our longer-term retail growth outlook.

Speaker #3: Including our PENN Play loyalty program and omnichannel strategy, our strategic investments in both gaming and non-gaming amenities, our ongoing retail development project pipeline, limited new competitive supply, and third-party investments that are helping to drive economic growth in a few of our key markets.

Speaker #3: The interactive segment delivered another quarter of meaningful adjusted EBITDA improvement year-over-year, as we continue to execute on our strategy of focusing on growth in our US iCasino and Canadian operations to improve profitability.

Jay Snowden: The Interactive segment delivered another quarter of meaningful adjusted EBITDA improvement year-over-year as we continue to execute on our strategy of focusing on growth in our US iCasino and Canadian operations to improve profitability. Our US Hollywood-branded standalone casino app generated quarter-over-quarter as well as year-over-year growth, achieving record revenues in Q2. Our Ontario gaming operations continue to gain momentum, supported by strong growth in OSB revenues, aided by solid World Cup engagement and cross-sell of the reactivated World Cup OSB user base into iCasino. Revenue in the quarter was negatively impacted by customer-friendly online sportsbook outcomes, particularly in June during the NBA Finals and World Cup, as well as lower volumes in part due to our reduced marketing spend on lower value and unprofitable customer segments.

Jay Snowden: The Interactive segment delivered another quarter of meaningful adjusted EBITDA improvement year-over-year as we continue to execute on our strategy of focusing on growth in our U.S. iCasino and Canadian operations to improve profitability. Our US Hollywood-branded standalone casino app generated quarter-over-quarter as well as year-over-year growth, achieving record revenues in Q2. Our Ontario gaming operations continue to gain momentum, supported by strong growth in OSB revenues, aided by solid World Cup engagement and cross-sell of the reactivated World Cup OSB user base into iCasino. Revenue in the quarter was negatively impacted by customer-friendly online sportsbook outcomes, particularly in June during the NBA Finals and World Cup, as well as lower volumes in part due to our reduced marketing spend on lower value and unprofitable customer segments.

Speaker #3: Our US Hollywood-branded standalone casino app generated quarter-over-quarter as well as year-over-year growth, achieving record revenues in Q2. Our Ontario gaming operations continued to gain momentum, supported by strong growth in OSB revenues aided by solid World Cup engagement and cross-sell of the reactivated World Cup OSB user base into iCasino.

Speaker #3: Revenue in the quarter was negatively impacted by customer-friendly online sportsbook outcomes. Particularly in June, during the NBA Finals and World Cup, as well as lower volumes in part due to our reduced marketing spend, lower value, and unprofitable customer segments.

Speaker #3: Importantly, this shift is improving our marketing efficiency and is consistent with our discipline approach to managing the interactive business that we outlined earlier this year.

Jay Snowden: Importantly, this shift is improving our marketing efficiency and is consistent with our disciplined approach to managing the Interactive business that we outlined earlier this year. Notably, while our OSB hold rate was flat year-over-year to date, our OSB net win rate improved. We saw encouraging Interactive engagement trends during the World Cup. Approximately 70% of our sportsbook users placed a World Cup wager, with approximately 45% of those World Cup bettors placing a soccer wager for the first time. This event served as a meaningful engagement and reactivation opportunity for us heading into the NFL season. On 13 July, we launched theScore Bet Sportsbook & Casino and our standalone iCasino apps, theScore Casino and Hollywood Casino in Alberta, Canada.

Speaker #3: Notably, while our OSB hold rate was flat year-over-year, to date, our OSB net win rate improved. We saw encouraging interactive engagement trends during the World Cup. Approximately 70% of our sportsbook users placed a World Cup wager, with approximately 45% of those World Cup bettors placing a soccer wager for the first time.

Speaker #3: This event served as a meaningful engagement and reactivation opportunity for us heading into the NFL season. On July 13, we launched the ScoreBet sportsbook and casino, and our standalone iCasino apps, the ScoreCasino and Hollywood Casino, in Alberta, Canada.

Speaker #3: While still early, we are encouraged by our Alberta user and handle volumes on a per capita basis, and believe our exclusive strategic partnership in Canada with the Toronto Blue Jays will complement the strength of the ScoreBet brand there.

Jay Snowden: While still early, we are encouraged by our Alberta user and handle volumes on a per capita basis, and believe our exclusive strategic partnership in Canada with the Toronto Blue Jays will complement the strength of theScore Bet brand there. Our expected investment in Alberta remains approximately $20 million for the year, and our 2026 Interactive segment adjusted EBITDA guidance is unchanged at a loss of $20 million, which Felicia will discuss in more detail in a few minutes. First, I want to cover some updates on our exciting retail development projects. Hollywood Casino Joliet, which opened last August, continued to deliver strong results in Q2, and that momentum has continued into early Q3. Our team there is doing a great job. Meanwhile, M Resort continues to capture previously unmet demand and drive enhanced property performance following the opening of our new hotel tower last December.

Speaker #3: Our expected investment in Alberta remains approximately $20 million for the year, and our 2026 interactive segment adjusted EBITDA guidance is unchanged at a loss of $20 million.

Speaker #3: Which Felicia will discuss in more detail in a few minutes. But first, I want to cover some updates on our exciting retail development projects.

Speaker #3: Hollywood Casino Joliet, which opened last August, continued to deliver strong results in Q2, and that momentum has continued into early Q3. Our team there, excuse me, is doing a great job.

Speaker #3: Meanwhile, M Resort continues to capture previously unmet demand and drive enhanced property performance following the opening of our new hotel tower last December. M Resort generated record net revenue and adjusted EBITDA in Q2, and notably, we hosted three of our top five largest groups by revenue ever during the quarter.

Jay Snowden: M Resort generated record net revenue and adjusted EBITDA in Q2, and notably, we hosted three of our top five largest groups by revenue ever during the quarter. We recently opened our new hotel tower at Hollywood Columbus on 12 June, strengthening our position as the leading regional gaming destination in the state of Ohio. The property generated an all-time net revenue record in July, the first full month with the hotel open. Over the hotel's first month and a half of operations, we have seen outer market guests account for 85% of hotel cash revenue, which again speaks to it being a regional gaming destination. Additionally, over that same timeframe, rated guests have increased their average daily worth by 10% when staying at the hotel.

Speaker #3: We recently opened our new hotel tower at Hollywood Columbus on June 12, strengthening our position as the leading regional gaming destination in the state of Ohio.

Speaker #3: The property generated an all-time net revenue record in July, the first full month with the hotel open. Over the hotel's first month and a half of operations, we have seen outer market guests account for 85% of hotel cash revenue, which again speaks to it being a regional gaming destination.

Speaker #3: Additionally, over that same timeframe, rated guests have increased their average daily worth by 10% when staying at the hotel. Our final of the four growth projects, Hollywood Casino Aurora, opened on June 24, and while still early, has been showing strong growth KPIs, approximately doubling admissions, slot volumes, table volumes, and non-gaming revenues versus prior-year levels.

Jay Snowden: Our final of the four growth projects, Hollywood Casino Aurora, opened on 24 June, and while still early, has been showing strong growth KPIs, approximately doubling admissions, slot volumes, table volumes, and non-gaming revenues versus prior year levels. Our hotel is also attracting higher worth customers, with our rated guests generating 21% higher average daily worth when staying at the property. The property is also driving trial and expanding our reach in the market, as 20% of our guests since opening have been new to Hollywood Aurora. Additionally, 25% of our guests since opening were reactivated customers. Up next in the pipeline will be the relocation of Hollywood Council Bluffs, which is expected to open in 2028. This project will convert a first-generation riverboat casino license into a modern and more efficient land-based facility that will connect seamlessly with our existing 444-room hotel.

Speaker #3: Our hotel is also attracting higher-worth customers, with our rated guests generating 21% higher average daily worth when staying at the property. The property also is driving trial and expanding our reach, in the market as 20% of our guests since opening have been new to Hollywood Aurora.

Speaker #3: Additionally, 25% of our guests since opening were reactivated customers. Up next in the pipeline will be the relocation of Hollywood Council Bluffs. Which is expected to open in 2028.

Speaker #3: This project will convert a first-generation riverboat casino license into a modern and more efficient land-based facility, that will connect seamlessly with our existing 444-room hotel.

Speaker #3: We believe the new property will greatly enhance our competitive positioning in the greater Omaha market. The project has an anticipated construction budget of $180 to $200 million, that budget, the programming, and the design will be very similar to the new Hollywood Joliet in Illinois.

Jay Snowden: We believe the new property will greatly enhance our competitive positioning in the greater Omaha market. The project has an anticipated construction budget of $180 to 200 million. That budget, the programming, and the design will be very similar to the new Hollywood Joliet in Illinois. With that, I'll turn it over to Felicia.

Speaker #3: And with that, I'll turn it over to Felicia.

Speaker #1: Thanks, Jay. Our retail segment generated record quarterly revenues of $1.5 billion and adjusted EBITDA of $517.2 million. Which reflects year-over-year growth of approximately 4% in revenues and 6% in adjusted EBITDA, respectively.

Felicia Hendrix: Thanks, Jay. Our Retail segment generated record quarterly revenues of $1.5 billion and adjusted EBITDA of $517.2 million, which reflects year-over-year growth of approximately 4% in revenues and 6% in adjusted EBITDA, respectively. Adjusted EBITDA margins were 34.4% and flow-through improved quarter-over-quarter and year-over-year, reflecting our property team's efforts to manage costs across the board, including labor, marketing, and G&A efficiencies. Importantly, we saw strong performance across the portfolio, including, but not limited to, contributions from our four recently completed development projects. Underscoring this point, same-store revenues and adjusted EBITDA grew approximately 2% and 4%, respectively, in the quarter. We're raising our full year 2026 retail revenue and adjusted EBITDA guidance to reflect the better-than-expected results in Q2 and an increase in our prior assumptions for H2.

Speaker #1: Adjusted EBITDA A margins were 34.4% and flow-through improved quarter over quarter and year over year, reflecting our property team's efforts to manage costs across the board, including labor, marketing, and G&A efficiencies.

Speaker #1: Importantly, we saw strong performance across the portfolio including but not limited to contributions from our four recently completed development projects. Underscoring this point, same-store revenues and adjusted EBITDA grew approximately 2% and 4%, respectively, in the quarter.

Speaker #1: We're raising our full-year 2026 retail revenue and adjusted EBITDA guidance to reflect the better-than-expected results in the second quarter and an increase in our prior assumptions for the second half of the year.

Speaker #1: The midpoint of our revised 2026 revenue guidance is $5.87 billion, and for adjusted EBITDA, our new guidance is $1.963 billion at the midpoint, which implies a 50 basis point year-over-year improvement in adjusted EBITDA margins for the second half of the year at the midpoint.

Felicia Hendrix: The midpoint of our revised 2026 revenue guidance is $5.87 billion, and for adjusted EBITDA, our new guidance is $1.963 billion at the midpoint, which implies a 50 basis point year-over-year improvement in adjusted EBITDA margins for H2 at the midpoint. Our new guidance implies the continued expectation for retail adjusted EBITDA to grow year-over-year in the mid-single digits, more specifically at a rate similar to the 5.6% growth we just reported for Q2. We expect normalized seasonality in H2. Our Interactive segment generated revenues of $349.4 million in Q2, including a skin tax gross-up of $185.5 million and adjusted EBITDA loss of $9.5 million. On the revenue side, we experienced solid growth across our key focus areas, US.

Speaker #1: Our new guidance implies the continued expectation for retail-adjusted EBITDA to grow year-over-year in the mid-single digits, more specifically at a rate similar to the 5.6% growth we just reported for the second quarter.

Speaker #1: We expect normalized seasonality in the second half of the year. Our interactive segment generated revenues of $349.4 million in the second quarter, including a skin-tax gross-up of $185.5 million and adjusted EBITDA loss of $9.5 million.

Speaker #1: On the revenue side, we experienced solid growth across our key focus areas, USI Casino and our Canadian operations, which was somewhat offset by customer-friendly online sportsbook outcomes and lower volumes as Jay touched on earlier.

Felicia Hendrix: iCasino and our Canadian operations, which was somewhat offset by customer-friendly online sportsbook outcomes and lower volumes, as Jay touched on earlier. On the adjusted EBITDA side, we delivered another quarter of meaningful improvement year-over-year, reflecting disciplined execution of our strategy to drive profitability. We are fine-tuning our 2026 Interactive Segment revenue guidance to $1.57 billion from our prior $1.6 billion to reflect recent and current operating trends. Our new guidance includes a skin tax gross-up of roughly $830 million, up from $820 million prior, and assumes modest year-over-year growth in both OSB and iCasino for H2, with iCasino growth higher than OSB growth. We continue to expect an adjusted EBITDA loss of $20 million in our Interactive Segment for 2026, inclusive of a $20 million investment for our Alberta launch.

Speaker #1: On the adjusted EBITDA side, we delivered another quarter of meaningful improvement year-over-year, reflecting disciplined execution of our strategy to drive profitability. We are fine-tuning our 2026 interactive segment revenue guidance to $1.57 billion from our prior $1.6 billion, to reflect recent and current operating trends.

Speaker #1: Our new guidance includes a skin-tax gross-up of roughly $830 million up from $820 million prior, and assumes modest year-over-year growth in both OSB and I Casino for the second half, with I Casino growth higher than OSB growth.

Speaker #1: We continue to expect an adjusted EBITDA loss of $20 million in our Interactive segment for 2026, inclusive of a $20 million investment for our previously. The third quarter is expected to be the largest quarterly loss of the year, given our investment in Alberta, and we expect the fourth quarter Interactive segment adjusted EBITDA to be positive.

Felicia Hendrix: As we have guided previously, Q3 is expected to be the largest quarterly loss of the year given our investment in Alberta, and we expect the Q4 Interactive Segment adjusted EBITDA to be positive. We expect the Other category adjusted EBITDA to be -$119 million for 2026, unchanged from our original guidance back in late February. The table on Page 9 of our earnings release summarizes our cash expenditures in the quarter, including cash payments to our REIT landlords, cash taxes, cash interest on traditional debt, and total CapEx. Of our total $98 million of CapEx in the quarter, $58 million was project CapEx primarily related to our development projects. We ended the Q2 with total liquidity of $1.9 billion, inclusive of $887 million in cash and cash equivalents.

Speaker #1: We expect the other category adjusted EBITDA to be negative $119 million for 2026, unchanged from our original guidance back in late February. The table on page 9 of our earnings release summarizes our cash expenditures in the quarter, including cash payments to our REIT landlords, cash taxes, cash interest on traditional debt, and total capex.

Speaker #1: Of our total $98 million of capex in the quarter, $58 million was project capex, primarily related to our development projects. We ended the second quarter with total liquidity of $1.9 billion inclusive of $887 million in cash and cash equivalents.

Speaker #1: In April, we refinanced our $1 billion revolver, which is currently undrawn, and our $447 million Term Loan A facility. Both now mature in 2031.

Felicia Hendrix: In April, we refinanced our $1 billion revolver, which is currently undrawn, and our $447 million term loan A facility, both now mature in 2031. In May, we repriced and extended our term loan B facility, which now matures in 2033. Also in May, we repaid the remaining $106.7 million principal balance of our 2.75% convertible notes due 2026, which eliminates 4.5 million potentially dilutive shares associated with the notes. In June, we received approximately $225 million in funding from GLPI for the new Hollywood Aurora. We elected not to take GLPI capital in connection with the construction of our Hollywood Columbus Hotel tower. Following these transactions to strengthen our balance sheet, our nearest maturity is now our $400 million, five and five-eighth notes, which are due in January 2027.

Speaker #1: And in May, we repriced and extended our term loan B facility, which now matures in 2033. Also in May, we repaid the remaining $106.7 million principal balance of our $2.75% convertible notes due 2026, which eliminates $4.5 million potentially dilutive shares associated with the notes.

Speaker #1: And in June, we received approximately $225 million in funding from GLPI for the new Hollywood Aurora, we elected not to take GLPI capital in connection with the construction of our Hollywood Columbus Hotel Tower.

Speaker #1: Following these transactions to strengthen our balance sheet, our nearest maturity is now our $400 million five-and-five-eighths notes, which are due in January 2027. As we highlight on slide 5 of our earnings deck, our near-term deleveraging goals have improved since we provided them in April, benefiting from an improvement in our cash flow outlook.

Felicia Hendrix: As we highlight on slide five of our earnings deck, our near-term de-leveraging goals have improved since we provided them in April, benefiting from an improvement in our cash flow outlook. Specifically, the $31 million increase in the midpoint of our retail adjusted EBITDA guidance flows fully into cash flow, given our reiteration of our maintenance CapEx and other uses of cash for 2026. While we are reiterating our maintenance CapEx guidance of $220 million, 2026 project CapEx has been refined to $180 million from our prior $200 million guidance, given a shift of some spend from 2026 into 2027, which brings our total 2026 CapEx guidance to $400 million from our prior $420 million forecast. We continue to expect total cash payments under our triple net leases to be $1 billion in 2026. For 2026 cash interest expense net of interest income, we continue to project $150 million.

Speaker #1: Specifically, the $31 million increase in the midpoint of our retail-adjusted EBITDA guidance flows fully into cash flow, given our reiteration of our maintenance capex and other uses of cash for 2026.

Speaker #1: While we are reiterating our maintenance capex guidance of $220 million, 2026 project capex has been refined to $180 million from our prior $200 million guidance, given a shift of some spend from 2026 into 2027, which brings our total 2026 capex guidance to $400 million from our prior $420 million forecast.

Speaker #1: We continue to expect total cash payments under our triple net leases to be $1 billion in 2026. For 2026 cash interest expense net of interest income, we continue to project $150 million and for cash taxes, our outlook is unchanged.

Felicia Hendrix: For cash taxes, our outlook is unchanged. We do not expect to be a cash taxpayer in 2026. Our fully diluted weighted average common share count at the end of Q2 was 135 million shares. RSUs and stock options are diluted by about 2 million shares annually. As I just mentioned, we repaid the remaining convertible notes in May, which removes the related dilution from the share count calculation going forward. I will now turn it back to Jay.

Speaker #1: We do not expect to be a cash taxpayer in 2026. Our fully diluted weighted average common share count at the end of the second quarter was 135 million shares, RSUs in stock options are diluted by about $2 million shares annually, and as I just mentioned, we repaid the remaining convertible notes in May, which removes the related dilution from the share count calculation going forward.

Speaker #1: I'll now turn it back to Jay.

Speaker #2: Thanks, Felicia. With the second quarter under our belt, 2026 continues to be a year of strong execution for us, and I can't thank our team members across PENN enough.

Jay Snowden: Thanks, Felicia. With Q2 under our belt, 2026 continues to be a year of strong execution for us, and I cannot thank our team members across PENN enough. We delivered record quarterly retail segment revenue, raised our retail guidance, continued to improve interactive profitability, and further strengthened our balance sheet. During the remainder of the year, we will remain focused on growing cash flow, reducing leverage, optimizing our corporate overhead, and maintaining the disciplined approach to capital allocation. With that, Tasha, we can open up the line for questions.

Speaker #2: We delivered record quarterly retail segment revenue, raised our retail guidance, continued to improve interactive profitability, and further strengthened our balance sheet. During the remainder of the year, we will remain focused on growing cash flow, reducing leverage, optimizing our corporate overhead, and maintaining the disciplined approach to capital allocation.

Speaker #2: And with that, Tasha, we can open up the line for questions.

Speaker #3: Thank you. If you would like to ask a question, please press *1 on your telephone keypad. To leave the queue at any time, please press *2.

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. To leave the queue at any time, please press star two. Once again, that is star one to ask a question. In the interest of time, please limit yourself to one question and one follow-up. We will take our first question from Dan Politzer with JPMorgan. Please go ahead. Your line is open.

Speaker #3: Once again, that is star 1 to ask a question. And in the interest of time, please limit yourself to one question and one follow-up.

Speaker #3: We'll take our first question from Dan Pulitzer. With JP Morgan, please go ahead. Your line is open.

Speaker #4: Hey, good morning, everyone. Thanks for the question. This is going pretty quickly, so I think I got my math right, but, you know, the online sports betting or the interactive core revenue, I think you reduced by $40 million, but you did hold your adjusted EBITDA guide for $20 million loss.

Dan Politzer: Hey, good morning, everyone. Thanks for the questions. This was going pretty quickly, so I think I got my math right. The online sports betting or the interactive core revenue that I think you reduced by $40 million, but you did hold your adjusted EBITDA guide for a $20 million loss. Can you kind of walk through the puts and takes of that a bit? Were there some cost savings and labor efficiencies in there that you would call out?

Speaker #4: Can you kind of walk through the puts and takes to that a bit, and, you know, were there some cost savings in labor efficiencies in there that you'd call out?

Speaker #2: Yeah, there's labor efficiencies we continue to find efficiencies in our cost structure-related technology as well, as we look at third-party vendors. And then, of course, our marketing our marketing expenses are down.

Jay Snowden: Yeah, there's labor efficiencies. We continue to find efficiencies in our cost structure related to technology as well as we look at third-party vendors. Of course, our marketing expenses are down as well. It's mainly marketing and cost structure improvements.

Speaker #2: As well. So it's mainly marketing and cost structure improvements.

Speaker #4: Got it. That makes sense. And then, on the land-based side, obviously some strong margin improvement there. As you think about kind of the rest of the year and the cadence, I think usually, you know, first quarter through third quarter, it's roughly the same, and you step down in fourth quarter, but you have these, you know, the properties that, you know, you recently opened continuing to ramp.

Dan Politzer: Got it. That makes sense. On the land-based side, obviously some strong margin improvement there. As you think about the rest of the year and the cadence, I think usually, Q1 through Q3, it's roughly the same, and you step down in Q4, but you have the properties that you recently opened continuing to ramp. Can you give us an idea of how to think about margins and the expansion from here going forward?

Speaker #4: So can you give us an idea of how to think about margins and the expansion from here going forward?

Speaker #2: Yeah, happy to. At least as it relates to the second half of the year, so we beat on revenues 4%, EBITDA 6% in the second quarter, and that's exactly what we're guiding to do in the second half of the year as well, kind of just mirroring on a year-over-year basis the performance in the second quarter.

Jay Snowden: Yeah, happy to, at least as it relates to the H2 of the year. We beat on revenues 4%, EBITDA 6% in Q2, and that's exactly what we're guiding to do in the H2 of the year as well, kind of just mirroring on a year-over-year basis the performance in Q2. I think I would look at that the same way for Q3 and for Q4. To your point, Dan, Q4 is the lightest revenue, lightest EBITDA, and lightest margin quarter of the year, but we would expect to see the same 4% revenue, 6% EBITDA growth in Q4.

Speaker #2: So I think I would look at that the same way for third quarter and for fourth quarter, to your point. Dan, fourth quarter is the lightest revenue, lightest EBITDA, and lightest margin quarter of the year, but we would expect to see the same 4% revenue, 6% growth sorry, EBITDA growth in the fourth quarter.

Speaker #2: So from if you sort of shake all that out, our margins EBITDA margins were higher by about 55 basis points in the second quarter, year-over-year, and we're anticipating the second half of the year to be right around 50 basis points improvement, both third quarter and fourth quarter, if that makes sense.

Jay Snowden: If you sort of shake all that out, our EBITDA margins were higher by about 55 basis points in Q2 year-over-year, and we're anticipating the H2 of the year to be right around 50 basis points improvement, both Q3 and Q4, if that makes sense.

Speaker #4: Got it. Makes total sense. Thanks so much.

Dan Politzer: Got it. Makes total sense. Thanks so much.

Speaker #2: Thanks, Dan.

Jay Snowden: Thanks, Dan.

Speaker #3: Thank you. We'll take our next question from Brant Montour with Barclays. Please go ahead, your line is open.

Operator: Thank you. We'll take our next question from Brandt Montour with Barclays. Please go ahead. Your line is open.

Speaker #5: Hi, good morning, everybody, and thanks for taking my questions. So I wanted to start out with iCasino. Obviously, you called out iCasino first.

Brandt Montour: Hi, good morning, everybody, and thanks for taking my questions. I wanted to start out with iCasino. Obviously, you called out iCasino first, grew quarter-over-quarter, year-over-year. It's hard for us to see it in the reported numbers, right? We see iGaming reported down slightly quarter-over-quarter and the overall iGaming growing low single digits year-over-year, but we know that's not the same mix. Could you just maybe flesh out iCasino first growth cadence and trajectory to help us get a sense for how the back half could trend?

Speaker #5: You know, grew quarter-over-quarter, year-over-year. It's hard for us to see it in the reported numbers, right? We saw I we see I Gaming reported down slightly quarter-over-quarter.

Speaker #5: And, you know, the overall I Gaming growing, you know, low single digits year-over-year, but we know that that's, you know, not the same mix.

Speaker #5: So could you just kind of maybe flesh out I Casino First growth cadence and trajectory to help us get a sense for how the back half could trend?

Speaker #2: Yeah, so we're seeing strong growth on our standalone casino product, and we have, since we launched, so the somewhat softness there is related to the play from our sportsbook app, where people are cross-selling into casino.

Jay Snowden: Yeah. We're seeing strong growth on our standalone casino products, and we have since we launched. The somewhat softness there is related to the play from our sports book app where people are cross-selling into casino. The volume softness there has affected revenue there. We still feel really good about our standalone business and casino through the end of the year.

Speaker #2: And so the volume softness there has affected revenue there, but we still feel really good about the our standalone business and casino through the end of the year.

Speaker #5: Okay. Thanks for that. And then, on the overall sports business, Jay, you gave us some qualitative commentary on hold with the overall message that hold was an impact.

Brandt Montour: Okay. Thanks for that. On the overall sports business, Jay, you gave us some qualitative commentary on hold with the overall message that hold was an impact. Any way you could maybe quantify that, just given we're dealing with small numbers here on a net basis, it could actually swing the complexion of the overall digital results here?

Speaker #5: Any way you could maybe quantify that, just given we're dealing with small numbers here on a net basis, and so it could actually swing the complexion of the overall digital results here?

Speaker #2: Yeah, we the quick math, easy math on that is it's roughly $3 million impact hold for the quarter. So we would have been closer to a 6.5 million loss had we come in flat year-over-year on hold.

Jay Snowden: Yeah. The quick math, easy math on that is it's roughly $3 million impact hold for the quarter. We would've been closer to a $6.5 million loss had we come in flat year over year on hold.

Speaker #5: Perfect. Thanks, everyone.

Brandt Montour: Perfect. Thanks, everyone.

Speaker #2: Thanks, Brant.

Jay Snowden: Thanks, Dan.

Speaker #3: Thank you. We'll take our next question from Barry Jonas with Truist. Please go ahead. Your line is open.

Operator: Thank you. We'll take our next question from Barry Jonas with Truist. Please go ahead. Your line is open.

Speaker #6: Hey, guys. Curious if you could maybe just give a little more color about the Aurora Ramp relative to Joliet, and then as we think about Council Bluffs, given all the similarities with Joliet, should we expect similar ROI and ramp there as well?

Barry Jonas: Hey, guys. Curious if you could maybe just give a little more color about the Aurora ramp relative to Joliet. As we think about Council Bluffs, given all the similarities with Joliet, should we expect similar ROI and ramp there as well? Thank you.

Speaker #6: Thank you.

Speaker #2: Yeah, I'll tackle the second one first, just because it's top of mind. I would say yes with regard to the similarities between Council Bluffs and Joliet.

Jay Snowden: Yeah. I'll tackle the second one first, just because it's top of mind. I would say yes with regard to the similarities between Council Bluffs and Joliet. Budget, programming, design, and I think even from a ramp perspective, we would expect just like we did for Joliet to sort of get those margins where you would expect them to be maybe by month 12 to month 15. We're getting really close, I think, on the Joliet side now. We're anniversarying the opening of that property here in a matter of days. We're happy with the trajectory of the margins. You see some of that in the Midwest segment, where we had a really strong quarter.

Speaker #2: Budget, programming, design, and I think even from a ramp perspective, we would expect, just like we did for Joliet, to sort of get those margins where you would expect them to be maybe by month 12 to month 15.

Speaker #2: We're getting really close I think on the Joliet side now. We're anniversarying the opening of that property here in a matter of days. And we're happy with the trajectory of the margins.

Speaker #2: You see some of that in the Midwest segment, where we had a really strong really strong quarter. So I think so from a as you're thinking about Council Bluffs in '28, that's probably going to be the best property and the best model to look at in terms of how Joliet ramped over time.

Jay Snowden: I think as you're thinking about Council Bluffs in 2028, that's probably going to be the best property and the best model to look at in terms of how Joliet ramped over time. Aurora, remember, we have a hotel now, 225 rooms. We did not have a hotel at the old location. We are seeing really strong demand from VIP segment customers that we did know, but we're seeing much higher play when they visit us now because they're staying in the hotel. We're seeing an uplift of over 20% when they stay in the hotel from what their worth was previously at the old facility. That's, I think, very good news. When Joliet first opened, if you recall, the growth on a year-over-year basis was kind of in that 55% to low 60% year-over-year. It's been growing since then.

Speaker #2: Aurora, remember, we have a hotel now, 225 rooms. We did not have a hotel at the old location. So we are seeing really strong demand from VIP segment customers that we did know, but we're seeing much higher play when they visit us now because they're staying in the hotel.

Speaker #2: We're seeing an uplift of over 20% when they stay in the hotel from what their worth was previously at the old facility. That's I think very good news.

Speaker #2: When Joliet first opened, if you recall, the growth on a year-over-year basis was kind of in that 55 to low 60% year-over-year. It's been growing since then.

Speaker #2: The last several months have been closer to, you know, call it 75%, 80% year-over-year. And it's only one month, so I don't want to underwrite this, but just in sharing what we're seeing in the business, certainly we're happy with the results, and we shared some of the KPIs for Aurora about the business is almost essentially doubled in the first full month.

Jay Snowden: The last several months have been closer to, call it 75% to 80% year-over-year. It's only one month. I don't want to underwrite this, but just in sharing what we're seeing in the business. Certainly, we're happy with the results, and we shared some of the KPIs for Aurora, but the business has almost essentially doubled in the first full month. Again, things will settle. You get some benefit of everybody coming to see the property in that first month. We're very pleased with what the response has been, and the feedback we're getting is very positive.

Speaker #2: Again, things will settle. You get some benefit from, you know, everybody coming to see the property in that first month, but we're very pleased with what the response has been, and the feedback we're getting is very positive.

Barry Jonas: That sounds great. Just as a follow-up, yesterday we heard from a large OSB operator that they're going to be leaning into reinvestment. I'm not sure what other competitor responses will be, but maybe just comment on that if anything in your interactive strategy could change as a result, or you see any potential risks to your financial outlook depending on how this plays out. Thank you.

Speaker #6: That sounds great. Just as a follow-up, you know, yesterday we heard from a large OSB operator that they're going to be leaning into reinvestment.

Speaker #6: I'm not sure what other competitor responses will be, but maybe just comment on that. If anything, your interactive strategy could change as a result, or you could see any potential risks to your financial outlook depending on how this plays out.

Speaker #6: Thank you.

Speaker #2: Yeah, I it's a good question. We read or heard the same commentary I guess the way we're thinking about it, Barry, it hasn't changed in terms of our approach because we anticipated football season being quite the arms race this year.

Jay Snowden: Yep. It's a good question. We read or heard the same commentary. I guess the way we're thinking about it, Barry, it hasn't changed in terms of our approach because we anticipated football season being quite the arms race this year. You're going to have prediction markets that are targeting customers for the first football season ever, given the timeline of when they actually went live, was close to Super Bowl last year. We already assumed it was going to be a very aggressive, irrational marketing spend advertising and new customer acquisition approach this football season. I think this just speaks to it being aggressive, not only from a prediction market standpoint, but maybe some of the incumbent OSB digital-only players as well. It doesn't change the way we're thinking about it. I think it is a very competitive marketplace out there right now.

Speaker #2: You're going to have prediction markets that are targeting customers for the first football season ever, given the timeline of when they went actually went live was close to Super Bowl last year.

Speaker #2: So we already assumed it was going to be a very aggressive irrational marketing spend advertising and new customer acquisition approach this football season. I think this just speaks to it being aggressive not only from a prediction market standpoint, but maybe some of the incumbent OSB digital-only players as well.

Speaker #2: So it doesn't change the way we're thinking about it. I think, you know, it is a very competitive marketplace out there right now. Michigan is a good example.

Jay Snowden: Michigan is a good example. It's been quite the aggressive environment there with a couple of private operators that have launched in the last couple of quarters, and we've held up quite well in Michigan. So we would expect to hold up well in football season. We already assumed in our projections for the remainder of the year that it would be very competitive, and we think we're faring quite well in states like Michigan, where we're already seeing an environment like that.

Speaker #2: It's been quite an aggressive environment there, with a couple of private operators that have launched in the last couple of quarters, and we've held up quite well in Michigan.

Speaker #2: And so we would expect to hold up well in football season. We already assumed in our projections for the remainder of the year that it would be, you know, very competitive and we think we're faring quite well in states like Michigan where we're already seeing an environment like that.

Speaker #6: Perfect. Thank you, Jay.

Barry Jonas: All right. Thank you, Jay.

Speaker #2: It's great.

Jay Snowden: Great.

Speaker #3: Thank you. We'll take our next question from Joe Stout with Susquehanna. Please go ahead. Your line is open.

Operator: Thank you. We'll take our next question from Joseph Stauff with Susquehanna. Please go ahead. Your line is open.

Speaker #7: Thank you. Good morning, Jay. Felicia, first question I wanted to ask you is, just to clarify—I don't think so—but within your guide for the year on retail, is there anything with respect to potential benefit in Pennsylvania following the Supreme Court ruling?

Joseph Stauff: Thank you. Good morning, Jay, Felicia. First question I wanted to ask you is, just to clarify, I don't think so, but within your guide for the year on retail, are you assuming anything with respect to potential benefit in Pennsylvania following the Supreme Court ruling?

Joe Stauff: Thank you. Good morning, Jay, Felicia. First question I wanted to ask you is, just to clarify, I don't think so, but within your guide for the year on retail, are you assuming anything with respect to potential benefit in Pennsylvania following the Supreme Court ruling?

Jay Snowden: We are not building any of that in, Joe. The way that we guided, we basically guided the beat in Q2, then an incremental $10 million for H2 is the quick math there. We're coming off of a strong month in July. One of the questions that we had been fielding in some investor meetings was, is H1 as good as it gets kind of thing for regional gaming because of the tax return being higher this year? I would say certainly within our portfolio, we don't believe that's the case. We have a slide in our presentation that lays out the tailwinds and sort of the lack of headwinds coming at us right now, and we do feel that momentum continuing into H2.

Speaker #2: We are not building any of that in, Joe. The way that we guided, we basically guided to the beat in Q2, and then an incremental $10 million for the second half of the year is the quick math there.

Speaker #2: And we're coming off of a strong month in July. So, I mean, one of the things questions that we had been fielding in some investor meetings was, you know, is the first half of the year as good as it gets kind of thing for regional gaming because of the tax return being higher this year and I would say certainly within our portfolio, we don't believe that's the case.

Speaker #2: And we have a slide in our presentation that lays out the tailwinds and sort of the lack of headwinds coming at us right now, and we do feel that momentum continuing into the second half of the year.

Speaker #2: But that's the quick math on the guide.

Jay Snowden: That's the quick math on the guide.

Speaker #7: And what do you think about, like, any tailwind that you might expect? You know, say in Pennsylvania, whether it be in the fourth quarter—I know there's an October 15th deadline—or maybe that is some sort of tailwind in '27.

Joseph Stauff: What do you think about any tailwind that you might expect, say in Pennsylvania, whether it be in Q4, I know there's a 15 October deadline, or maybe that is some sort of tailwind in 2027?

Joe Stauff: What do you think about any tailwind that you might expect, say in Pennsylvania, whether it be in Q4, I know there's a 15 October deadline, or maybe that is some sort of tailwind in 2027?

Speaker #2: I think it's a good question, Joe. I don't want to sort of bake it into our assumptions until we know how this plays out.

Jay Snowden: I think it's a good question, Joe. I don't want to sort of bake it into our assumptions until we know how this plays out. Recall that when the Supreme Court ruled those skill games to be illegal, they gave the legislature 120 days to try to figure out if there was going to be enabling legislation to regulate and tax. We have to see how that plays out. We obviously have a big seat at the table. We have four land-based casinos in the state of Pennsylvania and are well connected in Harrisburg. I think we'll just have to see how that plays out over the course of the next, I think, the date is sometime in October.

Speaker #2: Recall that when the Supreme Court ruled those field games to be illegal, they gave the legislature 120 days to try to figure out if there's going to be enabling legislation to regulate and tax.

Speaker #2: And so we have to see how that plays out. We obviously have a big seat at the table. We have four land-based casinos in the state of Pennsylvania and are well connected.

Speaker #2: In Harrisburg. So we'll I think we'll just have to see how that plays out over the course of the next, I think, the data sometime in October.

Speaker #7: Mm-hmm. And if I could just squeeze. Yeah, sorry.

Joseph Stauff: Mm-hmm.

Joe Stauff: Mm-hmm.

Jay Snowden: I would say. Sorry, Joe.

Joseph Stauff: Yeah, sorry.

Joe Stauff: Yeah, sorry.

Speaker #2: Joe, real quick, sorry. I would say along to your question, Missouri did come to a similar conclusion. The Attorney General in Missouri has been doing a great job of shutting down these skill-based games.

Jay Snowden: Joe, real quick, sorry. I would say along to your question, Missouri did come to a similar conclusion. The Attorney General in Missouri has been doing a great job of shutting down these skill-based games. I don't think it's by coincidence that our Missouri properties have been performing very well over the last couple of quarters. Not that they haven't previously, but the last couple of quarters, our results in St. Louis and Kansas City have been very strong.

Speaker #2: I don't think it's by coincidence that our Missouri properties have been performing very well over the last couple of quarters, not that they haven't previously, but the last couple of quarters are results in St.

Speaker #2: Louis and Kansas City have been very strong.

Speaker #7: Yeah, I appreciate that. And if I could just squeeze something in, is there Aaron, is there anything different within, say, the Alberta you know, kind of operating framework that would suggest that you couldn't get a similar amount of share that you have in October in October.

Joseph Stauff: Yeah, I appreciate that. If I could just squeeze something in. Aaron, is there anything different within, say, the Alberta kind of operating framework that would suggest that you couldn't get a similar amount of share that you have in Ontario, in Alberta?

Joe Stauff: Yeah, I appreciate that. If I could just squeeze something in. Aaron, is there anything different within, say, the Alberta kind of operating framework that would suggest that you couldn't get a similar amount of share that you have in Ontario, in Alberta?

Speaker #7: Ontario, in Alberta?

Speaker #2: I don't think so. I mean, first of all, our product has never been better. We're going into a competitive market, but we're spending aggressively relative to what we did in Ontario.

Aaron LaBerge: I don't think so. First of all, our product has never been better. We're going into a competitive market, but we're spending aggressively relative to what we did in Ontario. Early results from a handle perspective, even though it's a slow sports calendar, are very encouraging. We anticipate to be very aggressive, and we hope to have the same and similar market shares to what we enjoy in Ontario. That's the focus, and it's looking good so far.

Speaker #2: In early results from a handle perspective, even though it's a slow sports calendar, are very encouraging. So we anticipate to be very aggressive, and we hope to have the same in similar market shares to what we enjoy in Ontario.

Speaker #2: That's the focus and it's looking good so far.

Speaker #1: Yeah, it’s certainly—that’s our target, Joe, to your point. And so, we figure with it being a more competitive sort of starting gate in Alberta, that we needed to be a little bit more aggressive in our spend per capita, and we’re feeling good about that decision so far.

Jay Snowden: Yeah, certainly, that's our target, Joe, to your point. We figure with it being a more competitive sort of starting gate in Alberta, that we needed to be a little bit more aggressive in our spend per capita, and we're feeling good about that decision so far.

Speaker #7: Thanks a lot.

Joseph Stauff: Thanks a lot.

Joe Stauff: Thanks a lot.

Speaker #3: Thank you. We'll take our next question from Jordan Bender with Citizens. Please go ahead, your line is open.

Operator: Thank you. We'll take our next question from Jordan Bender with Citizens. Please go ahead. Your line is open.

Speaker #6: Hey, everyone. Good morning, and thanks for the question. There's been a couple more assets that have been put up for sale, at least we spoke.

Jordan Bender: Hey, everyone. Good morning, and thanks for the question. There's been a couple more assets that have been put up for sale, at least publicly on the retail casino side since the last time we spoke. Curious to get your temperature on M&A, and could you look to Vegas, just kind of giving what you know today?

Speaker #6: So curious to get your temperature on M&A and could you look to Vegas just kind of giving what you know today?

Speaker #2: Yeah, it's a good question, Jordan. I mean, look, I like to be in the position that we are right now at Penn, where we have we have several compelling options as we think about capital allocation.

Jay Snowden: Well, it's a good question, Jordan. Look, I like to be in the position that we are right now at PENN, where we have several compelling options as we think about capital allocation. This year, the big focus has been on delevering, and we're having some real quality conversations with long-only investors about the balance sheet and the direction of our leverage profile. That's going to continue to be a big focus for us at PENN to get that lease-adjusted net leverage down below five times. We're heading there quickly, which is great as you look out to the end of the year and certainly in early 2027, get that traditional net leverage down below two. Again, we're headed there very quickly. That's clearly a priority for us. Will continue to be certainly over the next 12 months. Share repurchases continue to sound and look very good.

Speaker #2: This year, the big focus has been on delevering and we're having some real quality in conversations with long-only investors about the balance sheet and the direction of our leverage profile.

Speaker #2: And that's going to continue to be a big focus for us at Penn—to get that lease-adjusted net leverage down below five times.

Speaker #2: We're heading there quickly, which is great as you look out to the end of the year and certainly in early 2027, get that traditional net leverage down below two.

Speaker #2: Again, we're headed there very quickly. So that's clearly a priority for us. We'll continue to be certainly over the next 12 months. Share repurchases, continue to sound and look very good.

Speaker #2: Our free cash flow yield on 2027 consensus is still sitting pretty close to 20%. That doesn't make sense to me, but certainly makes buying back shares a lot more attractive.

Jay Snowden: Our free cash flow yield on 2027 consensus is still sitting pretty close to 20%. That doesn't make sense to me, but certainly makes buying back shares a lot more attractive anywhere in those sort of mid to high teen levels, and that's where we've been trading. Lastly, it's early, but we've been very happy with the results with these four growth projects. We do have other growth projects that we've been analyzing. Three right now that we're feeling really positive about. We believe that there's a level of predictability with those investments because we've done it before. I think we know what to expect. It's a little bit more proven versus you're taking a shot on M&A, it's less proven, in terms of what the return profile will be.

Speaker #2: Anywhere in those sort of mid to high teen levels and that's where we've been trading. And then lastly, we, you know, we're it's early, but we've been very happy with the results with these four growth projects and we do have other growth projects that we've been analyzing.

Speaker #2: Three right now that we're feeling really positive about and we believe that, you know, there's a level of predictability with those investments because we've done it before.

Speaker #2: I think we know what to expect. It's a little bit more proven versus, you know, you're taking a shot on M&A. It's less proven.

Speaker #2: So in terms of what the return profile will be. So it's not to say that we wouldn't look, it's just to say that we're probably in that case going to wait for an inbound and it's going to have to check several boxes for us.

Jay Snowden: It's not to say that we wouldn't look, it's just to say that we're probably, in that case, going to wait for an inbound, and it's going to have to check several boxes for us. It's going to have to, with a high level of confidence, deliver a better return than what we can do in some of these other capital allocation categories. I think it's also going to have to be something that adds strategic value for us in terms of geographic location. Does it get us to a new market or a bigger presence in a market that we enjoy being in?

Speaker #2: It's going to have to, you know, with a high level of confidence deliver a better return than what we can do in some of these other capital allocation categories.

Speaker #2: And I think it's also going to have to be something that adds strategic value for us in terms of, like, geographic location. Does it get us to a new market or a bigger presence in a market that we enjoy being in?

Speaker #6: Great. I appreciate that color. And then follow-up, on the iGaming side of the business, seems like a big focus, especially in the back half of the year.

Jordan Bender: Great. I appreciate that color. Follow-up, on the iGaming side of the business, seems like a big focus, especially in the back half of the year. Can you just kind of talk to, as you think about your investment or your customer acquisition within iGaming, how are you focusing that on direct versus cross-sell from sports into iGaming?

Speaker #6: Can you just kind of talk to, as you think about your investment or your customer acquisition within iGaming, how are you focusing that on direct versus cross-sell from sports into iGaming?

Speaker #2: Well, we're going to continue to focus on growing casino. Clearly, standalone is on a hot growth path. We're going to lean into that. Casino in general has very attractive CACs.

Aaron LaBerge: Well, we're going to continue to focus on growing casino. Clearly, standalone is on a hot growth path. We're going to lean into that. Casino in general has very attractive CACs, customer acquisition costs. We're exploiting that currently. On the sportsbook side, we are planning to grow through the end of the year. If you remember, we rebranded from ESPN Bet to theScore Bet in December. As sort of that audience normalizes, what we've realized is theScore brand, while still small and growing in the US, is very loyal, and we're taking care of those users. We saw a lot of engagement and reactivation through the World Cup, and we're keeping those people engaged through football. We feel good there. Cross-sell should continue as the sportsbook business grows as well. Very focused on Hollywood.

Speaker #2: Customer acquisition costs so we're, you know, exploiting that. Currently, on the sportsbook side, you know, we are planning to grow through the end of the year.

Speaker #2: You know, if you remember, we rebranded from ESPN Bet to theScore Bet in December, and as sort of that audience normalizes, you know, what we've realized is theScore brand, while still small and growing in the U.S., is very loyal.

Speaker #2: And so we're taking care of those users we saw a lot of engagement and reactivation through the World Cup, and we're keeping those people engaged through football.

Speaker #2: So we feel good as the sportsbook business grows as well. But very focused on Hollywood.

Speaker #6: Thank you.

Jordan Bender: Thank you.

Speaker #3: Thank you. We'll take our next question from Lizzie Dove with Goldman Sachs. Please go ahead, your line is open.

Operator: Thank you. We'll take our next question from Lizzie Dove with Goldman Sachs. Please go ahead. Your line is open.

Speaker #5: Hey, good morning. Thanks for taking the question. I just wanted to go back to what you said a question or so ago, just on the desire to kind of do more of these growth investments at your existing properties, which, you know, seem to have been going very well so far.

Lizzie Dove: Hey, good morning. Thanks for taking the question. I just wanted to go back to what you said a question or so ago, just on the desire to kind of do more of these growth investments at your existing properties, which seem to have been going very well so far. If I heard you right, I think you said there was maybe kind of three that were on the docket or consideration list. Could you maybe expand on that in terms of what the kind of benchmarks are and hurdle rates as you kind of think about which to do or not to do within the remaining portfolio?

Speaker #5: And if I heard you right, I think you said there was maybe kind of three that were on the docket or consideration list. And so could you maybe expand on that in terms of, you know, what the kind of benchmarks are and hurdle rates as you kind of think about which, you know, to-do or not to-do within the remaining portfolio?

Speaker #2: Yeah, happy to, Lizzie. Of those three, I would say one is a very compelling hotel project along the lines of what we're seeing for Columbus.

Jay Snowden: Yeah, happy to, Lizzie. Of those three, I would say one is a very compelling hotel project along the lines of what we're seeing for Columbus. Again, we're doing the analysis there and feeling better, and we're learning a lot, obviously, along the way, both Aurora. I shouldn't say both, Aurora, M Resort, and Columbus. Hotel, we're feeling like we've got a really good handle on the right size, the right design quality, size of room, amenity package to deliver the right return. I would say there's a hotel one that we're taking a hard look at right now. There's a couple of water-to-land conversion projects. You should expect that we would do those probably in the South region is where those would likely be. There's another opportunity in the state of Illinois as well.

Speaker #2: And so again, we're doing the analysis there and feeling better and we're learning a lot, obviously, along the way, both Aurora I shouldn't say both, Aurora and Resort.

Speaker #2: And Columbus. So hotel, we're feeling like we've got a really good handle on, you know, the right size, the right design quality, size of room, amenity package to deliver the right return.

Speaker #2: So I would say that's the there's a hotel one that we're taking a hard look at right now. And then there's a couple of water-to-land conversion projects and you should expect that we would, you know, do those probably in the south region is where those would likely be.

Speaker #2: There's another opportunity in the state of Illinois as well. I would say as we're thinking about those projects, we're not in a rush to get them all going at the same time.

Jay Snowden: I would say as we're thinking about those projects, we're not in a rush to get them all going at the same time. I think it makes the most sense, just from a dollars out the door perspective, to spread these out. We have Council Bluffs that is scheduled to open in 2028. If we're to announce something else, it would probably be a 2029 opening. The next one would be a 2030 opening, is the way to think about it. That's certainly the way we're thinking about it internally so that we can continue to do what we believe the priorities are from a free cash flow and capital allocation perspective. You can delever, maybe buy back stock and pursue these projects simultaneously.

Speaker #2: I think it makes the most sense just from a dollars-out-the-door perspective to spread these out. We have Council Bluffs that is scheduled to open in '28.

Speaker #2: If we're to announce something else it would probably be a '29 opening and then the next one would be a '30 opening is the way to think about it.

Speaker #2: That's certainly the way we're thinking about it internally. So that we can continue to do what we believe the priorities are with a from a free cash flow and capital allocation perspective.

Speaker #2: You can de-lever, maybe buy back stock and pursue these projects simultaneously. But if you're, you know, do all of them all at the same time, you're a little bit more limited in being able to kind of walk and shoot them.

Jay Snowden: If you do all of them all at the same time, you're a little bit more limited in being able to kind of walk and chew them.

Speaker #5: Makes sense. Thanks. And then it might be a little early for me to ask this question, but just given you've seen this really strong acceleration in cash flow and, you know, taking up your guidance today, just how do you think about kind of growing off these levels into '27 and beyond?

Lizzie Dove: Makes sense. Thanks. Then it might be a little early for me to ask this question, just given you've seen this really strong acceleration in cash flow and taking up your guidance today, just how do you think about kind of growing off these levels into 2027 and beyond? Just high level, any kind of moving pieces that we should be thinking about?

Speaker #5: Just high level, are there any kind of moving pieces that we should be thinking about?

Speaker #2: I mean, it is early. So fair on that. We're not going to get into guiding for next year at this point. We've got another five months to go.

Jay Snowden: It is early, fair on that. We're not going to get into guiding for next year at this point. We've got another five months to go. I would say that we're feeling good about the momentum in the business. As we look out to 2027 and even 2028 at this point, because casinos take time to build, we're not seeing new supply projects that are being built or have even been announced that would likely impact us over the next couple of years. That could change tomorrow in a market, the runway for us is about as good as it's been. If you consider 2026, we didn't really have any new casino openings other than a couple of smaller ones in Baton Rouge, Louisiana. The next couple of years, it looks pretty clean. I think that's something to keep in mind.

Speaker #2: I would say that we're feeling good about the momentum in the business. And as we look out to '27 and even '28 at this point, because, you know, casinos take time to build, we're not seeing new supply projects that are being built or have even been announced that would likely impact us over the next couple of years.

Speaker #2: Now, that could change tomorrow. In a market, but the runway for us is about as good as it's been. If you consider '26, we didn't really have any new casino openings other than a couple of smaller ones in Baton Rouge, Louisiana.

Speaker #2: And the next couple of years, it looks pretty clean. So I think that's something to keep in mind. We're feeling good about heading into next year without having to, you know, those headwinds coming at us and impacting us in some of our key markets.

Jay Snowden: We're feeling good about heading into next year without having those headwinds coming at us and impacting us in some of our key markets. We expect the momentum in the business at PENN to continue to move forward into 2027.

Speaker #2: And we expect the momentum in the business at Penn to continue to move forward into '27.

Speaker #5: Great. Thank you.

Lizzie Dove: Great. Thank you.

Speaker #3: Thank you. We'll take our next question from Jeff Stanchel with Stifel. Please go ahead, your line is open.

Operator: Thank you. We will take our next question from Jeff Stantial with Stifel. Please go ahead. Your line is open.

Speaker #6: Hey, good morning, Jay. Felicia, thanks for taking our questions. Maybe starting off on iCasino. I wanted to follow up on Jay's something you said in response to Barry's question, which is, you know, we talk a lot or on the sports and the prediction side on CPAs moving higher and higher, but to your point, there has been some competition coming in on online casino side as well.

Jeff Stantial: Hey, good morning, Jay, Felicia. Thanks for taking our questions. Maybe starting off on iCasino, I wanted to follow up on, Jay, something you said in response to Barry's question, which is, we talk a lot on the sports and the prediction side on CPAs moving higher and higher. To your point, there has been some competition coming in on the online casino side as well. Aaron, curious just to get your thoughts here on sort of the competitive environment in iCasino, say, by iCasino relative to, say, six months ago. And then from a retention standpoint, just help us think about sort of when you do see a new competitor come into a given market, what is sort of the response? Do you lose a little bit of play out of the gate? Do stickier players come back naturally? Do you have to bonus to get them back eventually?

Speaker #6: Aaron, curious just to get your thoughts here on sort of the competitive environment in casino, say, iCasino relative to, say, six months ago, and then from a retention standpoint, just help us think about sort of when you do see a new competitor come into a given market, what's sort of the response?

Speaker #6: Do you lose a little bit of play out of the gate, the stickier players come back naturally? Do you have to bonus to get them back eventually?

Speaker #6: Just sort of help us think about how you find, you know, the equilibrium one, two, three months after a new competitor comes into a given state.

Jeff Stantial: Just sort of help us think about how you find the equilibrium one, two, three months after a new competitor comes into a given state. Thanks.

Speaker #6: Thanks.

Speaker #2: Well, I think promo obviously is key and making sure that your product is sticky and serving the user, but then clearly, you know, as competition comes in and people spend on the promo cycle, it's very important that our CRM is really focused not on not only on our most valuable users, but on retaining them as well.

Aaron LaBerge: Well, I think promo obviously is key in making sure that your product is sticky in serving the user. Clearly, as competition comes in and people spend on the promo cycle, it's very important that our CRM is really focused not only on our most valuable users, but on retaining them as well. That's a big focus. As I said before, CACs have been very attractive on the Hollywood side, which is where we continue to spend a lot of our marketing dollars and promotion dollars around the brand, and we expect that to continue throughout the end of the year.

Speaker #2: And so that's a big focus. As I said before, CACs have been very attractive on the Hollywood side, which is where we continue to spend a lot of our marketing dollars and promotion dollars around the brand.

Aaron LaBerge: That's a big focus. As I said before, CACs have been very attractive on the Hollywood side, which is where we continue to spend a lot of our marketing dollars and promotion dollars around the brand, and we expect that to continue throughout the end of the year.

Speaker #2: And we expect that to continue. Throughout the end of the year.

Speaker #6: That's great. Thanks for that, Aaron. And then maybe switching gears over to the retail business, I wanted to ask about the M Resort project. Jay, I'm curious—if you look at that property's results and maybe compare them against some of the public numbers on the broader market, I'm just curious how much you think the project is growing the overall market versus taking share.

Jeff Stantial: That's great. Thanks for that, Aaron. Maybe switching gears over to the retail business, I wanted to ask on the M Resort project. Jay, curious, if you look at that property's results and maybe compare it against some of the public numbers on the broader market, just curious how much you think the project is growing the overall market versus taking share. Competitively, have you seen any response from some of the surrounding casinos as they try to build back share? Thanks.

Speaker #6: And then competitively, have you seen sort of any response from some of the surrounding casinos as they try to build back share? Thanks.

Speaker #2: Yeah, the Las Vegas locals results are all publicly reported every month. And so you see the trends there. And they've been, I would say, kind of flattish so far this year.

Jay Snowden: Yeah. The Las Vegas locals results are all publicly reported every month, you see the trends there and they've been, I would say, kind of flattish so far this year. Obviously, with our new hotel, we would be expect to be leading in terms of growth, and we are. I'm not saying I know how every property in the market's doing. Obviously Durango's continuing to do great for Red Rock Resorts. M Resort for us, I think we're targeting a bit of a different customer profile. Certainly during the week we're more of a meeting and convention destination for people from all around the country. On weekends there's definitely strong locals business, but we also are a destination for people driving in from Southern California.

Speaker #2: Obviously, with our new hotel, we would be expect to be leading in terms of growth, and we are. I'm not saying I know how every property in the market's doing.

Speaker #2: Obviously, Durango is continuing to do great for Red Rock Resorts. But M Resort, for us, I think we're, you know, we're targeting a bit of a different customer profile, certainly during the week.

Speaker #2: We're more of a meeting and for people from all around the country. And then on weekends, there's definitely, you know, strong locals business, but we also are a destination for people driving in from Southern California.

Speaker #2: So our model is a little bit different. And we have just shy of 800 rooms there now to be able to accommodate leisure customers casino customers, cash paying, convention business.

Jay Snowden: Our model's a little bit different and we have just shy of 800 rooms there now to be able to accommodate leisure customers, casino customers, cash paying, convention business. We're continuing to do really significant A-level entertainment out by the pool and driving 5,000 to 8,000 people per event. I would say we feel like our model is a little bit different there. I'm not sure that we're really taking share from folks as much as probably growing that part of the Las Vegas Valley. Certainly our M Resort property as a regional destination. We're feeling good about the place that we sit in, and how that fits in with the rest of the competitive set in the Las Vegas locals market.

Speaker #2: And we're continuing to do really significant, you know, A-level entertainment out by the pool and driving five to 8,000 people per event. So I would say we feel like our model is a little bit different there.

Speaker #2: So, I'm not sure that we're, you know, really taking share from folks as much as probably growing that part of the Las Vegas Valley.

Speaker #2: And certainly, our M Resort property as a regional destination—so we're feeling good about the place that we sit in and how that fits in with the rest of the competitive set in the Las Vegas locals market.

Speaker #6: Thanks very much.

Jeff Stantial: Thanks very much.

Speaker #3: Thank you. We'll take our next question from Sean Kelly with Bank of America. Please go ahead, your line is open.

Operator: Thank you. We'll take our next question from Shaun Kelley with Bank of America. Please go ahead. Your line is open.

Speaker #4: Hey, good morning, everyone. Thanks for taking my questions. You know, Jay or Felicia, or Aaron, maybe just a quick any quick update you could give us directionally on just how big Ontario's contribution is overall to the online segment now.

Shaun Kelley: Hey, good morning, everyone. Thanks for taking my questions. Jay, Felicia, or Aaron, maybe any quick update you could give us directionally on just how big Ontario's contribution is overall to the online segment now? I know we don't break it out specifically, but that is a market that we just don't get as much data on, and I think the idea here is more to give us some context for trying to size the Alberta opportunity for you going forward.

Speaker #4: I know we don't break it out specifically, but that is a market that we just don't get as much. Kind of data on. And I think, you know, the idea here is more to give us some context for trying to size the Alberta opportunity for you going forward.

Speaker #2: Yeah, we haven't provided that breakdown by market, Sean, previously. I would tell you that it is our number one largest market, both on the OSB side as well as in, well, I would say it's right there with Pennsylvania for us on iGaming.

Jay Snowden: Yeah. We haven't provided that breakdown by market, Shaun, previously. Well, I would say it's right there with Pennsylvania for us on iGaming. It is actually by a good margin, our number one market for OSB. If you can back into how we do in Pennsylvania and assume that OSB is probably closer to maybe 2x or 2.5x what we do in PA, and iGaming would be very similar.

Speaker #2: But it is actually by a good margin, our number one market for OSB. So if you can kind of back into how we do in Pennsylvania and assume that OSB is probably closer to maybe 2x or 2.5x, what we do in PA, and iGaming would be very similar.

Speaker #3: Perfect. Thanks, Jay. And then going back to your an earlier question on Project CapEx for the sort of the land-based piece, you know, I think Felicia, if I caught it right, if you were thinking about Project Capital or maybe an opening in 2028 and then a potential next project or land-based conversion being in 2030, would that directionally imply, you know, something like 100 million of Project Capital a year?

Shaun Kelley: Perfect. Thanks, Jay. Going back to an earlier question on project CapEx for the land-based piece. I think, Felicia, if I caught it right, if you were thinking about project capital or maybe an opening in 2028 and then a potential next project or land-based conversion being in 2030, would that directionally imply something like $100 million of project capital a year? Again, not trying to hold you to guidance and appreciate these numbers can be lumpy, just trying to think about how you're thinking about the phasing of cash flow.

Speaker #3: Again, not trying to hold you to guidance and appreciate these numbers can be lumpy, but just trying to think about how you're thinking about the phasing of cash flow.

Speaker #5: Yeah, like Jay said, you know, just to repeat, well, for our future projects, we will probably have one a year. You know, it's hard to talk about, you know, is it not going to be 100 million dollars a year because the build-outs will intersect.

Felicia Hendrix: Yeah, like Jay said, just to repeat, well, for our future projects, we will probably have one a year. It's hard to talk about, is it not going to be $100 million a year because the build-outs will intersect. I think that if you look at what our project CapEx is in 2026, that's probably a good proxy to use for estimates going forward.

Speaker #5: So you know, I think that if you look at what our Project CapEx is in 2026, that's probably a good proxy to use for estimates going forward.

Jay Snowden: That might be a little bit on the high side, just because you have multiple coming in at the same time.

Speaker #2: Maybe a little bit. That might be a little bit on the high side, just because we have multiple coming in at the same time.

Speaker #2: But.

Speaker #5: Yeah, there's some crossover. So it's, you know, it's again in terms of staging them. But if you think about, you know, if you want to just build out your model, you know, maybe plus or minus—give or take—what we said for this year, which is 180.

Felicia Hendrix: Yeah, there's some crossover. Again, in terms of staging them, if you think about if you want to just build out your model, maybe plus, give or take what we said for this year, which is $180.

Speaker #3: Great. Thank you both.

Shaun Kelley: Great. Thank you both.

Speaker #2: Thanks.

Jay Snowden: Thanks.

Speaker #3: Thank you. We'll take our next question from John DeCree with CBRE. Please go ahead. Your line is open.

Operator: Thank you. We'll take our next question from John DeCree with CBRE. Please go ahead. Your line is open.

Speaker #6: Oh, hi. Good morning, everyone. I wanted to ask Jay about the promotional environment. I think in a prior question you briefly touched on some of the pressures from competitiveness, and supplies starting to fade.

John DeCree: Hi. Good morning, everyone. I wanted to ask Jay about the promotional environment. I think in a prior question you've briefly touched on some of the pressures from competitiveness supply starting to fade. This time last year, we were talking about some of your competitors kind of elevating their promotional intensity. From where you sit today as it stands, have you seen anything change in the retail business on the promotional front? Has that subsided a little bit? We've seen broadly pretty strong regional numbers across the board. Curious how the environment sits today.

Speaker #6: But this time last year, you know, we were talking about some of your competitors kind of elevating their promotional intensity. From where you sit today, as it stands?

Speaker #6: Have you seen anything change in the retail business on the promotional front? Is that subsided a little bit? You know, we've seen broadly pretty strong regional numbers across the board.

Speaker #6: So, you know, curious how the environment sits today.

Speaker #2: Yeah, I would say the regional gaming environment is as healthy as I've seen it in a really long time. There really aren't any markets that stand out as being irrational from a marketing reinvestment standpoint right now.

Jay Snowden: Yeah. I would say the regional gaming environment is as healthy as I've seen it in a really long time. There really aren't any markets that stand out as being irrational from a marketing reinvestment standpoint right now. Baton Rouge maybe a little bit just because you have a new opening there, but we have a high-end property there that targets more of a mid-high worth customer. We're, I think, holding up quite well in Baton Rouge. As you look across the rest of the portfolio, those GGR state-reported numbers every month are not being driven by higher levels of reinvestment. You see our margin profile in Q2, growth year-over-year, 55 bps.

Speaker #2: Baton Rouge maybe a little bit just because you have a new opening there, but we have a, you know, high-end property there that targets more of a mid-high worth customer.

Speaker #2: And so we're, I think, holding up quite well in Baton Rouge. But as you look across the rest of the portfolio, those GGR state-reported numbers every month are not being driven by higher levels of reinvestment.

Speaker #2: You see our margin profile in the second quarter—growth year over year, 55 bps. We anticipate growing our margins again in the second half of the year by 50 bps, which would tell you we have confidence in our ability to execute, and our teams are doing an amazing job, because it's not one thing.

Jay Snowden: We anticipate growing our margins again H2 by 50 bps, which would tell you we have confidence in our ability to execute, our teams are doing an amazing job. It's not one thing. The teams, both interactive, retail, everyone's focused on driving efficiencies and doing more with less and being really smart on every marketing dollar spent to make sure we've got a strong return on that dollar and challenging areas of the cost structure that maybe would've been considered more fixed costs in the past. I couldn't be happier with the performance across the company H1. Everyone's laser-focused on continuing to do as good, if not better, in H2.

Speaker #2: The teams—both Interactive and Retail—everyone's focused on, you know, driving efficiencies and doing more with less, and being really smart on every marketing dollar spent to make sure we've got a strong return on that dollar.

Speaker #2: And challenging areas of the cost structure that maybe would have been considered more fixed costs in the past. So I couldn't be happier with the performance across the company the first half of the year.

Speaker #2: And, you know, everyone's laser focused on continuing to do as good, if not better, in the second half of the year.

Speaker #6: Thanks for that, Jay. And if I could follow up on the M&A question earlier, kind of based on what you've all seen so far and learned from on-the-channel states, you've mentioned a couple of boxes that maybe M&A would need to check.

John DeCree: Thanks for that, Jay. If I could follow up on the M&A question earlier. Based on what you've all seen so far and learned from omni-channel states, you've mentioned a couple of boxes that maybe M&A would need to check. Where does having retail and digital presence kind of rank in the importance of future M&A? I guess, Canada could be an example where you have a pretty strong digital position but no retail exposure yet. Is that an interesting enough opportunity with the cross-sell that you've seen thus far, that maybe some of those markets, where you have digital but not retail are uniquely interesting to you?

Speaker #6: Where does having retail and digital presence kind of rank in the importance of future M&A? And I guess, you know, Canada could be an example where you have a pretty strong digital position, but no retail exposure yet.

Speaker #6: Is that, you know, an interesting enough opportunity that the cross-sell that you've seen thus far that maybe some of those markets where you have digital but not retail are, you know, uniquely interesting to you?

Speaker #2: Yeah, I would say, John, that what really matters in that case of you want to see omnichannel work is you need iCasino and land-based casino.

Jay Snowden: Yeah, I would say, John, that what really matters in that case, if you want to see omni-channel work, is you need iCasino and land-based casino. Just having sports betting as the digital offering and land-based, you're not going to see as much crossover. Yeah, I would circle the states that are either already live with iCasino or states that are maybe most likely to go next. That would certainly check maybe a smaller box from a strategic value perspective for us. We're interested at some point of getting into states maybe that we're not in, or there's markets that maybe we have smaller position than we would like to have. Those would be interesting.

Speaker #2: Just having sports betting as the digital offering in land-based, you're not going to see as much crossover. So yeah, I would circle the states that are either already live with iCasino or states that are maybe likely most likely to go next.

Speaker #2: That would certainly check, you know, maybe a smaller box from a strategic value perspective for us. We certainly would want to, you know, we're interested down, you know, at some point of getting into states maybe that we're not in.

Speaker #2: Or there's markets that maybe we have, you know, smaller position than we would like to have. And so those would be interesting. But again, we're just, we're not going to, we're not chasing what will probably wait for inbounds on the assets that will be available through some of the M&A that's taking place in the space, at least for the next 12 months.

Jay Snowden: Again, we're not chasing. We'll probably wait for inbounds on the assets that'll be available through some of the M&A that's taking place in the space, at least for the next 12 months. It would have to be right price, right location, and potentially omni-channel, to your question.

Speaker #2: And it would have to be right price, right location, and potentially omnichannel to your question.

Speaker #6: Awesome. That's really helpful, Jay. Thank you for this time.

John DeCree: Awesome. That's really helpful, Jay. Thank you for the time.

Speaker #2: Thanks, John.

Jay Snowden: Thanks, John.

Operator: Thank you. We'll take our next question from Steven Pizzella with Deutsche Bank. Please go ahead. Your line is open.

Speaker #3: Thank you. We'll take our next question from Steve Pizzella with Deutsche Bank. Please go ahead, your line is open.

Speaker #4: Hey, good morning. Thank you for taking our question. Just on the 4Q Interactive profitability, can you help us bridge the drivers of that, whether from Alberta, iCasino, OSB margins?

Steven Pizzella: Hey, good morning. Thank you for taking our question. Just on the Q4 interactive profitability, can you help us bridge the drivers of that, whether from Alberta, iCasino, OSB margins? How should we think about that bridge?

Steve Pizzella: Hey, good morning. Thank you for taking our question. Just on the Q4 interactive profitability, can you help us bridge the drivers of that, whether from Alberta, iCasino, OSB margins? How should we think about that bridge?

Speaker #4: How should we think about that bridge?

Speaker #2: In terms of profitability through the end of the year, I mean, clearly it's going to be casino-driven, and Canada-driven. Those are our big focuses.

Jay Snowden: In terms of profitability through the end of the year? Clearly it's going to be casino-driven and Canada-driven. Those are our big focuses, and then operating profitably in OSB states and making sure that we're focused on high-value customers, and retaining the ones that we have today that are of high value. Canada, casino, and then profitably operating in OSB states. If you look at our contribution margin by category that Aaron just laid out, they're all three moving in the right direction quickly in terms of quote, unquote, "profitability," at least at the contribution margin level. That is the team's focus right now. That's the mission, and we're on a really good path.

Speaker #2: And then operating profitably in OSB states, making sure that we're focused on high-value customers and retaining the ones that we have today who are of high value.

Speaker #2: So, Canada, casino, and then profitably operating in OSB states. Yeah. I mean, if you look at our contribution margin by category that Aaron just laid out, they're all three moving in the right direction quickly in terms of, you know, quote-unquote profitability—at least at the contribution margin level.

Speaker #2: And that is the team's focus right now. That's the mission, and we're on a really good path.

Speaker #4: Okay. Thank you.

Steven Pizzella: Okay, thank you.

Steve Pizzella: Okay, thank you.

Speaker #3: We'll take our next question from Trey Bowers with Wells Fargo. Please go ahead, your line is open.

Operator: We'll take our next question from Trey Bowers with Wells Fargo. Please go ahead. Your line is open.

Speaker #5: Hey, guys. Just to continue to kind of beat the drum on M&A, is a strict property, you mentioned strategically necessary, is a strict property something that you feel like the customer base is asking for if one were to become available?

Trey Bowers: Hey, guys. Just to continue to kind of beat the drum on M&A. You mentioned strategically necessary. Is a strip property something that you feel like the customer base is asking for if one were to become available? Then two, against that, you guys highlighted the free cash flow yield of the stock for 2027, and as you think about any M&A, does that M&A need to produce a return that's better or at least equal to buying your own stock at this point? Are there strategic points to it that would make you guys say, "Well, we'll do something that might not have that kind of level of cash on cash return"? Thanks.

Speaker #5: And then, to go against that, you guys highlighted the free cash flow yield of the stock for '27. As you think about any M&A, does that M&A need to produce a return that's better than, or at least equal to, buying your own stock at this point?

Speaker #5: Or are there, you know, strategic points to it that would make you guys say, well, we'll do something that might not have that kind of level of cash on cash return?

Speaker #5: Thanks.

Speaker #2: I mean, it certainly, Trey, needs to be close to those levels. There might be a strategic reason why you would do something where it doesn't have to be exact, or it could be, you know, a rounding up kind of thing.

Jay Snowden: It certainly, Trey, needs to be close to those levels. There might be a strategic reason why you would do something that it doesn't have to be exact or it could be round up kind of thing. Like I said earlier, we have very compelling options from a capital allocation perspective, and that's a good position to be in. I'd like for the share buybacks option to be less attractive because our free cash flow yield is lower. Hopefully it will be soon. I would say overall, M&A, we're going to compare that to what does share buybacks look like for us, what does continuing to delever look like? The growth projects internally have very nice cash on cash returns next to them as well.

Speaker #2: But, you know, we have like I said earlier, we have very compelling options from a capital allocation perspective. And that's a good position to be in.

Speaker #2: I'd like for the share buyback option to be less attractive because our free cash flow yield is lower—and hopefully, it will be soon.

Speaker #2: But I would say overall, you know, M&A, we're going to compare that to what a share buyback looks like for us, what does continuing to delever look like, the growth projects internally have very nice cash on cash returns next to them as well.

Speaker #2: So, you know, it's going to, M&A is going to have to really stand out against all three of those options. And that makes it a pretty high bar.

Jay Snowden: M&A's going to have to really stand out against all three of those options, and that makes it a pretty high bar. I would say for Las Vegas, it would probably be in that category of would our customer love if we had a Las Vegas Strip location? I would say yes, but with the caveat that not any location, not any product, and we're certainly not interested in acquiring an asset that's going to require another $400, $700 million CapEx investment because it's got deferred maintenance. It would have to check a lot of boxes. We'd love to be on the Las Vegas Strip at the right time, but it would have to be right price, right asset, and who knows what'll come on the market, but that would be some of the criteria.

Speaker #2: And I would say for Las Vegas, it would probably be in that category of, would our customer love it if we had a Las Vegas Strip location?

Speaker #2: I would say yes, but with the caveat that not any location, not any product, and we're certainly not interested in acquiring an asset that's going to require another $400 million, $700 million capex investment because it's got deferred maintenance.

Speaker #2: So it would have to check a lot of boxes. We'd love to be in the Las Vegas strip at the right time, but it would have to be right price, right asset, and, you know, who knows what will come on the market, but that would be some of the criteria.

Speaker #5: And I guess just a more micro question in terms of the numbers from the West and the Amazor. There was some margin pressure there and a little less flow through.

Trey Bowers: I guess just a more micro question in terms of the numbers from the West and the M Resort. There was some margin pressure there and a little less flow through. Is that just kind of ongoing startup costs, or is there anything about that property that we should think about kind of a different margin profile than what you currently have in that segment? Thanks.

Speaker #5: Is that just kind of ongoing startup costs or is there anything about that property that we should think about kind of a different margin profile than what you currently have in that segment?

Speaker #5: Thanks.

Jay Snowden: Thank you for asking that question. I probably should have been more proactive. If you look in the investor deck, it's a footnote, which is why I'm sure no one has seen it yet. There's some one-time accounting adjustments in Q2, and I'll quickly walk you through what those are. Q2 of this year, we had basically offsetting accounting adjustments. We had a $2 million, what we call a good guy accounting adjustment that hit the Midwest region. You can deduct $2 million from the EBITDAR produced at the Midwest and calculate what the margin was. It's very close to what it was last year when you do that. Obviously, we had strong top-line growth, but we were still ramping Joliet, and we just opened Aurora, that's why the margin hasn't really improved there yet, but it's pretty close to flat.

Speaker #2: Thank you for asking that question. I probably should have been more proactive. If you look in the investor deck, it's a footnote, which is why I'm sure no one has seen it yet.

Speaker #2: There's some one-time accounting adjustments in the second quarter, and I'll quickly walk you through what those are. So second quarter of this year, we had basically offsetting accounting adjustments.

Speaker #2: We had a $2 million, what we call, good guy accounting adjustment that hit the Midwest region. So you can deduct $2 million from the EBITDA produced at the Midwest and calculate what the margin was.

Speaker #2: It's very close to what it was last year when you do that. And, obviously, we had strong top-line growth, but we were still ramping Joliet and we had just opened Aurora.

Speaker #2: So that's why the margin hasn't really improved there yet, but it is pretty close to flat. In the West, we had a $2 million negative accounting adjustment this year.

Jay Snowden: In the West, we had a $-2 million accounting adjustment this year. In addition, in the West, last year, we had a $+2 million accounting adjustment. When you're looking at the West, you really need to sort of net out that it should have been $2 million better than what you see. Last year's EBITDAR number was really 2 years lower than what you see. That's how it plays out in the West. When you do that math, you'll see that the margins in the West were actually up 10 basis points on a year-over-year basis. We're feeling really good about M Resort's ramp. It's not like we're discounting the hotel to fill rooms. Thank you for asking the question. We did put that in the footnote. Didn't want to make a real big deal of it because it's accounting adjustments.

Speaker #2: In addition, in the West, last year, we had a $2 million positive accounting adjustment. So when you're looking at the West, you really need to sort of net out that it should have been $2 million better than what you see.

Speaker #2: And last year's EBITDA number was really two years lower than what you see. So that's how it plays out in the West. And when you do that math, you'll see that the margins in the West were actually up 10 basis points on a year-over-year basis.

Speaker #2: So we're feeling really good about M Resort's ramp. It's not like we're, you know, discounting the hotel to fill rooms, and so thank you for asking the question.

Speaker #2: We did put that in the footnote. Didn't want to make a real big deal of it because it's accounting adjustments. They wash out for the second quarter this year.

Jay Snowden: They wash out for Q2 this year. There's nothing to consider as being material, but it does move the pieces between the different regions.

Speaker #2: There's nothing to consider as being material, but it does move the pieces between the different regions.

Speaker #5: Really helpful. Thanks.

Trey Bowers: Really helpful. Thanks.

Speaker #2: Thanks, Trey. Tasha, why don't we do one more question?

Jay Snowden: Thanks, Trey. Tasha, why don't we do one more question?

Operator: Great. We'll take our last question from Daniel Guglielmo with Capital One Securities. Please go ahead. Your line is open.

Speaker #3: Great. We'll take our last question from Daniel Guglielmo with Capital One Securities. Please go ahead. Your line is open.

Speaker #6: Hi everyone. Thank you for taking my question. Yeah, just one for me. On Aurora, I know the outlet mall is a big draw for people to that area.

Daniel Guglielmo: Hi, everyone. Thank you for taking my question. Yeah, just one from me. On Aurora, I know the outlet mall is a big draw for people to that area. Is there a seasonal cadence with people traveling there to shop that is maybe different from the traditional trends of regional gaming in Illinois?

Speaker #6: Is there a seasonal cadence with people traveling there to shop that is maybe different from the traditional trends of a regional gaming in Illinois?

Speaker #2: I would say we'll learn a lot. Obviously, I'd imagine that the fourth quarter, it's probably going to be really, really busy, which is great because that's typically a, you know, the slowest quarter of the year for us in the gaming business.

Jay Snowden: I would say we'll learn a lot. Obviously, I'd imagine that the Q4, it's probably going to be really, really busy, which is great because that's typically the slowest quarter of the year for us in the gaming business. With a lot of shoppers at the Chicago Premium Outlets there, I would expect that we're going to see a lot of new customers coming through and a lot of repeat visitation throughout the holiday period, November, December. I would say, Dan, give us a little bit of time and we'll share our learnings with you guys real-time. I would expect it to be good for the Q4 and probably more even for the other quarters of the year.

Speaker #2: But with a lot of shoppers at the Chicago Premium Outlet there, I would expect that we're going to see a lot of new customers coming through and a lot of repeat visitation throughout the holiday period, November, December.

Speaker #2: So I would say, Dan, give us a little bit of time and we'll share our learnings with you guys in real time. I would expect it to be good for the fourth quarter, and probably more even for the other quarters of the year.

Daniel Guglielmo: Great. Thanks.

Speaker #6: Great. Thanks.

Speaker #2: Okay. Thanks, Dan. And thank you everybody for joining our call. We look forward to speaking with you again in a few months to cover the third quarter earnings.

Jay Snowden: Okay. Thanks, Dan. Thank you everybody for joining our call. We look forward to speaking with you again in a few months to cover the Q3 earnings. Have a great one.

Speaker #2: Have a great one.

Operator: This concludes today's meeting. We appreciate your time and participation. You may now disconnect.

Q2 2026 PENN Entertainment Inc Earnings Call

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