Full Transcript: PENN Entertainment Q2 2026 Earnings Call

PENN Entertainment (NASDAQ: PENN ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This content is powered APIs. For comprehensive financial data and transcripts, visit Access the full call at Summary PENN Entertainment reported a strong second quarter, with a 20% year-over-year growth in adjusted EBITDA, driven by performance in both retail and interactive segments.

2 million, with nine properties setting Q2 records. 963 billion, reflecting a positive outlook for the second half of the year. S. iCasino and Canadian operations, despite some impact from customer-friendly sportsbook outcomes.

PENN Entertainment is executing several retail development projects, including new hotel openings at Hollywood Casino Joliet and Hollywood Columbus, which are contributing to strong growth. The company is focusing on deleveraging, optimizing corporate overhead, and maintaining disciplined capital allocation, with a goal to reduce lease-adjusted net leverage below five times. Management highlighted their strategic initiatives, including the PENN Play Loyalty program and omnichannel strategy, as well as ongoing investments in gaming and non-gaming amenities.

In response to competitive pressures in the sportsbook market, the company remains focused on maintaining profitability and efficient marketing spend. 9 billion in liquidity and reduced capex guidance due to shifts in project timelines. Full Transcript OPERATOR Greetings and welcome to the PENN Entertainment second quarter 2026 earnings call. I would now like to turn the conference over to Joe Gifone, Investor Relations.

Please go ahead. Joe Gifone, Investor Relations 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 and A.

And during Q and 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's CEO, Jay Snowden. Jay, please go ahead. Jay Snowden, CEO Thanks, Joe, and good morning.

I'm joined here by Felicia Hendrix and Aaron LaBerge, as well as other members of the senior management. As you'll see from our release and investor presentation, we continued 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 delever 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 EBITDAR. 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 PENN 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. S. iCasino and Canadian operations to improve profitability. S.

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 on 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 year over 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 13, we launched the theScore Bet Sportsbook and Casino and our standalone iCasino apps, theScore 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 theScore Bet 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, excuse me, 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 EBITDAR 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 12, 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 time frame, 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. Felicia Hendrix, CFO Thanks, Jay. 2 million, which reflects year-over-year growth of approximately 4% in revenues and 6% in adjusted EBITDAR, respectively. 4%, and flow-through improved quarter over quarter and year over year, reflecting our property teams' 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 EBITDAR grew approximately 2% and 4%, respectively, in the quarter. We're raising our full-year 2026 retail revenue and adjusted EBITDAR 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. 963 billion at the midpoint, which implies a 50 basis point year-over-year improvement in adjusted EBITDAR margins for the second half of the year.

At the midpoint, our new guidance implies continued expectation for retail adjusted EBITDAR to grow year over year in the mid-single digits. 6% growth we just reported for the second quarter. We expect normalized seasonality in the second half of the year. 5 million.

S. iCasino 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. 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 nine 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. 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. 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 Columbus hotel tower.

58% notes, which are due in January 2027. As we highlight on slide 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. RSUs and stock options are dilutive 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.

Jay Snowden, CEO 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.

OPERATOR Thank you. If you would like to ask a question, please press star one on your telephone keypad. To leave the queue at any time, please press star two. Once again, that is star one to ask a question.

And in the interest of time, please limit yourself to one question and one follow-up. P. Morgan. Please go ahead.

Your line is open. P. Morgan Hey, good morning, everyone. Thanks for the question.

This is going pretty quickly, so I think I got my math right. But the online sports betting, or the Interactive core revenue, I think you reduced by $40 million, but you did hold your adjusted EBITDAR guide for a $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? Felicia Hendrix, CFO Yeah, there's labor efficiencies.

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

Morgan Got it. That makes sense. And then on the land-based side, obviously some strong margin improvement there. And as you think about kind of the rest of the year and the cadence, I think usually first quarter through 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? Felicia Hendrix, CFO Yeah, happy to. At least as it relates to the second half of the year. So we beat on revenues, 4%—EBITDAR 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% EBITDA growth in the fourth quarter.