PENN - NASDAQ

To all sites on hold, we appreciate your patience, and please continue to stand by. Please stand by. Your program is about to begin. Greetings. And welcome to the Penn Entertainment third quarter 2025 earnings call. I would now like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead.

Thank you, Risa. Good morning, and thank you for joining Penn Entertainment's 2025 third quarter conference call. We'll get to management's presentation and comments momentarily as well as your questions and answers. During the Q&A session, we ask that everyone please limit themselves to one question and one follow-up. Now I'll review the safe harbor disclosure. Please note that today's discussion contains forward-looking statements. 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. Now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go ahead.

Thanks, Joe, and good morning to everyone. Joined here in YMSing by Felicia Hendrix, Todd George, Aaron LaBerge, and other members of our exclusive online sports betting senior management team. Earlier this morning, we issued a joint announcement with ESPN regarding our mutual and amicable decision for an early termination of our marketing agreement on December 1. I want to start off by saying that we are grateful for the exhaustive and collaborative efforts by our friends at ESPN. And the Penn Interactive team to compete for a podium position in the highly competitive OSB space. Although we made significant progress, improving our product offering and building a cohesive ecosystem with ESPN, we were unable to establish ESPN Bet as a scale player. Prioritizing our digital assets in Canada, and our Hollywood iCasino products to further leverage our core retail casino business and overall omnichannel business model. It is the right time to realign our interactive focus enhances connectivity. This shift emphasizes cross-sell opportunities across our ecosystem with our 33,000,000 plus Penn Play customer database. Going forward as of December 1, pending final regulatory approvals, our US and Canadian OSB brands will be the Score Bet which as you know has been delivering strong results for years in Ontario. Of North America's largest and most competitive online markets. Aaron LaBerge and his best-in-class team are currently working on a seamless customer experience that includes the current app being automatically updated to the Score Bet when you open it on the dates of transition. All account information, balances, betting history, pending bets, marketing offers, promotions transfer over automatically. There will be no new app to download or new registration process to go through. Our digital realignment will free up resources to strategically invest in the North American markets and customer cohorts with the strongest return potential which we expect will drive enhanced unit economics and profitability. We will also continue to build our digital database in states with a Penn retail property in order to leverage cross-sell opportunities and prepare for the potential legalization of iCasino in those markets down the road. Lastly, the transition to the Score Bet will present an opportunity to optimize our digital business and operate more efficiently, including replacing fixed media spends with performance-based and regionally targeted marketing that complement our retail and iCasino footprint. Digital engagement with current and potential new customers is essential to our company's long-term success. 64% of our total company player database growth since 2019 has come from our digital channels. This has allowed us to attract a much younger customer demographic and to create significant and unique cross-sell opportunities and experiences for them. Our data shows that customers who play with us across multiple channels are significantly more valuable than single-channel customers. Have much higher retention, which is critical as the industry continues to evolve rapidly. Our North America iCasino business achieved its highest quarterly gaming revenue to date an improvement of nearly 40% year over year. Driven by record cross-sell from OSB of 62% and strong growth from our standalone Hollywood and the Score Bet iCasino apps. In the third quarter. Going forward, OSB will remain a strong top of funnel customer acquisition driver for Hollywood iCasino Casino. Will continue to be embedded into our OSB offering and states where it is legal. And Hollywood iCasino will also continue to operate as a standalone app. As highlighted on Slide eight, of our investor presentation, the introduction of our standalone app along with improved cross-sell from online sports betting, has led to a 79% increase in iCasino MAUs during the third quarter. It is worth noting that as encouraging as our iCasino results were in Q3, we set new all-time monthly records for MAUs, GGR, and NGR again in October. The momentum is continuing to build in this exciting growth channel. As you'll see on slide 11, over the last year, we have significantly improved the velocity of our product innovation in order to drive results in key areas of our interactive business. With a particular focus and significant year-over-year improvement in the area of customer retention. Let me wrap up our digital update by sharing that our interactive financial goals for 2026 of being breakeven or better have not changed. We will have complete control over our digital cost structure and marketing budget for 2026, will primarily focus on the highest margin markets and customer cohorts. We will provide a more detailed earnings guide on our Q4 earnings call in February. Shifting to our core regional casino business. As you'll see on slide 12, our talented teams across the country executed very well and demand was stable across gaming and non-gaming amenities during the quarter. Particularly at our properties not impacted by new supply. We saw particularly strong results in our West segment and increased competitor promotional activity in those same markets. At our properties across Ohio as well as in Saint Louis and Illinois. Similar to Q2, we also saw increases in theoretical revenue across all of our rated worth segments of our retail database along with overall growth in both total visitation and spend per visit in the aggregate across the portfolio. The fourth quarter is off to a solid start. And we are encouraged by early trends at our new Hollywood Casino in Joliet, which is driving both impressive volumes and database growth through its best-in-market offering. Across the country. Consistent with our long track record of delivering solid returns on our regional gaming investments. We are also pleased to share that revenue from Joliet so far has been almost entirely incremental to our Hollywood Aurora property. We've seen a 42% increase in our database at Joliet since opening and more than 50% of that growth, excuse me, was from previous inactive customers showing the benefits of the much improved products and location. Our new offering has also been highly efficient at activating digitally native customers in Illinois. While our other previously disclosed development projects remain on track. In Henderson, Nevada, the second hotel power at M Resort is scheduled to open on December 1. Our Hollywood Columbus Hotel Tower and new Hollywood Aurora casino relocation are scheduled to open in 2026 subject to final regulatory approvals. The relocation of Hollywood Council Bluff is anticipated to open in late 2027 or early 2028. And with that, I'll now turn it over to Felicia.

Thanks, Jay. As highlighted on Slide four in the investor presentation under the term of our early termination agreement cash payments to ESPN will cease at the end of 2025. Starting in 2026, we will no longer have any marketing obligations with ESPN. Pursuant to the termination agreement, a total of $38,100,000 will be paid to in 2025 for the marketing services we will incur through December 1. From December 1 to December 31, we will pay a total of $5,000,000 to each ESPN for traditional media to support the Score Bet and or Hollywood iCasino offerings. Regarding the warrants, all unvested warrants and performance warrants will be forfeited by ESPN. ESPN will retain roughly 8,000,000 of vested warrants with a weighted strike price of approximately $29. As a reminder, these are subject to net settlement in stock or cash at our option. An assumed exercise price of $29, the vested warrants would represent potential dilution of roughly 320,000 shares. Which, when compared to our 138,000,000 shares outstanding ending is 0.2% dilution. So really, no material dilutive impact from the example I just provided. Due to the net settlement. The noncash expense related to the vested warrants in the fourth quarter will be roughly $14,000,000. Our retail segment generated revenues of $1,400,000,000 adjusted EBITDAR of $465,800,000 and segment adjusted EBITDA margins of 32.8%. Earlier, Jay touched on our stable core demand in our retail segment particularly at our properties not impacted by new supply and increased competitor promotional activity. We have a lot to look forward to in the fourth quarter for our retail segment. The quarter is off to a nice start. Through the first weekend of November. Hollywood Casino Joliet trends are encouraging. We are also excited about the December 1 opening of the second hotel tower at M Resort. For our retail segment, we expect fourth quarter 2025 revenues to range from $1,410,000,000 to $1,430,000,000 and adjusted EBITDAR to range from $455,000,000 to $475,000,000. Our interactive segment generated revenues of $297,700,000 including a tax gross up of $139,500,000 and adjusted EBITDA loss of $76,600,000. Gaming revenues and adjusted EBITDA in the quarter came in below expectations due to customer-friendly hold across our digital and lower than anticipated OSB volumes. Given our brand transition and our targeted retention campaign, our fourth quarter 2025 Interactive segment adjusted EBITDA results will look different than the guidance as we provided earlier this year. We will incur a loss in the fourth quarter. But to provide guidance with a high degree of precision today is challenging given the unknowns around retention following the rebranding on December 1. In addition to well-known customer-friendly sports outcomes in October, the quarter will also be impacted by a number of one-time expenses that will not recur in 2026 as we exit the relationship, make changes to our current cost structure, and focus on rebranding and retention efforts. Based on what we know today, we expect the fourth quarter loss to be smaller than that of the third quarter. Importantly, our cash payments and noncash warrant expense to ESPN will cease at the end of the fourth quarter this year, which provide us with significantly more marketing and flexibility and a clean runway as we head into 2026. Corporate expense of $34,000,000 included $3,900,000 of legal and advisory costs related to activist activity in connection with our 2025 annual meeting of shareholders. We continue to expect other segment adjusted EBITDAR, which includes corporate expense, to be negative $121,000,000 for the year before any further legal and advisory costs. The table on Page 10 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 $172,700,000 CapEx in the quarter, $122,000,000 was project CapEx. Primarily related to our four development projects. We ended the 2025 total liquidity of $1,100,000,000, inclusive of $660,000,000 in cash and cash equivalents. In the third quarter, we repurchased $154,100,000 of shares at an average price of $19.34 per share. Since September 30, we have repurchased an incremental 85 at an average price of $17.44 per share which takes us to a total of $354,000,000 of shares repurchased as of November 5 at an average share price of $17.64 per share. In connection with our previously stated goal to repurchase at least $350,000,000 of shares this year. Since the beginning of 2022, we have repurchased $1,100,000,000 of shares or 25% of our shares outstanding. We have $395,000,000 remaining under our current share repurchase authorization, which expires at the end of this year. To that end, this morning, we announced that our board of directors has authorized a new three-year $750,000,000 share repurchase authorization, which commences on 01/01/2026. As we have demonstrated over the past several years, we consider share repurchases a major component of our capital allocation strategy which also includes delevering and investing in growth capital. Looking forward, we plan to continue to be opportunistic with our share repurchase activity. We expect to continue to delever, especially as the large losses in Interactive behind us, and we continue to evaluate our pipeline of future growth projects. Transitioning to our retail growth projects, on November 3, we received $150,000,000 in funding from GLPI at a 7.79% cap rate in connection with the $206,000,000 second hotel tower construction at the M Resort in Las Vegas. This follows the $130,000,000 in funding from GLPI we received in early August related to the $185,000,000 Joliet project and for the $360,000,000 Aurora project that opens in late Q2 2026 we have already committed to take $225,000,000 of funding from GLPI at a cap rate of 7.75%. We will draw from GLPI close to the opening of Aurora and we have not yet announced our funding plans for the $100,000,000 hotel tower at Columbus. We expect total cash payments under our triple net leases to be $246,000,000 for the fourth quarter reflecting a full 2% escalator on the amended and Penn master lease and a 1.5% fixed escalator on the 2023 master lease, both effective November 1. As we head into the final months of the year, we are updating our 2025 CapEx forecast to reflect the shift of some project costs into next year. We now expect project CapEx of $430,000,000 which compares to prior guidance of $490,000,000. Our total 2025 CapEx is now $685,000,000 compared to our prior guidance of $730,000,000, which reflects the shift slightly offset by a pull forward of some maintenance CapEx into 2025 from 2026. Twenty twenty five net cash interest expense, we project a $160,000,000. For cash taxes, we do not expect to be a cash taxpayer in 2025. And our basic share count at the end of the third quarter was 138,000,000 shares, after the June repurchase of the convertible notes, we now have 4,500,000 potential dilutive shares from the remaining convertible notes stub and about 1,000,000 dilutive shares from RSUs and stock options. I will now turn it back to Jay.

Alright. Thanks, Felicia. I'd like to conclude by reiterating my sincere thank you to ESPN chairman Jimmy Pitaro and his entire team at ESPN who have been great partners throughout our time together. There's a lot we will take away from this partnership. Including 2,900,000 new users into our ecosystem, a vastly improved products and feature set and a best-in-class digital team led by Aaron LaBerge, who will continue to oversee our interactive businesses, and our transition to the Score Bet. As I mentioned, we're looking forward to the launch of a unified online sports betting brand across all of North America, which will provide a path to stronger unit economics with a simplified cost structure. Our reduced fixed media spends will now provide us much more marketing flexibility to invest more in Canada. As well as in US iCasino and OSB markets and customer cohorts with more compelling returns. Particularly as we look ahead to new market openings like Alberta, is anticipated later in 2026. Importantly, we are in full control of our entire business moving forward. We own our brands. We own our database. We own our tech stack. We have extremely talented teams. This will enable us to better manage and forecast our digital business with greater precision, much like we have done in our regional gaming portfolio for many, many years. Penn's unique omnichannel strategy going forward is clear. We have a high quality and extremely well-maintained portfolio of land-based properties across the country that generate the highest tax-adjusted margins in the industry along with significant free cash flow. And we have several growth catalysts over the coming quarters. Coupled with less headwinds than we have seen in many years. Our digital business is complementary to the land-based segment. It is primarily focused on our Canadian operations, and iCasino First markets in The US. We'll continue to use OSB across The US to drive top of funnel database acquisition and cross-sell to Penn's retail and digital casino assets. But at a cost structure focused on overall profitability for the digital segment. The team and I are focused and excited to execute on this strategy to create compelling value for our shareholders over the short, medium, and long term. And with that, let's go ahead and open the line for questions.

At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star and two. We'll take our first question from Barry Jonas with Truist Securities. Your line is open.

Hey guys. With the ESPN exit, can you talk a bit more about any puts and takes for near term as well as maybe longer-term profitability for Interact and then maybe throw in omnichannel's contribution to retail in that as well. Thank you.

Thanks, Barry. Good morning. So, yeah, let's take a step back for a second. As you think about the investments that we've made in our digital business over the last, call it, five years, we really had four primary goals. As we made those investments. We knew that getting into the digital business, particularly sports betting, was gonna be a great top of funnel driver for the company. And we would be able to feed the database with a younger set of customers that just weren't visiting our retail casinos. The average age of our retail database was getting older. We knew this is an opportunity for us to really bring the average age of our database down. We've been successful in doing that. You see in one of our slides there and we've talked about before. The average age of our active database is younger by seven years. From 2019 to where we are now in 2025. So that was goal one. I think we've done a great job with that. We're still working at it, of course. Number two is once you have those younger customers and new customers in your database, you wanna be able to cross-sell them to your profitable land-based casino businesses. And we've shared with you before. We've been, you know, in doing that again that's gonna continue. That's a very important goal for us is cultivation of those relationships and to provide great experiences and ultimately provide monetization opportunities for the company with those new customers. So check that box. I think we've been effective at doing that. Again, more work in front of us. And I think number three for us was we want to make sure that we were preparing for the future and making sure that Penn as a company is set for where the industry is headed. And I'm sure we'll talk about plenty on this call. There's a lot going on in this industry right now. I feel like we're really under attack from a number of different directions. But I think the company today is positioned extremely well to compete regardless of which direction we end up going as an industry. And, what we want to do and accomplish digitally what we want to do and accomplish in our retail footprint, of course, it all comes together with the omnichannel strategy that we mentioned earlier. So I would say check the box. We built this company. We're prepared for the future. Really important goal. And then lastly, of course, we've been made these digital investments to make money, to deliver a return for our shareholders. We have not done that yet. That's the focus in 2026 and moving forward is to start to deliver profitability for our shareholders, which will only grow over time. So I think at a high level, that's the way we've been thinking about it. It's nice to be able to turn the corner and speak to profitability and we'll have more to speak to on that specifically for 2026 and beyond when we get on call in February with all of you.

Great. And then just I ask a follow-up on retail. You sort of cited increased competition and promotional activity. Curious how that's been impacting your operations beyond initial expectations in maybe how you're responding. Thank you.

Todd, you wanna take that one?

Sure. Thanks, Joe. Listen. It's I think there's been plenty of discussion around some of our competitors in the space and how they've responded. I think we're seeing kind of the double edge here. It's really about the new competition in key markets. I think slide 12, in the earnings deck shows a lot of the way we look at the business and what we're seeing. And in markets not impacted by new competition, performing really well. In the markets where we have new competition, there's also been a competitive response that has increased promotional reinvestment. And what that usually does is it can lead to increased marketing cost. But anytime you have a new competitor coming in, you'll have a little bit of a spike in labor costs. You'll see some retention bonuses for some key positions, but you all see salary and wage growth. You know, the good news is fairly temporary, some one-time expenses, and then things normalize over time. But if you look at slide 12, it shows a good snapshot of the way we performed around the country.

I would just add too, and this speaks to, you know, the job that Todd and our regional heads and our general managers in the company we have we have never we've never stopped investing in our properties. And we deliver best-in-market offerings and experiences in almost every one of our markets. So but Todd and I both been at this for too long to even say these days, but things happen. You get promotions, that kinda ramp up and ramp back down. The reality is in these mature markets, customers may chase a promotion once or twice. They end up settling back to where they feel comfortable there's a really good value proposition. And we how we stack up against everybody in the regional gaming space in terms of overall asset quality customer service delivery, and experience. So we'll be fine. This will be a little noise for a short period of time. It'll calm down and on we go.

Great. Thank you.

Our next question comes from Brandt Montour with Barclays. Your line is open.

Hello, everybody. Thanks for taking my questions. So the first one on digital, know, I know that we'll be waiting or we're gonna wait to hear more about your plans on profit. And I know that there's multiple moving pieces of profitability, including retention risk on the revenue side. But if you could just, Jay, focus on the cost side and talk about the fixed cost removal for ESPN, a $150,000,000 a year. And you said the word replace with the marketing you're gonna need to support the score. You know, is it fair to assume that sort of just looking at those two pieces that marketing score should, by definition, come in below what you were paying to ESPN?

Significantly below, I would say, Brandt. I mean, as you think about the marketing dollars we've been spending with ESPN, most of those dollars will take down to the bottom line. And some of those dollars will be redeployed to the markets and the customer cohorts that we talked about, the ones that will deliver us the highest returns. Primarily our business in Canada. We've been competing really well there with, not a lot of marketing spend and that's gonna change. We're gonna be able to spend more money in Canada and continue to grow our share, I think, profitably there. And in the iCasino hybrid states in The US, those are gonna be the primary markets of focus, obviously, highest value customers. That's the way that we think about it. So, again, we'll have more detail for you, but you should expect to see as we talk about 2026. We're gonna learn a lot the next two and a half months before we get on a call. With you again, sort of post rebrands. We understand what retention looks like. I think we have a very good plan around retention. We've been working on this plan for a couple of months now. And so we're gonna know a lot more in February. And gonna continue to adjust our cost structure and our marketing spend assumptions based on what we're seeing around retention and revenue projections as we go into 2026. So long-winded way of saying we have full control over all of those variables. And so stay tuned. We'll have more to share in February. But the goal is to stop, you know, to move away from losses in digital. Turn that around and really start generating significantly more free cash flow as a company.

Great. Thank you for that. And then just a quick one on the retail side. Back on the back of Barry's question. You know, I'm assuming the guide down at the EBITDAR line at retail was mostly that competition decided. Could you just maybe bifurcate between competition that you had been seeing in supply impacted markets like the reaction that I think you were talking about from other competitors. In those markets. Between that and potentially any increased promotional environment or promotional activity in markets that are not supply impacted. And I think I know I think you know who I'm talking about. If you could just sort of bifurcate those and let us know if the second one has become a bigger headwind as of late.

Yeah. Hey, Brent. This is Todd. But you know, the reality is that the group you're talking about also happens to be in every market where new competition has come in. So that's kinda that double impact that we saw in the other markets. For the most part, those are healthy markets where we have really good properties. Where we're typically market leader buying for number one consistently. So a little bit less there. And, obviously, there, you don't have the labor impact. So it really is kinda confined to that marketing, promotional environment, which as Jay mentioned, we take a bit of a different approach where reinvesting in our properties, creating that experience, people will gravitate back towards that experience versus what offer is in my hand, what coupon is in my hand.

Great. Thanks, everybody.

Our next question comes from Joe Stauff with Susquehanna. Your line is open.

Thank you. Good morning. I wanted to ask just a couple questions to refamiliarize myself with the Score Bet. Wondering, I guess, you know, maybe the updated share that you have in Ontario I assume, obviously, you'll launch in Alberta. And wondering, you know, for The US, customer database within the score, know, is there a concentration of adjacent markets in and around Ontario? Or is it like a wider distribution? Just wondering how to think about that.

Yeah. Happy to, Joe. And, Erin, anything I missed, feel free to in here. Here's a way to think about the score media app. And our offering is that we have roughly 4,000,000 monthly active users across North America. That's been wildly consistent even though we haven't paid as much attention to that business as we should be and will be going forward. But it stayed remarkably consistent really since the time of acquisition of the score. Of that 4,000,000, roughly two-thirds of those are in The US. And one-third of those are in Canada. The popularity of the score and the SCOR media and the SCOR brands is really spread across Canada. You see it as just overly concentrated Ontario, all provinces across Canada. There's about the same level of popularity and market share from a digital sports media perspective, which is why we are very encouraged about the opportunity in Alberta. As you think about The US and the two-thirds of that 4,000,000 or call it 2,600,000 monthly active users, roughly two-thirds of those users are in states currently that are online sports betting legal states. And so having that brand connection, we think will be helpful. It has been in Canada from, you know, the score media to the score bet from a sports betting perspective. We'll be able to do essentially the same. We'll be able to deploy the same playbook here in The US from a sports betting perspective that has been effective for us there. We'll see what that gets us, but we do think that that could be helpful. And, look, Aaron and team have done a great job improving the product and the experience our feature set, the UI UX. If you look at our retention results this year, the first two months of football season versus last year, significant improvement. So we're gonna be laser-focused on retention of existing users and then also getting some of these score media users that maybe currently aren't using ESPN Bet to use the Score Bet in The US as we move forward.

That's great. Got it. Thank you for that. And maybe two quick kinda clarifications. I guess, one, you know, you based on your commentary and based on my understanding historically is you own all the customer data associated with ESPN Bet. And the second clarify question is, I didn't see an expiration on the 8,000,000 warrants that ESPN will own going forward.

Since the beginning of our relationship. We own that customer dataset. So that's exactly correct. And for regulatory reasons, we're the only natural owner of that customer dataset. ESPN, because they're not licensed and they're not regulated, they can't have access to it. So that's just the way the deal goes. That does you know, I'm not sort of pointing out anything other than the way that it has to work from a regulatory perspective. So customer data stays with Penn. And that's something that obviously we're gonna continue to work on is reactivation and the things that we have in this football season. We've been fortunate to see some good results there. That'll continue. With regards to the warrant expiration.

Yeah. Joe, those were part of the ten-year deal. So at the end of ten years, they expire.

Gotcha. Alright. Thank you. Thanks, Joe.

Our next question comes from Jordan Bender with Citizens Capital Markets. Your line is open.

Hey, everyone. Thanks for the question. This is kind of the first time that you've run a unified online strategy across both Canada and The U. Kinda since you started your digital operations here. You know, here is as you start to dig into databases and expand, you know, digitally that way, you know, does it start to make sense to look at potentially buying retail properties up in Canada to cross-sell and further dig it to that customer database. Thank you.

Yeah. Thanks for the question, Jordan. I would say you know, that's something that's sort of been on our radar before. I'd say it would remain on our radar. I wouldn't necessarily think about it as moving up significantly in the list of priorities. But there's not a lot of options there. There's sort of two large operators in Canada from a retail perspective. And so if opportunities presented themselves at the right time and the right price, we would definitely take a hard look at that. And to your point, there would be synergies, like, from an omnichannel perspective similar to what seen in The US. But I would say it's not, you know, really ratcheting up on the priority list, but we would be opportunistic if the opportunity presented itself.

Appreciate it. Thank you. Felicia, you know, just kinda following up on your comments around capital allocation and the balance sheet. You've loosely kind of guided us or talked us to leverage targets kind of how you wanna run the business over the years. I mean, as we move kind of into the score and cleaning up, you know, some of the online losses, is there kind of a level or a leverage target that you would roughly wanna run the business kind of as we look out in the 26, 27, 28?

Yeah. Thank you for that. Yeah. I would say over the longer term, our optimal lease adjusted leverage level is probably somewhat below five times. So, you know, we're gonna remain focused on getting to that level. Over the next several years. But just keep in mind that that deleveraging trajectory, which we are obviously very focused on, just may not be perfectly linear because we're going to continue to be nimble you know, as opportunities present themselves. Right? We'll continue to be opportunistic buying back stock, and we're gonna continue to invest in our own growth opportunities as we look at our pipeline. Right? So, again, focused on delevering, getting below five times, but that may not be perfectly linear.

Yeah. I would just add that we do have and we're obviously encouraged. It's early, but we're encouraged by the results we've announced a few others that you're all aware of, and we've got others we're looking at right now within the company's portfolio that we think can also deliver really nice returns. So it's about balancing means Felicia said it very well. About balancing all three of those. They're all three priorities, and we think we can effectively balance them as we move forward.

Thank you very much.

Our next question comes from John DeCree with CBRE. Your line is open.

Hi. Good morning, everyone. Thanks for taking my question. Anyway, talk a little bit about the kind of users acquired with ESPN Jay. But wondering if you have any initial thoughts, and I realize this might be a tough question. About customer retention. In the digital channel when you rebrand to the score. You know, obviously, have some experience with that when Barstool went to ESPN Bet. So are there any kind of strategies or expectations score when you have about kind of retaining those customers and getting them to kinda stay with rebrand occurs.

Yeah. It's a great question. I would say that it's kind of apples and oranges when you think about what we did at the time of that brand change versus where we are now. We had put our customers through a lot of hoops to jump and, we had a new technology stack. We were down for several days. We asked them to come back in and reregister and redeposit. There was a lot going on that created noise in addition to the brand change. And I think feel like we're well positioned here. We deliver what is one of the best online sports betting and online casino experiences, not just as we see it, but as independent third parties that review and rate these apps and these experiences. We rate very high both in iCasino and online sports betting. We've been moving up the rankings. Matter of fact, one just came out earlier this week. We moved up a couple more spots. So we feel like from what we're seeing on product quality, and retention overall, this football season compared to last year, we're in a good spot. I don't wanna predict, you know, what retention and churn end up looking like over the coming. But, we feel like we're positioned well, you. We deliver a great experience. And our users the case. And, you know, we know that most of our users were their number one app, and so we wanna make sure that that stays we have a full calendar planned out as you can imagine and we have the ability to target and personalize from a marketing and CRM perspective today that we just didn't have even a year ago. And so we've got a full marketing plan and, we're gonna be ready to go. And if, you know, some don't respond initially, there's gonna be bounce back follow-up offers. And feel pretty good about the overall strategy. Aaron, anything you wanna add?

Yeah. I would just say, what Jay just said, it's the same exact app this time. So you don't have to download a new app. You don't have to reregister as he said. You'll show up. Your icon will change. And once you're in the app, the user experience is exactly the same. The logo on the app will change, but it's the same experience. And as Jay said, our retention has been really, really good this year as a result of all the product enhancements we've been making. So we feel really strong, and confident that, you know, people will still have the same experience. We'll communicate clearly that the brand has changed, but nothing else has. So the people that love using the app are still gonna have the same level of generosity and interaction with us, personalization, that exists today. So, you know, we feel pretty good. We're obviously gonna be watching it closely. As we rebrand.

That's really helpful. I appreciate that. It's good commentary. And maybe a quick one for Felicia. If I missed it, I apologize. But, you know, I know you took the financing for M Resort from GLPI. I think Aurora you're expected to do that next year. And anything for Columbus at this point? And maybe it's a little too early, but, I figured I'd ask anyway.

Yeah. That's right. It's too early. We'll make that decision as we get closer to the opening of Columbus.

Great. Thanks, Felicia. Thanks all.

Our next question comes from Dan Politzer with JPMorgan. Your line is open.

Hey, good morning everyone. I just wanted to follow-up on 2026. And Jay, your comments that you'll still be breakeven or better, and that hasn't changed. I guess, directionally, you know, we think about you're more you're gonna be more operationally efficient. ESPN Bet and all the associated fees and marketing costs go away. But you guys are investing in Score. I mean, directionally, have you know should the outlook be better today than it was, say, you know, two or three months ago? Or is it really just truly no difference at this point?

I think the target and goal for '26 we feel, you know, as we sit here today and until we better what retention looks like, post rebrand, it stays the same as it was, you know, earlier this year. Obviously, going into next year, it would have been more challenging for us. To be breakeven or better if we weren't able to exit early because the fees weren't changing, but the market share wasn't moving as fast as we needed it to. And as the levels of what we had forecasted is all of you on our last earnings call for football season. So this sort of gives us that clean runway as we clear runway as we move into 2026. And we feel like we've got a real good handle on all of the puts and takes, which is, you know, the team and I, it feels very good. It's no different than we feel about our regional gaming business. I think we've been one of the best in the industry of forecasting what's gonna happen. A level of precision that is, you know, as good as anyone. And we wanna get there on all aspects of our business, and 2026 will be a step in that direction for digital as well.

Got it. And then just to follow-up, I don't know. To the extent that you could maybe you could just comment or opine, you know, the kind of background how you got to this point. Was there a breaking point? Did prediction markets enter into your decision process at all? Just kind of any background you can discuss and obviously, you know, given your you have a competitor that now kind of stepped into that deal?

Yeah. I would say, the lines of communication certainly between Jimmy and I and our teams has been positive. It's been open, and it continued to be since our last earnings call. But we also know what that threshold level was of market share to be at by the third anniversary. And we could see through the first couple months of football season, though we're making a lot of improvements in a number of areas that we've shared with you. We weren't on a path, a trajectory to get to that level of market share. And so you know where it's headed. And why sort of string this along, let's get together and figure out the best path forward for both companies. I've been talking about this the last several quarters. There is that three-year out and companies are gonna have to do what's in their best interests. And I think that we figured out a path forward that was in both companies' best interests and was done in a way that was I think professional and that's the way the relationship was all the way through the first two years and change and think very highly of Jimmy and the entire team at ESPN and was then, you know, nothing but the best will still be very likely an advertising partner of theirs. There's no hard feelings. We had aspirations. We had goals to be a podium player. Didn't work out and, you know, we're moving on from that and they are too and that's I think, that's perfectly fine.

Got it. Thanks so much.

Our next question comes from Shaun Kelley with Bank of America. Your line is open.

Good morning, everybody. Thanks for taking my question. Jay, I think there are two strategic questions I have. First, I think as we all think about the Interactive business, there have kind of been actually three or four parts, right? And I know integrated strategy moving forward under the ScoreBet moniker makes a lot of sense, but we kind of think about Canada and some success up there. We think about market access as sort of a fee or profit pool for this business. And then we think about iGaming, the Hollywood Casino brand and probably contribution profit positive and then obviously the OSB investments. So like my question is very high level. As you thought about those different pieces, is there more to come here on the strategic side? Or as you've kind of done the full rework here, is like, are all those different pieces kind of set and this is the go-to-market for the next year or eighteen months for Penn and you as a management team, Or are there any other of those pieces that are in flux or you might be looking at as you just kind of think about the right fit for what Penn's business is moving forward?

Yeah. I look. I think strategically, what we've laid out today, we feel like we can execute against this. And again, what's the most important here is we have full control over all of the puts and takes. And, you know, we're a company that delivers when we have full control over in front of us, and that'll be the case on the digital side moving forward. The four parts of the digital business you laid out, you're right about that. I would say, however, that Canada sort of been more of a stand-alone because you have one brand for both sports and iCasino up there and we're talking about today in this brand change doesn't affect our Canadian operations at all. We've got nice momentum there. We had our all-time best iCasino month last month in Canada. So we've got nice momentum there. And we're gonna have I believe we can build on that with more of a focus and more resources and marketing dollars headed up north of the border. And market access, think, you know, we all that that's a nice revenue and EBITDA stream. It's not gonna be as high as it is today forever. Right? These deals will eventually expire over time. And so we want to make sure that you know we're not just relying on that because it's not there forever and we're taking. Of that money and we're investing building this company up for the future as I mentioned earlier, and we've done that. I think as it relates to US, iCasino, and OSB, they're so interconnected. You can't really I don't think you can look at iCasino as its own opportunity because think about our iCasino business in The US. Most of it today still comes from within the integrated sports betting app. So if you you can't, you'd have a hard time extracting all those players onto your stand-alone Hollywood iCasino if they've been playing slot machines and playing blackjack through your sports betting app. And so those two really are connected together. All of this has created a very large digital database for us that we do cross-sell into our land-based properties. And, you know, three-quarters of our land-based properties are in states where OSB is legal. And almost 40% of those digital native customers live within 50 miles of our properties. And visit our properties today and you see it, you feel it. There's a younger customer. They're in the sports books, playing tables. They're in our restaurants, and they're playing slot machines. Which is very encouraging. So I understand the way you're thinking about that. Would say strategically for us at all it all pulls together, and it really sets the company up the way we need to be set up. Where the industry is headed. Prediction markets, think, is an interesting topic. I actually my view on prediction markets is that this is a major threat to the industry. Know, take a step back. We're of course, very clearly take our direction from our state regulators. We always have. We always will. That doesn't change. I do think as an industry that we've got to play some offense here. When I say industry, I think it's operators. It's our working with our regulators, working with our state legislators and lawmakers because the posture that we're taking at this point is very defensive. It's gonna take a long time to play out, and it doesn't feel at the moment like the winning hand. And prediction markets are you know, they're live across the country, And I think that, you know, as an industry, we feel like we can outperform those guys if we're in the same market as they are with the same product, i.e., sports betting. We think our sports betting product is much better than prediction markets, and I think that's proving out. But where they are doing where they are building a real business is in states where it's not legal. It's legal sort of at the, you know, the commodities federal level and but it's but it's not at the state level. And so how does that play out in the court? It's gonna take years. And so I just don't I don't think that the, you know, the winning hand for us is gonna be to try to fight this out through the courts. It's likely to be appealed over and over again, take a long time, And look. Who loses out here? Customers do. There's no responsible gaming protections. Know your customer. All of the customer protections and regulations that we deal with and have been for decades those don't exist at the prediction market level. So, again, I think there's a lot more to do here. I think an industry, we need to come together and figure out how to play offense. So I would say, stay tuned. I don't think us all sitting around and monitoring what's happening is gonna be not it's not going to be a viable strategy.

Well, you kinda stole my second question. I'm not even sure I actually asked on prediction markets, but that was really definitely where I was going. So just the one very short follow-up, because I appreciate the depth of that answer, would just be you know, have you looked at all into the possibilities of casino mechanics as it relates to either prediction to prediction market overlays. You know, there was something that came up at least on sports betting side, a mechanic that Hardrock just kinda went live with. In Florida. And, yeah, I mean, how far down the rabbit hole are you going? Because, I mean, realistically, it feels like some of these things are actually possible. I know it seems crazy, but they are kinda possible. So have you kinda thought about that? You know, I know it's really far off today, but the pace of innovation, I think, you alluded to, is actually pretty incredible.

I actually don't think it's that far off. Sean, at all. And you mentioned what Hard Rock's doing in Florida. So now you're talking about past motor races and sports betting, but it's spinning a slot machine. Historical horse racing has been done in the land-based businesses. Let's I mean, let's be very clear about this. I would be shocked if prediction market operators as they're raising money as significant valuations and seem to be doubling every few months, aren't talking about this. And if you can move forward with prediction markets and sports gambling, what would stop you from offering prediction markets and contracts on the next spin of a slot machine? Next hand of blackjack, the next spin of the ball for a roulette table. So this is existential. Like, this is not like we're gonna be talking about this, I think, in a matter of months, not years. And I think as an industry, we gotta play offense and figure out how do we stay ahead of this. And, we gotta come together quickly, though. Like, we don't have a lot of time here, and I think there's some natural opportunities and some natural potential solutions here. To your question, should we be looking at a prediction model launch along those lines? Maybe. I think there's other paths that could be a lot more effective that would more level the playing field and allow us to do what we do best and offer great products and experiences that would be better than what they can offer. But we do need to work with the other constituencies in the space.

Thank you.

Our next question comes from Chad Beynon with Macquarie. Your line is open.

Hi, good morning. Thanks for all the commentary so far. With respect to iCasino, obviously, a lot of moving items announced today and in the past couple months. Jay, what's your appetite to look at non-North American markets given that you have the tech, the staff, the improved improvements to maybe have kind of a leg up against some of the other companies. That are in non-North American markets and aren't fully integrated. It appears that they're having a harder time. Yeah. What's your view on that? Thank you.

Yeah. I would say that, let's talk in a few quarters. Right now, obviously, the focus is all about retention as we go through the rebrand on December 1 against pending final regulatory approval. We feel like we've got a good plan, but we've got a lot in front of us. We need to execute and stay, you know, heads down laser focus on delivering the best possible result as we head into 26. For our digital business and cross-sell in our retail businesses, retail openings. So but we also can walk and chew gum. So I would say that there there's an opportunity to present itself I think we're feeling like as though we have a world-class team. We know we have one of the best products both in OSB and iGaming in The United States, and we think we could compete anywhere. We're just not gonna be looking to do that in the near term, but if opportunities presented themselves or we felt like we were at a point where we're ready to go elsewhere, we would strongly consider that. It's just not something that you would expect to hear from us. You shouldn't expect to hear from us in the shorter term.

Okay. Thank you. And then lastly on Joliet, have you seen repeat visitation? You talked about some of the activation in the early numbers, and I know it is. Pretty early overall. But you know, do you think some of the added customers could begin to come at the property maybe at the same rate or pace as your portfolio or kind of what you would expect? Thank you.

Hey, Chad. This is Todd. Yeah. Listen, there's I think there's so many good takeaways right now. And again, at or above our expectations and all the major KPIs, but the frequency that we're seeing there is in line or better than some of our best-performing properties and significantly better than the prior Joliet property. But I'd also point to just in a there's a slide in there and it shows, you know, the 42% growth in the database, which is a combination of reactivation as well as new members. And, again, you're catering to you start looking at total spend at the property. So greatly improved offerings around the food and beverage area. So you've got people coming in now for more of that entertainment experience that talked about before. So they're spending time on a slot machine or a table game or a table game. And then making their way to food and beverage and then hopefully back to the gaming floor. So and then from a frequency standpoint, when you start evaluating, you know, how properties perform, you look at guest count, you look at frequency, you look at daily spend. All of those are going in a very good direction.

Risa, if we could take one more question, please.

Absolutely. Our final question will come from Jeff Stanchel with Stifel. Your line is open.

Hey, good morning everyone. Thanks for squeezing us in. Maybe starting off on the land-based business, margins down about 90 bps year on year in the quarter. Jay or Todd, whoever wants to take this, can you just give us a sense for how margins trended for that cohort of assets that were not impacted by new supply? And then if you take that even one step further, can you unpack some of the key drivers to that performance? Meaning, was there more geographic mix shift in taxes again? How has wage inflation trended? Are there other pockets of inflation right now? Just any color there would be great. Thanks.

Yeah. Thanks. This is Todd. I think it's, again, directionally focused on that slide 12 and it'll show you, you know, the impact on both revenue and flow through. But then you start looking at some of the items that I mentioned earlier with both marketing, as well as labor. Also, keep in mind, you know, this will come up, periodically, but you've got your controllable and then there's the payroll related. So every now and then, you do see a little bit of an uptick in payroll related. We did see some of that, especially in the south segment. You also you know, we've got some nice properties that have high-end place. So, at times, you're gonna take a small hit to bad debt expense. So there's those types of things that find their way in and out of an income statement. This quarter, we happen to have a few more going that way. Really nice year over year. You're starting to see the state numbers come out and again, not just us, healthy for the entire industry. But, you know, where September ended, October took right back off. Obviously, helped by the calendar with five Fridays. But we're really happy with the way Q4 started out. Felicia touched on, the first weekend. That continued into the month of November as well.

That's great. Thanks for that. Color, Todd. And then switching gears back over to the interactive side of things, Jay. You talked to, you know, throughout the call on reallocation of resources over to iCasino. The Canadian business and then more of that higher value player cohort. As we just think about the benefits of sort of more financial and operational resources being freed up, I'm curious what sort of opportunities you see more on the product development side, you know, if this can increase your philosophy of new games coming out, maybe optimization of the CRM and the bonusing models, anything like that. And then back on the marketing side of things, should we just think about this as more pushing heavier into UA reinvestment for that higher LTV iCasino led player? And then how should we just think about, you know, maybe other marketing channels that you might now push on whether that's more top of funnel spend outside of ESPN driving awareness for the SCOR brand in The US or maybe more allocating resources further down into the funnel to higher tech channels? Just any thoughts there would be great.

This is Aaron. So a few things. One, on the marketing side, if you think about ESPN bet, and the marketing spend that we had there, it was a national brand and a national platform. And we spent a lot of time trying to make that work. At the same time, we did we do have a set of marketing spend that we manage ourselves. Around performance marketing and acquisition. That is very effective for us from a CAC perspective. And so if you look at our growth in iCasino, largely, part of that is coming not only from our retail database, but also from our targeted marketing. And so now all the marketing spend that we drop to our operating model from the ESPN deal is now gonna be able to be applied in a very precise fashion targeting states that are iCasino and OSB only. ICasino, OSB in retail, Ontario, Alberta's coming. So we feel like we have a lot more control and precision from a marketing perspective, and it's been working already. So we're not guessing about how effective this will be. We now have more money to actually drive the business. From a product perspective, if you look at the difference between ESPN bet, from a year ago to today, it's night and day. And by the way, I was just came out with a report. ESPN Bet was most improved. Our retention is better than it's ever been. The product is very competitive. So those same people are actually our team that builds our casino product as well. So if you think about the level of innovation the velocity of change to the app, a lot of that's gonna apply to our casino product as well. Because, obviously, in a casino first strategy, the score is going to be a big component of that and the score bet. But, you know, a lot of our development time is gonna be spent on making sure that we have the best casino product in market. And the same people that have been building that for ESPN bed and focusing all of our resources to try to make that work given our expectations there are now gonna be working on Hollywood as well. So we're really excited about the product really excited about the marketing flexibility. I mean, as Jay said, between the score media, the score bet, and Hollywood Casino, these are brands that we own and we control everything about how those operate. So we're pretty optimistic about moving forward.

That's great. Thanks for that color, Aaron.

Alright. Thank you everybody for dialing in. We look forward to speaking with all of you again, in February on our Q4 call. Have a great day.