Patrick Keough

Patrick Keough inquired about Brightstar's observations regarding Mega Millions performance since its price change, asking how and when the company will assess the success of this strategic adjustment.

Answer

CEO Vince Sadusky noted that evaluating the Mega Millions price change has been difficult due to a lack of significant jackpot runs until recently. He explained the new math model shifts more funds to next-tier prizes, differentiating it from Powerball, and that player understanding of this change will take time. CFO Max Chiara deferred detailed 2026 guidance to the year-end report but highlighted accelerated core business performance, particularly in Italy, and ongoing OPtiMa cost savings efforts, with $30 million already achieved by 2025.

Patrick Keough requested an early outlook on Brightstar's 2026 growth, specifically how it aligns with the recently introduced 2028 targets.

Answer

CFO Max Chiara stated that detailed 2026 guidance would be provided with the year-end numbers. He highlighted that the core business has accelerated, with Italy performing above trend and the U.S. core business recovering. He also mentioned the acceleration of Optima cost savings, with $30 million already realized through 2025 and an additional $50 million targeted by 2028.

Patrick Keough asked for an update on the cumulative construction impact against the previously estimated $25 million for the year, and whether the company is tracking above or below that number. He also sought early thoughts on the tavern business, including the number of operational taverns, their performance relative to expectations, and the pipeline.

Answer

Stephen Cootey (EVP, CFO, and Treasurer, Red Rock Resorts Inc) stated that the company is tracking below the $25 million estimate for construction disruption, detailing marginal impact at Sunset Station, minor disruption at Durango, and specific figures for Green Valley Ranch. Scott Kreeger (President, Red Rock Resorts Inc) reported eight taverns under contract, two operational, and five coming online next year. He noted that early indicators show performance ramping to investment thesis, attracting a younger audience and new customers who are migrating to larger properties.

Patrick Keough asked for an update on the cumulative construction disruption impact for the year, comparing it to the previously estimated $25 million. He also sought early insights into the tavern business, including the number of operational taverns, their performance relative to expectations, the pipeline, and the customer demographics they attract.

Answer

Stephen Cootey, EVP, CFO, and Treasurer, indicated that the cumulative disruption is tracking below the $25 million estimate, with marginal impacts at Sunset and Durango, and Green Valley Ranch disruption quantified at $2.5M-$3M for Q3 and an anticipated $8M for Q4. Scott Kreeger, President, reported that two of eight contracted taverns are operational and ramping to investment thesis, attracting a younger, previously unknown customer base that is now migrating to larger properties.

Patrick Keough of Truist Securities asked two questions on tax mitigation: First, how the Illinois surcharge revenue will be taxed and if similar surcharges could be applied in other states. Second, how DraftKings balances competitive pricing against customer awareness as a mitigation tool.

Answer

Co-Founder & CEO Jason Robins stated that DraftKings' position is that the surcharge is a pass-through and should not be taxed, though Illinois may disagree. He noted that if it is taxed, adjusting pricing would be a more logical approach. The company will treat the Illinois rollout as an 'experiment' to gather data before considering it for other high-tax states.

Patrick Keough of Truist Securities asked about tax mitigation, inquiring how the Illinois surcharge revenue will be taxed and if DraftKings is considering similar surcharges in other high-tax states. He also asked how tweaking sportsbook pricing factors into these mitigation strategies.

Answer

Co-Founder & CEO Jason Robins stated that DraftKings' position is that the Illinois surcharge is a pass-through and should not be taxed, though the state has a different view. He noted that if it's treated as taxable revenue, there would be no benefit over simply incorporating it into pricing. The company will evaluate the results of the Illinois experiment before considering a similar approach in other high-tax states.

Patrick Keough of Truist Securities inquired about the growth momentum in the Hybrid Dealer segment, particularly with regional operators, and asked if the Virtual Sports segment was still on track for a Q3 inflection point for year-over-year growth.

Answer

President & CEO Brooks Pierce confirmed that the Hybrid Dealer segment is gaining traction with a mix of customer tiers through various aggregators and is seeing week-by-week growth in players and volume. For Virtual Sports, Pierce indicated that a return to year-over-year EBITDA growth is the target, but it is now more likely to occur in Q4 2025 rather than Q3 due to the timing of new product rollouts.

Patrick Keough inquired about the specific challenges facing the Virtual Sports segment beyond the known issues with its largest customer and asked for an update on the company's M&A strategy, including the strategic review of its holiday parks business.

Answer

Brooks Pierce, an executive, explained that the Virtual Sports issue is primarily driven by one customer and that the business is stabilizing. He highlighted new product innovations, like features based on same-game parlays, that are being enthusiastically received by key clients. Executive Chairman A. Weil added that the company is seriously exploring a sale of the holiday parks business and is optimistic about a favorable outcome. He also noted that while the company is always looking for acquisitions, nothing is currently on the horizon.

Patrick Keough inquired about the performance of the Formula 1 weekend in its second year and whether Golden Entertainment expects to benefit more from the event in the future.

Answer

President and CFO Charles Protell acknowledged that the falloff in F1 demand was unexpected. He explained that while the company saved on direct event expenses like tickets, it was unable to increase room rates due to lower-than-expected citywide occupancy, which negatively impacted results.