Core Viewpoint - A proposed bipartisan Senate bill targeting prediction market platforms has led to a significant decline in DraftKings' stock, which fell 6% to $22, while Penn Entertainment's stock remained stable due to its minimal exposure to prediction markets [2][3][6]. Group 1: DraftKings - DraftKings' stock decline is attributed to the proposed Senate bill that poses regulatory risks to its Predictions product, which has been a key growth driver with a revenue growth of 42.8% in Q4 2025 [2][3][10]. - The company reported Q4 2025 revenue of $1.99 billion, marking a 42.8% year-over-year increase, and achieved its first-ever full-year GAAP net income of $3.71 million [10]. - DraftKings' stock has struggled, down 32% year-to-date and 42% over the past year, with the recent 6% drop adding further pressure [11]. Group 2: Penn Entertainment - Penn Entertainment's stock remained flat due to its diversified business model and limited exposure to prediction markets, with its online sportsbook revenue growing 73% year-over-year in Q4 2025 [2][12]. - The company operates a portfolio of regional casinos and has seen positive adjusted EBITDA in December, indicating operational improvements [13]. - Penn Entertainment has authorized a $750 million share buyback program, reflecting management's confidence in the business at current prices [13]. Group 3: Market Implications - The proposed Senate bill could reduce competitive pressure on licensed sportsbooks like DraftKings if it restricts prediction market platforms, potentially benefiting incumbents [14][15]. - However, regulatory uncertainty and insider selling concerns complicate the outlook for DraftKings, which has seen a significant decline in stock value [16]. - Analysts maintain a consensus price target of around $36 for DraftKings, but legislative risks could lead to revisions in these targets [17].

Core Insights - The company reported improving profitability trends across its retail casino portfolio and interactive segment during Q4 2025, with expectations for significant free cash flow generation and deleveraging in 2026 [4][19] Financial Performance - Adjusted EBITDAR grew year-over-year, despite a $7 million impact from poor weather in December, particularly affecting the Northeast segment [3] - The interactive segment generated revenue of $398.7 million in Q4, with a year-over-year improvement in Adjusted EBITDA of $70 million, driven by record gaming revenue and improved sportsbook operations [11][12] Growth and Development - The company anticipates total CapEx of $445 million for 2026, with retail net revenue projected between $5.7 billion and $5.85 billion, and interactive revenue around $1.6 billion [5][14] - New developments, including the Hollywood Columbus hotel tower and the Hollywood Casino Aurora, are expected to generate over 15% cash-on-cash returns [8][9] Interactive Segment Strategy - The rebranding of the U.S. online sportsbook to theScore Bet has led to positive Adjusted EBITDA, with expectations for the interactive segment to reach breakeven in 2026, representing a $268 million year-over-year improvement [10][12] - The company is focusing on iCasino-led hybrid states and Canada for growth, rather than competing aggressively in online sports betting-only states [13] Capital Allocation and Financial Health - The company plans to generate over $3 per share of free cash flow in 2026 while reducing lease-adjusted net leverage by more than one turn [19] - Total liquidity at the end of the quarter was $1.1 billion, including $687 million in cash and cash equivalents [18] Market and Regulatory Environment - The company is closely monitoring the evolving landscape for prediction markets and is focused on maintaining compliance with regulatory requirements [20] - Potential new market expansion in Alberta is being considered, with estimated marketing investments of CAD 15 million to CAD 20 million [22]

Core Viewpoint - PENN Entertainment, Inc. reported strong fourth-quarter financial results, leading to a significant increase in stock price, with shares trading 10.45% higher at $13.85 [4] Financial Performance - The company achieved adjusted earnings per share of 7 cents, surpassing the consensus estimate of a 5-cent loss [2] - Total revenue for the quarter was $1.80 billion, exceeding the consensus estimate of $1.76 billion [2] - Retail segment revenue reached $1.4 billion, while the Interactive segment generated $398.7 million in revenue [2] Segment Performance - The Interactive segment experienced record gaming revenue in the fourth quarter, driven by growth in the standalone Hollywood iCasino product and improvements in the online sportsbook offering [3] - The company noted increased cross-sell activities contributing to the Interactive segment's success [3] Liquidity and Debt - As of December 31, total liquidity was reported at $1.1 billion, which includes $686.6 million in cash and cash equivalents [3] - Traditional net debt stood at $2.2 billion at the end of the quarter [3]

Financial Data and Key Metrics Changes - PENN Entertainment reported retail revenues of $1.4 billion and adjusted EBITDAR of $456.4 million for the quarter, with segment adjusted EBITDAR margins at 32.3% [12] - The company expects retail net revenues for 2026 to range from $5.7 billion to $5.85 billion, with adjusted EBITDAR projected between $1.86 billion and $1.98 billion [13] - The interactive segment generated revenues of $398.7 million in the fourth quarter, with an adjusted EBITDA loss of $39.9 million [14] Business Line Data and Key Metrics Changes - The retail segment experienced year-over-year growth in theoretical revenue across all rated worth and age segments, despite a $7 million negative impact from bad weather in December [8] - The interactive segment is expected to achieve breakeven adjusted EBITDA for the full year 2026, representing a $268 million year-over-year improvement [5] - iCasino growth was reported at over 40%, while online sportsbook growth reached 73% year-over-year [10] Market Data and Key Metrics Changes - The South segment faced challenges due to new supply in Louisiana, while the Midwest segment was impacted by new competition in Council Bluffs, Iowa [8] - Regional strength was noted in Ohio and St. Louis, with significant performance at the L'Auberge Lake Charles property [8] - The new hotel tower at M Resort in Las Vegas achieved record gaming volumes and net revenue [9] Company Strategy and Development Direction - PENN is focused on improving free cash flow generation, deleveraging, and returning capital to shareholders [4] - The company plans to open two more retail growth projects by the end of Q2 2026, contributing to expected year-over-year retail net revenue and adjusted EBITDAR growth [12] - Strategic investments made over the past years are expected to yield significant operational benefits and cost savings [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving year-over-year segment adjusted EBITDAR growth of 20% in 2026 [3] - The company anticipates a strong second half of 2026, benefiting from the opening of four growth projects [38] - Management highlighted the importance of retaining users and engaging them across the ecosystem as a priority for long-term growth in the interactive segment [11] Other Important Information - PENN entered the fourth quarter with total liquidity of $1.1 billion, including $687 million in cash and cash equivalents [18] - The company expects total 2026 CapEx to be $445 million, down from $408 million in 2025 [19] - PENN repurchased 354 million shares in 2025, representing about 14% of shares outstanding [57] Q&A Session Summary Question: Can you elaborate on the 2026 target of 20% revenue growth? - Management indicated that growth is primarily driven by iGaming, with strong retention rates and expectations for NGR growth despite lower handle [26][28] Question: What are the expectations regarding promotional environment and supply pressure in 2026? - Management noted a reduction in promotional impact and anticipated stabilization in markets affected by new supply [30][31] Question: What factors are considered in the guidance range for new supply impact? - Management expressed stronger confidence in the second half of the year, accounting for weather impacts and new project openings [36] Question: How does the company view the development pipeline in the casino business? - Management mentioned ongoing analysis of potential projects, particularly in aging riverboat markets [46] Question: What are the expected costs for the Alberta launch? - Management estimated the marketing launch costs for Alberta to be in the CAD 15 million to CAD 20 million range [75]

Financial Data and Key Metrics Changes - PENN Entertainment reported Adjusted EBITDAR growth year-over-year, despite adverse weather conditions in December impacting results by approximately $7 million [3][12] - The retail segment generated revenues of $1.4 billion with an Adjusted EBITDAR of $456.4 million, reflecting a segment Adjusted EBITDAR margin of 32.3% [12] - For 2026, the company forecasts retail net revenues between $5.7 billion and $5.85 billion, with Adjusted EBITDAR ranging from $1.86 billion to $1.98 billion [13] Business Line Data and Key Metrics Changes - The interactive segment achieved revenues of $398.7 million in Q4, with a year-over-year revenue growth of 52%, driven by iCasino growth of over 40% and online sportsbook growth of 73% [10][14] - The interactive segment is expected to reach breakeven Adjusted EBITDA in 2026, representing a $268 million year-over-year improvement [5][16] - The retail side experienced year-over-year growth in theoretical revenue across all rated worth and age segments, with significant contributions from older demographics and VIP play [8] Market Data and Key Metrics Changes - The South segment faced challenges due to new supply in Louisiana, while the Midwest segment was impacted by new competition in Council Bluffs, Iowa [8] - Regional strength was noted in Ohio and St. Louis, as well as at the L'Auberge Lake Charles property [8] - The company anticipates that the opening of new properties will provide a tailwind for growth in the second half of 2026 [38] Company Strategy and Development Direction - PENN is focused on improving free cash flow generation, deleveraging, and returning capital to shareholders [4][22] - The company plans to open two more retail growth projects by the end of Q2 2026, which are expected to enhance revenue generation [4][9] - Strategic investments made over the past years are expected to yield significant operational benefits and cost savings [6][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 20% Adjusted EBITDAR growth in 2026, driven by strategic initiatives and operational improvements [3][4] - The company is optimistic about the performance of its interactive segment, particularly following the rebranding to theScore Bet [11][22] - Management acknowledged the impact of weather and competition on performance but expects stabilization and growth as new projects come online [31][38] Other Important Information - PENN expects to generate over $3 per share of free cash flow in 2026 and reduce lease-adjusted net leverage by more than one turn [8][19] - The company has a total liquidity of $1.1 billion, including $687 million in cash and cash equivalents [18] - Total CapEx for 2026 is projected at $445 million, down from $408 million in 2025, with a focus on optimizing capital expenditures [19] Q&A Session Summary Question: Can you elaborate on the 20% revenue growth target for 2026? - Management indicated that growth is primarily driven by iGaming, with strong retention rates and expectations for NGR growth despite lower handle [26][27] Question: What are the expectations regarding promotional environment and supply pressure in 2026? - Management noted a reduction in promotional impacts and anticipates improved trends as new supply shocks are lapped [31][32] Question: What is the anticipated impact of new supply and project growth on guidance? - Management expects stronger performance in the second half of the year, with all growth projects contributing positively [38][40] Question: How does the company view the development pipeline in the casino business? - Management is analyzing additional projects and expects to provide updates in 2026 [49][50] Question: What are the expected costs associated with the Alberta launch? - Management estimates marketing launch costs for Alberta to be in the CAD 15 million to CAD 20 million range [80][81]

FOURTH QUARTER 2025 EARNINGS PRESENTATION February 26, 2026 FORWARD-LOOKING STATEMENTS This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "expects," "believes," "estimates," "projects," "intends," "plans," "goal," "seeks," "may," "will," "should," "look forward to," or "anticipates" or the negative or other variations of these or similar words, ...

Core Insights - PENN Entertainment, Inc. announced a new corporate organizational structure to align with its strategic priorities, focusing on digital assets in Canada and the Hollywood iCasino product in the U.S. [1] Group 1: Corporate Strategy - The restructuring aims to leverage the core retail casino business and enhance the overall omnichannel business model [1]

Core Insights - The U.S. online betting industry is transitioning from growth to profitability, with investors focusing on execution and balance-sheet discipline, highlighting a competitive landscape between DraftKings Inc. (DKNG) and PENN Entertainment, Inc. (PENN) [1][2] DraftKings (DKNG) - DraftKings operates as a pure-play digital operator, emphasizing scale, technology, and customer engagement to enhance long-term earnings potential [2][3] - The company is experiencing improving momentum with accelerating handle growth, stronger customer retention, and increased parlay mix, which are expected to support higher sportsbook margins over time [3] - DraftKings is expanding media partnerships and product initiatives while maintaining disciplined capital allocation, including a larger share repurchase authorization [4] - The company continues to invest in new initiatives and technology, which may affect near-term profitability, leading to uneven margins compared to peers [6] - DraftKings faces inherent volatility in sportsbook results, which can significantly impact revenue and EBITDA, creating challenges for earnings visibility [5] PENN Entertainment (PENN) - PENN has strategically reset its digital operations by exiting the ESPN BET partnership and focusing on owned assets like theScore Bet and Hollywood iCasino, which simplifies the business and reduces marketing costs [7] - The company is witnessing strong momentum in iCasino, which is increasingly viewed as a profit engine, with record revenue driven by cross-selling from online sports betting [8][9] - PENN's regional casino business provides stable cash flow and differentiates it from digital-only competitors, with strong performance in several markets and a visible development pipeline [10] - Execution risk in the Interactive segment remains a concern, particularly with the transition away from ESPN BET, which introduces uncertainty around customer retention [11] - PENN's diversified structure and focus on profitability position it favorably compared to DraftKings, especially as the industry matures [24] Stock Performance & Valuation - DraftKings shares have underperformed compared to PENN over the past six months [12] - DraftKings is trading at a premium on a forward 12-month price-to-sales (P/S) ratio compared to PENN [16] - The Zacks Consensus Estimate for DKNG's 2026 earnings implies a year-over-year improvement of 100.4%, while PENN's estimate suggests a 116.4% improvement [18][21] Conclusion - PENN Entertainment is currently better positioned than DraftKings due to its balanced business model, digital reset, and stable cash flow from regional casinos, while DraftKings remains more exposed to sportsbook volatility and investment needs [24]

Financial Data and Key Metrics Changes - The retail segment generated revenues of $1.4 billion with adjusted EBITDA of $465.8 million, resulting in segment-adjusted EBITDA margins of 32.8% [13] - The interactive segment reported revenues of $297.7 million, including a tax gross-up of $139.5 million, and an adjusted EBITDA loss of $76.6 million [14] - Total liquidity at the end of Q3 was $1.1 billion, including $660 million in cash and cash equivalents [16] Business Line Data and Key Metrics Changes - The North America iCasino business achieved its highest quarterly gaming revenue to date, with a nearly 40% year-over-year improvement driven by record cross-sell from OSB of 62% [6][7] - iCasino monthly active users (MAUs) increased by 79% during Q3, with new all-time records for MAUs, gross gaming revenue (GGR), and net gaming revenue (NGR) set in October [7] - The transition to theScore Bet is expected to enhance digital business efficiency and profitability, with a focus on high-margin markets [5][8] Market Data and Key Metrics Changes - The company noted stable demand across gaming and non-gaming amenities, particularly in regions not impacted by new supply and increased competitor promotional activity [9] - The new Hollywood Casino in Joliet has driven impressive volumes and database growth, with a 42% increase in the active database since opening [10] Company Strategy and Development Direction - The company is realigning its interactive focus to prioritize digital assets in Canada and the Hollywood iCasino product, leveraging cross-sell opportunities across its ecosystem [4][5] - The early termination of the ESPN agreement will cease cash payments and marketing obligations, allowing for a more flexible marketing strategy focused on high-return markets [12][23] - The company plans to continue investing in growth capital while managing share repurchases as a key component of its capital allocation strategy [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate increased competition and promotional activity, emphasizing the importance of maintaining a strong value proposition [36] - The company is focused on achieving profitability in its digital segment by 2026, with a clear plan for retention and marketing strategies post-rebranding [8][43] - Management highlighted the importance of controlling the business's cost structure and marketing budget to enhance profitability moving forward [8][23] Other Important Information - The company repurchased $154.1 million of shares at an average price of $19.34 per share in Q3, with a total of $354 million repurchased as of November 5 [17] - The total CapEx for 2025 is now projected at $685 million, reflecting a shift of some project costs into the next year [20] Q&A Session Summary Question: Impact of ESPN exit on near-term and long-term profitability - Management discussed the strategic investments made in digital business and the importance of cross-selling to the retail segment, emphasizing the younger customer demographic acquired through digital channels [27][30] Question: Increased competition and promotional activity - Management acknowledged the impact of new competition and promotional activity on operations, noting that while there may be temporary increases in costs, the company remains committed to delivering best-in-market offerings [34][36] Question: Customer retention strategies post-rebranding - Management expressed confidence in retaining customers during the transition to theScore Bet, highlighting improvements in product quality and user experience [70][71] Question: Future growth opportunities in Canada - Management indicated that while there are limited retail property options in Canada, they remain open to opportunistic acquisitions that align with their omnichannel strategy [61] Question: Leverage targets for the business - Management stated that the optimal leverage level is below five times, with a focus on balancing share repurchases, growth investments, and debt reduction [62]

Financial Data and Key Metrics Changes - The Retail segment generated revenues of $1.4 billion with adjusted EBITDAR of $465.8 million, resulting in segment adjusted EBITDAR margins of 32.8% [16] - The Interactive segment reported revenues of $297.7 million, including a tax gross-up of $139.5 million, and an adjusted EBITDA loss of $76.6 million [18] - Total liquidity at the end of 2025 was $1.1 billion, including $660 million in cash and cash equivalents [20] Business Line Data and Key Metrics Changes - The North America iCasino business achieved its highest quarterly gaming revenue to date, improving nearly 40% year over year, driven by record cross-sell from OSB of 62% [8] - The introduction of a standalone app and improved cross-sell from online sports betting led to a 79% increase in iCasino monthly active users (MAUs) during the third quarter [9] - The company expects fourth quarter 2025 revenues for the Retail segment to range from $1.41 billion to $1.43 billion, with adjusted EBITDAR ranging from $455 million to $475 million [18] Market Data and Key Metrics Changes - The company noted stable demand across gaming and non-gaming amenities, particularly in markets not impacted by new supply and increased competitor promotional activity [11] - The new Hollywood Casino in Joliet has seen a 42% increase in its active database since opening, with over 50% of that growth coming from previously inactive customers [12] Company Strategy and Development Direction - The company is shifting its interactive focus to prioritize digital assets in Canada and Hollywood iCasino products, emphasizing cross-sell opportunities across its ecosystem [5] - The transition to the Score Bet brand is expected to optimize the digital business and operate more efficiently, including replacing fixed media spends with performance-based marketing [7] - The company plans to continue investing in growth capital while also focusing on share repurchases and deleveraging [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning to compete effectively in the evolving industry landscape, highlighting the importance of an omnichannel strategy [28] - The company aims to achieve breakeven or better in its interactive segment by 2026, with a focus on profitability and operational efficiency [10][96] - Management acknowledged the challenges posed by increased competition and promotional activity but remains optimistic about the company's ability to maintain its market position [41][44] Other Important Information - The company announced an early termination of its exclusive online sports betting marketing agreement with ESPN, ceasing cash payments at the end of 2025 [15] - A total of $38.1 million will be paid to ESPN for marketing services incurred through December 1, with an additional $5 million for traditional media support [15] - The company has repurchased $354 million of shares as of November 5, with a new three-year $750 million share repurchase authorization commencing on January 1, 2026 [21] Q&A Session Summary Question: Can you talk about the near-term and long-term profitability for interactive following the ESPN exit? - Management highlighted that the digital investments aimed to attract younger customers and cross-sell to retail businesses, with a focus on profitability moving forward [32][34][38] Question: How has increased competition and promotional activity impacted operations? - Management noted that while new competition has led to increased marketing costs, properties not impacted by new supply are performing well [41][44] Question: Can you clarify the expected marketing costs post-ESPN? - Management indicated that marketing costs will be significantly lower than those previously paid to ESPN, allowing for more targeted spending in high-return markets [48][49] Question: What are the strategies for customer retention during the rebranding to Score Bet? - Management expressed confidence in retaining customers due to improved user experience and a comprehensive marketing plan, emphasizing that the app experience will remain unchanged [84][90] Question: What is the company's leverage target moving forward? - Management stated that the optimal lease-adjusted leverage level is below five times, with a focus on deleveraging while remaining opportunistic in capital allocation [76][78]