PENN Entertainment, Inc.

Greetings and welcome to the Penn Entertainment second quarter conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. I would now like to turn the conference over to Joe Giaffone, Investor Relations. Please go ahead.

Thank you, Dena. Good morning, and thank you everyone for joining Penn Entertainment's 2022 second quarter conference call. We'll get to management's presentation and comments momentarily, as well as your questions and answers, but I'll first 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 involved 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. 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 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 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. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release, as well as on the company's website. With that, it's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go ahead.

Thanks, Joe. Good morning, everyone. Joining me today is our CFO, Felicia Hendricks, and our head of operations, Todd George, as well as other members of our executive team. As usual, we have provided a link to our investor deck in our earnings release, which we'll be referring to in our prepared remarks. So I'm sure you no doubt noticed our company's new logo and name change to Penn Entertainment. Over the past few years, Penn has transformed our business through a highly differentiated strategy focused on organic cross-sell opportunities, which is reinforced by our investments in our market-leading retail casinos, sports media assets, owned technology, including a state-of-the-art, fully integrated digital sports and online casino betting platform, and an in-house iCasino content studio. Our new name maintains ties to our legacy while better reflecting our evolution into North America's leading provider of integrated entertainment, sports content, and casino gaming experiences. Next month, we'll also be celebrating the 50th anniversary of Penn National Racecourse, which is where our company's story began. We're all proud of our heritage and how Peter Carlino took over from his father and grew the company from that single racetrack into one of the top regional gaming companies in the country. I'm honored to follow in his and Tim Wilmot's footsteps and to help write this next chapter in our company's growth story. In terms of our results, as you'll see on slides six and seven, we had a good quarter with consistent performance across the portfolio. We beat consensus on both revenues and EBITDA and generated sequential upside over last quarter, thanks in part to the performance of our interactive segment and strong results at our retail operations, despite a tough comp against the second quarter last year. As highlighted on slide 10, our destination properties, which benefited from hotel remodels, new restaurants, entertainment, and Barstool branded sports books performed particularly well in the second quarter. Our My Choice database has increased by over 1.2 million registrations over the last four quarters, driven by both our retail properties and our new interactive offerings, which provides significant opportunities for future growth. We are encouraged by the ongoing visitation and engagement growth in the VIP segment of our database. in addition to year-over-year increases and rated theoretical across all segments, except those at the age 65 and above, which is highlighted on slide 11. Our unrated segment trends, though down in the second quarter year-over-year, partly due to federal stimulus payments last year and more entertainment options outside of our casino offerings and online offerings available this year, also reflect strong conversion of non-rated players into our My Choice loyalty program. Turning to slide 12, our three Cs, cardless, cashless, and contactless technology and omnichannel engagement also continue to drive our growth. Our MyWallet cashless experience is now available at nine properties in three states, and we expect to roll the technology out to 12 additional properties by the end of this calendar year pending regulatory approval. Guests that use our mobile wallet and who engage with us via online offerings are not only more loyal, but they also play at a higher spend level when visiting a property and generate a higher total value when engaging with us across multiple channels. Given our second quarter results and strong volumes in July, we've decided to maintain our current 2022 guidance range, which we notably increased last quarter to between $6.15 billion to $6.55 billion in revenue and EBITDA of $1.875 billion to $2 billion. We believe that our property level EBITDA margins are sustainable in this current revenue environment at approximately 37%. Turning to our interactive segment, we experienced nearly 100% year-over-year revenue growth this quarter, excluding the impact of gaming tax reimbursements to third-party skin partners. We remain on track to deliver EBITDA losses of approximately $50 million for the year. The largest portion of the loss will occur in the third quarter due to our contribution to the California Sports Betting Ballot Initiative along with the start of football season in new markets like Ontario and Kansas, and we remain on track to be profitable starting in the fourth quarter of this year. As highlighted on slide 13, our Barstool branded retail sportsbooks are really resonating with the younger demographics and creating meaningful cross-sell opportunities. Our recently converted Barstool sportsbook in Lake Charles, Louisiana, set a new standard for retail sportsbook experiences, and we are seeing very encouraging results from the addition. We are on track to open the Barstool Sportsbook at La Berge Baton Rouge this fall, and based on our ongoing success in Louisiana, we are optimistic about our upcoming sportsbook launches in Kansas and Ohio, where we have similar market-leading properties bolstered by large casino databases. And with the legislature recently approving sports betting in Massachusetts, the birthplace of Barstool Sports and also home to our Plain Ridge Park Casino, We're excited to add yet another possible retail launch by the end of this year, and mobile wagering is anticipated in 2023. Turning to slide 14, our early results following the successful launch of the Scorebet mobile app in Ontario on April 4th demonstrates the strength of the brand in Canada and the benefits of our fully integrated media and betting ecosystem. This allows us to drive significantly stronger results and a greater than 50% cross-sell into iCasino. When we acquired the SCORE, we discussed an interactive roadmap that included the SCOREbet working towards transitioning to a proprietary risk and trading platform in the summer of 2022. I'm extremely pleased to share that last month we successfully deployed our risk and trading platform on the SCOREbet, which completed the vertical integration of our sportsbook operations in Ontario. I want to thank all of our team members at the SCORE who worked so diligently on this project over the last couple of years. and executed this launch on schedule, allowing us to be live in Ontario with a significantly enhanced product ahead of the fall season. Custom building all components of a sportsbook infrastructure is a massive undertaking, which clearly demonstrates the industry-leading technology, engineering, and product expertise that we have in-house at Penn between the SCORE, Penn Interactive, and our corporate product and engineering teams. This sets us up very well for the future. As we talked about previously, the benefits of a vertically integrated online betting operation are numerous. You'll see on slide 16, we've broadened the score bet offerings and increased event props and in-game wagering options. Second, owning all components of this platform unlocks greater personalization and media and betting integration capabilities, allowing us to create bespoke user experiences that are meaningfully engaged and subsequently retain customers. Third, we will realize valuable savings over the next 18 months on third-party platform costs while driving wider margins. And finally, we're operating on a faster, more reliable platform that provides for shorter timeframes to build and launch new features. We also remain on track to transition the Barstool Sportsbook in the US to the SCORES player account management and trading platform the third quarter of 2023. and we are working with our existing providers here in the U.S. to ensure a smooth transition process. Post-migration, we will begin to realize the full benefits of our in-house technology stack, including meaningful cost synergies and improved marketing and promotional capabilities. Turning to slides 17 and 18, our Penn Game Studios continues to develop highly engaging content. This quarter, we also introduced 97 new third-party slot and table game offerings across our iCasino platform, and we have a deep pipeline of future customized and third-party iCasino content for both Barstool and the Scorebet. As you'll see on slide 19, we continue to build momentum on the media front as well, with the score growing revenues year over year in the second quarter double digits, and monthly sessions were up 20%. Barstool has also continued to expand its audience and reach, while always looking for new outside-of-the-box growth opportunities. Looking forward, we believe there is upside for the media business as we begin to realize the benefits of cross-promotion with Barstool Sports and additional monetization opportunities. Before I turn it over to Felicia, I also want to note, as highlighted in our deck, that we were once again very active on the ESG front this quarter, particularly with our ongoing diversity, equity, and inclusion efforts. We recently came in fourth out of 40 gaming companies in the all-in diversity projects benchmark DE&I survey, In addition, recently Forbes magazine rated us 139th out of 500 of America's best employers for diversity, which is the highest ranking of any publicly traded gaming company. With that, I'll turn it over to Felicia.