PENN Entertainment, Inc.

Greetings and welcome to the Penn Entertainment first quarter 2023 results conference call. During the presentation, all participants will be in the 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 Mr. Joe Jaffone, Investor Relations. Please go ahead.

Thanks, Frank. Good morning, everyone, and thank you for joining Penn Entertainment's 2023 First Quarter Conference Call. We'll get to management's presentation and comments momentarily, as well as your questions and answers. During the Q&A, we ask that everyone please limit themselves to one question and one follow-up. Now, we'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 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 discussion 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 the forward-looking statements are described in today's news announcement and the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and Form 10-Q. Penn Entertainment 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. I have here with me in Wyoming our CFO, Felicia Hendricks, and our head of operations, Todd George, as well as other members of the executive team who can help answer any questions that you may have during Q&A. As for the first time as an official member of our Penn family, we're also joined by Erica Ayers, CEO of Barstool Sports. As you know, we completed our acquisition of Barstool on February 17th, and our integration efforts to date have gone as planned, but more on that in a moment. First, we're pleased to report that Penn delivered another solid quarter with consistent retail performance across most of our portfolio. Our properties proved to be more resilient than initially anticipated, given the increased supply in a few markets and the ongoing uncertain macroeconomic environment. Turning to slide four in our investor presentation, Penn generated first quarter revenues of $1.67 billion and adjusted EBITDA of $478.2 million, with strong performance in our Northeast segment, helping to offset softer year-over-year results in the South. As you'll see on slide five and six, our retail EBITDA margins were negatively impacted by approximately 100 basis points due to the regional shift in our gaming revenues year over year to the northeast, which has a higher blended tax rate of approximately 42% versus the south, which is approximately 22%. And to a lesser extent, the settlement of certain property litigation matters. Looking beyond the first quarter, April really was a story of two halves. We started the month off slowly with the Easter weekend, but finished strong in the final two weeks, including having our number one company-wide slot volume weekend of the year so far in the last weekend of April. Given our Q1 performance combined with current trends, we are increasing our prior revenue guidance for the year to reflect the acquisition of Barstool Sports while maintaining our current adjusted EBITDA guidance. Felicia will be providing more color on our guidance in a few minutes. Turning to slide nine, we generated over 350,000 new signups this quarter for our industry-leading customer loyalty program, which is a 13% increase year over year. 63% of our Q1 database growth came from our online offerings. Notably, in Q1, we saw the strongest growth rates in our 65-plus-year-old age segment and rated theoretical revenue. These guests appear to be returning to more normal pre-COVID behavior of late, and are responding well to our added amenities and continued improvements in our non-gaming offerings. At the same time, the 21 to 44 year old age demographic was stable in Q1 year over year after very strong growth throughout 2021 and 2022, and continues to grow significantly when compared to 2019. This age segment has grown from 13% of total rated theoretical in Q1 19 to 18 and a half percent in Q1 of 23. Our VIP play also remains strong in Q1, with year-over-year increase in both guest count and frequency of visitation. The positive momentum in our database comes at a perfect time as we recently launched PennPlay, our enhanced and rebranded customer loyalty program, which is designed to help better align all of our brands under the Penn Entertainment umbrella and create a more seamless omni-channel experience. Some of the new perks. include the ability for day one customers to begin immediately earning meaningful rewards just by signing up. In addition, members can now earn loyalty points across all of our business verticals, interactive, as well as retail gaming and marketplace, featuring popular retailers where they can redeem gifts and earn tier points and pen cash on everyday items. Members also have access to entertainment experiences with Penn partner brands, including Live Nation and Choice Hotels. PennPlay is supported by our industry-leading 3Cs technology, which we've talked about before, and which is currently deployed at 21 of our properties, collectively representing 70% of our retail EBITDA. We've grown our total Penn Wallet customers to 195,000 and received 104 million in total Penn deposits as of the end of the first quarter. As we've emphasized in the past, those guests who use the digital wallet demonstrate superior loyalty through increased visitation, time on device, and total theoretical. And as you'll see on slide 11, our effective cross-marketing efforts combined with our ability to deliver a seamless, best-in-class customer experience has led to a significant increase in guests who engage with us across multiple channels, which is the key to our future growth. Our interactive segment saw revenue improvement during the first quarter, driven in part by our acquisition of Barstool Sports as well as our recent sportsbook launches, including Ohio and Massachusetts. In addition, as highlighted on slides 17 and 18, we're continuing to generate impressive results from the Scorebet and iCasino in Ontario, where we're live with our fully-owned best-in-class tech stack, which has helped generate record gross revenues from sports betting in March and six-month retention rates that are 118% higher than the U.S., On the iCasino side in Ontario, we had our ninth consecutive record month for GGR through March and 26% higher online sports betting to iCasino cross-sell than in the U.S., which we attribute in large part to our in-house promotional engine. Our success in Ontario provides us with a blueprint for improved performance for the Barstool Sportsbook and Casino after we complete our migration to this platform in July. Having full control of our product roadmap in the U.S. will enable us to connect with our customers on a more personalized level and quickly add new features and betting markets to the Barstool Sportsbook while also enhancing our iCasino product with new content and bonus mechanics. In addition, with an improved customer experience post-migration, we will be well-positioned to drive stronger loyalty and retention while offering seamless cross-play in our omnichannel ecosystem. As I mentioned at the outset of our call, Our integration efforts with Barstool Sports thus far have been going very smoothly, and we've enjoyed exploring new opportunities for growth across numerous verticals. On the media side, Barstool demonstrated strong audience and viewership growth in the first quarter, achieving record cross-platform views, up more than 40% from the prior year, and growing more than 60% in both YouTube subscribers and TikTok followers. During the quarter, Barstool Golf's new partnership with the PGA Tour also led to co-branded merchandise at the players and waste management tournaments. Meanwhile, the Scores mobile business is also delivering strong results in both revenue and engagement metrics, with total user sessions up 22% year-over-year. The Scores award-winning digital media app is providing its highly engaged audience with up-to-date scores, news, community chat features, and betting lines. proving to be a perfect second screen for watching live sports and another strong acquisition funnel for our retail and digital offerings. And with that, I'll now turn it over to Felicia.