Title

Presentation

PENN Entertainment, Inc. misses on earnings expectations. Reported EPS is $-0.02 EPS, expectations were $0.05.

Operator: Thank you for your patience. Your conference will begin in approximately two minutes. Please continue to stand by. Greetings, and welcome to the PENN Entertainment, Inc. First Quarter 2026 Earnings Call. I would now like to turn the conference over to Joseph Jaffoni, Investor Relations. Please go ahead.

Joseph Jaffoni: Thank you, Chelsea. Good morning, and thank you for joining PENN Entertainment, Inc.’s 2026 first quarter conference call and webcast. We will get to management’s comments and presentation momentarily as well as your questions and answers. During Q&A, we ask that everyone please limit themselves to one question and one follow-up. I will now review the safe harbor disclosure. 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 is now my pleasure to turn the call over to PENN’s CEO, Jay Snowden. Jay, please go ahead.

Jay Snowden: Thanks, Joe. Good morning. I am pleased to report PENN’s diversified retail portfolio delivered another solid quarter, as Retail segment adjusted EBITDAR grew year over year. Our property performance was encouraging across the portfolio with particular strength in the West segment, reflecting the ongoing ramp of M Resort’s new hotel tower and impressive results from the team at Ameristar Blackhawk. In the Midwest segment, we delivered strong revenue and EBITDAR growth led by our properties in the St. Louis market as well as continued momentum at the new Hollywood Joliet in Illinois. Results thus far from our first two development projects provide us continued confidence in the anticipated success from the upcoming openings of the Hollywood Columbus hotel tower on June 12 and the new Hollywood Casino Aurora on June 24, in addition to our new Council Bluffs relocation scheduled to open in 2028, all of which are subject to final regulatory approvals.

As we have said previously, we anticipate our four development projects will generate 15% plus cash-on-cash returns on our aggregate project cost of $800 million, which is net of the 50% contribution from the City of Aurora. Overall, increases in both visitation and spend per visit companywide supported year-over-year theoretical revenue growth across all of our rated worth segments, representing the largest quarterly increase in three years for the Retail segment. Looking ahead, we continue to see solid trends into April despite higher gas prices and ongoing geopolitical uncertainty. Importantly, we are also beginning to see improving trends in those regions where we are anniversarying new supply, particularly in Bossier City, Louisiana, and Council Bluffs, Iowa.

Turning to the Interactive segment, we saw significant adjusted EBITDA improvement of approximately $78 million year over year in Q1 driven by nearly 15% year-over-year growth in iCasino revenue and approximately 5% year-over-year growth in online sports betting revenue, and a significant reduction in marketing spend coupled with continued cost management. This marks the first full quarter under our realigned digital strategy, which is focused primarily on our U.S. iCasino states and Canada, while operating under a more efficient cost structure overall. We are continuing to see positive trends in Ontario, including year-over-year growth in average monthly active users, online sports betting revenue, and iCasino revenue. These results reflect the ongoing strength of theScore Bet brand in Canada and our realigned digital strategy, which we think bodes well for the anticipated July 13 launch of regulated iCasino and online sports betting in the province of Alberta.

theScore Bet has been approved as a registered iGaming operator by the AGLC and preregistration efforts have begun in the province. We expect our Alberta launch to result in a $20 million loss in 2026, within the range we previously provided on our quarterly earnings call in February. As Felicia will discuss in a moment, the resulting change to our prior breakeven guidance for 2026 Interactive adjusted EBITDA is entirely attributable to this $20 million investment in Alberta. Said differently, outside of Alberta, our breakeven Interactive guide for the year is unchanged. Slide five of our investor presentation underscores our continued focus on our major pillars of growth as our Retail and Interactive segments, along with our recently optimized corporate structure and maintenance CapEx spend, drive significant improvement in free cash flow generation in 2026, which in turn strengthens our balance sheet as leverage declines and sets us up for an even stronger free cash flow story in 2027.

I will now turn it over to Felicia.

Felicia Kantor Hendrix: Thanks, Jay. Our Retail segment generated revenues of $1.4 billion, adjusted EBITDAR of $471.4 million, and segment adjusted EBITDAR margins of 33.2%. Our adjusted EBITDAR results benefited from a one-time favorable adjustment related to a legal accrual, which nets out to a $5 million benefit primarily in the South region. As it relates to 2026 guidance, based on our better-than-expected first quarter Retail results, we are increasing the midpoint of our 2026 Retail revenue and adjusted EBITDAR guidance by $20 million and $12 million, respectively, to reflect the upside generated in the quarter. As a result, our revised guidance ranges are $5.73-$5.86 billion for revenue and $1.88-$1.98 billion for adjusted EBITDAR.

As you think about the second quarter, as Jay mentioned, we continue to see stable trends carrying into April. While this is the case, as we noted on our February earnings call, we do expect some temporary disruption in the quarter, as the legacy Aurora riverboat will be closed for about two weeks due to regulatory requirements prior to opening the new Hollywood Casino Aurora on June 24. The 2026 Retail segment should benefit from the contribution of all four of our development projects, and we expect adjusted EBITDA to grow year over year in the mid-single digits. Our Interactive segment in the first quarter generated revenues of $358.3 million, including a tax gross-up of $185.8 million, and an adjusted EBITDA loss of $10.8 million. We now expect 2026 Interactive revenues of approximately $1.6 billion, inclusive of an estimated tax gross-up of about $820 million, and an adjusted EBITDA loss of $20 million, which, as Jay just mentioned, is entirely attributable to the Alberta launch.

On the revenue side, our revised guidance now takes into account the online sports betting promotional spending associated with launching in a new market, particularly in the third quarter, as well as further fine-tuning our online sports betting expectations for the year. Importantly, we are also seeing better-than-expected performance in stand-alone iCasino in the U.S. and in Canada, which is somewhat offsetting the factors I just mentioned, and is consistent with our Interactive segment strategic priorities. We continue to expect small losses in the second and third quarter, but note that the loss in the third quarter will be the largest loss of the year due to the Alberta launch. We expect 2027 to be profitable in the Interactive segment.

Overall, our first quarter 2026 Interactive segment performance and outlook reflect the benefits of our increased emphasis on U.S. iCasino states and Canada, as well as our more rationalized and nimble cost structure. We expect the “Other” category adjusted EBITDAR to be negative in 2026, unchanged from our original guidance back in late February. The table on page eight 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 $95 million CapEx in the quarter, $65 million was project CapEx, primarily related to our four development projects. As we remain focused on delevering and strengthening our balance sheet, in March we issued $600 million of unsecured notes due 2031 at an interest rate of 6.75% and used the proceeds to repay borrowings under our revolver.

Accordingly, we ended the first quarter 2026 with total liquidity of $1.7 billion inclusive of $[inaudible] in cash and cash equivalents. Subsequent to quarter end, on April 16, we refinanced our $1 billion revolving credit facility and refinanced approximately $447 million of our Term Loan A. In June, we expect to receive approximately $225 million in funding from GLPI for the new Hollywood Casino Aurora, which opens on June 24, and the remaining $21 million from the City of Aurora by the end of the year. We have elected not to take GLPI capital in connection with the construction of our Hollywood Columbus hotel tower, which opens June 12. As we highlight on slide five of our earnings deck, we expect to delever by at least one full turn for lease-adjusted net leverage and by at least two full turns for traditional net leverage at year-end 2026, driven by strong free cash flow generation throughout the year and more optimized CapEx spend.

Total 2026 CapEx is now expected to be $420 million, down from our prior guidance of $445 million, and that total includes $200 million of project CapEx, down from our prior guidance of $225 million, and $220 million of maintenance CapEx, which is unchanged. The reduction in project CapEx reflects a timing shift moving from 2026 to 2027 for the Council Bluffs relocation project, which is now expected to be completed in 2028. Importantly, this is only a change in our planned start date with no changes to scope or budget. We continue to expect total cash payments under our triple-net leases to be $1 billion in 2026, and for 2026 cash interest expense, net of interest income, we now project $150 million, reflecting our $600 million notes offering and current interest rates.

For cash taxes, our outlook is unchanged. We do not expect to be a cash taxpayer in 2026 given the favorable tax deductions enabled by the one big beautiful bill in addition to our acquired NOLs and various tax credits. Our basic share count at the end of the first quarter was 1.334 billion shares. We also have 4.5 million potential dilutive shares from the remaining convertible notes stub and about 1 million dilutive shares from RSUs and stock options. I will now turn it back to Jay.

Jay Snowden: Thanks, Felicia. I said during our last earnings call that 2026 would be a year of strong execution for PENN. While we have the rest of the year still to deliver, I am happy to report we are off to a great start. Looking ahead, we will remain laser focused on improving our free cash flow generation while optimizing our corporate overhead and remaining disciplined with our capital. With that, can we please open the line for our first question, Chelsea?

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Operator: As a reminder, that is star one to ask a question. We do ask that you please limit yourself to one question and one follow-up. Our first question will come from Barry Jonas with Truist Securities. Please go ahead.

Barry Jonas: Hey, guys. Good morning. Jay, if we look outside of your development projects, what do you think is driving your strong retail trends? I think the consumer is benefiting from higher tax refunds, but as you mentioned, you do have higher gas prices and general macro uncertainty to deal with. Thanks.

Jay Snowden: I think it is really what you laid out, Barry. It is hard for us to know exactly what the drivers are. There are definitely puts and takes. Gas prices are higher, although, as I have said in the past, as you look at regional gaming over the last several decades, the economic indicator that most closely correlates to behavior on regional gaming is employment, and employment continues to be a really good story in the U.S. Gas prices may be a little bit of noise and a headwind. The vast majority of our customers in the regional portfolio come within a 30-minute drive, so you are probably not making a decision on the price of gas as to whether you are visiting a casino once every week or two weeks or once a month, because it is not going to cost you much to get there.

I would say we are seeing some benefit from tax refunds being higher year over year by what I read as 11%-12%, which is helpful, and I think we will probably continue to see and feel that. April feels very much through the first three weeks like a continuation of Q1, which is good. We are not seeing any cracks in the armor. We are feeling really good as we look out for the remainder of the year. As it relates specifically to PENN and our portfolio, we are now fully anniversaryed around the Bossier City new supply which opened in February. You probably feel an impact through maybe March, but now that we are here in April, we are starting to see some nice trends on a year-over-year basis out of Bossier City. In Council Bluffs, Iowa, we saw incremental supply hitting the Nebraska market across the state line probably through about now last year, so by the time you get to the second half of the year, we are feeling pretty good.

You do not see any new supply really impacting us. There is a little bit of renovation competition in Baton Rouge, but that is not going to impact us by much given our asset quality there. We are going to have all four of our growth projects up and running — two of them fully ramping with M Resort hotel and Joliet, and two just opened. Learnings we have from the hotel expansion at M and the water-to-land conversion at Joliet are going to make the Columbus and Aurora ramps probably a bit stronger and faster. It still will take time, but there are learnings we are applying there. Overall, we are feeling good about the consumer generally, and we are feeling really good about the setup for PENN specifically as we move throughout the remainder of the year.

Barry Jonas: Great. And then just for a follow-up, maybe for Felicia. I think your free cash flow targets look very strong this year. How confident are you in hitting them and maybe growing off these levels into 2027 and beyond? And then just sneaking in, should we think about potential uses? Thank you.

Felicia Kantor Hendrix: We feel confident in our guidance. As Jay just said, we feel good about the consumer, generally and specifically, and we have talked about our pillars. One of those pillars of growth is increasing our free cash flow production going forward, especially given our right-sized CapEx and the resizing of our overall corporate structure. We are in a good place. We continue to improve in our Interactive segment, generating smaller losses throughout the year and, as we get into the fourth quarter, generating profitability. So again, we feel good about our free cash flow profile and growth looking forward. As we get into 2027 and think about our return of capital, we are obviously looking at share repurchases and continuing to delever.

As you can see on slide five of our earnings slides this morning, we expect to generate lease-adjusted net leverage in the ranges of 5.3x to 5.7x this year — a significant decrease from 2025 — and our traditional net leverage over two turns lower in 2026. We expect that to continue to decrease into 2027. Then we are in a very good place as we look at our typical uses of capital inclusive of share repurchases, investing in our continued growth pipeline, and continued delevering.

Jay Snowden: I would just take a step back. We are going to generate $3 plus of free cash flow per share this year. Our stock is trading just under $15 as of yesterday. So you have a 20% free cash flow yield. We have a tremendous amount of confidence in the ability to deliver on that this year. In every category, the story gets better in 2027. We are not going to guide yet for 2027, but you should assume everything looks better, which means that free cash flow story and the free cash flow yield are even more compelling as you look out to what is now not that far away given we are in April 2026.

Operator: Our next question will come from Brandt Montour with Barclays. Please go ahead.

Brandt Montour: Good morning, everybody. Thanks for taking my question. I just want to start off with digital. Was hoping you could talk, Jay, a little bit more about how that business progressed throughout the first quarter. Presumably, you continue to build iGaming stand-alone momentum and perhaps some further cost rationalizations. But we did see the industry iGaming growth slow in March. How would you characterize how your contribution margin exited the first quarter in terms of your trajectory toward breakeven?

Jay Snowden: Happy to, Brandt. The backdrop for PENN is that we have really shifted our focus the last six months, and certainly throughout Q1, from the OSB-only states in the U.S. to much more of a focus — prioritization of OpEx and customer acquisition — on Canada as well as the states in the U.S. that offer both iGaming and OSB. From our perspective, the progression in the quarter looked quite good. February was the one softish month we had; January was solid; March was solid. We continue to see really good momentum on the stand-alone Hollywood Casino side of things. Overall, we are feeling comfortable. We are focused in the right areas. There is some pressure on customer acquisition costs as it relates to U.S. sports betting — that has been well covered — because of prediction markets and others in online sports betting stepping up to respond to that.

That is not really a big focus of ours right now. Our focus is on Canada and getting ready for the Alberta launch. We feel really good about the setup there. We have done a lot of analysis on what worked for us with the Ontario launch and what maybe did not. We are doing more of the right things, and we expect to deliver market share results in Alberta that look very similar to what we have generated in Ontario, where we continue to have momentum. Our story may be a bit unique in that Canada is really driving a lot of our results, Hollywood stand-alone iCasino in the U.S. is driving results, and OSB is maybe less important overall to the Interactive story. We are feeling good about the momentum we have internally at PENN.

Aaron LaBerge: Canada growth in March was very strong, and our stand-alone casino growth is very healthy. We are setting record revenues there. Growth and acquisition continue to be strong. As Jay said, we are seeing some softness on the OSB side, but we are offsetting that with disciplined spend and reinvestment in the areas that matter. Casinos — specifically stand-alone — and Canada both look really good going out of this quarter and into last quarter.

Jay Snowden: Lastly, our retention in the U.S. post rebrand is exactly where we expected it to be. It has been very strong with our higher-worth customers, which has been the primary focus. We have lost some of the unprofitable and lower-worth customers — that was by design as we pulled back on reinvestment in some key strategic areas. We feel really good about having a handle on everything, which is important as we look out through the remainder of the year. When we put out the original guide for Interactive, we had some wiggle room on marketing spend, reinvestment, and cost structure, and we can make adjustments in real time, which is what we did in Q1 and will continue to do throughout the year. You will see really nice momentum in Canada and the U.S. as we close out the year with a profitable fourth quarter.

Brandt Montour: That is great. Thanks for that. Just following on to that, in the deck, I think it says marketing spend was down over 65%. We were looking for 50%. Is that efficiencies you found in the quarter or timing? How should we think about the rest of the year in terms of that extra savings you outlined for the first quarter?

Jay Snowden: Aaron, do you want to take the first stab?

Aaron LaBerge: The decrease in marketing spend is also inclusive of what we are spending with ESPN. The rest is focused efficiency across the markets that are working, as we just talked about. We were spending a lot more in OSB-only states, which were not as profitable for us, so we have shifted that. We are focused in hybrid states that have both iCasino and sports betting. Stand-alone is showing a lot of great momentum, so we are spending there. Canada is starting to pick up as well, so we are spending there. We have a lot of levers to move around to make sure our marketing is working in the best way for us, and that is what we have been doing.

Jay Snowden: There is nothing really one-time driving that decrease year over year, Brandt. It is us continuing to get better and smarter and be more judicious in terms of where we are allocating marketing dollars every week, every month, every quarter. That will continue. There will be a little bit of noise in Q3 with the Alberta launch, so I would not bake the Q1 decrease in for the rest of the year because of third-quarter noise. We feel really good about having a handle on cost structure, marketing, reinvestment, delivering the best returns, where to invest in customer acquisition, and where to pull back. The focus is on getting this to breakeven or better as we move throughout the remainder of the year and into 2027.

Aaron LaBerge: We will continue to monitor results and invest where we see opportunity and where it is effective throughout the year.

Operator: Our next question will come from Daniel Politzer with JPMorgan. Please go ahead.

Daniel Politzer: Hey. Good morning, everyone. Thanks for the question. First, on the regional gaming landscape, there has been news flow on potential M&A. Where do you stand as you think about your balance sheet and leverage improving relative to potential opportunities if there were assets to come on the market or fall out of any large transaction?

Jay Snowden: We are staying close to the headlines as you are, and we will see what does or does not develop. I feel better about our balance sheet today than I have in years, and that is great. As you look out to the end of the year, for us to have our lease-adjusted net leverage back into the mid-5s — the midpoint of what we have here is 5.5x, maybe a little better — and traditional net leverage in the low-2s, then look out to 2027, where if you were looking at doing something from an M&A perspective, it probably takes you out to 2027 given timelines in our highly regulated industry. We would be looking at leverage levels that would be lower — low-5s on a lease-adjusted basis and into the high-1s from a traditional net leverage perspective.

We are going to have more capacity. The history of PENN M&A is very accretive given our overall operating structure. We have the industry’s best tax-adjusted EBITDAR margins, a great asset portfolio, and a very valuable database that can help improve results of assets we acquire. We would definitely be interested in looking at the right asset in the right market at the right price. We are not placing proactive calls, but if assets on the market are attractive, we will take a look.

Daniel Politzer: Thanks. Then turning to Interactive. In the quarter, your iCasino net revenue is up 15% and online sports book up 5%. Over the course of the year, it seems likely that iGaming will be up more. Can you put some parameters around how to think about growth through each of those segments for the full year?

Jay Snowden: We obviously have assumptions built out in our model and our guide. You will definitely see higher growth from iCasino than OSB. It also depends on market growth. I would expect us to be at or above market growth in iCasino. For OSB, on a net basis, probably close to where market growth is — handle definitely lower — but on a net revenue basis, at the market is probably the right way to think about it.

Operator: Our next question will come from Joseph Stauff with Susquehanna. Please go ahead.

Joseph Stauff: Thanks. Good morning, Jay. I wanted to ask if you could give maybe an update on Joliet and the progress thus far in the months and the outlook in terms of the ramp. And then the second question is on Alberta. I know the launch date was moving around, but assuming early July, what are you allowed to do going into that launch to leverage your brand in Canada, especially around the NHL playoffs and with Edmonton being about a third of the population?

Jay Snowden: I will take Joliet and then Aaron can respond to Alberta. We continue to feel really good about Joliet. Every month, we feel a little bit better. We are seeing strong results on the revenue side. You saw the slide where we are continuing to break records from a gaming revenue and non-gaming revenue perspective every quarter. The end of the quarter in March was our best month ever for Joliet, both in slots and tables. Same thing at M Resort. We feel really good about these investments and our ability to generate incremental revenue and incremental EBITDAR and EBITDA. Based on our learnings for Joliet, by the time we hit the 12-month mark in August, we are going to be feeling pretty good about the margin improvement as well from pre- versus post-, whereas the first six to nine months, revenues are much higher but you are figuring things out on the cost side and you have all of your restaurants and entertainment programs open most days of the week.

Then you start to dial it back with your learnings. We are in that dial-back and optimization phase with Joliet while continuing to see database trends improve. We are very excited about what we are seeing month to date in April, in addition to what we saw in Q1. I think we are right where we expected to be, and it is a good template for what we expect with Aurora, applying those same learnings and a roughly 12-month time frame to ramp. At M Resort, there are a lot of learnings we can apply to our Columbus hotel that is going to open in June as well.

Aaron LaBerge: In Alberta, we feel really good about our launch. TheScore brand in Canada is very strong — it is the number one media sports brand in market. We have as many people on theScore in Alberta as we do in Ontario, so it is very strong. We have a full-scale marketing plan that starts in July. The date is no longer moving around — it is July 13. We will have a full-scale launch then. We are already in market with preregistration. We will be active from a brand and performance marketing perspective. We launched in Ontario and enjoy a very nice market share there today — it is a big part of our gaming business — and we expect to see similar market share in Alberta based on the investments we are going to make.

We have a great partnership with the Jays, which is a national team, and we will lean on that. If you are in Ontario today, you are seeing theScore brand all around the city, and the same will continue in Alberta. We will leverage all of our assets, and we are expecting a very successful launch.

Operator: Our next question will come from Jordan Bender with Citizens. Please go ahead.

Jordan Bender: Hi, everyone. Good morning. It looks like you exited the Washington, D.C. sports betting market. Following the rebrand and now what you see in the business with it settling, any change to philosophy operating in certain states, whether size or tax rates?

Jay Snowden: It is a good question. That is something we are always evaluating. Generally speaking, staying in OSB-only markets — if we can get those to be close to breakeven from a contribution margin perspective — makes sense for us as you think about iGaming eventually passing legislatively in many of these states. Your number one feeder into iGaming is the cross-sell from online sports betting — 60% of our online gaming business in the states that offer both came from online sports betting initiation. That is compelling. If you are not losing money in a state and you have volume of customer activation and retention and you have cultivated relationships, it makes sense to stay in those markets. That is our view, but we will continue to look at each market individually. D.C., we did not have much volume, so it did not make sense for us there. Everywhere else, as of the last time we analyzed, it made sense to stay in the game.

Aaron LaBerge: That is the beauty of having a scale platform. You can launch and operate at an efficiency level that is breakeven or better, and it does not really cost you anything to stay there. D.C. was the only obvious one for us to look at. Currently, there are no plans to change our footprint.

Jordan Bender: Understood. Thanks. Felicia, I think your comments from last call point to sports betting gaming margins maybe being a little bit under what you expected for the quarter. Is it fair to assume there was a couple of million of bad hold in the EBITDA number in 1Q?

Felicia Kantor Hendrix: I think that is fair.

Jay Snowden: We came in at 8.4% versus a structural hold of 9%. That was some of the impact in Q1. Overall, we were pretty close to where we expected to be, so we did not call it out. Generally speaking, March Madness does not hold as well as other sports because you do not have the same same-game parlay volumes that you do with NBA, NFL, and MLB. We were not disappointed, but in Q2 it is more likely to be at that structural hold number of 9% or better depending on how things go for the NBA and NHL playoffs.

Operator: Our next question will come from John DeCree with CBRE. Please go ahead.

John DeCree: Hey. Good morning, everyone. Thanks for taking my questions. Jay, on the progress of an omnichannel strategy, can you talk a little bit about where your iGaming customers are coming from? Is that cross-selling from OSB? Is that activating the retail database? How is that strategy going and how are customers coming into the system?

Jay Snowden: It has been and continues to be a big focus for us, given where the industry is and where it continues to head. Having a digital and a retail relationship with your consumer is absolutely critical — an imperative. We are happy today with our ability to execute on that. Specifically on iGaming, roughly 60% of that business comes directly from online sports betting. In the states where we have a retail footprint — less so New Jersey, more Pennsylvania and Michigan — most of the rest of our business comes from our retail database. Then you have some organic through the brands and performance marketing efforts and customer acquisition investment. Overall, we are continuing to get better. We are continuing to work on our systems to make it a lot more automated, which will be better for the customer experience from an omnichannel perspective.

The ideal scenario — and I do not think we are that far away — is one platform, one app, and one wallet for everything, with full integration to your retail experience on premise. I feel really good about omnichannel execution. I think we do it very well relative to the market, and it is only going to get better as we continue to invest in resources and capital.

Aaron LaBerge: We got a lot of early growth from our database in Pennsylvania and Michigan, as Jay mentioned, but the brand is really strong. As we continue brand and performance marketing, the growth you see in our numbers is building on itself. It is a nice one-two punch to leverage your database and then support that with marketing to pull in new users. We are not seeing signs of that stopping based on our marketing spend, and we expect to continue that success, especially in hybrid states.

Operator: Our next question will come from Shaun Kelley with Bank of America. Please go ahead.

Shaun Kelley: Hi. Good morning, everybody. Thanks for taking my question. Jay or Aaron, building on that last question, I think you mentioned 60% of iGaming coming from some form of sports betting cross-sell. More broadly, we have seen a slowdown in OSB trends — you can see it in the 5% growth rate number. What is the offset for PENN? Your data looks like it is outperforming what we are seeing in the broader market. We are seeing a correlation between OSB slowdown and iGaming slowdown for those that rely on cross-sell. What is working for you to stay above that trend? It sounds like Ontario is one point, but anything else?

Jay Snowden: Overall, the way to think about it is Ontario is clearly an area of strength, and the launch of the Hollywood stand-alone casino is another. We are just now starting to anniversary those launches from late Q4 and early Q1 of 2024 into 2025. For us, being relatively new as a stand-alone with that brand lead is very compelling given that is the flag on our brick-and-mortar properties in Pennsylvania and Michigan. We are continuing to put some extra weight into Canada. In the areas where you would expect us to have brand equity — and we do — we are leaning in. That is why we are seeing performance a little bit better than the market. We would expect that to continue as we learn what is working and what is not. It is definitely Ontario and Hollywood stand-alone driving most of that.

Aaron LaBerge: In Ontario, the strength of theScore brand really helps us. The sportsbook is growing, and that high cross-sell drives gaming revenue. We have also seen growth in our stand-alone theScore Casino as well, which we are investing in, so that is a nice one-two punch in Canada. In the U.S., cross-sell is important, but if you are getting lower OSB volume, it will affect casino revenue on that cross-sell. We have been offset somewhat by the success we have seen in Hollywood. We are moderating between the two. They are both still very important to a healthy business, but we are seeing more growth on the casino-only side. We are focused on continuing to drive OSB in hybrid states because the crossover is important.

Shaun Kelley: Thanks. As a quick follow-up, could we get a legislative update? There are proposals in Michigan around potential iGaming/OSB tax increases, some in Ohio, discussions in Massachusetts and Arizona, and Maine as well.

Jay Snowden: Generally speaking, on the states you mentioned, it is still relatively early in the process. We need to see how it plays out. Since prediction markets have gotten aggressive on spending, and it appears there is some impact on customer acquisition costs and potentially on OSB handle, legislators and state leaders we are speaking to understand that now would not be a good time to raise taxes on incumbent operators, especially on the brick-and-mortar side. Those conversations have been ongoing but productive. As it relates to Maine, there is litigation pending regarding the iGaming legislation that passed. We will see how that plays out. We are not happy with how that was put together in Maine as one of the two land-based operators who have paid hundreds of millions of dollars in taxes, invested a lot of money, and employ a lot of Mainers.

If that ends up being implemented the way it was proposed, you should expect PENN to be investing next to zero in the state of Maine going forward.

Operator: Our next question will come from Chad Beynon with Macquarie. Please go ahead.

Chad Beynon: Hi. Good morning. Thanks for taking my question. Wanted to ask about the Chicago market. The VGT bill to permit restaurants in Cook County and Chicago was passed, and it looks like restaurants can start in the third and fourth quarter. Given your presence in the area — I know you are a little further out into the suburbs — do you think there will be any impact from this, and is anything factored into the guidance in the back half?

Jay Snowden: I would say no in terms of impact, just given where our properties are located, as you noted, in the suburbs. For Aurora, our primary competitor is Grand Vic. We do not really compete with folks who would plan on spending the majority of their gaming budget in downtown Chicago given traffic and commuter dynamics in Chicagoland. Same thing with Joliet; our primary competitor is Harrah’s Joliet. That will not change. If anything, we are excited about being able to participate. We have Prairie State Gaming, our VGT route operation business in Illinois, that does quite well for us and continues to grow on the top and bottom line. We anticipate participating in the expansion of VGTs in the greater Chicago area, which overall should be net positive for us.

Chad Beynon: Interesting. Thank you. With the increase that you have seen on the retail customer, what is the current status or update on cashless gaming? You were a leader with that. Do you think this will continue to progress and maybe with some of that retail business coming back, you could see more green shoots there?

Jay Snowden: The dynamic on cashless for us is that customers who are engaged with cashless love it and use it almost every time they visit our retail properties. We see stronger retention and LTV with those customers. We are not planning to do anything wildly different. We are looking to continue to improve the experience overall, and that will not change. We continue to make the experience better, particularly as we think about new openings like Joliet and Aurora and what adoption looks like. It is probably more an education thing than anything else. Those who have engaged with our cashless product do like it, but the percentage of those who engage is still below where we want it to be. We are continuing to work on that. Overall, I would expect adoption to continue to improve over time.

Operator: Our next question will come from Jeff Stanchel with Stifel. Please go ahead.

Jeff Stanchel: Hey, good morning, everyone. Thanks for taking our question. One from us on the retail business. It seems there is a bit more pushback recently against unregulated skill games and other gray market distributed gaming. You saw the Virginia governor veto the bill. Missouri seems to be starting some legal enforcement. There is a court case making its way through Pennsylvania. Jay, do you agree the trend seems to be shifting against these machines, and how much of a tailwind could this be if machine counts go down materially in any of these key states?

Jay Snowden: We are feeling better about where things sit in states like Pennsylvania and Missouri than we probably ever have. The skill game legal case is going to be in front of the Pennsylvania State Supreme Court in the next couple of months. We will see how that goes. We have a very strong opinion as to skill games and their illegality in most of these markets, if not all. In Missouri, you have an attorney general who we think is doing a fantastic job stepping up and shutting devices down. The argument is often that bar and tavern owners need the machines or else they may not have a profitable operation. The reality is these are illegal. I do not think we would make that argument in other areas of life. If you are operating illegal machines and the state attorney general says shut them down, they need to be shut down and probably should never have been in operation.

We are encouraged by what we are seeing in Pennsylvania and Missouri. There is still time for things to play out, and we will stay close to it. If it moves in the direction we hope, it would create a tailwind for us on the retail side. It is hard to measure given variables, but I would imagine it would ultimately be a tailwind.

Operator: Our next question will come from Ben Chaiken with Mizuho. Please go ahead.

Ben Chaiken: Hey. Good morning. Thanks for taking my questions. A few on Aurora. How long will you be in transition? Presumably, there will be some downtime from your comments — I am guessing it is largely in May. Is there anything notable about this opening and project versus Joliet? My perception is that the surrounding area around Aurora is a little more developed versus Joliet. And then, what are some of the learnings you alluded to earlier — you described it as potentially stronger and faster?

Jay Snowden: Happy to. For Aurora, you are correct: it will be roughly a two-week operational shutdown that will happen in June. It happens right before we open, so you should expect that to happen maybe a little bit in late May, but the rest will be in June. It will be entirely in the second quarter of 2026. Having done it once before closely with the Illinois regulators, we expect it to go smoothly, given that the Joliet transition also went smoothly. The biggest differences between Aurora and Joliet include the surrounding area, as you noted. The Rock Run development around Joliet is just now starting to come out of the ground. We have 250 residential units going up adjacent to Joliet that should be open by the end of this calendar year, and a 250-plus room hotel breaking ground soon and opening by 2027, within walking distance to Joliet.

That is a really good long tail for Joliet — as good as the start has been, it should get better over time. For Aurora, we expect a ramp that continues to improve over time as most new openings do. It is a more mature area — we are adjacent to the Chicago Premium Outlets, which generates millions of visits a year. We are going to have a hotel with over 200 rooms with suites, a spa — Joliet does not have that — a larger casino floor, more F&B, entertainment space, and outdoor entertainment. Think about Aurora as bigger with a few more amenities versus Joliet, in a very mature area, right off the interstate. We are feeling bullish about the Aurora opening given what we have seen in Joliet so far.

Ben Chaiken: That is helpful. One on Alberta. What were some of the considerations when thinking about customer acquisition and marketing? You talked about strategies that worked and did not work with Ontario. Any nuances you can share about expectations, whether that is player behavior or market size?

Aaron LaBerge: When we launched in Ontario, it was a lot less competitive. There are a lot more applicants and people in market for Alberta, which is a factor we are looking at. Leaning on theScore brand will help us break through some of that noise. In terms of players, it is hard to tell because they are not playing today. Right now, we are modeling similar behaviors to what we see in Ontario, and we will adapt from that.

Operator: Our next question will come from Trey Bowers with Wells Fargo. Please go ahead.

Trey Bowers: Hey, guys. Thanks for the question. On digital, as we look through the balance of the year, any incremental detail you can give on the cadence? When you say a small loss, should we look to Q1 as a good idea of what Q2 and Q3 should look like and then get to a Q4 level of exit profits?

Jay Snowden: Happy to, Trey. Q2 looks very similar to Q1 — maybe a touch better — but in that range of a small loss. Q3 would be a larger loss because you have the Alberta launch in Q3 for the first three months of that market. Q4 should be profitable and get us to a total loss for the year of $20 million. That is the cadence to think about.

Trey Bowers: Perfect. As a follow-up, going back to your comments on M&A earlier, with the shares where they are, how do you think of a hurdle rate for M&A versus buying your own stock, especially given you referenced the 20% plus free cash flow yield?

Jay Snowden: This is a topic we spend a lot of time on at the board level. We are constantly evaluating our capital allocation options. Something on the M&A side would have to look really free-cash-flow accretive to invest there. If you have a free cash flow yield at 20% plus, that is what you have to measure against, with different variables added to the equation. We think there could potentially be assets where, depending on the market and the value our database and operating cost structure could deliver, you could get a really nice return in that same neighborhood. There is no doubt that our stock is very attractive at these levels, especially as you look out to 2027.

Operator: Our next question will come from Bernie McTernan with Needham & Co. Please go ahead.

Bernie McTernan: Great. Good morning. Thanks for taking the question. On the retail guidance raise for this year, it was really only flowing through the 1Q beat. Was it just an earlier-than-expected impact from the growth projects, or any other color you could provide?

Jay Snowden: It is still early in the year. We are feeling really good about what we see in April, but we do not want to get ahead of ourselves. There is a lot of geopolitical and macro noise, and markets are fluctuating. Based on where we are in the calendar year, that is more of a factor than anything. If the trends we saw in Q1 and are seeing in April continue, then we would have guided higher than what we ultimately did. We want some more time under our belt, and we want to get the two new properties opened — Columbus and Aurora — and then we will have more to share. The next time we are on this call in August, we will be in a position to be more clear about the rest of the year.

Bernie McTernan: Makes sense. On OSB, revenue grew 5% this quarter. It seems like MAUs were down, so presumably handle was down. So the growth was driven by higher GGR hold and lower promotional intensity. Can you frame the runway if MAU and handle trends stayed this way — what is the runway to keep stable-to-slightly growing that OSB revenue base?

Aaron LaBerge: You hit it. Hold is helping us as our volumes are down. We will focus on maintaining volumes and growing them slightly, although our plan anticipated volumes would go down as part of our new structure and focus. Casino volumes are important, Canada is important, and OSB in hybrid states is important. We did see that softness, as you noted, but we held well. We continue to make improvements in our risk and trading. We have confidence in how we are holding and the improvements we are making. We think hold will continue to help us as volumes are flat.

Jay Snowden: On a year-over-year basis, MAU declines have been pretty consistent. It is not as though these are further accelerating in the wrong direction. It has been very stable post rebrand throughout Q1. The goal in 2026 is stability and then to start to see some growth in MAUs and continue to see growth in ARPMAU as you move throughout this year and next year. We are focused on our higher-worth sports betting customers. That is working for us; retention has been fantastic. We want to be above flat in OSB net revenue. We accomplished that in Q1 and want to continue to accomplish that as we move through the rest of the year and into 2027.

Operator: Why do we not take one more question? Our last question will come from Stephen Grambling with Morgan Stanley. Please go ahead.

Stephen Grambling: Hey. Thank you for sneaking me in. Sticking with overall digital, a clarification on turning profitable in the fourth quarter. Do you anticipate you could be profitable even if we strip out the licensing or skin revenue? And longer term, how do you think about how Canada versus the U.S., excluding skins, will contribute to EBITDA? Any puts and takes in each?

Jay Snowden: We will have a lot more to share as we move throughout the year. Overall for Q4, based on what we are anticipating right now, we will be profitable inclusive of the skin revenue. Probably pretty close to breakeven without the skin revenue, if not a little positive. We just need more time under our belt post rebrand, but that sets up very nicely as we head into 2027. We want to get this business to profitability overall and then to profitability after skin revenue, and we are going to do that. Trends are moving in the right direction from an NGR, cost structure, and contribution profit perspective. That will continue to get stronger every quarter as we conclude the year and head into 2027.

Stephen Grambling: Is there any reason to believe the margin structure long term would be different, excluding skin revenue, in Canada versus the U.S. on an apples-to-apples basis?

Jay Snowden: Canada is going to be our strongest margin market in North America, driven by volume and market share and by tax rate, and the fact that you have iCasino and OSB. Canada for us is market number one from a margin and profitability perspective. In the U.S., in the states that have both OSB and iCasino, we are going to see much stronger margins than the OSB-only states. We are of the opinion it is probably a matter of time before many of the OSB-only states turn to some form of iGaming, and we want to stay in the business and be ready when that day comes.

Operator: Thank you. We have now reached our allotted time for questions. I would like to turn the call back over to management for any additional or closing remarks.

Jay Snowden: Thanks, everyone, for dialing in. I know it is a busy morning in the space. Thank you, Chelsea, and we look forward to speaking to all of you again in August.

Operator: Thank you, ladies and gentlemen. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

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