PENN - NASDAQ

Greetings, and welcome to PENN Entertainment First Quarter 2025 Earnings Call. I would now like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead.

Thanks, Emma. Good morning, everyone, and thank you for joining PENN Entertainment's 2025 first quarter conference call. We'll get to management's presentation and comments momentarily, as well as your question-and-answer. During the Q&A session, we ask that everyone please limit themselves to one question and one follow-up. I'll quickly review the safe-harbor, and then we'll quickly get - and then we'll get right into the call. Please note that today's discussion contains forward-looking statements. Forward-looking statements involve risks, assumptions, and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors. It's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go ahead.

Thanks, Joe. Good morning, everyone. I'm joined here in Wyomissing by our CFO, Felicia Hendrix; our Head of Operations, Todd George; and our CTO and Head of Interactive, Aaron LaBerge, as well as other members of our senior executive team. As you see in our earnings release and accompanying investor presentation, PENN's properties demonstrated strong resilience in the first quarter following severe weather challenges. While January weather was slightly better year-over-year, it was still much worse than anticipated, and the weather-impacted days in February across the portfolio were up over three times versus last year, which ultimately impacted our adjusted retail EBITDAR by at least $10 million in the quarter. Also worth noting, we had a $5 million one-time accounting benefit in the South region in Q1 last year that impacts year-over-year results. Importantly, we saw gaming revenue - gaming volumes rebound nicely in March as the weather improved, and that trend continued through April and into May. Worth also noting, this past weekend was the second-best weekend of the year for revenue and number three in terms of overall visitation across the portfolio. You'll hear more about our second quarter trends from Todd in a moment. The capital investments we have been making at our properties over the last several years, including our new ESPN BET retail sportsbooks, combined with continued cross-sell from our industry-leading customer loyalty program have been contributing to our performance and the strong engagement this quarter with our VIP and mid-worth customer segments. As highlighted on Slide 7, during the quarter, we announced plans for a new land-based Hollywood casino in Council Bluff, Iowa to replace our existing three-level aging Riverboat. The new state-of-the-art facility will nicely complement the existing 160-room hotel and we believe it will significantly improve the customer experience and enhance the property's competitive position in the greater Omaha, Nebraska market. Construction is expected to take approximately 18 months to 24 months following the design and permitting approval process. Meanwhile, our four previously-announced exciting development projects remain both on-budget and on-schedule. Before turning to our Interactive results, I'd like to ask Todd to share a few comments on the second quarter trends as well as the competitive landscape.

Thanks, Jay. As highlighted on Slide 6 in our investor presentation, our retail business in April was stable with revenue growth of 2% year-over-year across all properties and 4% across all properties excluding those impacted by new supply. We're mindful of the uncertain economic environment that our customers are facing, but are encouraged by the trends we have seen, including our rated play being up in the quarter and continuing into April and now May. As Jay mentioned, we just had one of our top weekends. Unrated play saw a slight decrease in Q1 compared to prior year, but returned to almost flat in April when compared to prior year. The Q1 and Q2 results to-date have been driven by increases in our core segments through increased spend per visit and our BAI - excuse me, our VIP segments, driven by increased visitation and spend per visit. Our database continues to grow to over 32 million members through a combination of online and core operations, all fueling our omni-channel strategy. Our property teams have done a tremendous job navigating the competitive landscape while also picking up market-share in 14 of our 17 markets not impacted by meaningful new supply year-over-year in Q1. As Jay mentioned, over the last several years, we've made strategic investments in our properties, enhancing the entertainment and hospitality amenities, improving the guest experience through technology that removes friction and costs, and continuing to focus on our gaming offerings. We remain committed to providing highly competitive gaming offerings in each of our markets, including new and expanded high-limit areas, Asian-themed rooms, and the latest and most popular games. This constant focus on improving the guest experience is done with an eye towards efficiency as we continue to deliver the highest tax-adjusted retail gaming margins among our regional peers. As we think about our margins, we're laser-focused on generating returns on all of our spend, particularly in light of headlines around the impact of tariffs. To-date, we have not seen a material impact on the cost side. Notwithstanding this, we have a tremendous procurement team that is helping us navigate pricing and supplier options as well as excellent marketers and F&B operators who are adjusting promotions and F&B offerings to mitigate cost increases. Looking ahead, following the opening of new competition this February in Bossier-Shreveport, we can now focus our attention on our four growth projects opening over the next 12 months, which we could not be more excited about. Back to you, Jay.

All right. Thanks, Todd. As you'll see on Slide 9, we are reaping the benefits of our omni-channel strategy as our pre-existing customers in Pennsylvania and Michigan who engaged with our standalone Hollywood iCasino app are increasing their spend across both retail and online channels. In Pennsylvania, for example, in Q1, we saw year-over-year increases of 21% in retail theoretical play and 165% in online theoretical play with this same cohort. Similarly, in Michigan, in Q1 we saw year-over-year increases of 27% in retail theoretical play and 242% in online theoretical play. During the quarter, our Interactive segment had a negative $10 million EBITDA impact from the well-publicized customer-friendly sports-betting outcomes in the quarter during March Madness. Despite this, we generated record gaming revenue and significant year-over-year improvements in both adjusted revenue and adjusted EBITDA, highlighting the improved flow-through we are seeing in our business. ESPN BET and the Score BET continue to drive strong top of funnel performance, including successful cross-sell into our iCasino business, which achieved record NGR and average MAUs in Q1. As highlighted on Slide 13, this momentum is bolstered by the compelling results of our standalone iCasino app in Pennsylvania and Michigan and which recently expanded into New Jersey and Ontario. We're also encouraged to see that 70% of our standalone iCasino theoretical revenue is coming from incremental sources, including newly-acquired customers, digitally reactivated players, and players who were previously retail-only customers. This stat, along with the omni-channel results we highlighted earlier, suggests that we are seeing minimal cannibalization from our standalone iCasino offering on retail play and on our integrated iCasino in the ESPN BET and the Score BET apps. Our standalone iCasino app is also seeing 134 basis points higher hold rate versus the integrated iCasino offerings, driven by higher slot mix. Turning to Slide 14, we recently introduced several OSB product enhancements, including new features leveraging account linking, such as adding ESPN favorites to the app homepage and creating our new Mint Club rewards program. This program offers players who have linked to their accounts access to special weekly giveaways, including boosts and deposit bonuses, as well as access to free ESPN BET merchandise, and we have plans for even greater benefits for linked customers later this year, particularly around fantasy football. Aaron and his team have done a tremendous job building upon our strong technology foundation, which will be further enhanced by the recent addition of Billy Turchin as our new Chief Product Officer. Billy brings a wealth of experience to PENN, having most recently served as SVP of Product at FanDuel. He will lead the product teams overseeing our digital sports-betting, sports media and iCasino gaming experiences. And with that, I'll turn it over to Felicia.

Thanks, Jay. We report - for the first quarter, we reported retail revenue of $1.4 billion and adjusted EBITDA of $457 million and adjusted EBITDA margins of 33.1%. As Jay mentioned, our retail segment showed strong resilience during the quarter despite the impact of new supply in key markets and some severe weather challenges, which impacted adjusted retail EBITDA by at least $10 million. As the weather subsided, retail performance returned to business-as-usual, and that momentum continued until - into April and May. We are mindful, however, that the consumer and many of our suppliers are facing uncertainty. We have operated on - we have operated in uncertain times before and have experience with mitigating both slowing volumes and cost pressures if we are to face those consumer dynamics again. As we've highlighted in the past, we estimate that approximately 45% revenue declines can be offset through cost reductions, inclusive of being flexible with labor and marketing. Regarding costs, Todd highlighted that our tremendous Procurement team is working hard to insulate us from tariff-related cost pressures on the COGS side of our business. This is the same team that has saved us tens of millions of dollars in COGS over the past several years, despite a sharp increase in inflation due in part to the advantages of our scale. Moving to Interactive. We reported first-quarter adjusted revenues excluding the skin tax gross-up of $162 million and Interactive adjusted EBITDA of a loss of $89 million, which is a $107 million improvement year-over-year. Customer-friendly sports-betting outcomes impacted interactive EBIT - interactive adjusted revenue by $15 million and adjusted EBITDA by $10 million. Corporate expense was higher than expected in the quarter given legal and advisory-related costs of $7.7 million. We will likely incur incremental legal and advisory costs in the second quarter. However, it is difficult to project these non-recurring expenses at this time. In the quarter, we reported a $215 million pre-tax gain on a financing arrangement that we entered into in February 2021 with a third party, which provided the company with upfront cash proceeds while permitting us to participate in future proceeds on certain claims. This arrangement, which was booked as debt on our balance sheet was resolved and resulted in the gain, which includes cash received in 2021 of $72.5 million and non-cash interest accreted since that time of $143 million. The table on Page 8 of our earnings release summarizes our cash expenditures in the quarter, including cash payments to our REIT landlords, cash taxes, cash interest and total CapEx. Of our total $125 million of CapEx in the quarter, $96 million was project CapEx-related to our four development projects. We ended the first quarter with total liquidity of $1.5 billion, inclusive of $592 million in cash-and-cash equivalents. We de-levered in the quarter and expect to continue our deleveraging trajectory in 2025 and beyond. Year-to-date, we have repurchased $35 million of shares at an average price of $16.83. As we de-lever throughout the year, you should expect to see the magnitude of our share repurchases increase, particularly in the back-half of this year. You should also expect us to consider combining opportunistic repurchase activity with the programmatic approach to seek to take advantage of market volatility and what we view to be a severely dislocated stock price. Our 2025 retail guidance is unchanged from the ranges and drivers we provided on our fourth quarter earnings call. For Interactive, our 2025 revenue and EBITDA ranges are also unchanged, other than the flow-through of customer-friendly sports-betting outcomes of $15 million to revenues and $10 million to EBITDA. We continue to forecast a skin tax gross-up of $520 million for the year. For the second quarter, our Interactive revenue guidance range is $280 million to $320 million, including a $116 million skin tax gross-up, and our EBITDA guidance range is a loss of $70 million to a loss of $50 million. Our second-quarter interactive EBITDA guidance represents a year-over-year improvement of roughly $43 million at the midpoint. As our second-quarter interactive guidance demonstrates, we continue to expect each quarter of the year to generate lower interactive EBITDA losses sequentially, culminating in positive EBITDA in the fourth quarter and we reiterate our outlook for generating positive interactive EBITDA in 2026. Last quarter, we provided you with other segment EBITDA guidance of $121 million, which includes corporate expense. Given the current uncertainty regarding our non-recurring legal and advisory fees, we are not updating guidance for this segment at this time. As Jay mentioned, our four growth projects are on-time and on-budget. We continue to forecast total company CapEx for 2025 of $730 million and reiterate our full-year project CapEx forecast of $490 million. We do not expect to experience any noteworthy tariff-related CapEx increases on the four growth projects as they are near completion. With the Joliet opening around the corner, we continue to evaluate drawing on GLPI's balance sheet as a financing option for the project. As a reminder, GLPI has committed up to $130 million of Joliet's total $180 million CapEx at a cap-rate that is a spread to GLPI's cost-of-capital at this time. Jay also mentioned our exciting plans for the new Hollywood Casino in Council Bluff, Iowa. The estimated project budget is approximately $180 million to $200 million, and GLPI has agreed to provide funding of up to $150 million at a cap-rate of 7.1%, which may be structured at PENN's option as either rent or a five-year term loan. Given the potential for construction costs to rise to - due to increased tariffs, particularly on steel, we are currently evaluating opportunities to lock in costs now and exploring other ways to minimize our exposure to potential cost increases. For 2025 net cash interest expense, we continue to forecast $150 million. Net cash taxes are expected to be roughly $70 million, that's $70 million. We continue to expect to be free-cash-flow positive in 2025 and beyond and our basic share count at the end of the quarter was 151 million shares. And as I always mentioned, we typically have 15 million of diluted shares annually, inclusive of the 14 million share dilution from the converts. And I'll turn it back to Jay.

All right. Thanks, Felicia. In closing, I want to reiterate that our core retail business remains strong and is growing. We have four exciting retail development projects under-construction, all being delivered on or ahead of schedule and on-budget. Along with our planned landside relocation of Ameristar Council Bluffs, these projects will collectively enhance our portfolio, grow our free cash flow profile and serve as a catalyst for PENN's retail segment. Despite the current market concerns around consumer discretionary behavior, our core business is trending in the right direction. Solid employment numbers and low gas prices always bode well for regional gaming, as you know. Meanwhile, our digital business is continuing to evolve, supported by our well-known brands, differentiated IP, a fully-owned technology stack and newly recruited industry-leading talent. We are nearing an inflection point, and we anticipate each quarter of '25 to deliver a lower loss sequentially throughout the year in our Interactive division to be profitable in the fourth quarter of '25 and the full-year of '26 and beyond. We have strong conviction in our ability to deliver profitability in 2026 and beyond within this segment. As mentioned on our last earnings call and in our shareholder letter in this year's proxy, we have fully committed partners in ESPN who are continuing to work with us to deepen the integration of ESPN BET into ESPN's overall ecosystem. We have continued momentum in our iCasino business and importantly, we maintain strategic optionality and control over our future as we head into 2026. Our focus for the balance of this year remains on operational execution in order to transform our strategic investments into consistent long-term results and value for our shareholders. As we also stated in our recent letter to shareholders, we are confident that PENN's best days are ahead and we are moving with speed, discipline and determination to realize the full potential of this company for all of our shareholders. And with that, we can please open the line for our first question, Emma .

[Operator Instructions] We'll take our first question from Brandt Montour with Barclays. Please go ahead.

Good morning, everybody. Thanks for taking my questions. So first-off, maybe just starting with digital, the outlook for that segment doesn't seem like it's changed all that much. But you had some serious emphasis on iGaming in the deck, and market-share for the OSB side has been trending a little bit below, I believe, plan. So when you think about those different pieces, how would you describe what's changed under the surface for the rest of the year within digital within your guidance?

Yes, Brandt, I would say that generally, our assumptions that we put out last quarter for the year haven't changed. If, you know, OSB comes in a little light of the share projection and online casino comes in a little bit ahead, we think that those offsets are fine if that does happen. We're optimistic that we're going to continue to grow share in both online sports-betting and online gaming between now and the end-of-the year, one may outpace the other and that would be perfectly fine with us as long as we have momentum in both aspects of the business, then we feel comfortable with the guide that we put out for the full-year.

Okay. Thanks for that, Jay. And then just a follow-up on iGaming. We know it's early. Clearly, it seems like you're pretty happy with the launch so far. How far away is that segment from being contribution positive? And maybe qualify the answer with how much you're currently spending in your OSB promo budget to drive the cross-sell that's driving that momentum in iGaming today?

Yes, I'll attempt to answer it. Aaron, others can jump-in here. I would say that we are pleased so-far with the launch of our standalone Hollywood iCasino apps, particularly in Pennsylvania and Michigan where we have land-based properties with the same brand name. We have healthy retail businesses there. As I mentioned at the beginning, these standalone iCasino apps have been really good for us in that they're 70% incremental. So, you know, very little cannibalization from the Hollywood app offering that was within the ESPN BET app. And you should expect, as you would hear from not just us, but our competitors that our margin profile within iCasino is obviously stronger than it is within online sports betting. And the promotional spend within sports-betting just by nature of the business and the competitive side of it is higher than it is within iCasino as well. So that dynamic, I think will continue. I would expect that the iCasino momentum will - you'll see more of that in the quarters ahead. We have, I think, some really good plans to continue to cross-sell. I would say we're pleased with cross-sell, but there's still a lot of opportunity there. If you compare the online sports-betting audience within our ecosystem and how much has cross-selled into iGaming compared to others in the space, there's still opportunities for us to be more effective in there in that area. So I'd say overall at a high-level, that's where we're at. I think you should expect us to share more detail in terms of contribution margin profit within these segments in future quarters. We haven't really offered that previously. But we're happy with the progress so far.

Yes. I would just reinforce cross-sell is continuing to ramp up. Just last week, we saw all-time highs in our average weekly DAUs across iCasino. And in terms of the promotional dollars, we're seeing really effective promotion from our land-based databases to drive people into iCasino, which has been very nice to see. And obviously, we will then moderate that with strategic reallocation from OSB into iCasino in states where we think it matters. So we're really happy with the trajectory so far.

Yes, I would just add to what Jay and Aaron shared. Really tremendous progress where we've got our VIP team, whether you're working at a property or online. So they're driving people, regardless of if they drive them to a property or online, that's been really well-executed. And then really, you know, the key, it's not really the promotional dollars as Jay mentioned, it's that rebranding to Hollywood. So it's just ease of finding that online product. So it's going from Hollywood to Hollywood. That's been a tremendous help.

Excellent. Thanks, everybody.

We'll take our next question from Carlo Santarelli of Deutsche Bank.

Hi, guys. Thanks. So, Jay, Todd, I don't know whoever wants to take this one. If you think about normal cadence over the course of a year of seasonality, we've come to a couple of conclusions, but I think important in kind of understanding yours is more or less recognizing the anniversary of some of the competitions that are coming off. So if you guys kind of maybe walk us through the next 12 months to 18 months of where you'll start to lap some of the things that are maybe hurting you a little bit more pronounced than others.

I'll let you have that, Todd.

Yes, thanks, Jay. So Carlo, the last big one was obviously the live project in Bossier City. So we'll lap that in February of next year. But it will be a little bit noisy for the next 12 months at least just because of our projects starting to open. I feel very comfortable that within the next 12 months to 14 months, say, 12 months to 13 months, I guess we're now in May, we will have all of our properties open. So the year-over-year comparisons are going to be a little bit fuzzy just because of that. But for the most part, we started to lap everything. We just did have an expansion in Nebraska, in the last, I think, three weeks, four weeks, we are just out there to kind of look around at that market. So those are the two competitive impacts that we'll see over the next year, but then we'll be offsetting that with our new openings.

Yes, and we feel, I think really, really good about the timing of when we'll be going landside in Council Bluffs because the rest of the competition will have sort of settled in. And so you just look at the construction timeframe, we'll be coming into the market with a really new updated products, easier access to the casino, one-level versus three levels, much more efficient, so both on the cost side as well as revenue opportunities to the upside. And that was all part of our license renewal in the state of Iowa with our QSO there. But feeling good about what we have in front of us is largely in our control. We're going to be the one - the company that's opening up new projects as opposed to trying to fight off new supply in key markets, which for the first time in a long time, we'll be able to say that.

Great. Thank you. And then just along those lines, just a two-part question related to the pipeline. Obviously, some of the financing stuff is in-place, but there's also some called upon financing that you guys could pursue. Could you comment a little bit about how you're thinking about the timing of that? And also how we should think about disruptions as we get closer to the openings, you know, closure periods, things like that with some of the land-based conversions?

Yes, I'll let Felicia hit the financing question, then Todd, you can speak a little bit about the disruption on openings.

Yes, Carlo, our view really hasn't changed. We've really been trying to think about the financing as matching it to the openings. If we took financing today, for example, we'd be paying rent on a property that's not open yet. So I would think about that in terms of matching. Obviously, we're also - we're committed to the GLPI's balance sheet for Aurora. The other three projects, Joliet M and Columbus are at our discretion. And in addition to looking at the timing, we're also looking at, you know, GLPIs, the cap rates that GLPI would be offering us versus what we could get in the open-market versus using our balance sheet. So we have a lot of optionality around that. But I would say the first thing - the thing that we're mainly focused on is that matching of timing.

And one last point that was covered in our release is that Council Bluff is a little bit of a different potential structure. And so that can be either in the form of rents or as a five-year term-loan. So if we decide that it's rent, then obviously, again, you'd wait until matching - taking the financing around opening. So you're paying rent once you open the doors. But if it's a five-year term-loan, obviously, we could be starting to take the funding and financing in advance - well advance of the opening.

And then, Carlo, to your question on disruption, so I would look at it this way. The Columbus Hotel as well as the additional tower and meeting space at the M, minimal to zero disruption. I mean, it's simply adding a product, so no real disruption there. Even the Council Bluffs property, it's a minimal downtime as we approach that. And then the only thing with Aurora and Joliet, please keep in mind, this is not just moving from a riverboat to land-based. This is moving from a riverboat to a far better location with 10-times to 12-times the traffic counts that we currently see. So that downtime, if you look at what the other operators have been able to do in Illinois, it's looking at that two-week to three-week period. We just had a very, very productive meeting with the Illinois Gaming Board and really appreciate all their efforts with us and the leadership teams out there with Reuben and Greg. And we think we can get that time at the lower end of the range. So I think you can start thinking about maybe a two-week downtime, but more to come on that as we finalize the opening date.

Great. Thank you, everybody.

We'll take our next question from Shaun Kelley with Bank of America.

Hi, good morning, everybody. Thank you for taking my questions. For whoever wants to take it, maybe we could just start with kind of the digital promotional landscape. Just kind of curious on, first of all, for the standalone iCasino app, did you all sort of lean-in on the promotional level there just as you're trying to get that product up and rolling? Or is that a little bit more organic? And then just sequentially, as we think about sort of what you were offering in market 4Q and sort of what your expectations were, how did promos come in across both OSB and digital in this first quarter? Thanks.

Yes. I would say promos have really kind of come in where we anticipated them to be both in sports-betting and iGaming. And I would say both for the industry as well as what we intended to do in the first quarter as it relates to what was going on in the fourth quarter of last year. And specifically to iGaming, we really are focused in the early days of these standalone Hollywood iCasino app launches on organic cross-sell both from sports-betting as well as from our retail database, and that's been really effective. We're just now starting to get into more of the performance-based marketing spends. And so that's why we're confident you'll continue to see improved results as we move forward through the remainder of the year.

Great. Thanks, Jay. And then just as a follow-up and maybe switching over to the land-based side. Just big-picture, what's it take right now to kind of get some cost leverage on the revenue side? What's the sort of OpEx or run-rate operating expense pressure you all are facing? Is it sort of in the low single-digit range? Just kind of where you're feeling it? Obviously, you made some comments on tariffs. It doesn't sound like you're feeling much incrementally, but obviously, this has usually been something you've been really disciplined on and probably better than peers on?

Yes. I think it's largely labor is the one that's continuing to be a bit of a creep, nowhere near the levels on a year-over-year basis percentage-wise that we were seeing last year, in the year before. But that's the primary driver. I think we have a good handle on - marketing is within our control. Our procurement team, as noted by both Todd and Felicia, does an excellent job. And there's some - we're seeing a little bit of noise from a COGS perspective, but the teams are really creative and you find alternative options to keep your pricing where it needs to be and make sure you're not having to raise prices on consumers. It's one of the real benefits, I think, during times like now of regional gaming is you can walk in and our prices haven't changed from last year or five years ago or 10 years ago, whether you're a gaming customer or non-gaming customer. So, Todd, anything to add.

Yes, the only thing I would add, Shaun, Jay and I and were talking about this yesterday. Keep in mind that our revenue mix, when it - when we do more in the Northeast and Midwest than we do in the South and West, we have higher tax rates there. So there was a bit of a shift in revenues in Q1. So that did lead to a little bit of margin erosion. But we think as we work-through the weather, I think eight weeks of the last 10 weeks, we've seen year-over-year improvement in volumes in rated play. So - and that's been across-the-board. So as that kind of revenue mix comes back, we should be able to pick-up the benefit there.

That's right. And I did note in the prepared remarks, but might as well hit it here again. We had a $5 million accounting good guy in Q1 last year. So as you're looking at the comparisons year-over-year, keep that in mind both in terms of EBITDA as well as margins in the South region.

Thank you.

Thanks, Shaun.

We'll take our next question from Barry Jonas at Truist Securities. Please go ahead.

Hi guys, good morning. I wanted to start with ESPN BET. I think the new ESPN DTC product should be out soon. Should we be thinking of this as a potentially meaningful catalyst for you guys? I think any color here would be helpful. Thanks.

Well, I think I think the world will hear about that very soon. So I don't want to comment too much on the product, but I will tell you it is we think it's a first-in-market integration and we're incredibly excited about it. It's very cool and we think it will have a difference in terms of driving users and exposure to our platform. So we're very excited about it and can't wait for you guys to see it.

Got it. And then either for Jay or Todd, I think another Pennsylvania land-based casino operator has talked about potentially exiting in response to skill-based gaming. Can you maybe just talk about the risk you see around skill-based in the state and beyond? Thanks.

Yes, happy to. We've spoken about this on previous earnings calls. And it's a complicated issue, skill-based gaming. We view skill-based games as largely look-alike slot machines, and they really - if they're going to be competitive with us, they really need to be regulated and taxed like us as well. We feel very strongly about that. And so it's sort of - it's an ongoing discussion at the legislative level in the state of Pennsylvania. I know others have commented on the impact to their business. It obviously impacts all of us on the land-based side. There's tens of thousands of these things sprinkled across the state. And we'll see where it goes, but we feel like there's hopefully some potential outcome that's going to be good for the industry as well. So I'm cautiously optimistic on that topic currently.

Great. All right. Thank you, Jay.

Thanks, Barry.

We'll take our next question from Joe Stauff with Susquehanna.

Thank you. Good morning. I wanted to just go back and maybe ask another question about just the ramp that you have with the iCasino standalone product. Jay, I think you said is 70% of the new customers for iCasino standalone are incremental. Did you mean, say, independent of what is - whether it be ESPN BET channel customer and/or a retail customer, could you just clarify that 70% incremental piece?

Yes, happy to. 70% incremental to our iCasino business, meaning that the 30% is coming - came over from the Hollywood offering within ESPN BET. The other 70% is a combination of retail who had never engaged with us in our digital iCasino products, reactivated customers, the customers who have been dormant within our database or just brand-new to the entire ecosystem.

Gotcha. And a follow-up, maybe also to clarify on the new app coming out from ESPN. Aaron, does this require you guys a lot of work in terms of, say, integrations that you have to do above and beyond what you're doing in terms of the core product that ESPN BET and Hollywood standalone?

Well, we certainly - I don't know if I would say a lot of work, but it's certainly a bespoke integration that's going to be linked and associated with the content that you watch. So we have created different types of markets and processes for sharing that in real-time with ESPN, which will manifest itself in the product. So we think it's the best-in-class and first of its experience as it relates to watching live events as it relates to BET integration. So we're excited about the work we've done and I think the world will too.

Obviously, the experience will be best for customers who have linked their ESPN account with ESPN BET. And so, Aaron, maybe comment on just sort of the progress we're continuing to see on linked as a percentage of total users?

Yes. Actually in the quarter, we've - instead of talking about linked users, we've created a rewards club called the ESPN Mint Club. So when you think about Mint Club users, a very-high percentage of those of our MAUs are Mint Club users. They're logging in 2.7-times more to our product. They're placing 60% more weekly bets. They're generating more handle, they're holding better. These are really our best customers, not just for ESPN BET, but for ESPN as well. And so we think with flagship and the continued integrations that Jay talked about as it relates to the fantasy work we're doing for football is going to be a big accelerant to us continuing to deliver against our guidance.

I see. I see. Thank you.

Thanks, Joe.

We'll take our next question from Chad Beynon with Macquarie.

Hi, good morning. Thanks for taking my question. On the Interactive side, wondering if you could chime in on your view of the predictive markets and if you think your customers would be interested in that product, and kind of how you view it from a regulatory standpoint? Thank you.

Yes, I would say, you've heard from others, probably similar from us. We're staying very close. There's a lot going on right now in prediction markets as it relates to federal regulations versus state-level regulations. It is interesting, it does exist as you guys know it has for a long-time over in Europe. I think it is definitely more of a niche market for a variety of reasons. I think it's largely incremental, especially if it's something that's being offered in states where online sports betting is not currently legal. So I think more to come on that. It's obviously not priority one for us. We've got a lot in front of us right now in terms of execution and delivering on guidance for the remainder of the year and continuing to improve on all the areas that Aaron and Todd mentioned, both in interactive and retail, but we're staying close to it. And if this ends up being an opportunity for the industry, you should expect us to be participating.

Thank you. And then Jay, separately, just kind of looking at the bricks-and-mortar portfolio, you have one of the fresher fleets in the industry and you're upgrading some of the assets that need to be. Are there assets in the portfolio that maybe are viewed as non-core, maybe lower EBITDA performing properties, ones where maybe don't move the needle as much that you could potentially explore divesting to deleverage the balance sheet?

Look, we would never say no to that question. It really depends on the situation. It depends on if you got an offer, if it's an inbound. I would just remind you that our assets are largely tied-up as part of our Master Leases. And so it's not as simple as just, though, if you were interested in potentially divesting an asset or two that you just make calls and transact to the highest bidder, there's landlord implications and involvement. And so it's just - it's not as clean to sort of think about it maybe if you were a whole co-company and you could make those calls and kind of go through a process like that. I would say maybe a better way to think about it is that some of the assets we have that are a little bit more challenged from an infrastructure and just how old they are, quite frankly. We have more riverboats in Mississippi, we do in Louisiana. We have another one in Illinois and there's some really interesting potential opportunities in some of those markets to do things along the lines of what we've already announced in Aurora and Jolietta, Illinois as well as Council Bluffs. You should expect to hear more from us on some of those other opportunities that we think will have really strong return profiles based on what we're seeing throughout the industry right now on those that have gone from old riverboats onto land.

Great. Thank you very much.

Thanks, Chad.

We'll go next to Ben Chaiken with Mizuho.

Hi, good morning. Thanks for taking my questions. On the iCasino side, it sounds like both from the data that we get and also the commentary in the prepared remarks that you're having some success on the market-share side, especially for the standalone iCasino iGaming app. Are you seeing anything that makes you want to lean into marketing or investments in that product? And one follow-up. Thanks.

We're seeing really nice retention results. We have a great product there. We knew we did going-in. And so I would say we're just getting started on some of the, you know, new performance-based marketing spends. Let's see how strong the top of funnel is in those efforts and what the CPAs look like. Let's see what retention looks like for those newer users versus those that came over, maybe they were reactivated or came over from our retail database. But you should expect for as long as we're seeing encouraging results and attractive CPAs and strong retention, we're going to continue to lean-in and push on iGaming. We think it's a real big opportunity for us as a company and we have a great product. We have a great team overseeing that. That's continuing to get better every day. So I would say, yes, overall to that.

And as our cross-sell continues to improve, which is doing really well at the moment, as we grow our sports book, that's just going to continue to drive our iCasino business as well, obviously.

Got it. And then switching to - switching gears a little bit to Council Bluffs. You have the option of a term-loan versus rent. I guess from my seat, it seems like the obvious choice would be term-loan, but maybe I'm missing something. Maybe talk about the thought process deciding between term-loan and rent. And then I think, Jay, you were suggesting that a fewer other projects on the horizon. Do you think you'll have flexible financing options there as well?

I'll hit the last one first and then Felicia, you can hit the Council Bluffs question. Yes, we think we'll have flexible financing because we do have options. We can always finance these projects on our own balance sheet. We have landlord relationships that are very healthy and it's great to have those relationships and have that optionality and - when you're thinking about these projects. And some of it's going to depend on what are - what's the credit market look like at the time that you're needing to fund these projects. There's times where it might be more obvious that you want to do this on your own balance sheet versus work with a landlord or other financing sources. Please, I'll hand it over to you on Council Bluffs.

Yes. So just on the optionality and to what - key off of what Jay just said, I mean, we really owe that optionality on Council Bluffs to our great relationship with GLPI and it's fantastic to be able to have that ahead of us. And you're right, you know, on the surface, structuring it more as a loan is more attractive than rent. As you know, rent - our rent will escalate every year. And so having that loan could ultimately be the better decision, but we'll have time and we'll make that dent. I don't want to kind of pre-determine what we're going to do, but having that optionality is very favorable.

Okay. Helpful. Thank you.

We'll take our next question from Bernie McTernan with Needham.

Great. Good morning. Thanks for taking the question. A big focus for investors on the OSB marketplace is just U.S. handle growth. So just interested in terms of what you guys are seeing there. I would love any color. Thank you.

Yes. I would say, you've heard others talk about this. We don't have any new state launches happening in 2025 other than potentially in Missouri later - very late in the year. Alberta, there's continued progress there. We're actually quite excited about Alberta given our success in Ontario. And there was good news there yesterday. It continues to move along through the process. So we're cautiously optimistic that will happen sometime in the next couple of quarters as well or hopefully before the end-of-the year. And obviously, those are - those state launches or new province launches are part of what's been driving those higher handle results on a year-over-year basis for the last several years. This is a slower year in terms of state launches. So I think you should expect to see handle growth for the industry, but it's probably going to be less significant this year because of that dynamic than it has been the last several until you get to those state launches. And you're probably going to see a little bit more muted just generally from a seasonality standpoint, when you get to Q2 and Q3, there's just less big event things going on and it will probably start to inflect to stronger growth results when you get to September through the remainder of the year.

Understood. Thanks, Jay.

Thanks, Bernie.

Our next question comes from Jordan Bender with Citizens.

Good morning, everyone. First sports-betting, you talked about what's ahead of you. Some initiatives might be easier to achieve than others. But Jay, for sports-betting as your relationship continues with ESPN, can you maybe expand on some of the low-hanging fruit between the two businesses that might help customer growth and retention through the end of the year? Thank you.

Yes, I think I'll let Aaron answer most of that. We hit it at a high-level and maybe Aaron will double-click on some of those opportunities. Obviously, the streaming direct-to-consumer launch with ESPN this late-summer, early fall, that's going to be a big opportunity for us to drive top of funnel as well as strong retention. And look, we're finally getting to a point after being live with ESPN BET for a year and a half where the real deep integrations that we all were excited about when we did the deal and shook hands, those are all starting to happen now. Having that linkage between ESPN and ESPN BET and now you go into our betting app and your favorite teams are all right on the top of the home screen and so you can scroll through and see if you want to place bets with your favorite teams because we have that information. And then you get to football season with fantasy. There's - we're finally going to be able to do the things that we were hoping to do. It just took a little bit of time, but Aaron, maybe you can spend…

No, look, I would say in addition to the Mint Club, which is sort of special offers for linked users, with that one click link, your favorites get pulled over into ESPN BET, you can go in and bet the markets for your favorite teams. What we're already finding too is those users love to bet parlays more on - in those favorite placements, which is actually very good. But your favorites don't just appear in ESPN BET. They follow you through the ESPN ecosystem experience too, including what - their new flagship product, which means you'll have a personalized betting experience, not just within ESPN BET, but within ESPN. And we've been working towards that over the past year, you're going to now start to really see the benefits of that, especially moving into football. This year, if you're a fantasy player and ESPN has the biggest fantasy platform in the U.S., there is no better place to come, play fantasy and bet your team than ESPN and ESPN BET. It will be no question. And the product is going to be native, it's going to be integrated not only into the ESPN BET experience, but there will be a derivative version of that within the ESPN experience and you'll seamlessly move across the two. So we are super-excited not only about flagship coming up, but also the NFL season is going to be really special as it relates to fantasy embedding.

That's a level of differentiation and personalization that isn't happening today. It should be effective. We're not going to get ahead of ourselves of like how much better and what's - but that's why we are confident that market-share will continue to grow between now and the end-of-the year, both in sports-betting as well as in iGaming again for different reasons, but we should see continued growth in both of those areas.

Really helpful color. And then the follow-up, Felicia, taking the comments about stock dislocation in your prepared remarks, understanding there's a price for anything and you spoke to the brick-and-mortar side of the business already, but could you look to do something strategically before the opt-out cause next year if you're not getting credit within your valuation? And that's on the online side, sorry.

Yes. I mean, I wouldn't - there's really nothing to say on that topic in terms of next year. I hit that on our last earnings call that's in the contracts. Both sides have the option at the third anniversary if we haven't hit a threshold level of revenue market-share to decide if they want to rework the deal or continue on or exit and that hasn't changed. So look, we're focused. Our partners are focused. We're excited about what's ahead of us. Let's see where we are as we trend through the next couple of quarters. I think it will probably be not obvious - not just obvious to us, but obvious to others as well what path is going to make the most sense. But we're staying focused and our teams are staying focused on working together to deliver a really great and differentiated experience. And we're confident that it's going to create - it's going to deliver solid results. And through football season going into 2026, we've got an opportunity to really show why we did this deal in the first place. And for whatever reason, if those things aren't working, then you've got optionality as you head into 2026. So I would say nothing has really changed there, but we're excited about what's in the queue.

Great. Thank you very much.

We'll take our next question from Ryan Sigdahl with Craig-Hallum.

Hi, good morning, guys. Jay, you mentioned, I think it was in response to a question in your prepared remarks, but turning performance marketing back on, was that in context of the Hollywood iCasino standalone or also ESPN BET in both sides because I believe it's been turned-off since December of 2023. So just how you think about leveraging that channel and maybe accelerating the customer acquisition and getting them into the funnel to experience the user experience that you're building here?

Yes, it's all a balance as you can appreciate, Ryan, in terms of how much you're doing there outside as it relates to sports-betting outside of what you're spending with ESPN. So we've been doing performance marketing and online sports-betting outside of ESPN, not as much obviously in the last six months as the previous six months, but I think we're getting smarter and more surgical around what's working, what's not and where to invest and where not to. But my comments were more specific to since the launch of Hollywood iCasino, our initial first few months were really focused on organic cross-sell and obviously activating - reactivating customers that had been dormant. Now it's an opportunity for us to get a little bit more aggressive on the performance-based marketing and see what type of customer profiles come in, how much quality do we have there? What are the CPAs, what's the retention? And we just got started recently, but we're seeing some nice top of funnel results.

Makes sense. And then just a quick follow-up. Timeline for launch in West Virginia?

Do we have a latest on the Hollywood standalone for West Virginia?

Yes, I don't have that in front of me.

Yes, it's sometime in the next couple of quarters. I don't have the date in front of me, Ryan. We're obviously working with the regulators there, but we are live, as you know, Pennsylvania, Michigan, New Jersey. We just launched the Score Casino in Ontario. And so West Virginia is the last state, at least currently for us to launch a standalone Hollywood iCasino app, which should be good for us because we have a Hollywood branded casino there. It's the largest casino in the state of West Virginia. So I would say sometime in the next couple of quarters.

Very good. Thanks guys. Good luck.

Thanks, Ryan.

We'll take our next question from John DeCree with CRB.

Hi, good morning, everyone. Thanks for taking all the questions. Jay or Todd, you guys have as good of a pulse as anyone on kind of the regulatory and legislative process. I think Ohio considering iGaming was probably not on our big oak cart for this year and it's a big state for you guys in the retail network. So maybe a two-part question. What are you guys seeing on the legislative front? And then how do you like your position or how do you think about your position in a state like Ohio where you kind of get to start maybe from the starting line with everyone else? And then given where you have a big retail presence in terms of quickly launching versus maybe where you started before playing catch-up?

Yes, happy to. We're obviously very involved and engaged in Ohio. A bill has not been put forward yet. I know there's articles being written about a bill being worked on right now. I would say, look, we now have a much more competitive iGaming product and we have a standalone app in addition to what we offer within ESPN BET that we know is competitive, and we're better operators in that space than we were even six months ago or nine months ago. Every state is a bit different. We're not going to necessarily be on the same page with every other company because some markets we have no casino, some markets we have a small casino, and some markets we've got, like the state of Colorado, gaming laws were passed there where the casinos are only in the mining towns in the mountains, an hour and a half away from the population. So that's not a good scenario for us if we have one of those large casinos, which we do in Black Hawk, Colorado. So it really does depend. We're obviously very focused on doing what's in the best interest of our shareholders. And so Ohio will stay close as we would in any other state. But I don't want to comment too much because I know that bill is still being worked on currently.

Great. Thanks, Jay. Appreciate it.

All right. We'll take one more question, Emma.

We'll take our final question from Jeff

Great. Good morning, everyone. Thanks for squeezing me in. I wanted to touch on more on the iCasino side of Interactive, Jay, you shared a lot of detail on the momentum that you're seeing following the standalone app launch and improvement in the product, which is just quite noticeable anecdotally. I'm curious if you look at your competitor that holds that number-one spot for product and maybe even some of the other players that round out the top three, top four, just what are some key areas that you've identified where you think there is still room to close any gaps that you still see out there on product in '25 and '26 and beyond? Thanks.

I'll take a stab and Aaron obviously jump-in there. I'd say, look, I'll also hit sports-betting. I think the biggest opportunity for us right now beyond sort of the more organic things that we're working on with our partners at ESPN around integrations and personalization is around live betting. I think where our product offering today is good, but it needs to be better than good. And so we're working hard on that. We just launched some streaming offerings. And so live betting is getting - the experience is improving every day right now. And - but we have more work to do there in terms of live betting with same-game parlays and just live betting generally and reducing latency and things of that nature. So on the sports-betting side, I would say mostly around lives. As it relates to online gaming, I don't - it's not a product mix issue at all. I think we have great products. We have great variety. We have our own games that we've developed that performed quite well, especially in the areas of digital blackjack. And in some slot cases as well, slot themes. But I would say overall for us, it's probably more around CRM and promotional engine and just that same level of personalization and you want people to feel that they're being treated different and better within the experience and the ecosystem that you provide than anyone else. And so we're still working on that. The product team is hard at-work to make sure that we're creating some points of differentiation that are improved versus anyone else.

Yes. I would just add, just build on personalization, I think is one of the things we're really focusing on in iCasino just reducing the friction, elevating and putting the games you care about in front of you, getting you into them faster, the same exact approaches we're taking with the sports book as well, but we think that's going to be just make it easier and more fun for you to get into what you want as quickly as you can. As Jay said, we've got a nice product mix. Our UI is world-class, our games are world-class. So just getting you into what you want as quickly as possible, I think is going to make a difference and we're working hard on that.

Great. That's helpful. Thanks for that. And then just following-up on something Felicia said earlier in the prepared remarks, I think you previously talked to some exposure to tariffs on the steel side with the Council Bluffs project and some strategies or some exploration in-place of some ways to try to mitigate or get around that. I was hoping to just expand on that a little bit further based on your discussions right now, is your expectation that you could fully fix these in any sort of GMPs or is the understanding that tariffs will be carved-out kind of from here onward? And then with respect to steel specifically, are there opportunities to resource domestically? Or is it more about sort of leaning on your suppliers and things of that nature? Thanks.

I can take that one. So we're not looking at a high-rise there. So the need for steel is not as high as if we were building a hotel tower, it's a one-level casino that Jay had touched on. But also we're in a really good position from a timing standpoint. So we can kind of spot the market and look to lock-in. We have a great procurement team as both Felicia and I have mentioned as well, it's a great D&C team that can work-through this and then work those changes into the design since this is very much a known issue, D&C - our design and construction and procurement team are working together on that already. So again, as this tariff noise kind of plays out over the upcoming months, we feel good about the ability to lock-in when the time is right.

And then I'll just underscore, we did provide a budget range for Council Bluffs just because of what's going on in the marketplace right now around tariffs. So the four other growth projects that we're getting close to opening, we were a lot more precise of what those budgets were going to be in the early days because we didn't have that as a factor. So that's why the range is there.

Great. Thanks very much.

All right. Thanks, Jeff. Thanks, everybody, for joining us this morning and look-forward to speaking with all of you again on our Q2 earnings call in August. Have a great day.