PENN Entertainment, Inc.

Greetings, and welcome to the Penn Entertainment fourth quarter 2025 earnings call. I would now like to turn the conference over to Joe Giaffone, Investor Relations. Please go ahead.

Thank you, Nikki. Good morning, everyone, and thank you for joining Penn Entertainment's 2025 fourth quarter conference call. We'll get to management's comments and presentation momentarily, as well as your Q&A. 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. Forward-looking statements involve risks, assumptions, and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors. It's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go ahead.

Thanks, Joe. Good morning, everyone. I'm joined here in Wyoming by Felicia Hendricks and Aaron LaBerge, as well as other members of our senior executive team. I'm pleased to report Penn's diversified retail portfolio delivered another solid quarter during which retail adjusted EBITDA grew year over year after adjusting for poor weather in December. In our interactive segment, we successfully rebranded our U.S. online sportsbook to the score bet on December 1st and achieved positive adjusted EBITDA in December, driven by continued momentum from our iCasino products, disciplined cost management, and strong online sports betting hold rates. 2026 is an exciting year for us in which we expect to generate year-over-year segment adjusted EBITDA growth of 20%. We are well positioned to benefit from the strategic investments we have made over the last several years and are laser focused on improving free cash flow generation, deleveraging, and opportunistically returning capital to shareholders. I want to highlight the foundations that set us up nicely to deliver on our goals for this year and beyond, which are summarized on slide six of our investor presentation. First, our diverse retail business is healthy and growing and generating sustainable free cash flow. In addition to anniversaring much of the new supply in several of our key markets, we will have two more retail growth projects opening by the end of the second quarter this year, and we're seeing continued momentum at the two that we opened last year. Second, we expect our interactive segment to inflect a break-even adjusted EBITDA for the full year, which would represent a $268 million year-over-year improvement. Third, we have right-sized our maintenance capital spends on a go-forward basis, which we'll touch upon more later. And fourth, we will begin to realize synergies from our corporate restructuring and cost optimization initiatives. The new organizational structure we announced in early January will allow us to become a leaner and flatter organization, enabling business leaders to be more empowered and drive greater productivity. All in all, we expect to save over $10 million in annualized run rate expenses for the company as we streamline the organization, which will mostly phase in over the first half of the year. The operational benefits are already in flight. In terms of right-sizing our property maintenance capex, we have done an excellent job over the last six years of upgrading our casinos, refreshing our slot floors, and investing in non-gaming amenities like updated hotel rooms, new retail sports books, new restaurants, and entertainment venues. In addition, our dockside to land-based growth projects are expected to meaningfully reduce our maintenance capex costs going forward. With the improvements we have made to our properties, we feel comfortable with bringing our recurring maintenance capex levels down by $20 million and returning to near pre-COVID level spending. Slide 7 really drives home the significant free cash flow we expect to generate in 2026 and beyond. Importantly, this growth in free cash flow will enable us to delever meaningfully in 2026 and opportunistically return capital to shareholders. In fact, we expect to generate more than $3 per share of free cash flow in 2026 and reduce our lease-adjusted net leverage by more than one turn. Returning now to our results for the quarter, on the retail side, we experienced another quarter of year-over-year growth in theoretical revenue across all rated, worth, and age segments, with our older demographics and VIP play contributing meaningfully to these results. The bad weather in December negatively impacted segment-adjusted EBITDA by approximately $7 million. In addition, our south segment was negatively impacted by new supply, Bossier City and New Orleans, and those markets in Louisiana. And our midwest segment was impacted by new supply in Council Bluffs, Iowa. Core business trends were otherwise stable across the portfolio, with regional strength in Ohio and St. Louis, as well as our LaBerge Lake Charles property. We're seeing continued momentum at our new hotel tower at M Resort in Las Vegas, which is capturing previously unmet demand, including booking two of the largest groups in the property's history recently. In December, the property achieved record gaming volumes, and in January, we generated record net revenue at M. Meanwhile, the new Hollywood Casino Joliet is delivering strong results both from new and reactivated customers, with a nearly 130% year-over-year increase in the number of active players, helping to drive meaningful increases in both gaming and non-gaming revenues. The early performance of these projects provides us continued confidence in the anticipated success from the upcoming openings of the Hollywood Columbus Hotel Tower and the new Hollywood Casino Aurora, in addition to our new Council Bluffs properties scheduled to open in late 2027 or early 2028. As we said previously, we anticipate all these development projects to generate approximately 15% plus cash-on-cash returns. On the interactive side, we experienced record gaming revenue in the fourth quarter, driven by the continued growth of our standalone Hollywood iCasino products and increased cross-sell, as well as improvements in our online sportsbook product offering and operations. Revenue growth, excluding tax growth up of 52% year over year, was primarily attributable to iCasino growth of 40% plus and online sportsbook growth of 73%. including strong revenue and positive adjusted EBITDA in December, our first month operating as the score bet in the U.S. Additionally, adjusted EBITDA improved $70 million year-over-year in the fourth quarter, driven by strong adjusted flow-through of 95%. We are encouraged by the upward trajectory of the interactive business. Our sportsbook is maturing through a more disciplined, regionally-focused marketing strategy that prioritizes iCasino jurisdictions. Our reduced fixed media spend provides us much more marketing flexibility to strategically invest more in Canada, as well as the U.S. hybrid states with both iCasino and online sports betting, and in customer cohorts with more compelling returns, particularly as we look ahead to new market openings like Alberta, which is anticipated later this year in 2026. We've retained users through the ScoreBet rebrand and continue to engage them across our ecosystem. Retention and new user growth will remain our top interactive priorities and the foundation for our long-term growth in that segment. The positive trends in our interactive segment give us confidence to recommit to achieving break-even adjusted EBITDA in 2026. And with that, I'll turn it over to Felicia.