Daniel Guglielmo

Daniel Guglielmo inquired about additional U.S. states that could potentially adopt historical racing in the future, where Churchill Downs could leverage its integrated Exacta platform and expertise for medium-term growth.

Answer

William C. Carstanjen, CEO of Churchill Downs Incorporated, expressed satisfaction with Exacta's results in Virginia, Kentucky, New Hampshire, Kansas, and Alabama. He believes that Historical Horse Racing (HRM) presents a compelling story for legislators in other states, highlighting its benefits in job creation, capital investment, and support for agricultural industries. He noted that numerous states have considered HRMs, and the company's role is to help share this positive story and develop relationships for future opportunities.

Daniel Guglielmo inquired about Exacta customers in Kansas and Alabama, asking if there are additional U.S. states that could adopt historical racing, allowing the company to leverage its integrated platform and expertise for medium-term growth.

Answer

CEO Bill Carstanjen highlighted the positive results of HRM in Virginia, Kentucky, New Hampshire, Kansas, and Alabama, emphasizing its benefits for states (jobs, capital investment, agriculture). He stated the company's role is to convey this story to other states where HRM is 'percolating' to identify new opportunities.

Daniel Guglielmo questioned the incremental mid-to-long-term benefits of Churchill Downs wholly owning its brick-and-mortar properties across both Live & Historical Racing and Gaming segments, and whether the market adequately credits this full ownership.

Answer

CEO Bill Carstanjen explained that owning real estate provides stability and predictability, aligning with the company's strategy for growing and stabilizing its businesses. He acknowledged that the market might not fully credit this aspect but highlighted the company's stable and well-executed regional gaming strategy.

Daniel Guglielmo of Capital One Securities, Inc. inquired about the remaining growth runway for the HRM business in Kentucky and Virginia, asking if the markets are approaching maturity.

Answer

CEO William Carstanjen stated his belief that there is still a 'substantial runway' for growth in both states. He noted that key performance metrics remain very positive, giving the company optimism that its current strategy of continued investment and execution will yield further growth.

Daniel Guglielmo asked that with the major multi-year Churchill Downs project being paused, what other growth opportunities at existing properties might the company be prioritizing or 'dusting off' in the interim.

Answer

CEO William C. Carstanjen clarified the pause on the large project is temporary and due to cost uncertainty from the macro environment, not a change in the project's viability. He highlighted numerous other growth avenues, including strong organic growth in Kentucky HRM properties, the continued ramp-up of The Rose, the Richmond and Henrico HRM projects in Virginia, and potential expansion in New Hampshire. He stated the company has many growth levers and is sequencing them prudently.

Daniel Guglielmo of Capital One Securities asked about the company's pricing power and ability to increase prices in a potentially higher inflationary environment, citing recent wage growth data.

Answer

CEO William C. Carstanjen acknowledged that the company monitors such economic data. However, he stated that the effect of wage growth is not currently a discernible or isolated factor impacting trends across their businesses, whether in Derby pricing or wagering, compared to other ongoing market dynamics.

Daniel Guglielmo asked why HRM consumer demand in Kentucky and Virginia has remained so strong compared to other regional gaming states and how this compares to original expectations.

Answer

CEO William C. Carstanjen explained that the outperformance is due to HRMs being a newer, less mature product in these markets. The company is still driving growth through product improvements (better games, math), increasing market penetration, and growing customer awareness. He noted that because of these unique growth tailwinds and high margins, the HRM business has a different financial profile that doesn't track with more mature regional gaming markets.

Daniel Guglielmo from Capital One Securities asked for an update on the cautious consumer environment, specifically if pressure in the Midwest persists or has become more broad-based, and sought clarification on the impact of ARKO's value meal deals on merchandise margins and overall basket size.

Answer

Arie Kotler, Chairman, President, and CEO of ARKO, confirmed that pressure in the Midwest continues, but noted some ease in other regions, attributing this to fuel prices dropping below $2.50, which increased customer visits, gallons, and transaction baskets. Regarding value meal deals, Kotler clarified that these promotions are 100% vendor-supported, thus not lowering ARKO's margins. He emphasized that these promotions drive traffic, leading customers to purchase higher-margin core categories like OTP, candy, and energy drinks, thereby increasing overall basket size and reducing reliance on cigarette sales.

Daniel Guglielmo asked for an update on consumer behavior, specifically if the pressure in the Midwest market persisted and if the $3, $4, $5, $6 value meal deals contributed to merchandise margin expansion or primarily served as traffic drivers.

Answer

Arie Kotler, Chairman, President, and Chief Executive Officer, Arko, confirmed that pressure in the Midwest continued but noted some easing in other regions, attributing this to fuel prices dropping below $2.50, which led to increased store visits, gallons, transactions, and basket sizes. He emphasized that ARKO's initiatives and promotions were effectively attracting customers. Regarding the value meal deals, Mr. Kotler clarified that these promotions are 100% vendor-supported, ensuring that ARKO's merchandise margins remain consistent. He explained their primary purpose is to drive customer traffic, which in turn encourages purchases in higher-margin core categories like OTP, candy, and energy drinks, thereby reducing the business's reliance on cigarette sales.

Daniel Guglielmo questioned the characteristics of retail stores deemed 'strategic' for capital investment and asked how the benefit realization from new dealer fuel supply contracts has performed against expectations.

Answer

Rob Giammatteo, EVP and CFO, explained that strategic stores are located in markets with favorable demographics, competitive dynamics, and a physical plant with a 'right to win,' as determined by a strategic review. He confirmed that converted dealer sites are performing in line with expectations, contributing 14 million incremental gallons in the quarter. Arie Kotler, CEO, added that every conversion has been accretive from day one.

Daniel Guglielmo asked for an update on regional consumer pressure, specifically whether the Midwest continues to be the primary area of concern or if cautious consumer behavior has become more widespread. Daniel Guglielmo also inquired whether ARKO's value meal promotions directly expand merchandise margins or primarily serve as a strategy to increase customer traffic and overall basket size.

Answer

Arie Kotler, Chairman, President, and CEO, confirmed that pressure in the Midwest persists but noted some easing in other regions, attributing this to fuel prices dropping below $2.50, which led to increased customer visits, gallons, transactions, and basket sizes. He emphasized that ARKO's initiatives and promotions are effectively attracting customers. Arie Kotler clarified that value meal promotions are 100% vendor-supported, meaning they do not lower ARKO's margins. He explained that while they bring customers in, their main benefit is driving sales in other higher-margin core categories like OTP, candy, and energy drinks, thereby increasing overall basket size and reducing the relative impact of cigarette sales. He stressed the significant effort by the merchandising and marketing team to differentiate ARKO and engage customers through loyalty and food service.

Daniel Guglielmo from Capital One Securities asked if the cautious consumer sentiment and regional pressures, particularly in the Midwest, observed in previous quarters, were still prevalent or had become more widespread. He also inquired whether ARKO's value meal promotions directly expanded merchandise margins or primarily served to increase customer traffic and overall basket size.

Answer

Arie Kotler, Chairman, President, and CEO of ARKO Petroleum, confirmed ongoing pressure in the Midwest but noted some easing in other regions, attributing it to lower fuel prices. He clarified that value meal promotions are fully vendor-supported, thus not impacting ARKO's merchandise margins directly, but effectively drive customer traffic and encourage purchases of higher-margin core categories.

Daniel Guglielmo asked about the potential for rent catch-up benefits from upcoming lease renewals, particularly for older vintage leases, and the impact of U.S. consumer health on older concepts.

Answer

Stephen Preston (Chairman and CEO) confirmed expected rent catch-up benefits, citing historical recovery rates over 105% for lease expirations since 2016 and high Placer scores for 2026/2027 expirations. Pierre Revol (CFO) added that re-tenanting vacant properties, like Twin Peaks with a 92% rent increase, provides significant tailwinds. Stephen Preston (Chairman and CEO) acknowledged consumer struggles due to inflation, emphasizing a focus on essential/service tenants, strong real estate, and replaceable rents, while also noting a reduction in casual dining exposure.

Daniel Guglielmo asked if FrontView REIT is seeing a rent catch-up benefit from older vintage leases due for renewal in 2026 and 2027, and inquired about the continued impact of U.S. consumer health on older concepts.

Answer

Stephen Preston, Chairman & CEO, confirmed a rent catch-up benefit, citing historical recovery rates over 105% for lease expirations since 2016, and noted high Placer scores for upcoming renewals. Pierre Revol, CFO, added that re-tenanting vacant properties, like Twin Peaks, yields significant rent increases. Stephen Preston, Chairman & CEO, acknowledged consumer struggles with inflation, emphasizing a focus on essential/service tenants, strong real estate, and replaceable rents, while also noting a reduction in casual dining exposure.

Daniel Guglielmo of Capital One Securities inquired about the tangible benefits of properties having direct frontage during negotiations and asked about the characteristics of properties targeted for disposition beyond just shorter lease terms.

Answer

An executive explained that direct frontage is a significant benefit, leading to quicker re-tenanting and broader interest from potential users due to the desirable real estate fundamentals. Randall Starr, Co-CEO & CFO, added that the disposition strategy also involves recycling assets from non-target sectors like casual dining into preferred sectors such as medical, automotive, and QSRs. Another executive noted the strategy includes cap rate arbitrage, using top-tier brokers for sales to achieve lower cap rates while using smaller brokers and direct relationships for acquisitions.

Daniel Guglielmo asked about the underwriting standards for new acquisitions, specifically lease terms, annual escalators, and triple-net coverage. He also inquired about the primary profile of property sellers in the current market.

Answer

Co-CEO and Co-President Randall Starr confirmed that new leases have rental increases consistent with the historical 1.5-2% range and are a mix of absolute net and double-net structures. He highlighted that 95% of Q4 acquisitions were corporate credits. Starr added that sellers are primarily motivated private investors, as the current high-interest-rate environment has reduced competition from traditional 1031 exchange buyers.

Daniel Guglielmo asked whether smaller private buyers are re-entering the outparcel market as rates fall and if certain geographic regions are appearing more frequently in the company's deal screening process.

Answer

Co-CEO Stephen Preston noted that buyer volume has been 'relatively static' with no significant uptick from smaller buyers. Co-CEO Randy Starr added that these buyers face a 'lack of liquidity' from smaller banks, creating an opportunity for FrontView. Starr also stated the pipeline is diversified across 18 states, with notable presence in the Southeast, Mid-Atlantic, and Midwest.

Daniel Guglielmo requested an update on Lineage's Lean journey, including the number of facilities where it has been implemented to date and any modifications to the program or its implementation strategy as it expands to additional warehouses.

Answer

Greg Lehmkuhl, President and CEO, reported that approximately one-third of Lineage's revenue base is now directly supported by a Lean manager. He explained that these resources are being elevated from single-building support to regional roles, and their efforts are being integrated with the LinOS deployment team to simultaneously implement technology and process improvements. Lehmkuhl reaffirmed Lineage's commitment to the Lean philosophy for waste reduction and expects these initiatives, along with other productivity efforts, to offset inflation in the coming year, even before LinOS significantly impacts financial results.

Daniel Guglielmo requested an update on Lineage's Lean journey, including the number of facilities completed to date and any changes to the program or its implementation as it rolls out to additional warehouses.

Answer

Greg Lehmkuhl, President and CEO, stated that approximately a third of Lineage's revenue base is directly supported by Lean managers. These resources are now being elevated to regional support and integrated with the LinOS deployment team, with a continued commitment to the Lean philosophy to offset inflation.

Daniel Guglielmo asked if there is a noticeable divergence in occupancy demand between Lineage's large and small customers as the market recovers.

Answer

CEO W. Lehmkuhl stated that there has been no significant divergence, describing the customer base as very stable. He emphasized that the company's scale and diversification across all customer types, commodities, and regions provide a natural hedge, as a shift in one segment would likely be balanced by another.

Daniel Guglielmo asked about the implications of Caesars Windsor transitioning into the regional segment and whether this indicates additional expansion opportunities in Canada, or if it was a unique situation.

Answer

CEO Tom Reeg clarified that the Caesars Windsor situation was unique, involving the acquisition of the OpCo EBITDA at a favorable multiple after being a long-time manager. He noted that other Canadian opportunities often involve smaller properties in challenging locations, which are typically less appealing to the company.

Daniel Guglielmo asked about the implications of Caesars Windsor moving into the regional segment in March, specifically inquiring if this transition opens up additional opportunities for expansion in Canada or if it was a unique situation.

Answer

CEO Tom Reeg clarified that the Caesars Windsor situation was unique, stemming from Caesars' long-standing role as a manager of the asset and the opportunity to acquire the OpCo EBITDA at a favorable multiple, with expectations for further improvement as a wholly-owned entity. He stated that while Caesars would look at other opportunities in Canada, most involve smaller properties in challenging locations, which typically haven't been of interest to the company.

Daniel Guglielmo asked about OpEx pressure observed in Q2 and Q3, and which specific expenses, beyond marketing, are receiving increased attention for 2026 budgeting.

Answer

CEO Tom Reeg identified labor as the primary expense focus, noting manageable increases due to existing union contracts in Las Vegas and Atlantic City. SVP of Corporate Finance, Treasury, and Investor Relations Brian Agnew clarified that regional labor figures in the 10-Q are not strictly same-store due to new property openings and prior year one-time benefits.

Daniel Guglielmo asked about OpEx pressure observed in Q2 and Q3, and specific expenses beyond marketing that will be a focus for 2026 budgeting.

Answer

Tom Reeg, CEO, identified labor as the biggest expense, noting manageable increases due to union contracts. Brian Agnew, SVP of Corporate Finance, Treasury, and Investor Relations, clarified that regional labor figures in the 10-Q are not strictly same-store due to new properties (Danville, New Orleans) and prior year one-time benefits.

Daniel Guglielmo of Capital One Securities, Inc. asked CEO Tom Reeg if he still felt better about the business this year compared to last year and what aspect of the business he believes is most underappreciated by investors.

Answer

CEO Tom Reeg reaffirmed his confidence, highlighting the strength of the company's diversified model. While acknowledging the soft summer in Vegas, he expressed strong optimism for Vegas post-Q3, continued confidence in the Regional segment, and growing confidence in Digital every quarter. Reeg identified the Digital segment's momentum, scaling, and trajectory toward its financial targets as the most underappreciated piece of the Caesars story.

Daniel Guglielmo asked if there have been any changes in spend per customer in Las Vegas during March and April, and inquired about any potential supply chain risks to the 2025 CapEx plan.

Answer

CEO Tom Reeg stated unequivocally that the company has not seen any change in consumer spending patterns in its business to date. CFO Bret Yunker confirmed there is no impact from supply chain issues on the company's current CapEx guidance.

Daniel Guglielmo asked about the metrics used to measure success in competitive regional 'battleground' markets and inquired about any significant regional CapEx projects planned for 2025.

Answer

CEO Tom Reeg explained that success is judged by analyzing investment and market share gains on a county-by-county basis, with aggressiveness tailored to the property's competitive strength. President and COO Anthony Carano and Reeg highlighted the ongoing ~$160 million renovation of the Harvey's tower and casino in Lake Tahoe as the main chunky regional project, with spending split across 2024-2026.

Daniel Guglielmo asked if Caesars is considering other significant renovation growth projects within its portfolio beyond the ones in Las Vegas and New Orleans. He also inquired about the drivers behind the softer table game drop in the Las Vegas segment during the quarter.

Answer

CEO Tom Reeg identified the multi-year, $160 million project at Harvey's Lake Tahoe as the most substantial ongoing renovation, which includes the casino floor, a room tower, and new restaurants. He also mentioned smaller, high-impact projects at Flamingo and Caesars Palace. Regarding the softer table drop, Reeg attributed it to timing shifts of a handful of large players who were present in the prior year's quarter but visited at different times this year.

Daniel Guglielmo inquired about the implementation and sequencing of the company's four-part turnaround plan and asked for an update on the rationalization of DFD doors, referencing a previously discussed target of reducing 5-10% of the footprint.

Answer

President & CEO Joshua Charlesworth clarified that all aspects of the turnaround plan have already been implemented and are underway simultaneously, with benefits like higher EBITDA and positive cash flow expected in the second half of the year. Regarding DFD doors, he stated that the company has expanded its scope beyond the initial 5-10% rationalization, now targeting the exit of 1,500 underperforming doors while adding 1,100 higher-volume, more profitable locations.

Daniel Guglielmo inquired about the company's aggressiveness in pruning underperforming U.S. locations and asked for details on the process, timeline, and financial targets for refranchising certain international markets.

Answer

CFO Jeremiah Ashukian explained that the company is highly focused on profitable growth and could exit as much as 5% to 10% of its U.S. doors this year. Regarding refranchising, he noted that while a process was launched in Q1, they will take their time to find the right long-term partners, with any proceeds used to pay down debt.

Daniel Guglielmo inquired about the 2025 outlook for operating expenses and the company's process for rationalizing underperforming Delivered Fresh Daily (DFD) locations as it expands with major national partners.

Answer

CFO Jeremiah Ashukian explained that OpEx will be pressured in the first half of 2025 due to investments in operations leadership and logistics outsourcing, with leverage expected in the second half. CEO Josh Charlesworth added that as they expand with partners like Walmart and Target, they are continuously optimizing the network by closing lower-performing doors to ensure sustainable, profitable growth.

Daniel Guglielmo of Capital One Securities asked if the expansion with major partners like McDonald's and Target would lead to the closure of less efficient Delivered Fresh Daily (DFD) locations. He also requested an update on the progress of new production hub construction.

Answer

CEO Joshua Charlesworth explained that profitability is driven by route density, not just individual store sales, and the expansion provides an opportunity to optimize the entire network. He emphasized partnering with high-traffic national players is the priority. He also confirmed progress on hub construction, stating that 3 hubs are now in construction and contracts are signed for 10, keeping them on track to support the accelerated U.S. expansion.

Daniel Guglielmo asked if there were any changes to the company's regional focus, particularly concerning the Sunbelt. He also inquired whether tenant revenues are keeping pace with rising costs and if this has become a more frequent topic of discussion.

Answer

CEO Mark Manheimer stated their regional view is unchanged, continuing to follow population and retail growth, much of which is in the Sunbelt. He noted that while labor costs are a factor in some industries, inflation has moderated, and most retail tenants are feeling bullish and are in growth mode, so it is not an increased topic of conversation.

Daniel Guglielmo asked if there were any changes to the company's view on Sunbelt population growth and regional investment attractiveness, and whether tenant revenues are keeping pace with rising operating costs.

Answer

President & CEO Mark Manheimer stated their view on Sunbelt growth is unchanged, as it continues to drive retail opportunities. He acknowledged that while labor costs have impacted some tenants, the pressure has moderated, and most retailers in their portfolio are in growth mode and feeling bullish about their outlook.

Daniel Guglielmo asked if NetStreet's view on Sunbelt population growth has changed and if certain regions are more attractive. He also inquired whether tenant revenues are keeping pace with rising labor and technology costs.

Answer

President & CEO Mark Manheimer affirmed their view on Sunbelt growth is unchanged, as it continues to drive retail opportunities. He acknowledged that while labor costs have impacted some tenants like restaurants, the issue has moderated, and most retailers in their portfolio feel bullish and are focused on growth.

Daniel Guglielmo asked if private buyers still face difficulty obtaining financing for non-investment-grade assets and whether the quarter's 66% investment-grade profile acquisition mix is expected to be the norm going forward.

Answer

CEO Mark Manheimer confirmed that the private financing market remains challenging, requiring more 'handholding' on dispositions. He reiterated that they are not dogmatic about the investment-grade mix and will continue to chase the best risk-adjusted returns, noting the mix has varied widely in past quarters based on market opportunities.

Daniel Guglielmo from Capital One Securities asked about the difference in lease escalation terms between acquired and disposed properties and inquired about any planned material changes to the company's geographic diversification by state.

Answer

CEO Mark Manheimer stated that acquired properties have significantly better internal growth, with many featuring annual rent increases, compared to disposed assets which often have flat leases and shorter remaining terms. He also noted no material changes are expected in state diversification, though growth will likely continue to favor Sunbelt states, while remaining agnostic to location if market dynamics are strong.

Daniel Guglielmo from Capital One Financial Corp. asked for commentary on the performance of non-public partners on the Las Vegas Strip and about the company's formal risk management process.

Answer

CEO Edward Pitoniak noted strong performance in Las Vegas, highlighting the Sphere as a significant new demand driver benefiting partners like The Venetian. Chief Accounting Officer Gabe Wasserman detailed the formal risk process, which includes rigorous quarterly management meetings to separately review the performance of all lease and loan investments.

Daniel Guglielmo from Capital One Securities asked if short-term softness in Las Vegas operating trends typically impacts real estate cap rates for casino assets. He also requested an overview of the performance and key business drivers for VICI's non-gaming experiential partners like Great Wolf, Cabot, and Canyon Ranch.

Answer

CEO Edward Pitoniak asserted that cap rates are more dependent on broader real estate capital market conditions than on quarter-to-quarter operator performance. President and COO John W. Payne added that despite some commentary, key metrics like MGM's 94% occupancy in Q3 remain strong. CFO David Kieske provided an update on experiential partners, noting Great Wolf's performance remains solid, Cabot benefits from avid high-end golfers, and Canyon Ranch is capitalizing on the wellness trend.

Daniel Guglielmo of Capital One Securities asked if recent macro impacts have altered the criteria for identifying new U.S. locations as part of the long-term goal of 1,500 company-operated Shacks.

Answer

CEO Robert Lynch responded that the site selection strategy has not changed but is proving effective in the current environment. While they will continue to develop in legacy markets, they are heavily investing in high-growth areas like Arizona, Texas, and the Southeast. He noted the drive-thru format is a key enabler, providing access to new types of real estate in these promising markets.

Daniel Guglielmo of Capital One Securities asked for insights on regional consumer trends, specifically which areas performed stronger or weaker than internal models predicted.

Answer

CFO Katherine Fogertey highlighted double-digit comp growth in Florida, Arizona, Georgia, and Ohio, and noted that every region either maintained or improved its sales trends sequentially. CEO Rob Lynch added that data shows Shake Shack improved its value perception over the last year across all income cohorts, which is helping drive broad-based growth.

Daniel Guglielmo from Capital One Securities inquired about the process for monitoring construction projects and the typical timeline from initial sale-leaseback interest to a deal announcement.

Answer

CEO Peter Carlino explained that the level of oversight is proportional to a project's scale and complexity, with the Bally's Chicago project receiving significant attention from their head of construction. He noted that while GLPI is not the developer, they remain closely involved to ensure success. On deal timelines, Carlino stated it is 'totally unpredictable,' ranging from 90 days to several years, depending on the counterparty's motivation.

Daniel Guglielmo of Capital One Securities asked if the Ameristar project could signal the start of more redevelopment projects with PENN Entertainment. He also inquired about the current construction environment regarding timelines, labor, and supply chains.

Answer

SVP & Chief Development Officer Steven Ladany and CEO Peter Carlino confirmed that PENN is reviewing its entire portfolio for enhancement opportunities, and successful projects could lead to more. Steven Ladany noted that regarding the construction environment, he has not heard of labor hiccups but has seen some non-domestic material suppliers add premiums or warnings related to potential tariffs.

Daniel Guglielmo from Capital One asked how rising treasury yields impact capital deployment and whether other tenants are seeking funding for property improvements, including if there's a minimum deal size.

Answer

SVP & CIO Matthew Demchyk and CEO Peter Carlino stressed their disciplined approach, stating that they adjust investment spreads to their cost of capital and will not pursue deals that are not accretive. SVP & Chief Development Officer Steven Ladany responded that there is no minimum size for funding tenant improvements and that such discussions are picking up as tenants recognize the tangible ROI from property investments.

Daniel Guglielmo from Capital One Securities asked for more detail on the types of businesses within the growing 'entertainment' industry bucket. He also inquired if the company's informal 15% industry concentration cap would apply to this category.

Answer

CEO Peter Mavoides explained that the vast majority of the entertainment bucket consists of outlets like Dave & Buster's, Chicken and Pickle, and bowling alleys, which are food-driven entertainment experiences with fungible real estate. He stated that breaking it out further would not materially enhance disclosure. He also confirmed that they do think about the 15% soft cap as being applicable to that entertainment line item.

Daniel Guglielmo asked if any material changes in geographic diversification by state or region are expected over the next year, given the forward pipeline. He also inquired if there has been increased inbound demand from partners looking to expand in Southern cities experiencing wage growth.

Answer

CEO Peter Mavoides responded that geography is an output of their tenant relationships, and he expects geographic diversification to grow ratably with no material changes anticipated in the next 12 months. He confirmed that their relationships are bringing them into high-growth southern markets, but the inbound demand for capital has been proportionately similar to their existing geographic diversity.