PENN (PENN) Q4 2025 Earnings Call Transcript

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Date

Feb. 26, 2026 at 8 a.m. ET

Call participants

• Chief Executive Officer — Jay Snowden
• Chief Financial Officer — Felicia Kantor Hendrix
• Chief Technology Officer — Aaron LaBerge

Takeaways

• Retail segment revenue -- $1.4 billion, with adjusted EBITDAR of $456.4 million and adjusted EBITDA margin of 32.3%.
• Retail full-year guidance -- Net revenue forecasted at $5.7 billion to $5.85 billion and adjusted EBITDA at $1.86 billion to $1.98 billion, reflecting anticipated new project openings and weather impacts.
• Retail weather impact -- December inclement weather reduced adjusted EBITDAR by $7 million, with additional negative EBITDA impact of $5 million to $10 million from severe weather early in the year.
• Retail growth projects -- Openings of Columbus hotel tower and Aurora property expected at end of Q2, with anticipated benefit from all four growth projects in the second half.
• Maintenance CapEx reduction -- Recurring maintenance capital expenditure to decline by $20 million, returning to near pre-pandemic levels due to property upgrades and dockside-to-land conversions.
• Project CapEx and funding -- Total Q4 CapEx was $190 million, including $85 million for four core development projects; $115 million and $225 million in project funding from GLPI connected to M Resort and Aurora, respectively.
• 2026 CapEx guidance -- $445 million total, split as $225 million project CapEx and $220 million maintenance CapEx, down from $408 million and $239 million, respectively, the prior year.
• Cash flow and liquidity -- $1.1 billion in liquidity at quarter-end, including $687 million in cash and equivalents.
• Triple net lease and interest payments -- $1 billion in total lease payments and $145 million projected cash interest expense for 2026.
• Interactive segment revenue -- $398.7 million, inclusive of a $182.7 million tax gross-up; adjusted EBITDA loss of $39.9 million for the quarter.
• Interactive 2026 guidance -- Segment revenue targeted at approximately $1.6 billion (including $760 million estimated tax gross-up); about 20% growth rate excluding tax gross-up.
• Interactive segment EBITDA outlook -- Guidance projects breakeven adjusted EBITDA in 2026, a $268 million year-over-year improvement versus 2025.
• Interactive segment marketing expense -- Year-over-year marketing spend to drop approximately $150 million due to completion of payments to ESPN and alignment with revised strategy.
• Interactive contribution margin -- All components (U.S. online sports betting, iCasino, Canada) expected to generate positive contribution margin in 2026.
• Hold rates -- Sportsbook hold to average 9%, iCasino hold to remain at 3.7%.
• Retail segment customer trends -- 13% year-over-year increase in active players at Hollywood Casino Joliet, with “meaningful increases in both gaming and non-gaming revenues.”
• M Resort performance -- Achieved record gaming volumes in December and record net revenue in January post-expansion; hotel now nearly doubles prior room count.
• Interactive rebrand and retention -- The U.S. online sportsbook was rebranded to theScore Bet in December; “positive adjusted EBITDA in December” and high user retention through the rebrand.
• Operating cost structure -- Corporate restructuring to save over $10 million in annualized run-rate expenses as changes phase in through first half of 2026.
• Capital return -- $354 million in share repurchases during 2025, equating to approximately 14% of shares outstanding, with a cumulative $1.1 billion repurchased (25% of shares) since 2022.
• Free cash flow guidance -- Over $3 per share of free cash flow projected for 2026; company expects to reduce lease-adjusted net leverage by over one turn.
• Share count and dilution -- 133.2 million basic shares outstanding at quarter-end, with up to 4.5 million potential dilutive shares from convertible notes and about one million from RSUs/stock options.
• Development pipeline -- Additional water-to-land casino conversions being evaluated in Louisiana, Mississippi, and Illinois; management anticipates three or four potential projects.

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Risks

• Felicia Kantor Hendrix said, “the severe weather in the first quarter thus far has negatively impacted retail adjusted EBITDA by approximately $5 million to $10 million.”
• New casino supply in Bossier City, New Orleans, and Council Bluffs created revenue pressure in affected markets during the quarter.
• Company guidance anticipates two weeks of revenue downtime for the Aurora property opening in Q2, acting as a near-term headwind.
• Jay Snowden said, “It really puts the PENNs and the MGMs and the Caesars of the world in a very awkward position. We have our land-based businesses that generate tremendous cash flow. We employ tens of thousands of team members across the country. We are big contributors to our communities. And those gaming licenses are the most valuable assets we have. We are not going to put those at risk. So when regulators say this is illegal gambling, do not do it, we do not do it,” signaling industry uncertainty around the evolving legal status of prediction markets and associated regulatory risk.

Summary

PENN Entertainment (NASDAQ:PENN) reported segmental growth in retail adjusted EBITDA and achieved record gaming volumes at flagship properties, despite weather disruptions and competitive pressures in select geographic markets. Management committed to a disciplined capital allocation strategy, balancing significant development investment, accelerated share repurchases, and projected deleveraging, supported by more than $3 per share of forecasted free cash flow for 2026. Core Interactive operations benefited from a successful U.S. sportsbook rebranding, marked by positive adjusted EBITDA in December and a significant marketing pivot, while full-year segment guidance shows a $268 million annual EBITDA improvement. Adjusted capital expenditure levels reflect a reduction in maintenance spending due to recent property enhancements, with additional project funding secured through GLPI and municipal sources. Management expects all areas of the Interactive business—U.S. sports betting, iCasino, and Canada—to achieve positive contribution margins and projects retail EBITDA growth as all four current development projects hit their operational stride in the latter half of the year.

• Guidance for 2026 incorporates anticipated retail project ramp-ups, scheduled Aurora property downtime, and no contribution from unlaunched jurisdictions such as Alberta.
• Management noted early evidence that labor, utility, and insurance costs are well-contained for the year, barring isolated labor negotiations.
• The company does not anticipate being a cash taxpayer in 2026 owing to recent legislative tax relief and available NOLs and credits.
• Company leaders stated that direct marketing focus will shift away from U.S. sports-betting-only states, prioritizing hybrid and Canadian markets for more efficient growth.
• Evaluation of additional water-to-land conversions may result in up to four new projects concentrated in three states, contingent on financial criteria and local support.
• Jay Snowden acknowledged ongoing legal and regulatory uncertainties regarding the U.S. prediction market landscape, explicitly linking operator compliance decisions to regulator positions.

Industry glossary

• Dockside-to-land-based conversion: The process of relocating a casino operation from a water-based or riverboat facility to a permanent land-based structure, typically improving operating efficiencies and reducing maintenance capital needs.
• iCasino: Online casino products offered by the company that provide digital table games, slots, and other legalized gaming experiences over the internet.
• NGR (Net Gaming Revenue): The revenue derived from gaming operations after deducting player winnings, through both retail and digital channels.
• Tax gross-up: An accounting methodology that increases reported revenue to reflect the amount paid in gaming taxes, presenting revenue on a gross basis rather than net of taxes.
• Triple net lease: A lease structure in which the tenant is responsible for property taxes, insurance, and maintenance costs in addition to base rent, as applied to the company’s real estate arrangements.
• Contribution margin: The specific segment earner’s margin after subtracting directly attributable variable costs, used here to assess profitability in Interactive business lines such as U.S. OSB, iCasino, and Canadian operations.

Full Conference Call Transcript

Jay Snowden: Thanks, Joe. Good morning, everyone. I am joined here in Wyomissing by Felicia Kantor Hendrix and Aaron LaBerge as well as other members of our senior executive team. I am pleased to report PENN Entertainment, Inc.'s diversified retail portfolio delivered another solid quarter during which retail adjusted EBITDA grew year-over-year after adjusting for poor weather in December. In our Interactive segment, we successfully rebranded our U.S. online sportsbook to theScore Bet on December 1 and achieved positive adjusted EBITDA in December, driven by continued momentum from our iCasino products, disciplined cost management, and strong online sports betting hold rates. 2026 is an exciting year for us in which we expect to generate year-over-year segment adjusted EBITDAR growth of 20%.

And we are well positioned to benefit from the strategic investments we have made over the last several years and are laser-focused on improving free cash flow generation, deleveraging, and opportunistically returning capital to shareholders. I want to highlight the foundation that set us up nicely to deliver on our goals for this year and beyond, which are summarized on Slide 6 of our investor presentation. First, our diverse retail business is healthy and growing, generating sustainable free cash flow.

In addition to anniversarying much of the new supply in several of our key markets, we will have two more retail growth projects opening by the end of the second quarter this year, and we are seeing continued momentum at two that we opened last year. Second, we expect our Interactive segment to inflect to breakeven adjusted EBITDA for the full year, which would represent a $268 million year-over-year improvement. Third, we have right-sized our maintenance capital spend on a go-forward basis, which we will touch upon more later. And fourth, we will begin to realize synergies from our corporate restructuring and cost optimization initiatives.

The new organizational structure we announced in early January will allow us to become a leaner and flatter organization, enabling business leaders to be more empowered and drive greater productivity. All in all, we expect to save over $10 million in annualized run-rate expenses for the company as we streamline the organization, which will mostly phase in over the first half of the year. The operational benefits are already in flight. In terms of right-sizing our property maintenance CapEx, we have done an excellent job over the last six years of upgrading our casinos, refreshing our slot floors, and investing in non-gaming amenities like updated hotel rooms, new retail sportsbooks, new restaurants, and entertainment venues.

In addition, our dockside-to-land-based growth projects are expected to meaningfully reduce our maintenance CapEx cost going forward. With the improvements we have made to our properties, we feel comfortable with bringing our recurring maintenance CapEx levels down by $20 million and returning to near pre-COVID level spending. Slide 7 really drives some of the significant free cash flow we expect to generate in 2026 and beyond. Importantly, this growth in free cash flow will enable us to delever meaningfully in 2026 and opportunistically return capital to shareholders. In fact, we expect to generate more than $3 per share of free cash flow in 2026 and reduce our lease-adjusted net leverage by more than one turn.

Returning now to our results for the quarter. On the retail side, we experienced another quarter of year-over-year growth in theoretical revenue across all rated worth and age segments with our older demographics and VIP play contributing meaningfully to these results. The bad weather in December negatively impacted segment adjusted EBITDA by approximately $7 million. In addition, our segment was negatively impacted by new supply in Bossier City and New Orleans in those markets in Louisiana, and our Midwest segment was impacted by new supply in Council Bluffs, Iowa. Core business trends were otherwise stable across the portfolio with regional strength in Ohio and St. Louis as well as our L’Auberge Lake Charles property.

We are seeing continued momentum at our new hotel tower at M Resort in Las Vegas, which is capturing previously unmet demand, including booking two of the largest groups in the property's history recently. In December, the property achieved record gaming volumes. And in January, we generated record net revenue at M. Meanwhile, the new Hollywood Casino Joliet is delivering strong results both from new and reactivated customers with a nearly 13% year-over-year increase in the number of active players helping to drive meaningful increases in both gaming and non-gaming revenues.

The early performance of these projects provides us continued confidence in the anticipated success from the upcoming openings of the Hollywood Columbus Hotel Tower and the new Hollywood Casino Aurora, in addition to our new Council Bluffs property scheduled to open in late 2027 or early 2028. As we said previously, we anticipate all of these development projects to generate approximately 15% plus cash-on-cash returns. On the Interactive side, we experienced record gaming revenue in the fourth quarter driven by the continued growth of our stand-alone Hollywood iCasino products and increased cross-sell as well as improvements in our online sportsbook product offering and operations.

Revenue growth, excluding tax gross-up, of 52% year-over-year was primarily attributable to iCasino growth of 40% plus and online sportsbook growth of 73%, including strong revenue and positive adjusted EBITDA in December, our first month operating as theScore Bet in the U.S. Additionally, adjusted EBITDA improved $70 million year-over-year in the fourth quarter, driven by strong adjusted flow-through of 95%. We are encouraged by the upward trajectory of the Interactive business. Our sportsbook is maturing through a more disciplined regionally focused marketing strategy that prioritizes iCasino jurisdictions.

Our reduced fixed media spend provides us much more marketing flexibility to strategically invest more in Canada as well as the U.S. hybrid states with both iCasino and online sports betting and in customer cohorts with more compelling returns, particularly as we look ahead to new market openings like Alberta, which is anticipated later this year in 2026. Importantly, we have retained users through theScore Bet rebrand and continue to engage them across our ecosystem. Retention and new user growth will remain our top Interactive priorities and the foundation for our long-term growth in that segment. The positive trends in our Interactive segment give us confidence to recommit to achieving breakeven adjusted EBITDA in 2026.

And with that, I will turn it over to Felicia.

Felicia Kantor Hendrix: Thanks, Jay. Our Retail segment generated revenues of $1.4 billion, adjusted EBITDAR of $456.4 million, and segment adjusted EBITDA margins of 32.3%. Inclement weather in December negatively affected retail adjusted EBITDAR in the quarter by $7 million, with the largest impact in the Northeast segment. We expect the combination of our high-quality portfolio plus our new growth projects to generate year-over-year retail net revenue and adjusted EBITDA growth in 2026. For retail net revenues, we forecast a range of $5.7 billion to $5.85 billion, and retail adjusted EBITDA will range from $1.86 billion to $1.98 billion.

As you think about your quarterly modeling, the severe weather in the first quarter thus far has negatively impacted retail adjusted EBITDA by approximately $5 million to $10 million. For the second quarter of 2026, at our new property in Aurora, we expect to have approximately two weeks of downtime as we look to open the new land-based facility. And as you know, our second half results will benefit from the opening of all four of our retail growth projects. All of these items are reflected in our guidance. Our Interactive segment in the fourth quarter generated revenues of $398.7 million, including a tax gross-up of $182.7 million, and adjusted EBITDA loss of $39.9 million.

For 2026, we expect Interactive revenues of approximately $1.6 billion inclusive of an estimated tax gross-up of about $760 million, or a revenue improvement of roughly 20% year-over-year, excluding the tax gross-up. This growth will be a function of the playbook we initiated in December as we transition to theScore Bet sportsbook in the U.S. and shifted our focus and resources to our U.S. iCasino states and Canada with a focus on iCasino and cross-sell. Complementing our revenue growth is a more rationalized cost structure. Our marketing expenses will decline significantly year-over-year as we made our last payment to ESPN in December 2025.

We anticipate our marketing spend to come in approximately $150 million lower than in 2025 as we align spending with our revised regional strategy focused on iCasino and Canada. With performance and brand spend fully in our control, we will adjust allocations based on results. Further, we have right-sized our Interactive operations to fit our new structure with payroll and G&A declining proportionately. As a result of our revenue growth expectations and more rationalized cost structure, we continue to expect our Interactive segment to generate breakeven adjusted EBITDA in 2026 and note that we will expect all components, U.S. OSB, iCasino, and our Canadian operations to generate positive contribution margin in 2026.

This forecast does not contemplate any new jurisdictions launching in 2026, including Alberta. As we look to full year 2026, we expect U.S. OSB MAUs to decline year-over-year given the transition from ESPN BET to theScore Bet, while U.S. iCasino as well as Canadian OSB and iCasino MAUs should increase year-over-year, reflecting our strategy to realign our digital focus. We expect the OSB and iCasino hold rates to remain around 9% and 3.7%, respectively. As for quarterly EBITDA cadence, the first three quarters of 2026 should generate small adjusted EBITDA losses, and we expect the fourth quarter to be profitable. We expect the Other category adjusted EBITDA to be a loss of $119 million for 2026.

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 $190 million of CapEx in the quarter, $85 million was project CapEx, primarily related to our four development projects. We ended the fourth quarter with total liquidity of $1.1 billion, inclusive of $687 million in cash and cash equivalents. On November 3, 2025, PENN Entertainment, Inc. received $115 million in funding from GLPI at a 7.79% cap rate in connection with the second hotel tower construction at the M Resort Las Vegas.

In conjunction with the opening of the $360 million Hollywood Aurora in late Q2, we expect to receive $225 million in funding from GLPI near project opening 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 Columbus hotel tower. The combination of this funding with a strong free cash flow and more optimized CapEx spend Jay discussed earlier will enable us to delever nicely throughout the year.

Total 2026 CapEx will be $445 million, which includes $225 million of project CapEx, down from $408 million in 2025, and $220 million of maintenance CapEx compared to $239 million in 2025. We expect total cash payments under our triple net leases to be $1 billion in 2026. For 2026 cash interest expense, we project $145 million. For cash taxes, 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 fourth quarter was 133.2 million shares.

After the June 20 repurchases of the convertible notes, we now 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: All right. Thanks, Felicia. In closing, I want to say that I am proud of what our property, Interactive, and corporate teams were able to accomplish in 2025, including the resilience shown on the retail side and the successful rebranding of our OSB product to theScore Bet. I could not be more excited about the many catalysts we have ahead of us in 2026, including the opening of our new Aurora property and the Columbia Hotel, the continued ramp of Joliet and the M Resort hotel tower, and achieving breakeven in Interactive. I am also excited to welcome our three new board members, Heather, Jeff, and Fabio, who bring a lot of relevant experience and fresh perspectives to our board.

We look forward to this being a year of strong execution at PENN Entertainment, Inc. with an emphasis above all on free cash flow generation and deleveraging and transforming our strategic investments into consistent long-term returns and value creation for our shareholders. And with that, we will now open for questions.

Operator: [Operator Instructions] We will take our first question from Brandt Montour with Barclays.

Brandt Montour: Thanks for all the details this morning. Maybe starting off on digital and drilling into that top-line '26 target of 20% revenue growth ex gross-up. Jay, maybe you could put a finer point on that or just flesh it out a little bit. We know that you are growing iGaming in excess of that. There are more moving pieces on the OSB side with handle down because of, obviously, the exit of and then, of course, hold was probably a benefit or was a benefit here in the recent months. And so we kind of really do not know what the run-rate top-line OSB is at right now. So just what is growing faster within that 20% iGaming.

But if you could just flesh out what is going to get you to that 20% and how conservative it is?

Jay Snowden: Yes. Happy to. Aaron, feel free to jump in as well. Certainly being driven primarily by growth in iGaming. We have seen really strong growth rates throughout 2025, and I am happy with what we are seeing so far at the start of 2026. Our product continues to get better on the stand-alone Hollywood app. We are seeing really, really strong retention. We were before the rebrands, and obviously, we were not affected as much on the iGaming side from the sports betting rebrand of ESPN BET to theScore Bet, so primarily driven by iGaming growth. We also expect to see NGR growth on the sports betting side despite lower handle.

As you can imagine, we have taken a really, I would say, refreshed look at our entire database on the Interactive side. If you look at from a retention perspective across the worth cohorts in the Interactive database, we sort of break it down into eight different categories and the top four are virtually unchanged from a retention perspective both before the rebrand and after the rebrand on a month-over-month basis. So feeling really good about retention at the mid-worth and high-worth segments. And where you are seeing falloff on the retention side is where we are doing that by design is at the lowest worth segments. Most of those are unprofitable customers.

And so pulling back on reinvestment at the low worth is going to help on flow-through overall. It is going to lower our promotional reinvestment overall, and focusing on our higher worth VIP and mid-worth customers just generates much more efficient business. So you will see NGR growth despite some handle declines in 2026.

Aaron LaBerge: Yes, not much to add. I mean iCasino is currently growing faster than 20% right now, which we are happy about. Obviously, OSB is going to continue to go down. But as Jay mentioned, we are going to moderate that with lower promotional expenses to improve flow-through. So we feel pretty good right now with what we are looking at for the year.

Brandt Montour: Okay. That is super helpful, guys. And then over in the retail, the promotional environment was a headwind in '25. To some extent, there was obviously supply pressure. Can you just talk about those two items? Obviously, they are related into '26 and what you are expecting for the year?

Jay Snowden: Yes. We are happy to share that we are seeing less impact. I think there was some sort of initial shock to some changes in reinvestment and some customer shifts and movements in a couple of markets. It is really primarily where we felt it the most is in a couple of markets in Louisiana, really three markets, Baton Rouge, New Orleans and, of course, Bossier City, which we talked about. And then in Council Bluffs, Iowa, the combination of new competition, new supply in Omaha, Nebraska, and then another competitor in Council Bluffs, where we saw some higher reinvestment levels. We are seeing that all start to sort of fade and we do lap finally.

We lapped the opening of the new supply in Bossier City here this month in February. We are feeling good about trends at our properties in Bossier City now that we have lapped that opening. There will probably be some residual impact maybe the next month or two. But we should be in the clear, I would say, in mid Q2 in terms of Bossier City. And I would say Council Bluffs, there was a pretty major expansion of a new competitor in Omaha, I believe it was April of last year. So by the time you get to mid to late Q2, you have anniversaried the new supply shocks and competitive reactions.

So I think the second half of the year should be feeling pretty good in terms of that acting then as a tailwind when you look at it on a year-over-year basis.

Operator: We will move next to Barry Jonas with Truist Securities.

Barry Jonas: Yes, Jay, why do I not take that second question you gave there maybe expanded as we think about the guidance range. Maybe what are you assuming between the range for new supply impact, something like more first half versus second, but also any assumptions embedded there for new project growth, anything for One Big Beautiful Bill. Just want to get a sense like what the difference is between the high and the low end of the guidance range.

Jay Snowden: Yes. We anticipated and contemplated all of the factors that you just highlighted, Barry. I do think that as I look at what consensus looks like by quarter, we probably feel stronger about the second half of the year than the first half. There is some weather impacts here in the first quarter that Felicia highlighted between $5 million and $10 million impact. We built that into our full year guide. So that is no change to the full year guide. But in terms of the cadence from Q1 to Q2, Q3, and Q4, there is a little bit of noise in Q2 in that we will be opening our Aurora property.

And you will recall that when we opened Joliet, we had to shut the property down for two weeks. And so there is obviously a cost headwind to not generating revenue but still having the costs flow through the P&L as we get ready to open Aurora. The second half of the year, we really feel like we are in the clear. We are going to have all four of our growth projects that we have been talking about for the last couple of years. We will be open, two of them fully ramping, the ones that we opened in 2025, and feeling pretty good about launching the other two.

They are likely to open at the very end of Q2. The current construction schedule has us opening the Columbus hotel as well as the Aurora property really at the tail end of Q2, call it, end of June. We will firm that up in the next probably one month or one and a half months publicly, but that is the way I would model it. And as you think about same-store versus new when you look at the EBITDA projection or guide for 2026, we look at our same store, including the markets with new supply, as being basically flat year-over-year from an EBITDA perspective.

And then the upside you see on a year-over-year basis, the 3% growth overall, is being driven by the four growth projects.

Barry Jonas: Got it. And then I wanted to follow up on Interactive, really nice to see the breakeven guidance this year. But at least conceptually, how should we be thinking about the maybe profitability scenarios for the segment in the years ahead. Clearly, new iGaming legalization will be a major factor, but it does seem like the royalties are a major positive today that could tail off at some point.

Jay Snowden: Yes. We are the only market we are aware of that is going to launch new this year is Alberta. That will happen. We believe sometime around midyear. That has not been firmed up yet, but that is what we are anticipating. That should be a good market for us. Obviously, our strongest market, I have highlighted before, has been Ontario from a market share and a contribution margin perspective. So we expect Alberta to be a good market, reasonable tax rate similar to Ontario, both online sports betting and online casino.

There will be some investment that goes into that market similar to when we launched Ontario, but we would expect to have similar market share results in that market as well. TheScore brand really does carry across the country. It is not just specific to the province of Ontario. So feeling pretty good about that. And I think to answer your question of how does breakeven in '26, what does it look like, how does that bridge to '27, '28. We just need, I think, another couple of quarters to see what is the revenue trajectory both on the iGaming side as well as in OSB. How does the launch go in Alberta.

So look, we are in control of all of the levers. That is a great feeling as we head into 2026 here. And we feel really comfortable with being able to achieve breakeven. There are different paths to getting there, which would impact what your '27 and '28 outlook is. So we just need a little bit more time under our belt. We are feeling good about the first couple of months post rebrand. We provided you some KPIs in the slide presentation for what December and January look like on a combined basis. And feeling pretty good about that.

It is actually quite rare that when you go through a rebrand and you are making assumptions, obviously, you are building out what your assumptions are and then make adjustments on the fly. We have been really close to what we assumed we would be from a retention as well as a new user perspective. There have been little tweaks here and there that we have made. But overall, feeling pretty good about what we anticipated and what we are seeing in the business.

Operator: We will move next to Jordan Bender with Citizens.

Jordan Bender: I want to start on the casino side. So the bulk of the project CapEx is coming to an end in the coming months outside of Council Bluffs. Jay, you might not be able to say anything on it today, but how do you view the development pipeline in the casino business over the next coming years?

Jay Snowden: Yes. I will answer it, I guess, sort of internally looking if that is where you are headed directionally. I am happy to answer thoughts on externally. But within PENN Entertainment, Inc., we do have a few more projects that we are analyzing right now. I have mentioned before on our other calls that we have got some other aging riverboats in markets like Louisiana, Mississippi, and one more actually in Illinois that actually—as we do the analysis, the return profile looks quite similar to what we are seeing in Joliet real time and in M Resort. Now that one is hotel expansion, but we anticipate with Aurora, the water-to-land conversion. So I would say stay tuned on that.

We have been analyzing these for some time, and I think you should expect to hear more about that here in 2026. But you are right in terms of project CapEx, it was really at its peak in 2025 at over $400 million, and Felicia highlighted the first half of this year as we sort of finish up at Columbus and Aurora, another $225-ish million. So there will be some Council Bluffs spend as we get to the end of 2026 and head into '27. We anticipate that property opening up sometime towards the end of '27, it might leak into early '28.

Anything else that we have planned as long as it pencils and we have got the support locally, which are all the things that we are working on right now, and you should anticipate hearing more about that in the coming quarters.

Jordan Bender: Great. And then on the follow-up for the Interactive guide, a lot of positive comments around kind of what is going on following the rebranding, but the guidance I believe you guys did go from breakeven to positive to just breakeven. Can you kind of just flesh out what you are seeing in real time that has caused that shift?

Jay Snowden: Yes. Look, you have to take a midpoint when you are putting out a guide. And so I think that just feels comfortable right now. Again, we were positive EBITDA in December. I feel good about the business result in January. We are still in the middle of February. Super Bowl overall actually worked out in our favor. We did well, not so much on the moneyline wagers, but player props definitely worked in our favor and same-game parlay most of the star players did not score touchdowns in that game. So overall, Super Bowl was good. The other sports in February have been okay.

So hold has been, I would say, pretty close to where we anticipated through the first two months of the year on a combined basis. So we have built our budget from the bottom up, and it told us that we felt comfortable putting breakeven out there, and we are delivering against that now. We will obviously continue to update all of you on our quarterly calls as to how the year is progressing. But in terms of being two and a half months, close to three months post rebrand, we are right where we wanted to be.

Operator: We will move next to Daniel Politzer with JPMorgan.

Daniel Politzer: I wanted to follow up just on regionals. I know you called out the first quarter, you have seen a little bit of weather impact, but perhaps the other side of that, have you started to see any of the stimulus benefits, the tax refunds, start to flow through. And historically, what is the relationship between those tax refunds and maybe the uplift that you would see in your properties?

Jay Snowden: Yes, it is a good question, Dan. It is really hard for us to know when we see really good volumes on a weekend, how much of that is there has been a break in the weather, how much of that is that the tax refunds are starting to flow, and they are higher than people anticipated. So I think the answer is that we are seeing some of all of that. I would tell you that as bad as the weather was in January, and that really hit us across every one of our segments, regional segments other than West but even hit us in the South, you will recall the storm was really across the country.

And then in February, Midwest weather has actually been fine. It is the Northeast where we have gotten beat up. We had to shut down a couple of our properties early this week. So there is definitely noise there, but I would tell you that when the weather breaks, whether it is a weekday or certainly on the weekends, we are seeing really strong volumes. We are seeing really strong spend per customer when they visit. And I think that is probably going to continue now that the tax dollars are starting to flow through into people's accounts. We would anticipate finishing up February strong. The weather looks good in the 10-day forecast really across the country.

And March is set up to be a good month. The calendar does not work in our favor as well in Q1. Something else to keep in mind, we had an extra weekend day this year in January, which is the weakest month of the three. Last year, you had an extra weekend day in March, which is the strongest month of the three.

So something to keep in mind, again, just in terms of your quarterly modeling, Q1 maybe not as strong as maybe you would anticipate relatively speaking, but it is going to get stronger throughout the year, especially for PENN Entertainment, Inc. as we have the second half of the year, the four growth projects all open and starting to hit a run rate that we are comfortable with.

Daniel Politzer: Got it. That makes sense. And then just pivoting to capital allocation. I think in your slide, you refer to that capital return optionality. One, it is a two-part. Is there a number for the full year for the repurchases that you ended up doing? I am not sure if there was any incremental versus when we got the update on the last call. And then how are you thinking about that capital return as you referenced the optionality with returning to shareholders versus reducing debt versus some of those growth investments that might be on the horizon?

Felicia Kantor Hendrix: Yes. Thanks, Dan. Yes. So in 2025, as you know, we set out to purchase 350 million shares. And as we discussed in our last quarter, we ended up buying back 354 million for 2025. And just putting that into context, that is about 14% of our shares outstanding in '25. And then since 2022, we repurchased $1.1 billion of stock or 25% of our shares outstanding. So we have demonstrated repurchases are an important part of our capital allocation strategy and continue to be so, but also delevering and investing in our development pipeline, where we expect to generate 15% cash-on-cash returns, are also important parts of our capital allocation strategy.

So we talked about earlier that we expect to generate $3 per share of free cash flow this year. And then you couple that with the $225 million in funding we should receive from GLPI for Aurora before the end of the second quarter, and then the remaining $21 million that we will receive from the City of Aurora before the end of the year, all that is going to enhance our liquidity and reduce our leverage. So really then, at the end of the day, it is about our balance, right. And we will remain focused on all three of those components, buyback, delevering, and investing in our growth throughout the year.

Operator: We will move next with Joseph Stauff with Susquehanna.

Joseph Stauff: I wanted to ask maybe a couple of questions to dig in a little further on the early returns, obviously, Joliet and M Resort. And just kind of lessons and how we think about the ramp from here. We can all see the Joliet kind of win per unit per day somewhat flattening out. I do not know if that is the weather or maybe there are some marketing campaigns that you are thinking about. But—and also in M Resort, obviously, you have a lot more capacity. You talked about record gaming volumes in December and January. So I was wondering, is that a function of higher capacity, higher visitation.

What are you seeing there in terms of maybe de-risking, say, the 15% cash-on-cash return going forward?

Jay Snowden: Yes. No, good questions, Joe. Let me take a step back for a second, just in terms of the hotel expansion projects versus the water-to-land conversions. The hotel project expansions, you see really a more immediate impact positively to incremental revenues and incremental EBITDA. And the reason for that, I think, is relatively intuitive, which is that you are adding a hotel. There is not a whole lot of labor add. You have obviously got housekeeping, front desk, valet. But the Columbus property and the M Resort property were built for more hotel rooms, right. In the case of Columbus, built for a hotel in terms of restaurant capacity, entertainment venue capacity, gaming floor.

We did not have to invest in expanding any of those areas as part of those projects. So we knew that we had a lot of unmet demand that we could not handle at the M Resort, and we were sort of cultivating these relationships with many of these groups and conventions that would come through. And then they would just outgrow us because we only had 390 rooms. We have essentially almost doubled the capacity, pretty close to 750 total rooms at M now. And so we have got groups both coming back and new large groups coming in for the first time.

We can deliver a level of service and personalization that they just will not find on the Strip because those hotels are so large and those groups sort of can get lost. So feeling really good. I mean if you look at the M Resort results, which we do every day, and you look at occupancy and you look at ADR, you almost do not even realize we doubled the number of rooms because the occupancy has been almost as strong as it was prior year with half the rooms, the same thing on an ADR basis. So we are feeling really good about M Resort. The return profile gets us even more excited about Columbus.

Columbus, believe it or not, this is kind of an odd stat, but it is our #1 property in the portfolio from a cross-property visitation standpoint, and that is with no hotel today. So we obviously are feeling really good about being able to generate much stronger VIP cross-sell from other markets, both in Ohio and outside of Ohio, that it is a destination for us, especially during the Ohio State football season. So that is kind of the hotel expansion wrap-up, I would say. As it relates to Joliet, we are feeling really good because remember, and you have been there, Joe, you were there for the grand opening.

That property was really the first location or amenity or offering to open up in what is a very large mixed-use development called Rock Run. There is actually a 250-plus residential development that is opening up right next to ours later this year. There is a 285-room flagged hotel that is opening up within walking distance of our property sometime in 2027. There is a number of restaurants and entertainment venues. I mean this is—it is a real mixed-use development. For those of you that have been to St. Charles, Missouri close to the Ameristar property there, it is the same developer.

And we expect to have a similar critical mass when all is said and done over the next couple of years. So Joliet, as good as the start has been. And the way I sort of summarize the demand figures at Joliet, we have seen our active database, which we covered on the call earlier, 130% growth from pre to post. We see daily visitation has doubled. Our table volumes have doubled. Our non-gaming revenue doubled, and our slot revenue is between 40% and 50% growth. And so I think there is an opportunity to still grow that slot business higher than that base of 40% to 50%. And anything above that just makes the return profile that much stronger.

And the difference, again, between the hotel expansions versus these water-to-land casino conversions is that when we first opened, like we did at Joliet, the first few months, you have got a lot of slot-leased product on your floor, figuring out what your customers are gravitating toward from a slot content perspective. You have all of your restaurants open every day, all of your bars, and a lot of entertainment programming, you are figuring out what works. And so your margins are going to be lower those first, call it, a couple of quarters post opening. And then you start to fine tune. And I think we are the best in the business at doing that.

And so you should expect the margins for Joliet over the next couple of quarters to continue to improve. And by the time you hit the one-year anniversary, you are really cranking from a top line and a bottom line perspective. I would expect the same sort of cadence from quarter one to quarter four post opening for Aurora as well, whereas Columbus, you are going to see a more immediate impact both on the top line and bottom line as well as in your margins.

Joseph Stauff: And just a follow up. Is the Aurora property, the newer property, obviously, is that also opening up, I had not been there, in a mixed-use development as well similar to Joliet?

Jay Snowden: It is not, but we stand to benefit that we literally sit next to, immediately adjacent to, the Chicago Premium Outlets. And when you are entering and exiting that mall, which is—I do not have the stats in front of me, it is millions and millions of vehicles and people per month. And when you are exiting the Chicago Outlet Mall, you are at a stoplight, you turn left to go on the interstate, or you go straight and you roll right into our parking garage. So I would say it is actually a little bit better in the sense that just from a timing perspective, it is already developed and already has critical mass on a daily basis.

And so we stand to benefit. The Chicago Premium Outlets really do not have any sort of mid-tier or higher-end restaurant offerings, and that is something that we will have. Remember, though, we do not have a hotel at our Aurora property today on the water. We will have a hotel, we will have a spa, outdoor entertainment, lots of restaurants. It is a sort of a bigger, more higher-end amenity mix version of what you saw at Joliet. So we are feeling really good about being able to feed off of the Chicago Premium Outlet Mall there as well.

Operator: We will move next to Shaun Kelley with Bank of America.

Shaun Kelley: Jay or Felicia, if you could just remind us on the kind of size or scope around the Alberta launch costs. Ontario was quite a while ago, and I cannot actually remember if it was done under more of theScore model before your acquisition. But just kind of if you could help us put some parameters around if that market goes, I know the timing is a little uncertain. But if that market does open this year, what is the kind of range of J-curve investment you guys might expect to make there? That would be helpful.

Jay Snowden: Yes. We are still sort of finalizing our marketing launch plans there and taking the best of in terms of what works with our Ontario launch and eliminating the things that did not work. So I would say it is going to be probably somewhere in that $15 million to $20 million range, but give us another quarter to fine-tune our marketing plans and get back to you on that. Obviously, it is a really important market. And we have all learned through the years that those initial sign-ups you get, those are the most valuable customer cohorts that you end up with.

And so we have to make sure that we launch successfully in Alberta like we did in Ontario, and when you do, you tend to hold on to your market share much more effectively. So I would say stay tuned. But generally speaking, that is probably the range.

Shaun Kelley: Perfect. And then sort of a strategic follow-up, Jay, last quarter, you had, I think, some really defined views on the broader prediction market landscape. We continue to see a lot of sequential growth in that business. I am kind of curious on twofold. One, any identification you guys have on just your kind of core business on handle metrics as to any impact you might be seeing. But I think much more importantly, just your kind of—as this continues to evolve, we continue to see spin-offs of more and more gaming-like mechanics. Where do we sit today from where we were three months ago on your view?

And how do you think the industry is kind of coming together here as it relates to this because we have seen, obviously, the CFTC come in with some pretty public remarks blessing these markets and continue to see a lot of people moving forward?

Jay Snowden: Yes. It is a fully loaded question on a really controversial topic. I laid out a lot of my thoughts on the last call. I would say those thoughts really have not changed. What has continued to evolve is that it is really clear as mud today in terms of where this is going from a legal perspective. You have got regulators and attorneys general that are suing prediction markets, and then you have the prediction markets that are suing regulators and trying to beat them to the punch. It is obvious to anybody who has ever been in the gambling business, and even those who are not, that sports betting is gambling.

I do not know how you defend that it is not. And I know regulators have taken that view. It really puts the PENNs and the MGMs and the Caesars of the world in a very awkward position. We have our land-based businesses that generate tremendous cash flow. We employ tens of thousands of team members across the country. We are big contributors to our communities. And those gaming licenses are the most valuable assets we have. We are not going to put those at risk. So when regulators say this is illegal gambling, do not do it, we do not do it. But there are those that are able to do it and are doing it in other states.

And so it is just—it is very—it is confusing. I would say, the impact overall in terms of what we are seeing today on our sports betting business, we cannot really tell what the impact is. We all see the handle trends. I think there are lots of variables that impact handle, prediction markets certainly are one of those, how much we do not know today. This really cannot get in front of the U.S. Supreme Court fast enough. I mean, that would be my ultimate perspective and answer because we are just going to keep seeing this get delayed and delayed and delayed, and the businesses get bigger and broader, and what are they doing?

We do not know the answers to some of those questions. But we are obviously not going to put our licenses at risk. We are going to stay very close to our regulators. I do think, as I said on the last call, that we as an industry of land-based casinos that are not able, are not allowed to participate in prediction markets, we have got—I think the best defense is offense, and we have got to figure out how to play more offense here. And I have got ideas. I have shared that with some of my counterparts.

And we continue to discuss those ideas with our regulators as well as lawmakers on how we can play more offense as an industry and turn this into a win for them, meaning the states, and also for the operators like us.

Aaron LaBerge: And I would say on the sports betting side, you are seeing a lot more competition on the marketing side going after sports bettors directly. So we are seeing that versus going after investors, they are going after sports bettors. So that has become pretty evident over the short term here.

Operator: We will move next to Chad Beynon with Macquarie.

Chad Beynon: I wanted to ask about the Maine iGaming bill that was passed, obviously, unique in terms of the partners that are there. You guys have a good database and could potentially partner with somebody. Can you talk about if this bill goes into existence in terms of operations, maybe your opportunity to benefit economically in that market?

Jay Snowden: Sure, Chad. I mean that is—I cannot answer that one today because we are still in discussions. I would just take a step back. What happened in Maine is mind-blowing. We have been operating as a casino entity there for two decades. We have invested hundreds of millions of dollars. We have employed hundreds of Mainers. We are as involved in the community as you are going to find any business leader. And the governor in Maine decides to hand a monopoly to a third party that has never invested a dollar in the industry. I do not understand that. It does not make sense to me. It should not happen.

That said, it is being challenged legally, as it should be, and we will see where it goes. If it ends up standing, then we are going to do our best to figure out a way to compete in that market. But the way that this was done was not popular publicly, and that is very evident. And I am not sure how the governor concluded that was the best course. But it is what it is. We will figure out a way to compete if it does end up standing legally.

Chad Beynon: Okay. And then separately, on the retail guide, it looks like margins are going up by a few basis points, 45% flow-through at the midpoint. You guys are going to benefit from the new properties. You talked about the returns there. But just as we think about the same-store expenses, maybe labor, utilities, et cetera, the non-tax items. Do you have high confidence that there is not going to be much inflation in '26? And if you hit those revenue targets, at least at the midpoint, that you can hit on that flow-through?

Jay Snowden: Yes. From what we can see today, Chad, I would say yes. We have a couple of labor negotiations in 2026 that we thought we have got a pretty good handle in terms of what the outcomes, the range outcomes, will be. We have got a good handle on utility and insurance expenses, things of that nature. So it really is more of a—think about it as a first half of the year, you are still going to feel some impact from those new supply markets that we have not anniversaried yet or are in the process of anniversarying. You have got the Aurora opening, which again will be—will hurt margins at least for the first quarter, maybe two quarters.

The other three growth projects that we will be ramping at Joliet, and margins will be in a really good place certainly the second half of the year. M Resort's margins are in a great place right now. Columbus will be out of the gate in a great place. So that is sort of the impact. Just think about it maybe as a first half of the year, maybe not as much upside same-store margin, and then the second half of the year, you will probably start to see more upside in terms of margin growth at the same-store level.

Operator: We will move next to Jeffrey Stantial with Stifel.

Jeffrey Stantial: Jay, Felicia, Aaron. Maybe starting off on the Interactive business. We have seen a bit of an uptick in the promotional environment this quarter on the sports side of things. The private operators continue to spend quite aggressively and then some of the larger operators have come out with parlay insurance and other initiatives like that. Jay or Aaron, whoever wants to take this. Is this something you are noticing an impact on retention in sports that you could actually pinpoint in the quarter? Are you fast following any of the parlay-focused generosity initiatives?

And if you could just help us think about, I guess, overall sensitivity in the projections to the promotional environment, specifically in sports, just given the shift in strategy, that would be helpful.

Aaron LaBerge: Yes. This is Aaron. We are seeing that in sports, although as you know, our strategy has really shifted to focusing on iCasino in hybrid states and in Canada. So when we are looking at OSB-only states, we are taking a much more methodical look at our promo dollars and users that we are trying to retain and attract. So we have great retention at the high end of value. The promo chasers and the people that are looking for gimmicks and promos in the low end tend to be churning out, which is what we expected. And then we use that money to reinvest in hybrid states where there is iCasino and sportsbook.

So it is happening, but we are not necessarily competing in that market anymore as vis-à-vis FanDuel or DraftKings. We do not see ourselves in that realm, although we do try to find opportunities to provide value where they do not. But your observation is true. It is getting competitive, but we are kind of staying out of that right now.

Jeffrey Stantial: That is great. And then maybe staying on the Interactive business. Felicia, in the past, you have given us some frameworks for just thinking about market share across the two verticals, maybe without having to get into specific numbers this time, can you just talk directionally on how you think about overall market growth relative to market share expansion on the casino side that is sort of embedded in the '26 guide.

Jay Snowden: Yes. I will grab that one. This is Jay. I would say that we expect—we have essentially said it already. We would expect to continue to grow our market share on the iCasino side and see that our handle share will shrink on the OSB side. That is the best way to think about it. We are really focused on retention and driving profitable new users as first-time bettors into the ecosystem. So we are hyper-focused on the states that offer both online casino and OSB. OSB-only states, we are likely to have a different new sign-up offer. We actually already deployed that, that differentiation between OSB-only versus hybrid.

And so that is where it is going to be in 2026. We feel we also have a great opportunity on reactivation, people that over the last several quarters and years have registered and signed up and made deposits, maybe taking advantage of a promotion, and they are either inactive, dormant, or they are not as frequent players with us or gamblers with us as we would anticipate. So we are really focused on reactivation as well. And that is really—all of that just feeds into the P&L story for this year. It is going to be a much more efficient approach to the business and one that we think will generate a much higher return long term.

Operator: We will take our next question from David Katz with Jefferies.

David Katz: I wanted to just talk about the land-based or retail portfolio. You have made some obviously very effective investments in upgrading that. And do you have a pipeline of more of those? Should we expect to see more of those kind of upgrade projects? Clearly, the retail landscape has gotten much more competitive post-COVID.

Jay Snowden: Yes. I had mentioned earlier, David, we do have some more opportunities in states like Louisiana, Mississippi, and actually one more of our water-based facilities in Illinois. So we are analyzing the return profiles on those projects, working with local leaders, lawmakers, community leaders, and figuring out which of those may make sense for us as long as they hit our return profile that we are comfortable with, which would be that 15%-plus cash-on-cash. We have got others that we believe will fit that return profile. We just have to make sure that everything else lines up, and I would say stay tuned for more on that here in 2026.

David Katz: I appreciate it. If I could just follow up to that end. I do not expect you to give us a number today and in this forum, right. But is it a majority of the portfolio, right. Is it two to three properties, three to five properties. Any order of magnitude, I think, would be helpful here.

Jay Snowden: It would be certainly low single digit, less than a handful, but yes, across those three states I mentioned, call it, three or four projects that we are looking at right now. Thanks, David. And Nicky, we will take one more question, please.

Operator: We do have a question that comes from the line of Stephen Grambling with Morgan Stanley.

Stephen Grambling: Thank you for sneaking me in here. This should be maybe a quick one. I know that you gave a guide that implies kind of an OpEx growth rate on the property side. Just curious if you could provide any more details on some of the puts and takes that maybe underpin that.

Jay Snowden: Yes. I would say a pretty typical year of OpEx growth. We are comfortable with the flow-through on the incremental revenues that we are showing there at around 45%. Could end up being a little bit better than that, but you are going to have typical growth in your labor number, primarily annual merit increases. Like I said, we have a couple of labor negotiations that we are working through. So primarily there. We do not anticipate strategically any changes in our marketing reinvestment overall. You are going to have some natural growth in areas like insurance, sometimes utilities, but that would be driving the lion's share of it, Stephen. All right. Thanks, everyone, for joining.

We look forward to catching up with you again next quarter.

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

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