Greetings, and welcome to the Penn National Gaming First Quarter Conference Call. [Operator Instructions].

I would now like to turn the conference over to Mr. Joe Jaffoni, Investor Relations. Please go ahead, sir. .

Thanks, Silvana. Good morning, everyone, and thank you for joining Penn National Gaming's 2019 First Quarter Conference Call. We'll get to management's presentation and comments momentarily as well as your questions and answers, but first I'll review the safe harbor disclosure.

In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties.

These statements can be identified by the use of forward-looking terminology, such as expects, believes, estimates, projects, intends, plans, seeks, may, will, should or anticipates or the negative or other variations of these or similar words or by discussions of future events, strategies or risks and uncertainties, including future plans, strategies, performance, developments, acquisitions, capital expenditures and operating results.

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Such forward-looking statements reflect the company's current expectations and beliefs but are not guarantees of future performance. As such, actual results may vary materially from expectations. .

The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and Form 10-Q.

Penn National Gaming assumes no obligation to publicly update or revise any forward-looking statements. .

Today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G, and when required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in today's press release as well as on the company's website.

Thank you for your patience with that. .

And it is now my pleasure to turn the call over to Penn National's CEO, Tim Wilmott.

Tim?.

Thank you, Joe, and good morning to Penn National's first quarter conference call. After I provide some introductory comments, I'll be followed by Jay Snowden, our President and Chief Operating Officer, and then following Jay will be B. J. Fair, our Chief Financial Officer.

But to begin to talk about our first quarter results, despite softer volumes in the first couple of months due to weather primarily in the Midwest, a little bit in the Northeast, I really have to acknowledge our operations team who managed our cost structure very, very well.

And as we looked at the results after you back out the onetime prior-period adjustment for the marketing loyalty program, we were able to meet our adjusted EBITDAR guidance of $394.5 million. Our results demonstrated a year-over-year improvement in EBITDA margin by 80 basis points.

And I do want to comment that after the weather cleared, the month of March finished very strong for the quarter and helped facilitate these results. .

Moving onto an update on where we are with the Pinnacle integration. We did announce today that we're increasing by 15%, our estimate of cost synergies from a $100 million to $115 million, and we believe $55 million of that run rate will be achieved by the end of 2019 and the other $60 million will be achieved by the end of 2020. .

At the end of the first quarter, we've now realized about $40 million of run rate cost synergies. We're still at revenue synergies at $15 million to $20 million, most of that coming in 2020 and 2021.

And the catalyst for that will be the completion of the implementation of our mychoice loyalty program, which will be in place at all of our properties by the end of this July. .

Turning to an update on development and M&A activity. We closed as we announced our Margaritaville Bossier City acquisition in early January of 2019.

We are working with them, Michigan regulators, and pending their approval, we expect to close on our $300 million purchase of the Greektown operating assets in Detroit by the end of May, in partnership with VICI as our landlord. .

And then, update on the Category 4 Casinos in Pennsylvania, specifically in York and in Morgantown, we continue to work through the approval process. And we expect both to open in the second half of 2020.

And just to reiterate, including cannibalization at Penn National, the Hollywood Casino there in Central Pennsylvania, this combined $230 million investment, we believe will generate north of a 15%-cash-on-cash return. .

And finally, utilizing our free cash flow in the first quarter, we remain focused on deleveraging our balance sheet, and we're able to reduce our traditional debt by just under $40 million in the first quarter. And we remain on target to reduce lease-adjusted net leverage of under 5.5 by the end of 2020. .

With that, I'd like to turn the call over to Jay Snowden to provide a little bit more color of what's going on in the operating segments of our business.

Jay?.

Thanks, Tim. Good morning to everyone on the call. Well, harsh winter weather in January and February aside, we were very pleased with our first quarter performance across the portfolio.

March, as Tim mentioned, was particularly strong as 9 of our properties posted all-time record monthly EBITDA results, which definitely speaks to the general health of the consumer.

Also, as Tim mentioned, we were able to identify another $15 million cost synergies from the Pinnacle transaction, bringing the current total to $115 million, $5 million of that to be realized in '19 and $10 million in '20. .

The incremental $5 million in '19 was pulled forward into Q1 and helped offset the weather impacts and brings our current run rate, as of March 31, to $40 million.

These incremental cost synergies are the result of our best-in-class property and corporate leaders accelerating the sharing of best-demonstrated practices across the organization and continuing to challenge the long-held industry orthodoxies. .

The $115 million cost synergy target is still separate and unique from the $15 million to $20 million in revenue synergies we announced last quarter. Those efforts are beginning to gain momentum as we prepared to launch our consolidated enterprise-wide, player-affinity program, mychoice, later this summer. .

Moving to first quarter regional results.

Despite the aforementioned bounce back in March, the severe weather that plagued our Pennsylvania, Chicago and Council Bluffs markets in January and February was too much to overcome and caused top line softness that ultimately, negatively impacted EBITDA results in our Midwest and Northeast regions in the first quarter. .

Moving to the West region, weather was less of an issue year-over-year, and we experienced a solid quarter on both the top and bottom lines, highlighted by a record quarter in revenue, EBITDA and margins at our Black Hawk property in Colorado. .

Finally, in the South region, which experienced no significant weather issues year-over-year, our properties produced EBITDA growth of over 5% inclusive of the smoking-ban impact in Baton Rouge and the I10 -- excuse me I-210 Bridge work in Lake Charles. .

Of note, in the south, half of our properties, including the recently acquired Margaritaville in Bossier City, grew EBITDA by double-digit percentage versus Q1 of '18. .

Now shifting to some high-level database and sports betting trends. Spend per visit remains a good story across all work segments, while visitation is more of a mixed bag with year-over-year declines at the lower-worked segment as we continue to refine our profitability filters to maximize EBITDA..

VIP results were robust, and we posted our strongest year-over-year table games growth quarter on record partly due to the introduction of retail sports books in West Virginia, Pennsylvania and Mississippi. These trends had us very excited about the continued state-by-state legalization and rollout across the country.

As we prepared to close on the Greektown transaction at the end of May, we will soon be operating in 19 states, by far the most of any casino company in the U.S., presenting significant sports betting, iCasino and mobile gaming value-creating opportunities for Penn in the near future. .

With regard to April, results have been mixed in the regional markets predominantly due to the year-over-year Easter shift as well as some tax refund noise.

That said, the economic indicators of employment, wage growth, stock market performance, home values and consumer confidence remain at or near all-time highs and have us feeling good about the remainder of the year. .

With that, I'll hand it off to B. J. .

Thanks, Jay, and good morning, everyone. I'd like to provide an update to our 2019 guidance. I'll remind everyone that although we are projecting to close Greektown by the end of May, our guidance does not include any provision or assumptions for Greektown performance.

In addition, the guidance only includes $5 million of the incremental $15 million cost synergies identified in our release. .

The 2019 guidance and underlying assumptions are found on Pages 4 and 5 of the press release. We've provided detailed line item guidance in the release for the second quarter and an update to our full year guidance. On a high level, the updated revenue guidance for the year is $5.173 billion.

The reduction in revenue guidance is primarily attributable to the flow through of the first quarter operating results, plus a reduction of the revenue associated with the previously announced closing of our resorts property in Tunica.

Our adjusted EBITDAR for the full year is estimated to be $1.538 billion, which reflects the flow through of the first quarter operating results but, otherwise, maintains our EBITDAR guidance for the remainder of the year. .

the Penn Master lease was $1.88 million, the amended Pinnacle lease was $1.83 million and the Meadows lease was $1.99 million. .

We do expect to incur full escalation in November under the Penn Master lease. We do not expect to incur escalators under the amended Pinnacle lease or the Meadows lease at the end of their respective lease years. .

Free cash flow generation for the year is estimated at $374 million, and net free cash flow after mandatory debt payments and other obligations is expected at $299 million. Cash taxes and cash interests are identified in the release. And there's no change to our maintenance CapEx guidance. Cash on hand as of 3/31/19 was $400 million.

Our lease-adjusted gross and net leverage ratios as of 3/31/19 were 6.09 and 5.79, respectively. Our cash flow generation remains on pace to return to our target leverage ratio of 5.0 to 5.5x EBITDAR within 12 to 18 months following the close of Greektown. All of our debt covenants will be comfortably met. .

So just one final note regarding an explanation of the onetime point liability accrual adjustment, that was related to prior periods that we took in the quarter.

During the migration of our customer database to our new upgraded system, we uncovered a discrepancy in our accounting reports related to prior years for the customer loyalty point liability accrual. The discrepancy was only related to the accounting accrual and had no impact to the individual customer accounts. .

The amount of the discrepancy is not material to our financial reporting, but we believe it was important to identify since, absent the adjustment, the operating performance of the company was consistent with our adjusted EBITDAR guidance.

It's also worth noting that the $3 million charge was a contra revenue account, so it also had the impact of depressing our first quarter revenues by $3 million. .

With that, I'll turn it back to Tim. .

Thank you, B. J. Operator, we're now ready to take questions from our audience. .

[Operator Instructions] And our first question comes from the line of Harry Curtis with Instinet. .

I've got a two-part question.

Tim, when you look at the map of the U.S., are there holes in your locations that you'd like to fill? Or are you satisfied with your distribution?.

And then, if you're satisfied, then if you can talk about the strategies that going forward you're going to be using to drive shareholder value from here?.

Well, there are certainly, Harry, certain markets, one-off that we don't have representation in that could be an opportunistic play for Penn National. But as Jay said in his commentary, we're in -- we're going to be in 19 different jurisdictions. So we certainly like our current geographic footprint. .

And with that, as I've said in prior calls, as we think about the remainder of '19 into 2020, we've got a lot on our plate to execute against and to realize the synergies of the Pinnacle transaction; the Margaritaville transaction; and the soon, hopefully, to be completed, Greektown transaction, that if we just execute on those integrations and realize the synergies in those transactions, we're going to be generating a lot of free cash flow that will give us the opportunity, as we said, to delever, to continue, if appropriate, to return capital to shareholders and to continue to do tuck-in M&A acquisitions that are accretive to our shareholders.

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So absent, nothing else, we have a lot to execute on for the balance of this year into next year that I think it's going to generate value to our shareholders over the years to come. .

And maybe a quick follow-up on that.

Based on where multiple are today on the Strip, is it just unrealistic to think that at this point in the cycle it makes sense to be aggressive on looking for an asset on the Strip at this point?.

Certainly, the multiples are at points where we certainly couldn't do it alone. We need a landlord that has the ability to use their multiples to do some kind of acquisition, but I certainly think, as I said before, Harry, that we've got enough on our plate to focus our team on to execute in.

And given where things are on the Strip right now, it would be challenging in the near term for us to focus on that. .

Our next question comes from the line of Steve Wieczynski with Stifel. .

Jay, you had an interesting comment about you're seeing, I guess you said, weakness in your low-tier customer level, which is expected given the change in marketing spend around those customers.

But I guess -- the question is have you seen that lower-tiered customer gravitate to competitors properties, or in general, no, you really just don't care about that customer.

And I guess what I'm getting at here is, is the overall promotional environment, pretty rational around most of the country?.

Sure, Steve. It is rational right now and even some of the flare-up we saw last year -- points last year in Chicago and in parts of Northern Mississippi have calmed. And really the way we look at it on the low-worth segments is there's a number of those customers that, given the level of reinvestment, typically in the industry, are just unprofitable.

And so you have to be really thoughtful around what inducements you're providing those customers, and what we've seen is that there are a number of them that come less frequently. That's why frequency is down. But when they visit, those trips are profitable. .

And then we've seen a shift of migration from low-worth rated customers in the database many times to our unrated segment where they're not receiving offers anymore, but they're still coming to the property, which is why we've seen unrated growth for the last several years. .

So we're comfortable with the migration. I think you're seeing it across not just the Penn database but also within regional gaming in general. Our competitors, I think, are making a lot of the same movement, and these are trends that I think you're going to continue to see for probably quarters, if not years, to come. .

Okay. Got you. And then Jay, another question for you I guess. I think you talked about April being -- I think you used the word choppy, maybe, or something along those lines. Do you think that's a function of -- and I know, you talked about tax proceeds and stuff like that.

If you looked at something, I think you said, the South was kind of a market where there was no impact of weather.

Is something like the South still choppy or is just those markets where March was so strong? Maybe you've seen some visitation levels, kind of, fall off a little bit because of that?.

And I guess as you look to your guidance, specifically for the second quarter, is it more, kind of, around what you saw in April or is it kind of more of just what you saw in March or maybe help us think about that?.

Yes, I think most of what we're seeing in April and why I mentioned it was mixed, choppy, to use your term, is largely due to the Easter shift. It was entirely -- or almost entirely in the month of March last year. It was entirely in the month of April. So you have a lost weekend of only 4 weekends. You have 5 Mondays and 5 Tuesdays.

So April was set up to not have great have year-over-year comps. And we anticipate that the remainder of the year will be strong. You have more favorable calendar setup for May and June than you did for April in Q2.

The only other thing that I think is worth mentioning that is a little bit specific to us is that we're going through, as Tim mentioned, and consolidating our player loyalty card program.

It's a lot of hard work and some disruption that takes place in the second quarter, and we're going to be 100% on the same system, same platform and aggressively starting some market that mychoice player loyalty program the second half of the year. And so we anticipate the second half of the year to be stronger than the first half of the year. .

Our next question comes from the line of Felicia Hendrix with Barclays. .

Jay, we'll keep you on that hot seat here. So of the $5 million in incrementally synergies you realized in the first quarter, I just wanted to confirm that, that was entirely incremental to your initial guidance. .

And then I was wondering if you could just help us understand mechanically what you're able to do to pull that forward and realize that in the quarter?.

And then, I'm wondering if there's any way you could help us understand on a go-forward basis by quarter how we should think about the synergies?.

Sure, Felicia. So yes, the $5 million that we pulled forward into Q1 and into 2019 was incremental to what we had previously stated. So before today, we had communicated $50 million of run rate synergies in '19 and $50 million of run rate synergies in '20. And we're now at $55 million in '19 and $60 million in '20.

So there's $15 million of incremental cost synergies. .

Look, there's a lot going on, and we have a number of initiatives at the corporate level, at the property level. And so some of what was brought forward into Q1 is just an acceleration of what we had planned to happen in Q2 or Q3. .

And then in that process, throughout the last 6 months, we've also identified incremental synergies.

It's not as though we've come up with new categories, but we've just gotten a little bit better in the areas of labor management and marketing inefficiencies and procurement that lead us to feel comfortable that we can hit a minimum of $115 million on the cost side as we move forward. .

And so when we think about second quarter, are you willing to kind of quantify how much of that guidance is coming from synergies?.

I think it's probably safe to assume, Felicia, for modeling purposes that you've got $15 million run rate remaining in 2019, so $5 million per quarter is probably the easiest way to think about it. .

Okay, that's super helpful. And then maybe, while I have you, just a couple of things just regionally. One is, just wondering with the now-delayed opening of the Monarch Casino, I was just wondering if there was any way that you could use that to your advantage as you're positioning your property for the initial impact of that opening. .

And then, also, just in terms of Plainridge, are some -- you listed in the release a lot of assumptions that you had from some well-known headwinds.

But on Plainridge, how are you thinking about that in terms of your guidance in the light of the Wynn opening in June?.

Sure. So hitting Monarch first, we did read the earnings release from Monarch that there's going to be a delay by the time the hotel and casino expansion open to end of Q3. I think previously, they had said end of Q2.

We have not adjusted any of our modeling with regard to Black Hawk because we're just not close enough to it to understand is that a phased opening throughout Q3. .

Look, we're very happy with the results at our Black Hawk property, as I mentioned in my prepared remarks. We had our best quarters ever, top line, bottom line and margins, and we've got a lot of momentum there. VIP business is extremely strong. I think we picked up some business, while competitors are going through expansion or renovation.

And we plan to give those customers reasons to stay with us as we move forward. So I would anticipate a solid remainder of the year, certainly Q3 for the Black Hawk property, but we did not build that into our modeling. .

With regards to Plainridge, now that there's certainty around the June 23 opening date, that's what we had always modeled. That date's been out there now for about 6, 9 months. And so as we forecasted and guided for the year for the second quarter, we always knew that date and anticipated them opening on that date.

So it did not impact our guidance moving forward. .

Okay. Thanks. And then just a quick housekeeping question for B. J.

Your full year guidance that -- is that before or inclusive of the $3.1 million add back from the first quarter?.

It's inclusive of the $3.1 million. It's all rolled forward. .

Our next question comes from the line of Barry Jonas with SunTrust. .

I just wanted to dig in a little bit to the full year guidance composition. I see the float -- as you said you float through the $3.1 million accounting true-up in Q1. But then you've got the $5 million synergies.

And then I believe also that the rent -- as part of your rent assumption, it's about $3.5 million lower than before, $0.9 million of that relates to the escalators. And then I guess there's another $2.6 million, which maybe is Ohio or something else.

I'm just trying to understand compositionally how -- with all those changing, how the guidance really just flow through the Q1 miss?.

Yes. Barry, this is B.J. You're right in that with the $3 million miss on the -- or the $3 million reduction as a result of point liability, we did have a positive $3 million on the rent side, which ended up again primarily from the percentage rent associated with Ohio as well as some of the change in the escalators, as well. .

And so in addition, we also had the cash interest, which ended up with some positive on a cash flow flow-through as a result of change in LIBOR as well as we were fortunate enough to be able to -- we were being conservative in our first quarter of tier level of our interest rates associated in the -- for our revolver.

And so we actually were a little bit lower in that tier. .

So we ended up with a positive side there. There were also some additional noise. And as we go through in guidance, we talked about some of the closing costs and other items that we have for the resort's property in Tunica, created some severance and other items that ended up with a negative flow through on the cash flow.

So hopefully, that clears it up for you. .

Got it. And then just a question on Lake Charles. Our understanding of construction on the 210 could finish up a little bit early.

Just curious what the latest is there from your perspective and if that potentially could cause some upside to guidance?.

Yes, Barry, the latest from our perspective what we're hearing is that we're still anticipating an end-of-year completion. There is an incentive for the contractor to finish early by 60 days, which would have that project complete in October versus December. .

For now, we're trying to stay focused on anticipated impact through the remainder of the year. And if it moves up to October, that would obviously be good news for us. .

Great. And then just last one for me.

For sports betting, I think you've done 1 or 2 state-specific deals with third parties, but how are you thinking about just larger JVs or partnerships at this point?.

I would anticipate Barry that by our next earnings call, we'll able to -- we'll be ready to articulate our sports betting and iCasino strategy as we move forward.

We're getting a lot closer, both with regards to our primary strategy and then we've got some pretty exciting secondary strategies given the number of states and licenses that we have across the country. So more to come on that. .

The other thing, Barry, we're also watching the states right now are in session. How they're going to be enabling legislation for sports betting, whether it's going to be retail only or retail and online, and whether or not there's going to be additional skins per licensee or not..

So there's a lot of moving parts right now. And as Jay said, I think in the next 90 to 120 days, we'll be able to articulate a more clear strategy of how we're going to take advantage of this opportunity. .

Our next question comes from the line of Carlo Santarelli with Deutsche Bank. .

Jay, you provided some color. I just wanted to see if I could follow up a little bit on, kind of, the revenue outlook. When you look at delta in the quarter and lop off the second half resorts, Tunica, the revenue outlook has very modestly changed, if anything. I think it was like $3 million or so is what I calculated. .

But you had, obviously, a difficult January and February. April was mixed. It's been some time since we've kind of seen -- well, December, I guess, since we've seen some real strengths.

So my sense is the confidence that you guys see in kind of a top line guidance from now stems more from what you're seeing on nonweather-impacted, noncalendar-impacted periods.

Is that largely fair?.

I think that's fair, Carlo. And as I mentioned before, we're also a little bit more bullish on the second half of the year for Penn because we're going to have our -- a new loyalty program fully launched and consolidated. And we've got some strong top line drivers that should fuel some growth the second half of the year. .

Great. Thanks. And then B. J., just quickly, your free cash flow guidance for the year is up about $3 million, and that includes a $3 million -- I'm assuming that includes a $3 million that EBITDA missed guidance by for the first quarter.

So up about 2% or so overall, is that a shift in cash taxes, I imagine?.

No. Cash taxes remain the same, Carlo. It was the cash interest that we had a change in. So basically, the first quarter operating results and the improvement in rent expense, kind of, washed, and $3 million up really was the change in our cash interest assumptions. .

Our next question comes from the line of Chad Beynon with Macquarie. .

First, on capital allocation, I believe in the first quarter you replaced a retiring repurchase plan with a bigger one, and the stock has obviously had a little bit of dislocation as we've kind of worked through the quarter. .

I believe in that earlier release, you mentioned that you could be implementing a 10b5-1 kind of automatic, programmatic plan.

Can you just remind us on kind of what the situation is from share repurchases, and then if a 10b5-1 will be implemented?.

Chad, this is B.J. We -- in our last release, we said we left it open that we could implement a purchase plan as well as do open-market purchases. We did not repurchase any shares in the first quarter. .

I think that we really focused -- and as we've been saying previously, we've been focusing on our debt reduction. And that's primarily the focus that we had in the first quarter going forward. .

As we look, I mean, obviously, we think our share price is extremely well -- right priced right now. But in our overall capital allocation, as we looked at it, I think we were determining that the delevering is really where our focus is right now. .

In the short term, and we'll get to a point. Like I said before, Chad, that we'll delever, and then that will give us other options to consider tuck-in M&A and also returning capital back to shareholders. But right now, as B. J. mentioned, our short-term focus is to delever. .

Okay. Makes sense. And then regarding the higher $15 million in cost synergies.

Was that kind of spread geographically across the board or is there any one particular geography that could have higher flow through than what you had anticipated before?.

I think for modeling purposes, Chad, I would just spread it evenly across the regions. There might be a little bit incremental at the corporate level as well, but it's not pronounced in any particular part of the country. .

Our next question comes from the line of Joseph Greff with JPMorgan. .

Two questions, Jay. You may have addressed this in some way, but you talked in your prepared remarks that spend per visit was great and visitation more of a mixed bag.

Can you talk about that visitation comment? How much of that is weather related? How much of it is outside of the scope of bad weather?.

And then my second question relates to the 2Q guidance. I know the full year is fine, and that's great. But the seasonality of the 2Q, I would expect sequential growth just for seasonality reasons in the 2Q versus the 1Q.

What do you have baked in there that's different from historical seasonality, whether it's onetime issues like the Lake Charles bridge work? And that's all for me. .

Yes, Joe. Yes. Spend per visit across all the tiers of the database showed growth on a year-over-year basis. And visitation at the VIP level was also strong. We did see declines, as I mentioned in my prepared remarks, at the lower-worth segments. .

And look, I don't know exactly how much of that is due to weather. I would tell you that it's really confluence of weather factor in the first quarter and then this continued migration of customers that are receiving different levels of incentives.

And they're either visiting less but more profitably when they visit, or they're shifting over to unrated play. .

So there's some weather impact there, and there's some continued strategic impact to the visitation trends as well as that we're very comfortable with. .

And then with regards to our guidance for the year, look, there's the April shift -- or excuse me, the Easter shift in the month of April.

And as I mentioned, the only other real significant noise for us that might be unique to Penn is that we're going to have some disruption in the second quarter that we anticipated as we put our guidance out for the year. .

We knew we would be back-half heavy, given that we're not going to have any disruption once we have mychoice live at all of our properties by the end of July. So there'll be a little bit of noise throughout the second quarter. On the top line, we'll manage margins as we always do to get to the forecasted levels.

And we think the second half of the year is going to be pretty strong for us. .

Our next question comes from the line of Thomas Allen with Morgan Stanley. .

So just on the first quarter results, the South region really stood out as meaningfully outperforming expectations, and I assume it didn't have much weather impact.

But anything have a -- broadly happening that's really supporting that strength?.

Yes. Thomas, we were very pleased with the results in the South. It's a combination of factors. Margaritaville had their best quarter ever, timing of that acquisition was terrific, property has got tremendous momentum right now. Baton Rouge, there we still have the headwind of the smoking ban year-over-year.

We will anniversary that on June 1, but we did invest about $4 million in a smoking tariff at the property that went live in early March, and that has a real shot in the arm for us. .

The last couple of months, customer -- it's been very well received by our customer base in Baton Rouge, and we've gotten back some of that lost business on the slot side. .

And then just generally, we have more of the new Penn properties, the legacy Pinnacle properties. We have more concentration in the South region and there's a lot of good synergy work being pursued and implemented in that region, which is why I think we saw outsized gains.

But generally, it certainly helps when you don't have the weather impacts year-over-year, and we anticipate having a strong full year in the South region. .

And then just a follow-up on the second quarter guidance. There has been some freak, bad weather in the Midwest quarter-to-date.

Is that -- has that impacted you at all?.

A little bit. We had snow last Saturday in Chicagoland. Just when you're getting ready for spring, you get hit with a snowstorm in Chicago, it doesn't help. All of that is baked into our Q2 guidance. .

There's been some weather noise, some Easter noise. We feel comfortable with the guidance that we put out for the second quarter. .

Any way to quantify that weather hit in the second quarter?.

I don't think so. We're just looking at April results and what we anticipate for May and June at this point, Thomas. .

Our next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch. .

Just one for me, since a lot of ground's already been covered. But I thought that the comment in the opening remarks about what you guys are seeing on activity levels and table games volumes and sort of derivative of sports betting activity was interesting. I was just wondering if you could elaborate a little bit on traffic patterns in those markets.

What are you seeing on the casino floor? Just going to -- how is that behavior trending? What, more precisely, are you seeing? I just thought it was interesting. .

Yes. Look, I think the best properties for us -- the best proxies would be our Charlestown property in West Virginia and then our Penn National racecourse property where the retail sports books have driven pretty significant volumes on a relative basis. .

And where you see the bump is -- and it's well documented. You see a bump in table games as well as in your food and beverage volumes. And we've seen properties that were flattish to down slightly in table games or food and beverage are now seeing growth of between 5% and 10% at those properties.

So tough to say exactly what it's going to be across the country. .

Especially some markets are going to have retail only. Others are going to have retail and mobile. But I would tell you that the retail sports books certainly are helpful, particularly during the large events.

March Madness, we saw great volumes, not just in the sports book, but our table game results and our food and beverage results at the properties that have retail sports books were very strong. .

Perfect, Jay. And then maybe just as a follow-up. It's been a little while since we've sort of done just an overview or kind of prognosis now a little bit more and a few states have opened.

I mean what do you guys thinking or what's the current thinking about sort of overall profitability impact for sports betting on both the retail side where I think traditionally we've thought about it more in this big-traffic-driver type environment, but not a huge stand-alone P&L?.

And then, what are you seeing on the marketing side or the early reviews on the places that do have online? Is the marketing environment more competitive than you would've thought or in line with what you would've thought and sort of how could that end up impacting profit in the medium or long term? Again, not hard numbers, just thinking theoretically.

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Yes, look, the only market that has significant online sports betting business is New Jersey, and we don't operate there. So it's hard for me to give you any real color on what that impact has meant to the brick-and-mortar retail sports books. .

I would tell you that we're running healthy margins on a stand-alone basis with the sports book in West Virginia and in Mississippi because the tax rate is appropriate.

Pennsylvania, it's more of a volume driver for us, and we have to monetize those guests elsewhere in the casino because the tax rate is extraordinarily high, and that makes it very difficult to drive any level of profit whatsoever. .

So we're using it more as an acquisition tool in Pennsylvania, but we are on a stand-alone basis driving profit in the other markets. Charlestown is our significant sports book operation, and it's not immaterial on a property-level basis. It's certainly in the low single-digit millions of profit for us. .

But I wouldn't use that and extrapolate across the rest of the country because every state's going to roll out a bit differently. .

The good news is that most states have not followed Pennsylvania's mistake with this tax rate, and our -- we believe we're going to be in the 10% to 15% range, which is good for us.

We can certainly drive a margin there, whereas Jay said, in Pennsylvania with the 35% tax rate, the margins are very slim, and that's the reason we didn't invest a lot of capital in Pennsylvania because there were no returns to be realized. .

And now our final question comes from the line of David Katz with Jefferies. .

I just wanted to -- you've covered a lot ground, I appreciate that. I just wanted to go back to the M&A landscape one more time. And just make sure that we understand what the boundaries are. Tim, some of your commentary suggested that there's a bit more of a drift into harvest mode. But I wanted to make sure I heard that correctly.

And what would you consider the probabilities of some other awards, acquisition that are out there in the next 12 months or so? Or should we be looking more towards capital returns and deleveraging at this point?.

What I said, David, was, specifically, we had a lot on our plate to execute against on for the balance in '19 and '20. And I think it was the first question or so Harry Curtis had raised. There are opportunities for us to take a look at.

Obviously, we don't comment on any specific M&A activity, but we continue to look at opportunities, and we'll continue to do so. And if it makes sense, we'll certainly take advantage of like we have post the Pinnacle deal with both Margaritaville and Greektown. .

If it fits into our distribution strategy and it makes sense, the math makes sense for us, for our shareholder accretion, we'll take a look at it. But I would say, there's no increase or no decrease in M&A opportunities as we look at it. It's really the normal course of business as we look at -- as we've looked at in years past. It's not heightened.

It's not lessened. But as I said, our focus operationally is to execute against what's already on our plate. .

Got it. If I can just follow up with one detail.

Just looking back at the Tunica circumstance and the property that closed, have you told us whether there's some specific financial impact or benefit for that matter that's factored into the current guidance?.

We haven't communicated anything at this point, David, other than the impact for the second half of the year to our overall revenues. We anticipate in the short term being able to move the very small levels of EBITDA and profitable customers in Tunica to our 2 other properties in that market.

Time will tell as we get into 2020 and beyond if we can drive incremental EBITDA from this. .

But we knew when we acquired the 2 properties, Valleys and resorts in Tunica that 95% of the EBITDA came from Valleys, which has been rebranded to First Jackpot. And we stay very close to the Mississippi regulators. .

And obviously, you never want to close a property. It impacts people's lives. And we put a lot of time and a lot of thought into how we went about doing that. I think that we have a good plan to hire most of those folks elsewhere in Tunica, and we're working with our competitors in Tunica to place them if we can't place them at our 2 properties.

But at this point, we view it as a revenue impact and a neutral to EBITDA. .

And just to be clear, David, all of the cost associated with the closure as well as the impact on the revenue of being closed for the second half of the year, that is all running in our guidance, so everything is included in there. .

And there are no further questions at this time. I'll turn the call back to you. .

Thank you, operator. Well, thanks for your time and attention this morning. We'll continue to provide updates as things materialize. And we should, as I said, expect the close of Greektown to occur, pending regulatory approval, at the end of May. .

And with that, we'll be also back on a call in another 90 days or so to talk about our second quarter results. Again, thanks for your attention this morning. .

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line..