PENN Entertainment, Inc. Q1 FY2025 earnings call

• Strong resilience in retail post-severe weather, with gaming revenue rebounding in March and continuing into April/May. - Omni-channel strategy benefits: Pre-existing customers in PA and MI using Hollywood iCasino app increasing spend across retail and online. In PA, Q1 saw 21% YOY increase in retail theoretical play and 165% in online theoretical play. - Strategic investments in properties: Enhanced amenities, technology improvements, and focus on gaming offerings, with high-limit areas, Asian-themed rooms, etc. - Progress on growth projects: Four development projects on-budget and on-schedule, with excitement for those opening over next 12 months. - Cross-sell from iCasino app: Standalone Hollywood iCasino app in PA and MI driving increased spend, with 70% of iCasino revenue from incremental sources. - Mint Club rewards program: Created for ESPN, with high percentage of MAUs as Mint Club users, logging in more and placing more bets.

Retail: Reported retail revenue of $1.4 billion and adjusted EBITDA of $457 million with adjusted EBITDA margins of 33.1%. Despite weather challenges and new supply impact, retail showed resilience with revenue growth rebounding in March and continuing into April/May. Interactive: Reported first-quarter adjusted revenues excluding the skin tax gross-up of $162 million and Interactive adjusted EBITDA of a loss of $89 million, which is a $107 million improvement year-over-year. Customer-friendly sports-betting outcomes impacted interactive adjusted revenue by $15 million and adjusted EBITDA by $10 million.

• Retail guidance unchanged from fourth quarter earnings call ranges. - Interactive 2025 revenue range: $280 million to $320 million (including $116 million skin tax gross-up) for Q2, EBITDA guidance range: loss of $70 million to loss of $50 million. - Expect each quarter of 2025 to deliver lower interactive EBITDA losses sequentially, culminating in positive EBITDA in Q4 2025 and full-year positive EBITDA in 2026. - Continue to forecast total company CapEx for 2025 of $730 million and project CapEx for growth projects of $490 million.

• Weather impact: Severe weather in January/February impacted adjusted retail EBITDA by at least $10 million. - Competitive landscape: New competition in some markets, though focusing on growth projects opening next 12 months. - Tariff-related cost pressures: Monitoring procurement and marketing to mitigate cost increases, though no material impact yet. - Regulatory uncertainties: Skill-based gaming in PA and other regulatory issues affecting the industry.

Q: Brandt Montour asked about digital segment outlook and iGaming market-share.

A: Jay Snowden said assumptions for the year haven't changed, with offsets possible between OSB and online casino. Aaron LaBerge reinforced cross-sell is ramping up with all-time highs in average weekly DAUs for iCasino.

Q: Carlo Santarelli asked about lapping competitions and financing timing.

A: Todd George said will lap Bossier City competition in Feb next year, Felicia Hendrix discussed matching financing to openings, and Jay Snowden mentioned Council Bluffs financing options.

Q: Shaun Kelley asked about digital promotional landscape and land-based cost leverage.

A: Jay Snowden said promos in line with expectations, labor is main OpEx pressure, Todd George added revenue mix shift and mention of $5M accounting benefit last year.

Q: Barry Jonas asked about ESPN DTC product and skill-based gaming in PA.

A: Jay Snowden said excited about ESPN DTC product, cautious on skill-based gaming in PA.

Q: Joe Stauff asked about iCasino incremental customers and ESPN app integration.

A: Jay Snowden clarified 70% incremental iCasino customers, Aaron LaBerge discussed bespoke integration with ESPN.

Q: Chad Beynon asked about predictive markets and non-core assets.

A: Jay Snowden said staying close on predictive markets, discussed potential divestment of non-core assets with landlord implications.

Q: Ben Chaiken asked about iCasino marketing and Council Bluffs financing.

A: Jay Snowden said leaning into iCasino marketing, Felicia Hendrix discussed Council Bluffs financing optionality.

Q: Bernie McTernan asked about U.S. handle growth in OSB.

A: Jay Snowden discussed state launches, including Alberta and Missouri, and seasonality impact.

Q: Jordan Bender asked about ESPN sports-betting initiatives and stock dislocation.

A: Jay Snowden and Aaron LaBerge discussed ESPN streaming launch and stock optionality.

Q: Ryan Sigdahl asked about performance marketing and West Virginia launch.

A: Jay Snowden discussed performance marketing turn-on and West Virginia launch in next couple of quarters.

Q: John DeCree asked about Ohio iGaming legislative front.

A: Jay Snowden said engaged in Ohio, but bill still being worked on.

Q: Jeff Zuo asked about iCasino product gaps and Council Bluffs tariff mitigation.

A: Jay Snowden and Aaron LaBerge discussed product gaps in sports-betting lives and iCasino personalization, Todd George discussed Council Bluffs tariff mitigation strategies