Earnings Call Transcript - PENN Q4 2025

Joseph Jaffoni, Investor Relations

Thank you, Nicky. Good morning, everyone, and thank you for joining PENN Entertainment's 2025 Fourth Quarter Conference Call. We'll get to management's comments and presentation momentarily as well as your Q&A. During the Q&A session, we ask that everyone please limit themselves to 1 question and 1 follow-up. Now I'll review the safe harbor disclosure. Please note that today's discussion contains forward-looking statements. Forward-looking statements involve risks, assumptions and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors. It's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go ahead.

Jay Snowden, CEO

Thanks, Joe. Good morning, everyone. I'm joined here in Wyomissing by Felicia Hendrix and Aaron Laberge as well as other members of our senior executive team. I'm pleased to report PENN's diversified retail portfolio delivered another solid quarter during which retail adjusted EBITDA grew year-over-year after adjusting for poor weather in December. In our Interactive segment, we successfully rebranded our U.S. online sportsbook to the Score Bet on December 1 and achieved positive adjusted EBITDA in December, driven by continued momentum from our iCasino products, disciplined cost management, and strong online sports betting hold rates. 2026 is an exciting year for us in which we expect to generate year-over-year segment adjusted EBITDAR growth of 20%. We are well positioned to benefit from the strategic investments we have made over the last several years and are laser-focused on improving free cash flow generation, deleveraging, and opportunistically returning capital to shareholders. I want to highlight the foundation that set us up nicely to deliver on our goals for this year and beyond, which are summarized on Slide 6 of our investor presentation. First, our diverse retail business is healthy and growing, generating sustainable free cash flow. In addition to anniversarying much of the new supply in several of our key markets, we will have 2 more retail growth projects opening by the end of the second quarter this year, and we're seeing continued momentum at 2 that we opened last year. Second, we expect our Interactive segment to inflect to breakeven adjusted EBITDA for the full year, which would represent a $268 million year-over-year improvement. Third, we have rightsized our maintenance capital spend on a go-forward basis, which we'll touch upon more later. Fourth, we will begin to realize synergies from our corporate restructuring and cost optimization initiatives. The new organizational structure we announced in early January will allow us to become a leaner and flatter organization, enabling business leaders to be more empowered and drive greater productivity. All in all, we expect to save over $10 million in annualized run rate expenses for the company as we streamline the organization, which will mostly phase in over the first half of the year. The operational benefits are already in flight. In terms of rightsizing our property maintenance CapEx, we have done an excellent job over the last 6 years of upgrading our casinos, refreshing our slot floors, and investing in non-gaming amenities like updated hotel rooms, new tel sports books, new restaurants, and entertainment venues. In addition, our dockside to land-based growth projects are expected to meaningfully reduce our maintenance CapEx cost going forward. With the improvements we have made to our properties, we feel comfortable with bringing our recurring maintenance CapEx levels down by $20 million and returning to near pre-COVID level spending. Slide 7 really drives some of the significant free cash flow we expect to generate in 2026 and beyond. Importantly, this growth in free cash flow will enable us to delever meaningfully in 2026 and opportunistically return capital to shareholders. In fact, we expect to generate more than $3 per share of free cash flow in 2026 and reduce our lease-adjusted net leverage by more than 1 turn. Returning now to our results for the quarter. On the retail side, we experienced another quarter of year-over-year growth in theoretical revenue across all rated worth and age segments with our older demographics and VIP play contributing meaningfully to these results. The bad weather in December negatively impacted segment adjusted EBITDA by approximately $7 million. In addition, our segment was negatively impacted by new supply, Bossier City and New Orleans, in those markets in Louisiana and our Midwest segment was impacted by new supply in Council Bluffs, Iowa. Core business trends were otherwise stable across the portfolio with regional strength in Ohio and St. Louis as well as our LaBerge, Lake Charles property. We're seeing continued momentum at our new hotel tower at M Resort in Las Vegas, which is capturing previously unmet demand including booking 2 of the largest groups in the property's history recently. In December, the property achieved record gaming volumes. In January, we generated record net revenue at M. Meanwhile, the new Hollywood Casino Joliet is delivering strong results both from new and reactivated customers with a nearly 13% year-over-year increase in the number of active players helping to drive meaningful increases in both gaming and non-gaming revenues. The early performance of these projects provides us continued confidence in the anticipated success from the upcoming openings of the Hollywood Columbus Hotel Tower and the new Hollywood Casino Aurora, in addition to our new council properties scheduled to open in late 2027 or early 2028. As we said previously, we anticipate all of these development projects to generate approximately 15% plus cash-on-cash returns. On the interactive side, we experienced record gaming revenue in the fourth quarter driven by the continued growth of our stand-alone Hollywood Eye Casino products and increased cross-sell as well as improvements in our online sportsbook product offering and operations. Revenue growth, excluding tax gross-up of 52% year-over-year was primarily attributable to iCasino growth of 40% plus and online sports book growth of 73%, including strong revenue and positive adjusted EBITDA in December, our first month operating as the Score Bet in the U.S. Additionally, adjusted EBITDA improved $70 million year-over-year in the fourth quarter, driven by strong adjusted flow-through of 95%. We are encouraged by the upward trajectory of the interactive business. Our sportsbook is maturing through a more disciplined regionally focused marketing strategy that prioritizes iCasino jurisdictions. Our reduced fixed media spend provides us much more marketing flexibility to strategically invest more in Canada as well as the U.S. hybrid states with both iCasino and online sports betting and in customer cohorts with more compelling returns, particularly as we look ahead to new market openings like Alberta, which is anticipated later this year in 2026. Importantly, we've retained users through the Score Bet rebrand and continue to engage them across our ecosystem. Retention and new user growth will remain our top interactive priorities and the foundation for our long-term growth in that segment. The positive trends in our interactive segment give us confidence to recommit to achieving breakeven adjusted EBITDA in 2026. And with that, I'll turn it over to Felicia.

Felicia Kantor Hendrix, CFO

Thanks, Jay. Our Retail segment generated revenues of $1.4 billion adjusted EBITDAR of $456.4 million and segment adjusted EBITDA margins of 32.3%. Inclement weather in December negatively affected retail adjusted EBITDAR in the quarter by $7 million, with the largest impact in the Northeast segment. We expect the combination of our high-quality portfolio plus our new growth projects to generate year-over-year retail net revenue and adjusted EBITDA growth in 2026. For retail net revenues, we forecast a range of $5.7 billion to $5.85 billion and retail adjusted EBITDA will range from $1.86 billion to $1.98 billion. As you think about your quarterly modeling, the severe weather in the first quarter thus far has negatively impacted retail adjusted EBITDA by approximately $5 million to $10 million. For the second quarter of 2026, at our new property in Aurora, we expect to have approximately 2 weeks of downtime as we look to open the new land-based facility. As you know, our second half results will benefit from the opening of all 4 of our retail growth projects. All of these items are reflected in our guidance. Our Interactive segment in the fourth quarter generated revenues of $398.7 million, including a tax gross-up of $182.7 million and adjusted EBITDA loss of $39.9 million. For 2026, we expect Interactive revenues of approximately $1.6 billion inclusive of an estimated tax gross-up of about $760 million or a revenue improvement of roughly 20% year-over-year, excluding the tax gross-up. This growth will be a function of the playbook we initiated in December as we transition to the Score Bet sports book in the U.S. and shifted our focus and resources to our U.S. iCasino states and Canada with a focus on iCasino and cross-sell. Complementing our revenue growth is a more rationalized cost structure. Our marketing expenses will decline significantly year-over-year as we made our last payment to ESPN in December 2025. We anticipate our marketing spend to come in approximately $150 million lower than in 2025 as we align spending with our revised regional strategy focused on iCasino and Canada. With performance and brand spend fully in our control, we will adjust allocations based on results. Further, we have rightsized our interactive operations to fit our new structure with payroll and G&A declining proportionately. As a result of our revenue growth expectations and more rationalized cost structure, we continue to expect our Interactive segment to generate breakeven adjusted EBITDA in 2026 and note that we will expect all components, U.S. OSB, iCasino, and our Canadian operations to generate positive contribution margin in 2026. This forecast does not contemplate any new jurisdictions launching in 2026, including Alberta. As we look to full year 2026, we expect U.S. OSB MAUs to decline year-over-year given the transition from ESPN BET to the Score Bet while U.S. iCasino as well as Canadian OSB and iCasino MAUs should increase year-over-year, reflecting our strategy to realign our digital focus. We expect the OSB and iCasino hold rates to remain around 9% and 3.7%, respectively. As for quarterly EBITDA cadence, the first 3 quarters of 2026 should generate small adjusted EBITDA losses, and we expect the fourth quarter to be profitable. We expect the other category adjusted EBITDA to be a loss of $119 million for 2026. 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 $190 million of CapEx in the quarter, $85 million was project CapEx, primarily related to our 4 development projects. We ended the fourth quarter with total liquidity of $1.1 billion, inclusive of $687 million in cash and cash equivalents. On November 3, 2025, PENN received $115 million in funding from GLPI at a 7.79% cap rate in connection with the second hotel tower construction at the M Resort Las Vegas. In conjunction with the opening of the $360 million Hollywood Aurora in late Q2, we expect to receive $225 million in funding from GLPI near project opening and the remaining $21 million from the City of Aurora by the end of the year. We have elected not to take GLPI capital in connection with the construction of our Columbus hotel tower. The combination of this funding with a strong free cash flow and more optimized CapEx spend we discussed earlier, will enable us to delever nicely throughout the year. Total 2026 CapEx will be $445 million, which includes $225 million of project CapEx, down from $408 million in 2025, and $220 million of maintenance CapEx compared to $239 million in 2025. We expect total cash payments under our triple net leases to be $1 billion in 2026. For 2026 cash interest expense, we project $145 million. For cash taxes, we do not expect to be a cash taxpayer in 2026 given the favorable tax deductions enabled by the One Big Beautiful Bill in addition to our acquired NOLs and various tax credits. Our basic share count at the end of the fourth quarter was 133.2 million shares. After the June 20 repurchases of the convertible notes, we now have 4.5 million potential dilutive shares from the remaining convertible notes stub and about 1 million dilutive shares from RSUs and stock options. I will now turn it back to Jay.

Jay Snowden, CEO

All right. Thanks, Felicia. In closing, I want to say that I'm proud of what our property interactive and corporate teams were able to accomplish in 2025, including the resilience shown on the retail side and the successful rebranding of our OSB product to the Score Bet. I couldn't be more excited about the many catalysts we have ahead of us in 2026, including the opening of our new Aurora property and the Columbus Hotel, the continued ramp of Joliet, and the M Resort Hotel tower, and achieving breakeven in Interactive. I'm also excited to welcome our 3 new board members, Heather, Jeff, and Fabio, who bring a lot of relevant experience and fresh perspectives to our board. We look forward to this being a year of strong execution at PENN, with an emphasis above all on free cash flow generation and deleveraging and transforming our strategic investments into consistent long-term returns and value creation for our shareholders. And with that, can we please open the line for the first question.

Operator, Operator

We'll take our first question from Brandt Montour with Barclays.

Brandt Montour, Analyst

Thanks for all the details this morning. Maybe starting off on digital and drilling into that top line '26 target of 20% revenue growth ex gross up. Jay, maybe you could put a finer point on that or just flesh it out a little bit. We know that you're growing iGaming in excess of that. there's more moving pieces on the OSB side with handle down because of, obviously, the exit of and then, of course, hold was probably a benefit or was a benefit here in the recent months. And so we kind of don't know what the run rate top line OSB is at right now. So just what's growing faster within that 20% iGaming. But if you could just flesh out what's going to get you to that 20% and how conservative it is?

Jay Snowden, CEO

Yes, I'm happy to discuss this. Feel free to join in as well. The growth we are experiencing is primarily driven by iGaming. We have observed very strong growth rates throughout 2025, and I am pleased with our progress at the beginning of 2026. Our products are continually improving on the stand-alone Hollywood app, and we are seeing excellent retention, which was evident even before the rebrand. The iGaming segment was not significantly impacted by the rebranding of ESPN BET to the Score Bet, so the growth is primarily from iGaming. We also anticipate NGR growth in the sports betting segment despite a decrease in handle. We have taken a fresh look at our entire interactive database. From a retention standpoint across the worst cohorts, we break it down into eight categories, and the top four have remained virtually unchanged in terms of retention both before and after the rebrand on a month-over-month basis. We feel very positive about retention in the mid-worth and high-worth segments. The decline in retention we are experiencing is intentional and is occurring in the lowest worth segments, most of which are unprofitable customers. Scaling back on reinvestment in the low-worth segments will benefit our overall performance. This will reduce our promotional reinvestment and focusing on our higher worth VIP and mid-worth customers will create a much more efficient business. Therefore, you will see NGR growth despite some declines in handle in 2026.

Aaron LaBerge, COO

Yes, not much to add. I mean, iCasino is currently growing faster than 20% right now, which we're happy about. Obviously, OSB is going to continue to go down. But as Jay mentioned, we're going to moderate that with lower promotional expenses to improve flow through. So we feel pretty good right now with what we're looking at for the year.

Brandt Montour, Analyst

Okay. That's super helpful, guys. And then over in the retail, the promotional environment was a headwind in '25. To some extent, there was obviously supply pressure. Can you just talk about those 2 items? Obviously, they're related into '26 and what you're expecting for the year?

Jay Snowden, CEO

Yes. We're happy to share that we're seeing less impact. I think there was some sort of initial shock to some changes in reinvestment and some customer shifts and movements in a couple of markets. It's really primarily where we felt it the most is in a couple of markets in Louisiana, really 3 markets, Baton Rouge, New Orleans, and, of course, Bossier City, which we talked about. Then in Council Bluffs, Iowa, the combination of new competition, new supply in Omaha, Nebraska, and then another competitor in Council Bluffs, where we saw some higher reinvestment levels. We're seeing that all starts to sort of fade and we do lap finally. We lapped the opening of the new supply in Bossier City here this month in February. We're feeling good about trends at our properties in Bossier City now that we've lapped that opening. There'll probably be some residual impact maybe the next month or 2. But we should be in the clear, I would say, in mid Q2 in terms of Bossier City. I would say Council Bluffs, there was a pretty major expansion of a new competitor in Omaha, I believe it was April of last year. So by the time you get to mid to late Q2, you've anniversaried the new supply shocks and competitive reactions. I think the second half of the year should be feeling pretty good in terms of that acting then as a tailwind when you look at it on a year-over-year basis.

Operator, Operator

We will move next to Barry Jonas with Truist Securities.

Barry Jonas, Analyst

Yes, Jay, why don't I take that second question you gave there maybe expanded as we think about the guidance range. Maybe what are you assuming between the range for new supply impact, something like more first half versus second, but also any assumptions embedded there for new project growth, anything for One Big Beautiful Bill. Just want to get a sense like what the difference is between the high and the low end of the guidance range.

Jay Snowden, CEO

Yes. We anticipated and contemplated all of the factors that you just highlighted, Barry. I do think that as I look at what consensus looks like by quarter, we probably feel stronger about the second half of the year than the first half. There's some weather impacts here in the first quarter that Felicia highlighted between $5 million and $10 million impact. We built that into our full year guide. So that's no change to the full year guide. But in terms of the cadence from Q1 to Q2, Q3, and Q4, there's a little bit of noise in Q2 in that we'll be opening our Aurora property. You'll recall that when we opened Joliet, we had to shut the property down for 2 weeks. There's obviously a cost headwind to not generating revenue, but still having the costs flow through the P&L as we get ready to open Aurora. The second half of the year, we really feel like we're in the clear. We're going to have all 4 of our growth projects that we've been talking about for the last couple of years. We'll be open, 2 of them fully ramping, the ones that we opened in 2025. Feeling pretty good about launching the other 2. They're likely to open at the very end of Q2. The current construction schedule has us opening the Columbus hotel as well as the Aurora property really at the tail end of Q2, call it, end of June. We'll firm that up in the next probably 1 month or 1.5 months publicly, but that's the way I would model it. And as you think about same-store versus new when you look at the EBITDA projection or guide for 2026, we look at our same-store, including the markets with new supply as being basically flat year-over-year from an EBITDA perspective. The upside you see on a year-over-year basis, the 3% growth overall is being driven by the 4 growth projects.

Barry Jonas, Analyst

Got it. And then I wanted to follow up on interactive, really nice to see the breakeven guidance this year. But at least conceptually, how should we be thinking about the maybe profitability scenarios for the segment in the years ahead. Clearly, new iGaming legalization will be a major factor, but it does seem like the royalties are a major positive today that could tail off at some point.

Jay Snowden, CEO

Yes. We are the only market we're aware of that is going to launch new this year is Alberta. That will happen. We leave some time around midyear that hasn't been firmed up yet, but that's what we're anticipating. That should be a good market for us. Obviously, our strongest market, I've highlighted before, has been Ontario from a market share and a contribution margin perspective. So we expect Alberta to be a good market, reasonable tax rate similar to Ontario, both online sports betting and online casino. There will be some investment that goes into that mark similar to when we launched Ontario, but we would expect to have similar market share results in that market as well. The Score brand really does carry across the country. It's not just specific to the province of Ontario. So feeling pretty good about that. To answer your question of how does breakeven in '26 look? What does it look like? How does that bridge to '27, '28? We just need, I think, another couple of quarters to see what is the revenue trajectory, both on the iGaming side as well as in OSB. How does the launch go in Alberta? So look, we're in control of all of the levers. That's a great feeling as we head into 2026 here. We feel really comfortable with being able to achieve breakeven. There are different paths to getting there, which would impact what your '27 and '28 outlook is. We just need a little bit more time under our belt. We're feeling good about the first couple of months post-rebrand. We provided you some KPIs in the slide presentation for what December and January look like on a combined basis. Feeling pretty good about that. It's actually quite rare that when you go through a rebrand and you're making assumptions, obviously, you're building out what your assumptions are and then make adjustments on the fly. We've been really close to what we assumed we would be from a retention as well as a new user perspective. There have been little tweaks here and there that we've made, but overall, feeling pretty good about what we anticipated and what we're seeing in the business.

Operator, Operator

We will move next to Jordan Bender with Citizens.

Jordan Bender, Analyst

I want to start on the casino side. So the bulk of the project CapEx is coming to an end in the coming months outside of Council Bluff. Jay, you might not be able to say anything on it today, but how do you view the development pipeline in the casino business over the next coming years?

Jay Snowden, CEO

Yes. I'm happy to share some insights. Internally, we have a few more projects under consideration. As I've mentioned in previous calls, we have some aging riverboats in markets like Louisiana, Mississippi, and one in Illinois. The return profiles for these projects look similar to what we're currently seeing in Joliet and M-Resort. One of those is a hotel expansion, and with Aurora, we are looking at a water-to-land conversion. You can expect updates on this in 2026. Regarding project CapEx, it peaked in 2025 at over $400 million, with around $225 million spent in the first half of this year as we completed projects in Columbus and Aurora. There will be some expenses related to Council Bluff as we approach the end of 2026 and into 2027, with that property anticipated to open late in 2027, possibly extending into early 2028. We'll continue to evaluate any new plans based on local support and feasibility, and you can expect to hear more about those in the upcoming quarters.

Jordan Bender, Analyst

Great. And then on the follow-up for the interactive guide, a lot of positive comments around kind of what's going on following the rebranding but the guidance I believe you guys did go from breakeven to positive to just breakeven. Can you kind of just flesh out what you're seeing in real time that's caused that shift?

Jay Snowden, CEO

Yes. Look, you have to take a midpoint when you're putting out a guide. And so I think that just feels comfortable right now. Again, we were positive EBITDA in December. I feel good about the business result in January. We're still in the middle of February. Super Bowl overall actually worked out in our favor. We did well, not so much on the Moneyline wagers, but player props definitely worked in our favor, and same game parlay most of the star players did not score touchdowns in that game. Overall, the Super Bowl was good. The other sports in February have been okay. So hold has been, I would say, pretty close to where we anticipated through the first 2 months of the year on a combined basis. We've built our budget from the bottom up, and it told us that we felt comfortable putting breakeven out there, and we're delivering against that now. We will obviously continue to update all of you on our quarterly calls as to how the year is progressing. In terms of being 2.5 months, close to 3 months post-rebrand, we're right where we wanted to be.

Operator, Operator

We will move next to Dan Politzer with JPMorgan.

Daniel Politzer, Analyst

I wanted to follow up just on regionals. I know you called out the first quarter, you've seen a little bit of weather impact, but perhaps the other side of that, have you started to see any of the stimulus benefits, the tax refunds start to flow through. And historically, what is the relationship between those tax refunds and maybe the uplift that you would see in your properties?

Jay Snowden, CEO

Yes, it's a good question, Dan. It's really hard for us to know when we see really good volumes on a weekend, how much of that is that there's been a break in the weather. How much of that is that there's tax refunds are starting to flow, and they're higher than people anticipated. So I think the answer is that we're seeing some of all of that. I would tell you that as bad as the weather was in January, and that really hit us across every 1 of our segments, regional segments other than West, but even hit us in the south, You'll recall the storm was really across the country. In February, Midwest weather has actually been fine. It's the Northeast where we've gotten beat up. We had to shut down a couple of our properties early this week. There's definitely noise there, but I would tell you that when the weather breaks, whether it's a weekday or certainly on the weekends, we're seeing really strong volumes. We're seeing really strong spend per customer when they visit. I think that's probably going to continue now that the tax dollars are starting to flow through into people's accounts. We would anticipate finishing up February strong. The weather looks good in the 10-day forecast really across the country. March is set up to be a good month. The calendar doesn't work in our favor as well in Q1. Something else to keep in mind, we had an extra weekend day this year in January, which is the weakest month of the 3. Last year, you had an extra weekend day in March, which is the strongest month of the 3. So something to keep in mind, again, just in terms of your quarterly modeling, Q1, maybe not as strong as maybe you would anticipate relatively speaking, but it's going to get stronger throughout the year, especially for PENN as we have the second half of the year, the 4 growth projects all open and starting to hit a run rate that we're comfortable with.

Daniel Politzer, Analyst

Got it. That makes sense. And then just pivoting to capital allocation. I think in your slide, you refer to those capital return optionality. One, it is a 2-part. Is there a number for the full year for the repurchases that you ended up doing? I'm not sure if there was any incremental versus when we got the update on the last call? And then how are you thinking about that capital return as you referenced the optionality with returning to shareholders versus reducing debt versus some of those growth investments that might be on the horizon?

Felicia Kantor Hendrix, CFO

Yes. Thanks, Dan. Yes. So in 2025, as you know, we set out to purchase 350 million shares. As we discussed in our last quarter, we ended up buying back $354 million for 2025. Just putting that into context, that's about 14% of our shares outstanding in '25. Since 2022, we repurchased $1.1 billion of stock or 25% of our shares outstanding. We've demonstrated that repurchases are an important part of our capital allocation strategy and continue to be so, but also delevering and investing in our development pipeline, where we expect to generate 15% cash-on-cash returns are also important parts of our capital allocation strategy. We talked about earlier that we expect to generate $3 per share of free cash flow this year. You couple that with the $225 million in funding we should receive from GLPI for Aurora before the end of the second quarter. The remaining $21 million that we'll receive from the City of Aurora before the end of the year, all that's going to enhance our liquidity and reduce our leverage. At the end of the day, it's about our balance, right? We'll remain focused on all 3 of those components, buyback delevering and investing in our growth throughout the year.

Operator, Operator

We will move next with Joe Stauff with Susquehanna.

Joseph Stauff, Analyst

I wanted to ask maybe a couple of questions to dig in a little further on the early returns, obviously, Julia and M Resort. Just kind of lessons and how we think about the ramp from here, we can all see the Joliet kind of win per unit per day somewhat flattening out. I don't know if that's the weather or maybe there are some marketing campaigns that you are thinking about. But also in M Resort, obviously, you have a lot more capacity. You talked about record gaming volumes in December and January. So I was wondering, is that a function of higher capacity, higher visitation? What are you seeing there in terms of maybe derisking, say, the 15% cash-on-cash return going forward?

Jay Snowden, CEO

Yes, those are good questions. To provide some context regarding our hotel expansion projects compared to the water-to-land conversions, the hotel expansions have shown a more immediate and positive impact on our incremental revenues and EBITDA. In Columbus, we developed a hotel without needing to increase our restaurant, entertainment, or gaming capacities, as we were already aware of the unmet demand at the M Resort. We had been building relationships with various groups and conventions that surpassed our capacity of 390 rooms, and now we've nearly doubled that to about 750 rooms. This has allowed us to welcome both returning and new large groups, providing a level of service and personalization that's distinct from the larger hotels on the strip, where groups can get lost due to size. Looking at resort results, including occupancy and average daily rate (ADR), it may seem like we haven't increased our room count significantly, given that occupancy rates remain strong compared to last year when we had half the number of rooms. We are optimistic about the M Resort, and the return profile makes us even more enthusiastic about Columbus, which surprisingly ranks as our top property for cross-property visitation despite currently lacking a hotel. We are confident in our ability to boost VIP cross-sales from other markets, particularly during peak times like Ohio State football season. Regarding Joliet, we’re also pleased, as it was the first site to open in a major mixed-use development called Rock Run. A residential development of over 250 units is slated to open next to us later this year, along with a 285-room hotel anticipated to open by 2027. This area will have numerous restaurants and entertainment options, resembling the successful development near Ameristar in St. Charles, Missouri. We're expecting Joliet to reach a comparable scale in the coming years. Since the start, we've seen our active database grow by 130%, daily visits have doubled, and both our table and non-gaming revenues have increased significantly, with slot revenue experiencing growth of 40% to 50%. We believe there’s still potential to enhance the slot business even further, which would strengthen the return profile. The key distinction between hotel expansions and water-to-land conversions is that during the initial months, when we opened Joliet, we had many leased slots and were still learning which games resonated with our customers along with our restaurant and bar offerings. Initially, margins tend to be lower, but we anticipate improved margins at Joliet over the next few quarters. By the one-year anniversary, we expect robust performance on both the top and bottom lines. I foresee a similar pattern for Aurora from its first to fourth quarters post-opening, while Columbus is likely to have a more immediate impact on revenue, profitability, and margins.

Joseph Stauff, Analyst

And just a follow up. Is the Aurora property, the newer property, obviously, is that also opening up? I hadn't been there. in a mixed-use development as well similar to Joliet?

Jay Snowden, CEO

It is not, but we stand to benefit that we literally sit next to immediately adjacent to the Chicago premium outlets. When you're entering and exiting that mall, you're at a stoplight, you turn left to go on the interstate or you go straight and you roll right into our parking garage. I would say it's actually a little bit better in the sense that just from a timing perspective, it's already developed and already has critical mass on a daily basis. We stand to benefit from the Chicago Premium outlets, which don't have any sort of mid-tier or higher-end restaurant offerings, and that's something that we will have. Remember though we don't have a hotel at our Aurora property today on the water; we will have a hotel, a spa, outdoor entertainment, and lots of restaurants. It's sort of a bigger and more higher-end amenity mix version than what you saw at Joliet. We're feeling really good about being able to feed off of the Chicago Premium Outlet Mall there.

Operator, Operator

We will move next to Shaun Kelley with Bank of America.

Shaun Kelley, Analyst

Jay or Felicia, if you could just remind us on the kind of size or scope around the Alberta launch costs. Ontario was quite a while ago, and I can't actually remember if it was done under the sort of more of the Score model before your acquisition. But just kind of if you could help us put some parameters around if that market goes, I know the timing is a little uncertain. But if that market does open this year, what's the kind of range of J-curve investment you guys might expect to make there? That would be helpful.

Jay Snowden, CEO

Yes. We're still sort of finalizing our marketing launch plans there and taking the best of in terms of what works with our Ontario launch and eliminating the things that didn't work. I would say it's going to be probably somewhere in that $15 million to $20 million range, but give us another quarter to fine-tune our marketing plans and get back to you. Obviously, it's a really important market. We've all learned through the years that those initial sign-ups, you get those are the most valuable customer cohorts that you end up with. We've got to make sure that we launched successfully in Alberta like we did in Ontario. When you do, you tend to hold on to your market share much more effectively. I would say stay tuned. But generally speaking, that's probably the range.

Shaun Kelley, Analyst

Perfect. As a follow-up, Jay, last quarter you shared your insights on the broader prediction market landscape, and we are witnessing significant sequential growth in that area. I have two questions. First, do you have any insights on your core business handle metrics regarding any impacts you might be noticing? More importantly, as things continue to evolve and we see more gaming-like mechanics emerging, how do we stand today compared to three months ago in your assessment of the industry? We’ve observed the CFTC making public statements in support of these markets, and many players seem to be advancing.

Jay Snowden, CEO

It's a complex question about a contentious issue. I shared many of my thoughts on our last call, and those views remain unchanged. What has evolved is the uncertainty around the legal landscape. We're seeing regulators and attorneys general suing prediction markets while prediction markets are counter-suing regulators. It's clear to anyone involved in the gambling industry that sports betting is indeed gambling, and I find it hard to argue otherwise. Regulators have taken this stance, which places companies like ours, along with others such as MGM and Caesars, in a difficult position. Our land-based operations generate significant cash flow, employ thousands nationally, and give back to our communities. Our gaming licenses are invaluable, and we will not jeopardize them. When regulators declare something as illegal gambling, we comply. However, some entities in different states are able to operate otherwise, which complicates matters. As far as the impact on our sports betting business is concerned, we cannot clearly assess the effects at this time. We can observe handle trends influenced by various factors, including prediction markets, but the answers remain elusive. We are committed to safeguarding our licenses and staying aligned with our regulators. I believe that, as an industry of land-based casinos excluded from prediction markets, the best strategy is to be proactive. We need to find ways to champion our interests. I have some ideas which I have shared with peers, and we are actively engaging with regulators and lawmakers to explore how we can advocate effectively and create positive outcomes for states and operators alike.

Unknown Executive, Unknown Title

And I would say on the sports betting side, you're seeing a lot more competition on the marketing side going after sports betters directly. So we are seeing that versus going after investors; they're going after sports betters. So that's become pretty evident over the short term here.

Operator, Operator

We will move next to Chad Beynon with Macquarie.

Chad Beynon, Analyst

I wanted to ask about the main iGaming bill that was passed, obviously unique in terms of the partners that are there. You guys have a good database and could potentially partner with somebody. Can you talk about if this bill goes into existence in terms of operations, maybe your opportunity to benefit economically in that market?

Jay Snowden, CEO

Sure, Chad. I can't answer that one today because we're still in discussions. Let me take a step back. What happened in Maine is astonishing. We've been operating as a casino there for two decades, investing hundreds of millions of dollars and employing hundreds of locals. We are deeply involved in the community, more than most business leaders. The governor in Maine decided to grant a monopoly to a third party that has never invested in the industry. I don't understand that decision; it doesn't make sense to me and shouldn't happen. That said, this is being legally challenged, and we'll see where it goes. If it stands, we'll find a way to compete in that market. The way this was done has not been popular publicly, which is very clear. I'm not sure how the governor concluded this was the best course of action, but it is what it is. We'll find a way to compete even if it remains legally upheld.

Chad Beynon, Analyst

Okay. And then separately, on the retail guide, it looks like margins are going up by a few basis points, 45% flow-through at the midpoint. You guys are going to benefit from the new properties. You talked about the returns there. But just as we think about the same-store expenses, maybe labor, utilities, etc., the nontax items. Do you have high confidence that there's not going to be much inflation in '26? And if you hit those revenue targets, at least at the midpoint, that you can hit on that flow through?

Jay Snowden, CEO

Yes. From what we can see today, I would say yes. We have a couple of labor negotiations in 2026 that we feel we have a good understanding of the potential outcomes. We are also well-informed about utility and insurance expenses. It's really more about the first half of the year; there will still be some impact from the new supply markets that we have yet to fully experience. The Aurora opening will negatively affect margins for at least the first quarter, possibly the second quarter. The other three growth projects that we will be ramping up at Joliet are expected to have very strong margins. In the second half of the year, M Resorts’ margins are currently looking very good. Columbus is also starting off well. For the first half of the year, don't expect much increase in same-store margins, but in the second half, you should start to see more growth in same-store margin levels.

Operator, Operator

We will move next to Jeff Stantial with Stifel.

Jeffrey Stantial, Analyst

Jay, Felicia, Aaron. Maybe starting off on the Interactive business. We haven't seen a bit of an uptick in the promotional environment this quarter on the sports side of things. The private operators continue to spend quite aggressively, and then some of the larger operators have come out with parley insurance and other initiatives like that. Jay or Aaron, whoever wants to take this. Is this something you're noticing an impact on retention in sports that you could actually pinpoint in the quarter? Are you fast following any of the parlay-focused generosity initiatives? If you could just help us think about overall sensitivity and the projections to the promotional environment, specifically in sports, just given the shift in strategy, that would be helpful.

Aaron LaBerge, COO

Yes. This is Aaron. We are seeing that in sports, although as you know, our strategy has really shifted to focusing on iCasino in hybrid states and in Canada. When we're looking at OSB-only states, we're taking a much more methodical look at our promo dollars and users that we're trying to retain and attract. We have great retention at the high end of value; kind of the promo chasers and the people that are looking for gimmicks and promos in the low end tend to be churning out, which is what we expected. We use that money to reinvest in hybrid states where there's iCasino and sportsbook. It is happening, but we are not necessarily competing in that market anymore as vis-a-vis FanDuel or DraftKings; we don't see ourselves in that realm, although we do try to find opportunities to provide value where they don't. Your observation is true. It is getting competitive, but we're kind of staying out of that right now.

Jay Snowden, CEO

Yes. I would add to that, Aaron. Just one comment. I think you're seeing a lot more competition on the marketing side going after sports betters directly. We are seeing that versus going after investors; they're going after sports betters. So that's become pretty evident over the short term here.

Operator, Operator

We'll take our next question from David Katz with Jefferies.

David Katz, Analyst

I wanted to just talk about the land base or retail portfolio. You've made some obviously very effective investments in upgrading that. Do you have a pipeline of more of those? Should we expect to see more of those kinds of upgrade projects? Clearly, the retail landscape has gotten much more competitive post-COVID.

Jay Snowden, CEO

Yes. I had mentioned earlier, David, we do have some more opportunities in states like Louisiana, Mississippi, and actually 1 more of our water-based facilities in Illinois. So we're analyzing the return profiles on those projects, working with local leaders, lawmakers, community leaders, and figuring out which of those may make sense for us as long as they hit our return profile that we're comfortable with, which would be that 15-plus percent cash on cash. We've got others that we believe will fit that return profile. We just have to make sure that everything else lines up, and I would say stay tuned for more on that here in 2026.

David Katz, Analyst

I appreciate it. If I could just follow up to that end. I don't expect you to give us a number today and in this forum, right? But is it a majority of the portfolio, right? Is it 2 to 3 properties, 3 to 5 properties? Any order of magnitude, I think, would be helpful here.

Jay Snowden, CEO

It would be certainly low single digits, less than a handful, but yes, there's across those 3 states I mentioned, call it, 3 or 4 projects that we're looking at right now.

Operator, Operator

Thanks, David. Nicky, we'll take 1 more question, please.

Stephen Grambling, Analyst

Thank you for sneaking me in here. This should be maybe a quick one. I know that you gave a guide that implies an OpEx growth rate on the property side. Just curious if you could provide any more details on some of the puts and takes that maybe underpin that.

Jay Snowden, CEO

Yes. I would say a pretty typical year of OpEx growth we're comfortable with the flow-through on the incremental revenues that we're showing there at around 45% could end up being a little bit better than that, but you're going to have typical growth in your labor number, primarily annual merit increases. Like I said, we have a couple of labor negotiations that we're working through. You'll have some natural growth in areas like insurance, sometimes utilities, but that would be driving the lion's share of it, Stephen. All right. Thanks, everyone, for joining. We look forward to catching up with you again next quarter.

Operator, Operator

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.