PENN Entertainment, Inc.

Greetings, and welcome to the Penn Entertainment Second Quarter 2026 Earnings Call. I would now like to turn the conference over to Joe Cifoni, Investor Relations. Please go ahead.

Thank you, Tasha. Good morning, everyone, and thank you for joining Penn Entertainment's 2026 Second Quarter Conference Call and Webcast. We'll get to management's comments and presentation momentarily, as well as your Q&A. And during Q&A, we ask that everyone please limit themselves to one question and one follow-up. I'll briefly review the safe harbor disclosure and then we'll get right into the call. 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 Penn CEO Jay Snowden. Jay, please go ahead.

Thanks, Joe, and good morning. I'm joined here by Felicia Hendrix and Aaron LaBerge, as well as other members of the senior management team. As you'll see from our release and investor presentation, we continue to execute against our 2026 strategic priorities during the second quarter. We're on track to deliver more than 20% year-over-year adjusted EBITDA growth this year, driven by strong performance across our retail portfolio and significant adjusted EBITDA improvement in our interactive segment. This growth, combined with our corporate overhead optimization, is benefiting cash flow growth, which in turn is enabling us to de-lever our balance sheet this year faster than originally expected. Penn's best-in-class property-level management teams delivered impressive results for the retail segment, achieving record quarterly revenues in Q2. This performance was reflected across the portfolio, with nine properties setting Q2 records for both revenues and adjusted EBITDA. We also saw another quarter of year-over-year growth in rated revenue, supported by meaningful contributions from mid- and high-worth customer segments, as well as growth in unrated revenue, which has now increased in five of the last seven quarters, underscoring broad-based consumer demand. This momentum continued through July. Slide 8 in our investor presentation highlights the combination of internal growth drivers and external market tailwinds that support our longer-term retail growth outlook. including our Pen Play loyalty program and omnichannel strategy, our strategic investments in both gaming and non-gaming amenities, our ongoing retail development project pipeline, limited new competitive supply, and third-party investments that are helping to drive economic growth in a few of our key markets. The interactive segment delivered another quarter of meaningful adjusted EBITDA improvement year-over-year as we continue to execute on our strategy of focusing on growth in our US iCasino and Canadian operations to improve profitability. Our US Hollywood-branded standalone casino app generated quarter-over-quarter as well as year-over-year growth, achieving record revenues in Q2. Our Ontario gaming operations continued to gain momentum, supported by strong growth in OSB revenues, aided by solid World Cup engagement and cross-sell of the reactivated World Cup OSB user base into iCasino. Revenue in the quarter was negatively impacted by customer-friendly online sportsbook outcomes. particularly in June during the NBA Finals and World Cup, as well as lower volumes in part due to our reduced marketing spend, lower value and unprofitable customer segments. Importantly, this shift is improving our marketing efficiency and is consistent with our disciplined approach to managing the interactive business that we outlined earlier this year. Notably, while our OSB hold rate was flat Euro of the year to date, our OSB net win rate improved. We saw encouraging interactive engagement trends during the World Cup. Approximately 70% of our Sportsbook users placed a World Cup wager with approximately 45% of those World Cup bettors placing a soccer wager for the first time. This event served as a meaningful engagement and reactivation opportunity for us heading into the NFL season. On July 13th, we launched the Scorebet Sportsbook and Casino and our standalone iCasino apps, the Score Casino and Hollywood Casino in Alberta, Canada. While still early, we are encouraged by our Alberta user and handle volumes on a per capita basis and believe our exclusive strategic partnership in Canada with the Toronto Blue Jays will complement the strength of the Scorebet brand there. Our expected investment in Alberta remains approximately $20 million for the year, and our 2026 interactive segment adjusted EBITDA guidance is unchanged at a loss of $20 million, which Felicia will discuss in more detail in a few minutes. But first, I want to cover some updates on our exciting retail development projects. Hollywood Casino Joliet, which opened last August, continued to deliver strong results in Q2, and that momentum has continued into early Q3. Our team there is doing a great job Meanwhile, M-Resort continues to capture previously unmet demand and drive enhanced property performance following the opening of our new hotel tower last December. M-Resort generated record net revenue and adjusted EBITDA in Q2, and notably we hosted three of our top five largest groups by revenue ever during the quarter. We recently opened our new hotel tower at Hollywood Columbus on June 12th, strengthening our position as the leading regional gaming destination in the state of Ohio. The property generated an all-time net revenue record in July, the first full month with the hotel open. Over the hotel's first month and a half of operations, we have seen outer market guests account for 85% of hotel cash revenue, which again speaks to it being a regional gaming destination. Additionally, over that same timeframe, rated guests have increased their average daily worth by 10% when staying at the hotel. Our final of the four growth projects, Hollywood Casino Aurora, opened on June 24th, and while still early, has been showing strong growth KPIs, approximately doubling admissions, slot volumes, table volumes, and non-gaming revenues versus prior year levels. Our hotel is also attracting higher worth customers, with our rated guests generating 21% higher average daily worth when staying at the property. The property is also driving trial and expanding our reach in the market as 20% of our guests since opening have been new to Hollywood Aurora. Additionally, 25% of our guests since opening were reactivated customers. Up next in the pipeline will be the relocation of Hollywood Council Bluffs. which is expected to open in 2028. This project will convert a first-generation riverboat casino license into a modern and more efficient land-based facility that will connect seamlessly with our existing 444-room hotel. We believe the new property will greatly enhance our competitive positioning in the greater Omaha market. The project has an anticipated construction budget of $180 to $200 million. That budget, the programming, and the design will be very similar to the new Hollywood Joliet in Illinois. And with that, I'll turn it over to Felicia.

Thanks, Jay. Our retail segment generated record quarterly revenues of $1.5 billion and adjusted EBITDA of $517.2 million, which reflects year-over-year growth of approximately 4% in revenues and 6% in adjusted EBITDA, respectively. Adjusted EBITDA margins were 34.4% and flow-through improved quarter over quarter and year over year, reflecting our property team's efforts to manage costs across the board, including labor, marketing, and G&A efficiencies. Importantly, we saw strong performance across the portfolio, including but not limited to contributions from our four recently completed development projects. Underscoring this point, Same-store revenues and adjusted EBITDA grew approximately 2% and 4% respectively in the quarter. We're raising our full-year 2026 retail revenue and adjusted EBITDA guidance to reflect the better-than-expected results in the second quarter and an increase in our prior assumptions for the second half of the year. The midpoint of our revised 2026 revenue guidance is $5.87 billion, and for adjusted EBITDA, our new guidance is $1.963 billion at the midpoint, which implies a 50 basis point year over year improvement in adjusted EBITDA margins for the second half of the year at the midpoint. Our new guidance implies the continued expectation for retail adjusted EBITDA to grow year over year in the mid single digits, more specifically at a rate similar to the 5.6% growth we just reported for the second quarter. We expect normalized seasonality in the second half of the year. Our interactive segment generated revenues of $349.4 million in the second quarter, including a skin tax gross up of $185.5 million and adjusted EBITDA loss of $9.5 million. On the revenue side, we experienced solid growth across our key focus areas, USI Casino and our Canadian operations, which was somewhat offset by customer-friendly online sportsbook outcomes and lower volumes as Jay touched on earlier. On the adjusted EBITDA side, we delivered another quarter of meaningful improvement year over year reflecting disciplined execution of our strategy to drive profitability. We are fine-tuning our 2026 Interactive Segment Revenue Guidance to $1.57 billion from our prior $1.6 billion to reflect recent and current operating trends. Our new guidance includes a skin tax gross up of roughly $830 million up from $820 million prior and assumes modest year-over-year growth in both OSB and iCasino for the second half with iCasino growth higher than OSB growth. We continue to expect an adjusted EBITDA loss of $20 million in our interactive segment for 2026 Inclusive of a $20 million investment for our Alberta launch. As we have guided previously, the third quarter is expected to be the largest quarterly loss of the year given our investment in Alberta and we expect the fourth quarter interactive segment adjusted EBITDA to be positive. We expect the other category adjusted EBITDA to be negative $119 million for 2026 unchanged from our original guidance back in late February. The table on page 9 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 $98 million of CapEx in the quarter, $58 million was project CapEx primarily related to our development projects. We ended the second quarter with total liquidity of $1.9 billion, inclusive of $887 million in cash and cash equivalents. In April, we refinanced our $1 billion revolver, which is currently undrawn, and our $447 million term loan A facility, both now mature in 2031. And in May, we repriced and extended our term loan B facility, which now matures in 2033. Also in May, we repaid the remaining $106.7 million principal balance of our 2.75% convertible notes due 2026 which eliminates 4.5 million potentially dilutive shares associated with the notes. And in June, we received approximately $225 million in funding from GLPI for the new Hollywood Aurora. We elected not to take GLPI capital in connection with the construction of our Hollywood's Columbus Hotel Tower. Following these transactions to strengthen our balance sheet, our nearest maturity is now our $400 million 5 5⁄8 notes, which are due in January 2027. As we highlight on side 5 of our earnings deck, our near-term deleveraging goals have improved since we provided them in April, benefiting from an improvement in our cash flow outlook. Specifically, the $31 million increase in the midpoint of our retail-adjusted EBITDA guidance flows fully into cash flow given our reiteration of our maintenance CapEx and other uses of cash for 2026. While we are reiterating our maintenance CapEx guidance of $220 million, 2026 project CapEx has been refined to $180 million from our prior $200 million guidance given a shift of some spend from 2026 into 2027 which brings our total 2026 CapEx guidance to $400 million from our prior $420 million forecast. We continue to expect total cash payments under our triple net leases to be $1 billion in 2026. For 2026 cash interest expense, net of interest income, we continue to project $150 million. And for cash taxes, our outlook is unchanged. We do not expect to be a cash taxpayer in 2026. Our fully diluted weighted average common share count at the end of the second quarter was 135 million shares. Our RSUs and stock options are diluted by about 2 million shares annually. And as I just mentioned, we repaid the remaining convertible notes in May, which removes the related dilution from the share count calculation going forward. I'll now turn it back to Jay.

Thanks, Felicia. With the second quarter under our belt, 2026 continues to be a year of strong execution for us. And I can't thank our team members across Penn enough. We delivered record quarterly retail segment revenue, raised our retail guidance, continued to improve interactive profitability, and further strengthened our balance sheet. During the remainder of the year, we will remain focused on growing cash flow, reducing leverage, optimizing our corporate overhead, and maintaining the disciplined approach to capital allocation. And with that, Tasha, we can open up the line for questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. To leave the queue at any time, please press star 2. Once again, that is star 1 to ask a question. And in the interest of time, please limit yourself to one question and one follow-up. We'll take our first question from Dan Pulitzer with JP Morgan. Please go ahead. Your line is open.

Hey, good morning, everyone. Thanks for the question. This is going pretty quickly, so I think I got my math right, but, you know, the question Online sports betting, or the interactive core revenue, I think you reduced by $40 million, but you did hold your adjusted EBITDA guide for $20 million loss. Can you kind of walk through the puts and takes of that a bit, and were there some cost savings and labor efficiencies in there that you'd call out?

Yeah, there's labor efficiencies. We continue to find efficiencies in our cost structure-related technology as well, if you look at third-party vendors. and of course our marketing expenses are down as well. So it's mainly marketing and cost structure improvements.

Got it. That makes sense. And then on the land-based side, obviously some strong margin improvement there. As you think about kind of the rest of the year and the cadence, I think usually, you know, first quarter to third quarter, it's roughly the same. and you step down in fourth quarter, but you have the properties that you recently opened continuing to ramp. So can you give us an idea of how to think about margins and the expansion from here going forward?

Yeah, happy to, at least as it relates to the second half of the year. So we beat on revenues 4%, EBITDA 6% in the second quarter, and that's exactly what we're guiding to do in the second half of the year as well, kind of just mirroring on a year-over-year basis the performance in the second quarter. So I think I would look at that the same way for third quarter and for fourth quarter, to your point. Dan, fourth quarter is the lightest revenue, lightest EBITDA and lightest margin quarter of the year. But we would expect to see the same 4% revenue, 6% growth, sorry, EBITDA growth in the fourth quarter. So if you sort of shake all that out, our margins... EBITDA margins were higher by about 55 basis points in the second quarter year over year, and we're anticipating the second half of the year to be right around 50 basis points improvement, both third quarter and fourth quarter, if that makes sense.

Got it. Makes total sense. Thanks so much. Thanks, Dan.

Thank you. We'll take our next question from Brant Montour with Barclays. Please go ahead. Your line is open.

Hi. Good morning, everybody, and thanks for taking my questions. So I wanted to start out with iCasino. Obviously you called out iCasino first, you know, grew quarter over quarter year over year. It's hard for us to see it in the reported numbers, right? We see iGaming reported down slightly quarter over quarter and, you know, the overall iGaming growing, you know, low single digits year over year, but we know that that's, you know, not the same mix. So could you just kind of maybe flesh out iCasino first growth cadence and trajectory to help us get a sense for how The back half could trend.

Yeah, so we're seeing strong growth on our standalone casino product, and we have since we launched. So the somewhat softness there is related to the play from our Sportsbook app where people are cross-selling into casino. And so the volume softness there has affected revenue there. But we still feel really good about our standalone business and casino through the end of the year.

Okay, thanks for that. And then on the overall sports business, Jay, you gave us some qualitative commentary on hold with the overall message that hold was an impact. Any way you could maybe quantify that, just given we're dealing with small numbers here on a net basis, and so it could actually swing the complexion of the overall digital results here?

Yeah, the quick math, easy math on that is it's roughly $3 million impact hold for the quarter. So we would have been closer to a $6.5 million loss had we come in flat year over year on hold. Perfect. Thanks, everyone. Thanks, Brad.

Thank you. We'll take our next question from Barry Jonas with Turist. Please go ahead. Your line is open.

Hey guys, curious if you could maybe just give a little more color about the Aurora ramp relative to Joliet and then as we think about Council Bluffs, given all the similarities with Joliet, should we expect similar ROI and ramp there as well? Thank you.

Yeah, I'll tackle the second one first just because it's top of mind. I would say yes with regard to the similarities between Council Bluffs and Joliet, budget, programming, design, and I think even from a ramp perspective, we would expect just like we did for Joliet to sort of get those margins where you would expect them to be maybe by month 12 to month 15. We're getting really close to that. I think on the Joliet side now, we're anniversarying the opening of that property here in a matter of days. And we're happy with the trajectory of the margins. You see some of that in the Midwest segment where we had a really strong quarter. So I think so as you're thinking about Council Bluffs in 28, that's probably going to be the best property and the best model to look at in terms of how Joliet ramped over time. Aurora remember we have a hotel now 225 rooms we did not have a hotel at the old location so we are seeing really strong demand from VIP segment customers that we did know but we're seeing much higher play when they visit us now because they're staying in the hotel we're seeing an uplift of over 20% when they stay in the hotel from what their worth was previously at the old facility that's I think very good news. When Joliet first opened, if you recall, the growth on a year-over-year basis was kind of in that 55 to low 60% year-over-year. It's been growing since then. The last several months have been closer to, you know, call it 75%, 80% year-over-year. It's only one month, so I don't want to underwrite this, but just in sharing what we're seeing in the business, certainly we're happy with the results and we shared some of the KPIs for Aurora, but the business has almost essentially doubled in the first full month. Again, things will settle. You get some benefit of everybody coming to see the property in that first month, but we're very pleased with what the response has been and the feedback we're getting is very positive.

That sounds great. Just as a follow up, you know, yesterday we heard from a large OSB operator that they're going to be leaning into reinvestment. I'm not sure what other competitor responses will be, but maybe just comment on that. If anything, your interactive strategy could change as a result or you see any potential risk to your financial outlook, depending on how this plays out. Thank you.

Yep, it's a good question. We read or heard the same commentary. I guess the way we're thinking about it, Barry, it hasn't changed in terms of our approach because we anticipated football season being quite the arms race this year. You're going to have prediction markets that are targeting customers for the first football season ever, given the timeline of when they actually went live, was close to Super Bowl last year. So we already assumed it was going to be a very aggressive, irrational marketing, spend, advertising, and new customer acquisition approach this football season. I think this just speaks to it being aggressive, not only from a prediction market standpoint, but maybe some of the incumbent OSB digital-only players as well. So it doesn't change the way we're thinking about it. I think it is a very competitive marketplace out there right now. Michigan is a good example. It's been quite the aggressive environment there with a couple of private operators that have launched in the last couple of quarters. And we've held up quite well in Michigan. And so we would expect to hold up well in football season. We already assumed in our projections for the remainder of the year that Thank you. We'll take our next question from Joe Stouts with Susquehanna. Please go ahead. Your line is open. Thank you. Good morning, Jay. Felicia?

The first question I wanted to ask you is, just to clarify, I don't think so, but within your guide for the year on retail, are you assuming anything with respect to potential benefit in Pennsylvania following the Supreme Court ruling?

We are not building any of that in, Joe. The way that we guided, we basically guided the beat in Q2 and then incremental $10 million for the second half of the year is the quick math there. And we're coming off of a strong month in July. So, I mean, one of the things, questions that we had been fielding in some investor meetings was, you know, is the first half of the year as good as it gets kind of thing for regional gaming because of the tax return being higher this year and I would say certainly within our portfolio we don't believe that's the case and we have a slide in our presentation that lays out the tailwinds and sort of the lack of headwinds coming at us right now and we do feel that momentum continuing into the second half of the year but that's the quick math on the guide.

And what do you think about like any tailwind that you might expect you know say in Pennsylvania whether it be in the fourth quarter I know there's an October 15th deadline or maybe that is some sort of tailwind in 27?

I think it's a good question, Joe. I don't want to sort of bake it into our assumptions until we know how this plays out. Recall that when the Supreme Court ruled those field games to be illegal, they gave the legislature 120 days to try to figure out if there's going to be enabling legislation to Regulate and Tax. And so we have to see how that plays out. We obviously have a big seat at the table. We have four land-based casinos in the state of Pennsylvania and are well-connected in Harrisburg. So I think we'll just have to see how that plays out over the course of the next, I think, the date of sometime in October.

And if I could just please...

Missouri did come to a similar conclusion. The Attorney General of Missouri has been doing a great job of shutting down these skill-based games. I don't think it's by coincidence that our Missouri properties have been performing very well over the last couple of quarters. Not that they haven't previously, but the last couple of quarters, our results in St. Louis and Kansas City have been very strong.

Yeah, I appreciate that. And if I could just squeeze something in, Aaron, is there anything different within, say, the Alberta kind of operating framework that that would suggest that you couldn't get a similar amount of share that you have in October. Ontario in Alberta?

I don't think so. I mean, first of all, our product has never been better. We're going into a competitive market, but we're spending aggressively relative to what we did in Ontario. And early results from a handle perspective, even though it's a slow sports calendar, are very encouraging. So we anticipate to be very aggressive, and we hope to have the same and similar market shares to what we enjoy in Ontario. That's the focus, and it's looking good so far.

Yeah, certainly that's our target, Joe, to your point. And so we figure with it being a more competitive sort of starting gate in Alberta that we needed to be a little bit more aggressive in our spend per capita, and we're feeling good about that decision so far.

Thanks a lot.

Thank you. We'll take our next question from Jordan Bender with Citizens. Please go ahead. Your line is open.

Hey, everyone. Good morning and thanks for the question. There's been a couple more assets that have been put up for sale, at least publicly, on the retail casino side since the last time we spoke. So curious to get your temperature on M&A and could you look to Vegas, just kind of giving what you know today?

Yeah, it's a good question, Jordan. I mean, look, I like to be in the position that we are right now at Penn, where we have several compelling options as we think about capital allocation. This year, the big focus has been on delevering, and we're having some real quality conversations with long-only investors about the balance sheet and the direction of our leverage profile. And that's going to continue to be a big focus for us at Penn to get that lease-adjusted net leverage down below five times. We're heading there quickly, which is great as you look out to the end of the year and certainly in early 2027, get that traditional net leverage down below two. Again, we're headed there very quickly. So that's clearly a priority for us. We'll continue to be it certainly over the next 12 months. Share repurchases continue to sound and look very good. Our free cash flow yield on 2027 consensus is still sitting pretty close to 20%. That doesn't make sense to me, but certainly makes buying back shares a lot more attractive anywhere in those sort of mid to high teen levels, and that's where we've been trading. And then lastly, It's early, but we've been very happy with the results with these four growth projects. And we do have other growth projects that we've been analyzing, three right now that we're feeling really positive about. And we believe that there's a level of... Thank you for joining us. I think it's also going to have to be something that adds strategic value for us in terms of geographic location as it gets us to a new market or a bigger presence in a market that we enjoy being in.

Great, I appreciate that color. And then follow up on the iGaming side of the business seems like a big focus, especially in the back half of the year. Can you just kind of talk to as you think about your investment or your customer acquisition within iGaming? How are you focusing that on direct versus cross sell from sports into iGaming?

Well, we're going to continue to focus on growing casino. Clearly, standalone is on a hot growth path. We're going to lean into that. Casino in general has very attractive CACs, customer acquisition costs. So we're exploiting that currently. On the sportsbook side, we are planning to grow through the end of the year. If you remember, we rebranded from ESPN bet to the score bet. in December. And as sort of that audience normalizes, you know, what we've realized is the SCORE brand, while still small and growing in the U.S., is very loyal, and so we're taking care of those users. We saw a lot of engagement and reactivation through the World Cup, and we're keeping those people engaged through football, so we feel good there. So cross-sell should continue as the sportswear business grows as well, but very focused on Hollywood.

Thank you.

Thank you. We'll take our next question from Lizzie Dove with Goldman Sachs. Please go ahead. Your line is open.

Hey, good morning. Thanks for taking the question. I just wanted to go back to what you said a question or so ago just on the desire to kind of do more of these growth investments at your existing properties which you know seem to have been going very well so far and if I heard you right I think you said there was maybe kind of three that were on the docket or consideration list and so could you maybe expand on that in terms of you know what the kind of benchmarks are and hurdle rates as you kind of think about which you know to do or not to do within the remaining portfolio?

Yeah, happy to, Lizzie. Of those three, I would say one is a very compelling hotel project along the lines of what we're seeing for Columbus. And so, again, we're doing the analysis there and feeling better and we're learning a lot, obviously, along the way, both Aurora and I shouldn't say both, Aurora, M Resort, and Columbus. So hotel, we're feeling like we've got a really good handle on the right size, the right design quality, size of room, amenity package to deliver the right return. So I would say there's a hotel one that we're taking a hard look at right now, and then there's A couple of water-to-land conversion projects, and you should expect that we would do those probably in the south region is where those would likely be. There's another opportunity in the state of Illinois as well. I would say as we're thinking about those projects, we're not in a rush to get them all going at the same time. I think it makes the most sense just from a dollars-out-the-door perspective to spread these out. We have Council Bluffs that is scheduled to open in 2018. If we're to announce something else, it would probably be a 29 opening and then the next one would be a 30 opening is the way to think about it. That's certainly the way we're thinking about it internally so that we can continue to do what we believe the priorities are from a free cash flow and capital allocation perspective. You can de-lever, maybe buy back stock and pursue these projects simultaneously. But if you do all of them all at the same time, you're a little bit more limited in being able to kind of walk and chew them.

Thanks. And then it might be a little early for me to ask this question, but just given you've seen this really strong acceleration in cash flow and taking up your guidance today, just how do you think about kind of growing off these levels into 27 and beyond? Just high level, any kind of moving pieces that we should be thinking about?

It is early, so fair on that. We're not going to get into guiding for next year at this point. We've got another five months to go. I would say that we're feeling good about the momentum in the business. And as we look out to 27 and even 28 at this point, because casinos take time to build, we're not seeing new supply projects that are being built or have even been announced that would likely impact us over the next couple of years. Now, that could change tomorrow. in a market. But the runway for us is about as good as it's been. If you consider 26, we didn't really have any new casino openings other than a couple of smaller ones in Baton Rouge, Louisiana. And the next couple of years, it looks pretty clean. So I think that's something to keep in mind. We're feeling good about heading into next year without having to those headwinds coming at us and impacting us in some of our key markets. And we expect the momentum in the business at Penn to continue to move forward into 27.

Great. Thank you.

Thank you. We'll take our next question from Jeff Stanchel with Stiefel. Please go ahead. Your line is open. Hey, good morning, Jay, Felicia.

Thanks for taking our questions. Maybe starting off on on iCasino. I want to follow up on, Jay, something you said in response to Barry's question, which is, you know, we talk a lot on the sports and the prediction side on CPAs moving higher and higher. But to your point, there has been some competition coming in on the online casino side as well. Aaron, curious just to get your thoughts here on sort of the competitive environment in casino, say, iCasino relative to, say, six months ago. And then from a retention standpoint, Just help us think about sort of when you do see a new competitor come into a given market, what's sort of the response? Do you lose a little bit of play out of the gate? Do the stickier players come back naturally? Do you have to bonus to get them back eventually? Just sort of help us think about how you find, you know, the equilibrium one, two, three months after a new competitor comes into a given state.

Thanks. I think promo obviously is key in making sure that your product is sticky and serving the user, but then clearly As competition comes in and people spend on the promo cycle, it's very important that our CRM is really focused not only on our most valuable users, but on retaining them as well. And so that's a big focus. As I said before, CACs have been very attractive on the Hollywood side, which is where we continue to spend a lot of our marketing dollars and promotion dollars around the brand. And we expect that to continue throughout the end of the year.

That's great. Thanks for that, Aaron. And then maybe switching gears over to the retail business, I wanted to ask on the M Resort project, Jay, if you look at that property's results and maybe compare it against some of the public numbers on the broader market, just curious how much you think the project is growing, the overall market versus taking share, and then competitively, have you seen sort of any response from some of the surrounding casinos as they try to build back share? Thanks.

Yeah, the Las Vegas locals results are all publicly reported every month, and so you see the trends there. And they've been, I would say, kind of flattish so far this year. Obviously, with our new hotel, we would expect to be leading in terms of growth, and we are. I'm not saying I know how every property in the market is doing. Obviously, Durango is continuing to do great for Red Rock Resorts. But M Resort for us, I think we're targeting a bit of a different customer profile. Certainly, during the week, we're more of a – meeting and convention destination for people from all around the country. And then on weekends, there's definitely strong locals business, but we also are a destination for people driving in from Southern California. So our model is a little bit different, and we have just shy of 800 rooms there now to be able to accommodate leisure customers, casino customers, cash paying, convention business customers. and we're continuing to do really significant A-level entertainment out by the pool and driving 5,000 to 8,000 people per event. So I would say we feel like our model is a little bit different there, so I'm not sure that we're really taking share from folks as much as probably growing that part of the Las Vegas Valley and certainly our M Resort property as a regional destination. So we're feeling good about the place that we sit in and how that fits in with the rest of the competitive set in the Las Vegas locals market.

Thanks very much.

Thank you. We'll take our next question from Sean Kelly with Bank of America. Please go ahead. Your line is open.

Hey, good morning, everyone. Thanks for taking my questions. Jay or Felicia or Aaron, maybe just a quick, any quick update you could give us directionally on just how big Ontario's contribution is overall to the online segment now. I know we don't break it out specifically, but that is a market that we just don't get as much Thank you very much.

We haven't provided that breakdown by market, Sean, previously. I would tell you that it is our number one largest market, both on the OSB side as well as in, well, I would say it's right there with Pennsylvania for us on iGaming, but it is actually by a good margin our number one market for OSB. So if you can kind of back into how we do in Pennsylvania and assume that OSB is probably closer to maybe 2x or 2.5x what we do in PA, and iGaming would be very similar.

Perfect. Thanks, Jay. And then going back to an earlier question on Project CapEx for the land-based piece, I think, Felicia, if I caught it right, if you were thinking about Project Capital or maybe an opening in 2028 and then a potential next, Project or land-based conversion being in 2030. Would that directionally imply something like $100 million of project capital a year? Again, not trying to hold you to guidance and appreciate these numbers can be lumpy, but just trying to think about how you're thinking about the phasing of cash flow.

Yeah, like Jay said, just to repeat, for our future projects, we will probably have one a year. It's hard to talk about, is it going to be $100 million a year? Because The build-outs will intersect. So, you know, I think that if you look at what our project CapEx is in 2026, that's probably, you know, a good proxy to use for estimates going forward.

That might be a little bit on the high side, just to have multiple coming in at the same time.

There's some crossover. Again, in terms of staging them, but if you want to just build out your model, maybe plus, give or take, what we said for this year, which is 180.

Great. Thank you both. Thanks.

Thank you. We'll take our next question from John Decree with CBRE. Please go ahead. Your line is open.

Oh, hi. Good morning, everyone. I wanted to ask Jay about the promotional environment. I think in a prior question, you've briefly touched on some of the pressures from competitive news supplies starting to fade. But this time last year, we were talking about some of your competitors kind of elevating their promotional intensity. From where you sit today, as it stands, has Have you seen anything change in the retail business on the promotional front? Has that subsided a little bit? We've seen broadly pretty strong regional numbers across the board, so curious how the environment sits today.

Yeah, I would say the regional gaming environment is as healthy as I've seen it in a really long time. There really aren't any markets that stand out as being irrational from a marketing reinvestment standpoint right now. Baton Rouge maybe a little bit just because you have a new opening there, but we have a high-end property there that targets more of a mid-high-worth customer, and so we're, I think, holding up quite well in Baton Rouge. but as you look across the rest of the portfolio those GGR state reported numbers every month are not being driven by higher levels of reinvestment. You see our margin profile in the second quarter growth year over year 55 bps we anticipate growing our margins again second half of the year by 50 bps which would tell you we have confidence in our ability to execute and our teams are doing an amazing job it's not it's not one thing the teams both interactive retail everyone's Thanks for that, Jay. And

If I could follow up on the M&A question earlier, based on what you've all seen so far and learned from omnichannel states, you've mentioned a couple boxes that maybe M&A would need to check. Where does having retail and digital presence kind of rank in the importance of future M&A? And I guess, you know, Canada could be an example where you have a pretty strong digital position but no retail exposure yet. Is that an interesting enough opportunity that the cross-sell that you've seen thus far that maybe some of those markets where you have digital but not retail are uniquely interesting to you?

Yeah, I would say, John, that what really matters in that case if you want to see omnichannel work is you need iCasino and land-based casino. Just having sports betting as the digital offering and land-based, you're not going to see as much crossover. So Yeah, I would circle the states that are either already live with iCasino or states that are maybe likely, most likely to go next. That would certainly check, you know, maybe a smaller box from a strategic value perspective for us. We certainly would want to, you know, we're interested at some point of getting into states maybe that we're not in, or there's markets that maybe we have a smaller position than we would like to have. And so those would be interesting, but again, we're not chasing, we'll probably wait for inbounds on the assets that will be available through some of the M&A that's taking place in the space, at least for the next 12 months, and it would have to be right priced. Right Location, and potentially Omnichannel to your question. Awesome. That's really helpful, Jay. Thank you for this time. Thanks, John.

Thank you. We'll take our next question from Steve Pizzella with Deutsche Bank. Please go ahead. Your line is open.

Hey, good morning. Thank you for taking our question. Just on the 4Q interactive profitability, can you help us bridge the drivers of that, whether from Alberta, iCasino, OSB Margins. How should we think about that bridge?

In terms of profitability through the end of the year, I mean, clearly it's going to be casino-driven and Canada-driven. Those are our big focuses. And then operating profitably in OSB states, making sure that we're focused on high-value customers and retaining the ones that we have today that are of high value. So Canada, casino, and then profitably operating in OSB states.

Yeah, I mean, if you look at our contribution margin by category that Aaron just laid out, they're all three moving in the right direction quickly in terms of, you know, quote-unquote profitability, at least at the contribution margin level. And that is the team's focus right now. That's the mission, and we're on a really good path.

Okay, thank you.

We'll take our next question from Trey Bowers with Wells Fargo. Please go ahead. Your line is open.

Hey, guys. Just to continue to kind of beat the drum on M&A, is a strip property, you mentioned strategically necessary, is a strip property something that you feel like the customer base is asking for if one were to become available. And then two against that, you guys highlighted the free cash flow yield of the stock for 27. And as you think about any M&A, does that M&A need to produce a return that's better or at least equal to buying your own stock at this point? Or are there strategic points to it that would make you guys say, well, we'll do something that might not have that kind of level of cash on cash return? Thanks.

I mean, it certainly, Trey, needs to be close to those levels. So there might be a strategic reason why you would do something that it doesn't have to be exact or it could be, you know, roundup kind of thing. But, you know, we have, like I said earlier, we have very compelling options from a capital allocation perspective, and that's a good position to be in. I'd like for the share buyback option to be less attractive because our free cash flow yield is lower and hopefully it will be soon. But I would say overall, you know, M&A, we're going to compare that to what a share buyback look like for us, what is continuing to deliver look like the growth projects internally have very nice. Cash on Cash returns next to them as well. So M&A is going to have to really stand out against all three of those options, and that makes it a pretty high bar. And I would say for Las Vegas, it would probably be in that category of, would our customer love if we had a Las Vegas strip location? I would say yes, but with the caveat that not any location, not any product, and we're certainly not interested in acquiring an asset that's going to require another $400, $700 million investment. Thank you so much for joining us.

Thank you for asking that question.

I probably should have been more proactive. If you look in the investor deck, it's a footnote, which is why I'm sure no one has seen it yet. There's some one-time accounting adjustments in the second quarter, and I'll quickly walk you through what those are. So second quarter of this year, we had basically offsetting accounting adjustments. We had a $2 million, what we call a good guy, accounting adjustment that hit the Midwest region. So you can deduct $2 million from the EBITDA produced at the Midwest and calculate what the margin was. It's very close to what it was last year when you do that. And obviously we had strong top line growth, but we were still ramping Joliet and we just opened Aurora. So that's why the margin hasn't really improved there yet, but it's pretty close to flat. In the West, we had a $2 million negative accounting adjustment this year. In addition, in the West, last year, we had a $2 million positive accounting adjustment. So when you're looking at the West, you really need to sort of net out that it should have been $2 million better than what you see. And last year's EBITDA number was really two years lower than what you see. So that's how it plays out in the West. And when you do that math, you'll see that the margins in the West were actually up 10 basis points on a year-over-year basis. So we're feeling really good about M Resorts Ramp. It's not like we're discounting the hotel to fill rooms. So thank you for asking the question. We did put that in the footnote. Didn't want to make a real big deal of it because it's accounting adjustments. They wash out for the second quarter this year. There's nothing to consider as being material, but it does move the pieces between the different regions.

Really helpful.

Thanks. Thanks, Trey. Tasha, why don't we do one more question?

Great. We'll take our last question from Daniel Guglielmo with Capital One Securities. Please go ahead. Your line is open.

Hi, everyone. Thank you for taking my question. Just one for me. On Aurora, I know the outlet mall is a big draw for people to that area. Is there a seasonal cadence with people traveling there to shop that is maybe different from the traditional trends of regional gaming in Illinois?

I would say we'll learn a lot. Obviously, I'd imagine that the fourth quarter, it's probably going to be really, really busy, which is great because that's typically the slowest quarter of the year for us in the gaming business. But with a lot of shoppers at the Chicago Premium Outlet there, I would expect that we're going to see a lot of new customers coming through and a lot of repeat visitation throughout the holiday period, November, December. So I would say, Dan, give us a little bit of time and we'll share our learnings with you guys real time. I would expect it to be good for the fourth quarter and probably more even for the other quarters of the year. Thanks. Okay. Thanks, Dan. And thank you, everybody, for joining our call. We look forward to speaking with you again in a few months to cover the third quarter earnings. Have a great one.

This concludes today's meeting. We appreciate your time and participation. You may now disconnect