Truist Securities with Barry Jonas

Nick Hogan:

Howdy, Lucien. First of all, welcome back from your travels. I take it you're happy to be back in our

lovely little medieval university town here.

Lucien Wijsman:

Amen. Always, when I come back, when I walk around, I told my wife yesterday, I said it's so nice

to come home. But this time, I have to be honest, I absolutely loved every minute of my extended trip

through South Africa, which is just fantastic.

Nick Hogan:

Yeah, it's an absolutely lovely country. It's always cool to be down there. And we have King's Day here in

the Netherlands tomorrow, so I take it the Wijsman family is going to be decked out in orange clothing and

waving Dutch flags and all that stuff.

Lucien Wijsman:

Orange hats and makeup on the cheeks, red, white, and blue. Yes, yes.

Nick Hogan:

Very good. All right. So let's open up today with a bit of news from our backyard here. The Netherlands

state-based casino operator, Holland Casino, was in the news this week with CEO, Petra de Ruiter, someone we both know,

stating that the government's gaming tax increases over the next two years threaten to bankrupt the organization. So late last

year, Dutch parliament ratified a proposal to increase the Dutch betting and lottery tax from 30.5% to 37.8% over a

two-year period, so first to a rate of 34.2, which went into effect on January 1st of this year, then

increasing to the 37.8% level on January 1st of next year.

So initially, Holland Casino, which incidentally experienced a 10.4 million euro loss last year, it announced its intention to offset

the tax increases through a cocktail of cost cuts and revenue increases. So on the cost front, this includes the

closure of one of its 14 venues, Casino Zandvoort, a 20% headcount reduction across the board, and increased roulette hold

through the introduction of double zero wheels, among other measures. So there was far less specificity on the revenue front

as 2024 saw lower spend per trip in land-based operations, as well as significantly lower year over year receipts in

their online vertical.

So de Ruiter mentioned that to stay in the black, Holland Casino would likely be forced to recruit new players

more aggressively and also attempt to increase trip spend from existing players, both of which would put Holland Casino at

odds with its responsible gaming mission. And further, the pain here is also expected to wreak havoc in the country's

street market, with arcade operator JVH Gaming CEO, Eric Olders, another guy we both know, announcing late last year that

the company intends to shutter 25 venues, so that's nearly one third of its operational footprint, during the course of

2025. So as you are the Duchy at the table, Lucien, what say you here? Do you feel that this

insolvency danger is real or do you think this is more just an attempt to renegotiate? I am curious as

to your thoughts.

Lucien Wijsman:

The Duchy on the table who hasn't been really in the Netherlands for the last 25 years, whereas you. I

don't follow the news very, very closely, but what I do notice is that the biggest part of the decline

in revenues at Holland Casinos does not come from the land-based operations, but from the share of the online market,

which is 26% smaller than the year before, so I think that probably hurts them much more than what's happening

in the land-based area. Yeah, they're in a very competitive environment online, and they're the only online licensee that has

a very large land-based footprint as well. So I'm a bit surprised that they are unable to hold to the

market share that they had in the beginning, and I'm not going into the why's for that, but that seems

to be a much more important reason for the decline than anything else.

On the land base where they say that they have visitors spending less per visit, that's not in line with

all the other operations where I consult, where across the board, what I see is that less visitors spend more

or less the same time, spending more money per visit. That's what I see with all the big customers where

I am, and the reason for that is that the minimum bet, the entry bet to play slot machines has

gone up dramatically over the last number of years. It must have been the same at Holland Casinos. I'm a

bit surprised that they very much atypical there. Less visitors, yes, I believe. Same time spent, I would assume less

spent per visit. That surprises me very much.

And the last thing that you said was that they're now thinking of introducing double zero roulette. It's a monopoly

operator. I don't understand why they have not introduced double zero roulette 15 years ago. That is beyond what I

understand. Casinos now make money on table games from the bonuses which have a much higher household, and from increasing

the hold on the base game.

Nick Hogan:

And double zero basically doubles the house edge, yeah? Versus-

Lucien Wijsman:

2.7 to 5.4%.

Nick Hogan:

Yeah, okay.

Lucien Wijsman:

And if you look at the United States where there's enough casinos now offering triple zero, which gives you 8.27%.

I know Holland Casinos has tried to cover the rising expense. Of course the salaries have gone up dramatically in

the Netherlands, so the person behind the table will cost them much more. They've tried to cover that by increasing

the chip value on tables, so you now have a minimum chip value of 10 euro in most Dutch casinos

on roulette, which is simply too expensive for their player base. People cannot afford to play 10 euro chips easily,

so a lower chip value with double zero and bonuses in my book would've been an approach which would have

worked better, but I'm not selling on [inaudible 00:06:50].

Nick Hogan:

Okay. So moving along then, Lucien, it's time for a listener question here, and before I dive in, let me

say that we love to tackle any questions that anybody listening may have, so if you have a question about

what we're presenting or something you'd like us to present, please drop us an email at [email protected]. Again, that's R-E-E-L-C-A-S-T

at reelmetrics.com. Our policy is to keep all questions anonymous, so please speak directly and don't worry about us revealing

your identity. That is not something we do.

So this one comes from a French operator who asks, "Hi guys, I have a question about multi-game slots, which

we're forced to offer due to space limitations. Some vendors stuff 50 or more games into a single machine, even

though we seldom see more than five or so games producing nearly all of the result. I've long suspected that

the abundance of games costs us money as nearly every time I walk the floor, I encounter players scrolling through

game menus instead of playing. How do we get to the optimum number of games per machine?" So [foreign language

00:08:04]. It's a good one. Lucien, multi-game is certainly more your sweet spot than mine, so I'll let you tackle

this.

Lucien Wijsman:

Sour spot. It's not a sweet spot, it's a really sour spot. Look, I think here, you see the real

divide between the United States and Europe or other parts in the world, and that is that the larger casinos

are the least additional value you would find from having multi-game machines. I remember Canada where they had VLT operations,

10 machines in a bar, and if you have 10 machines in a bar, of course the multi-game concept makes

sense. If my machines are being played, 10 player comes in and so on and so forth.

So the suppliers of the multi-game devices in Europe were operators, are operators themselves, and they have small electronic casinos

where if you have 20 machines, it sort of makes sense to pack them with multi-games, especially if you have

more than one supplier. If you have 20 or 30 machines with three suppliers, so you have ten machines from

each supplier, it makes sense to have multi-game devices. But even then, I don't want to get into trouble for

saying this, I cherish the big European suppliers of equipment a lot, but it's true that in any country I've

been, if I look at popularity of games on multi-game devices, it's never more than three or four game titles

that make 85 to 90% of the total games played, and usually even more of the total handle, total bet,

whatever you want to call it.

So packing these machines with 50 games will lead to inexperienced players ending up playing slippery games as you call

them, until they end up on a sticky game. I personally do not see the advantage of having 50 games

on a device. And where I think there is parallels with online, if you look at online casinos, which Europe

seems to be a little bit ahead of other countries as well, the game in online was more is better.

There were websites out there with 1500 games, and I think that trend is being rapidly reversed at the moment,

because the same thing happens online.

Nick Hogan:

Sure.

Lucien Wijsman:

The same thing that you see in land-based is happening online. You can't have a player sitting in front of

a screen scrolling to 1500 games, which are all called Hot Hot, Super Hot, Blazing Hot, Extremely Hot, Crazy Hot,

Purple Hot, Hot, Hot, and how is a player supposed to understand that Hot, Hot is not as hot as

Blazing Hot, is not as hot as Extremely Hot. So I don't think it adds anything to be very, very

honest, and so yeah, I lean a little bit to agreeing with the person who posed that question. I think

it's easy, very easy to put too many games on a single machine, especially if your floor is big enough

to have single games.

Nick Hogan:

And now, do all the suppliers allow you to whittle down those game packs?

Lucien Wijsman:

It depends a little bit on the supplier you're talking to, but most suppliers are not super happy with it.

Nick Hogan:

Okay, meaning they're reluctant to let you cut the number of games that are being offered?

Lucien Wijsman:

Yes.

Nick Hogan:

Okay. Okay. And generally, your guidance would be do that, right? That would certainly be my guidance.

Lucien Wijsman:

Yeah. If your floor is big enough, I usually say I don't see the added value of having more than

the number of games that you can see on the player interface. If you can see seven or eight games

there, then I don't see the added value of packing more games on second, third, fourth screens. I think it

takes away from the time that you get out of your player on the machine.

Nick Hogan:

Yeah, okay. Okay, very good. Well, thanks again to the listener for that question. Really appreciate it. It was a

good question and one that we hear fairly frequently. So okay, Lucien, time to introduce today's guest. So if you've

spent any amount of time watching publicly listed gaming companies, there's no question you've heard this gentleman's name or seen

him on TV. He's an Ivy Leaguer with an undergrad degree from Cornell University and an MBA from Columbia Business

School, and he's a guy with industry chops going back more than 20 years with early career gigs at both

MGM Mirage and IGT.

Since then, he's gone on to industry related equity research roles at Buckingham Research, Wells Fargo, and B of A,

and these days, he serves as managing director and senior gaming equity analyst at Truist Securities. And for those of

us who have the pleasure to interact with him frequently, we know him to be an always smart, insightful, jovial

and all around good dude. I am speaking of course of Mr. Barry Jonas. Howdy, Barry, how are things? And

it looks like you're in Connecticut today. Is that the case?

Barry Jonas:

That is the case. Hey, guys. Thanks so much for having me.

Nick Hogan:

You bet. I would say it's been a while, but it really hasn't, right? We were just on a call

together last week.

Barry Jonas:

A lot going on, but yeah, we had a great call, going through what you guys are doing and some

updates to your research, but obviously, a lot has changed since.

Nick Hogan:

Yeah, yeah, for sure. Okay. So Barry, maybe we could just start. Can you walk us through your gaming industry

career a bit and the path that took you to your current role there at Truist?

Barry Jonas:

Yeah, absolutely. So in going way back to 2003, I was recruited out of B School to join MGM Mirage,

the predecessor named MGM Resorts. I joined a group called Corporate Resources, which was effectively a corporate strategy group focused

on merger synergies, operational enhancements. Spent about a year there and at that point, was poached over to IGT to

do a bit more of a higher level strategic role, focusing on mergers, acquisitions. I was working fairly closely with

the head of finance and CEO directly, so we did deals like IGT's first foray into digital gaming. At the

time, we did a deal in China to explore the China VLT market, and obviously did a lot of analysis

towards deals which did not transpire being the largest player at the time. If you recall, IGT, we're talking '05,

'06, with a 50 to 70% share, so sort of the 800 pound gorilla at the time.

Over time, I started doing more work in China and then somewhat started to shift to an operational head of

finance role there. But then fast-forward to oh '08, '09, the Chinese government somewhat decided some of the VLT activity

there was a little more gambling, less lottery, and ultimately was hit in the Great Recession like so many people

were at that time. I'd had a brief foray living in Las Vegas for four years, originally from New York.

I had moved back to New York around '07, '08, just for personal reasons, and then found myself looking for

a job, deciding do I move to Asia, do I move back to Vegas? Had met my wife though in

New York and was somewhat pot committed, so with all this gaming industry experience, I said, "What can I do

to take advantage of this knowledge as opposed to just starting over?" And really, Wall Street seemed to check a

lot of the boxes.

Equity research was calling at the time, and so effectively what I do today is, and I shifted to tech

research in 2010, but what I do is take a lot of the knowledge, a lot of the relationships that

I've founded over the years and apply that to help investors navigate this world of gaming from a public equity

perspective. At a high level, it's what stocks do I buy? What stocks do I sell? What do I hold?

Where can these stock prices go to the higher end, to the lower end? Also help companies understand the investor

attributes they're looking for that will help their stock go higher. But really at the end of the day, it's

trying to understand, to use a hockey euphemism, where the puck is going and where these companies should be focused

on. That's why we speak to folks like yourself, folks in industry, to get that higher level view.

But I've been doing that since 2010 now, longer than I worked in industry. Started some small shops, moved to

Wells Fargo, Bank of America, and now at Truist, which is one of these super regional banks out there. So

based in New York and travel pretty frequently seeing casinos and clients. Not a terrible day job.

Nick Hogan:

Okay, cool. Lucien?

Lucien Wijsman:

It sounds like a career. Super interesting people on the podcast, Nick, I have to say. Each time that we

do this, I think, "Wow." And so I'm listening to this and then I get it, so a big part

of your job is helping investors with little or no prior gaming experience to understand the industry, and at the

same time, you probably devote a bit of your time to helping gaming companies understand these investors, so yeah, it

goes both ways a little bit, I guess. So knowing that we have an exclusive gaming audience here, it's [inaudible

00:18:15] manage people from all over the world, not from the US but also from Europe and other places. Can

you break down for us what the investors tend to like and dislike about our industry, our gaming industry in

general?

Barry Jonas:

Yeah, absolutely. Look, I think one of the best characteristics as I see it is the barriers to entry, right?

It's very difficult, maybe a handful of jurisdictions where you can do this, but for the most part, you can't

really open up a new casino down the block. It has to go through an extensive licensing period. You're not

necessarily going to see Google, Microsoft, tomorrow come in and disrupt you. The barriers to entry, the license driven, the

limited new supply is a really strong characteristic to our industry. I think on the real estate side, very strong

cash flow dynamics, very stable. We've been tested through recessions, through COVID, and for the most part, come out just

fine. If you think about a casino, it's probably the most profitable real estate per square footage across the entire

real estate sector. And then shifting to digital, of course you've got a real growth vehicle, very high cash flow

dynamics. You don't necessarily have all the maintenance CapEx requirements, so the flow-through in terms of revenue to profit, straight

to money in the bank is extremely high, so there's a lot to like.

I'd say in terms of what to dislike is this industry has evolved. If you of course go back 50

years in the US, it was really just two markets, AC and then Las Vegas. Today, most of us can

be definitely sitting at a slot machine within a 30 to 60 minute drive throughout most of the country, and

there is a saturation question. So growth has slowed and investors, a large portion of the investor base wants growth.

They like growth, they pay up for growth, and the market now is a lot more mature than it ever

was, at least on the land-based side. Digital certainly offers a lot more growth per se, but there are questions

there about competition from prediction markets, sweepstakes. My guess is we're still in the early innings of growth there, but

certainly that's a question we get from investors.

Nick Hogan:

Gotcha.

Lucien Wijsman:

And I hear you talk about the saturation. I think you're talking about the United States more than anything else

here, so a lot of the capital has been invested in Asia over the years. I'm from Europe, and one

of the questions that I have is why does it not seem to work for the big money from the

United States to land up in European projects? And we both know that there's been attempts, but what do you

think is the reason behind that?

Barry Jonas:

Yeah, obviously there have been attempts, whether that's the UK, Spain, Greece for large-scale casinos, and I think a lot

of the casinos you see there are more smaller in nature. Now, it is hard to say. I think there's

clearly some political roadblocks, whether it's zoning, just the function of how these cities are structured, but maybe there's a

union angle, but just I know there've been a lot of frustration by companies and development consultants over the years

in terms of all the start-stop. So I'd say never say never, but it's definitely been a frustrating exercise. Not

a lack of interest from operators, from large-scale operators. I think more just can't get it over the finish line

for whatever local politics have hindered it.

Nick Hogan:

Gotcha. Okay. Another big part of your job, Barry, is obviously guiding investors regarding the financial health and value of

gaming companies. So could you walk us through some of the more unique factors and metrics that you watch with

gaming securities in making these assessments? And maybe we can talk about both operators and suppliers and how they're similar

and they're different.

Barry Jonas:

Yeah. Look, ultimately, we're going to look at whatever KPIs, key performance indicators the companies give us. So if you're

an operator, you might talk REVPAR, revenue per available room, to get a sense of how your average hourly rate

and your occupancy are trending for hotels. In a casino environment, that's probably more a Vegas question than a regional

property, certainly less for Asian, which are mostly gaming dominant. From a gaming perspective, yeah, you'll look at win per

unit per day on the slot side, you'll look at tables, you'll look at how the tables are yielding. So

try to get a sense what is happening there on a unit basis, and really try to see how that

compares to the overall market.

But at the end of the day, everything ties to revenue growth and then margin growth, margin sustainability. How you're

managing through costs that are going to go up just as a function of inflation, labor increases, input increases, tariffs

now, which are a big [inaudible 00:23:59]. And ultimately though, what's so interesting about gaming is I remember earlier in

my career, there were all these questions about Enron and financial fraud, and just given the regulations here, you see

a lot less of that in gaming, but you can manipulate some stats, but the one thing difficult to manipulate

is just cash. So we look closely at cashflow, free cashflow, and if you're seeing trends move in one direction

but cash moving the opposite, it's a big question mark.

So really, the major units, I'd say from a supplier perspective, it's a lot of the same things, top line

revenue, margin, free cashflow, but then you'll certainly want to pay attention to the mix between product sales and lease

participation. I think if you're an investor, you like steady, predictable cashflow, so the lease model is really great in

the sense that every day, your salesperson's not out there trying to make a sale. It's recurring. And much in

the way on the hotel side, you like conventions, stuff being locked down years in advance. You have predictability as

opposed to just guessing if somebody's going to come today or not. So I think that predictability is really essential

if you're trying to get a higher multiple for your company. Does that answer your question, Nick?

Nick Hogan:

Yeah, definitely. And certainly what you say about the recurring revenue being better for suppliers, it's also quite good for

operators too because it reduces a lot of flexibility. We talk about this all the time in terms of managing

inventories and making sure you have really solid assortment and merchandising strategies. It just introduces a ton of flexibility, so

I like hearing that there for sure. Then one thing that's really interested me for a long time, Barry, is

the extent to which you can correlate macroeconomic factors, so these are things like just general economic growth, interest rate,

employment numbers, consumer sentiment, how you can correlate that with gaming demand generally. So going back to your analogy of

knowing where the puck is going, all this kind of stuff. So which, if any, of these types of macroeconomic

indicators do you watch, and what kind of correlations do you see with these things?

Barry Jonas:

We watch all of these things, but I'd say we look at it at a very localized basis. We're looking

specific to cities, jurisdictions where our properties are. We're looking at disposable income, sentiment, jobs, and I'd say it varies.

In some places, high gas prices are not helpful. In others, like Louisiana area, that is helpful. So I think

it is very localized, but clearly the economy, especially at the point of saturation that we're at now where there

isn't a lot of unbridled demand out there that's not being met. There is an argument that maybe on the

digital side, there's a little less correlation, just given there's still pockets of demand not being met, or maybe they're

being met through the illegal or gray markets and are finding a home in the legal markets, but certainly very

important. And I think now in this period of time, you're seeing the macro dictate valuation and stock movements more

than say company specific items, so extremely important looking at the macro.

Nick Hogan:

So can you expand upon that a little bit? I don't necessarily follow you there.

Barry Jonas:

Stocks are off as much as 20% year to date at this point. It's not like fundamentals have caved, 20%

of or estimates have moved in 20%. I think it's just the market looking at some of the tariffs, looking

at the consumer, looking at stock market valuations. That's a metric I didn't talk about, but clearly at the higher

end, folks are influenced by how much money they see in their stock portfolios. But with that all devolving from

here, the market is basically re-rating these stocks. Either saying the multiple should be lower because the discount rate is

higher, or basically saying we don't believe the estimates that you are throwing out there. We think there's a lot

of risk to them.

Ultimately, what is valuation? Valuation is simply the present value of future earnings streams, right? You're going to make a

dollar this year, $2 next year, three. You're discounting it back at some discount rate which is the alternative rate

that you could do with that money, and now there's a lot more risk inherent in that and a lot

more uncertainty. So that's what we're seeing now.

Nick Hogan:

So out of that mix of things, is there one that's let's say kind of a... And when we're talking

about just underlying gaming demand, so like casino demand. Is there a leading indicator in that whole mix that you

say you see a big drop in it? Let's say it was consumer sentiment or something and you say, "Uh-oh."

Is there anything like that?

Barry Jonas:

I think employment is the one that we look at the closest. You certainly could argue looking at disposable income.

There's some coincidental or leading indicators that we'll try to look at. There's alternative data. People get access to credit

card spend and try to make assumptions there, real time and then in the future. We'll do a survey where

we'll look at forward booking trends in Vegas to look at our rates coming up, coming down, indicating demand. But

yeah, I think employment for me is one that I'm most closely looking at. Interest rates obviously is fairly important

because it influences valuation and then it influences the stock market. It also, to the flip side, influences folks on

limited income in terms of interest rates, but I think lower rates, generally, the market likes better.

Nick Hogan:

Okay, very good.

Lucien Wijsman:

So I wonder, it's a little bit on the back of the last questions from Nick, and I'm not sure

if you agree, but I think gaming has been looked upon historically is fairly recession proof or at least a

recession resistant industry. To what extent do you feel that this thesis holds water, and do you feel that this

has changed over the course of your career?

Barry Jonas:

I recall having this discussion in '07, '08, '09, and thinking, "We're golden, we're good," and then clearly we were

not. Look at regional gaming in the US. Yeah, the peak to trough from an EBITDA perspective was maybe only

down mid-teens percent. Vegas at the same time was down closer to 40% EBITDA peak to trough. Now, part of

that of course was new supply coming in to Vegas at the time. If you remember, you had President Obama

telling people not to go to Vegas at the time, so some external factors there. But look, I think the

scale of gaming, certainly in Vegas where around two thirds of the revenue base or non-gaming, makes it a little

bit more prone to having an impact from economic cycles. Now, is it the best house in necessarily a bad

neighborhood? Probably, but I would say recession resistant. I would definitely not say recession proof.

Nick Hogan:

And so you mentioned the cyclicality there, Barry, but you mentioned it in reference to non-gaming revenue, so I'm curious

about what you generally feel about the gaming revenue with the cyclicality.

Barry Jonas:

I think as the gaming gets bigger, you see more cyclicality, but certainly a lot less. Much more reasonable, at

least in a regional drive to market. If you think about people's wallets when they're undergoing stress, clearly they want

to spend less, but people certainly need an outlet, some escapism. You see trade down which in essence should benefit

some of your local regional players. Am I not going to spend a lot of money to bring the family

on an international vacation, but instead go to my local casino, have a few beers with friends and play a

little blackjack or poker? I think that is a real upside, but I think it's naive to think there isn't

some impact. But again, I would use the phrase best house in a bad neighborhood.

Nick Hogan:

Yeah, gotcha, gotcha.

Lucien Wijsman:

I think during Corona, that was a surprise to me in Europe, to see how casinos with much less machines

managed to stay afloat.

Nick Hogan:

Oh, yeah.

Lucien Wijsman:

And I think the same thing here.

Barry Jonas:

I think from the US perspective, when the casino was open, there was nothing else to do. You couldn't go

to a restaurant, you couldn't go to a concert, and COVID really was an opportunity to understand just how resilient

these casinos can be from a pure gaming perspective. The challenge became then they continued to grow on top of

that, grow on top of that, but certainly there's definitely a floor here which is much higher than floors for

other segments of the consumer sector. So a hundred percent recession resistant. This is definitely an area that I think

investors appreciate that dynamic, but clearly there'll be some contraction if we fall into an economic negative cycle here.

Lucien Wijsman:

So let's talk about some of the strategic or the bus factors and that can be rational or not rational

that are impacting the gaming valuations these days, and I'm referring to things like domestic and international expansion, online initiatives,

sports betting initiatives, those types of things. Can you give us an idea what's exciting investors, both positively and negatively?

Barry Jonas:

Yeah. Look, I'd say obviously if we did this a few months, a quarter from now, the answer would be

different. Unfortunately, the tariff uncertainty seems to be the main focus at the moment, just given the uncertainty, but clearly

anything that can drive growth is going to be a focus for investors. I think domestically in the US, there's

not many markets left for expansion on the land-based side. Potentially Texas, Georgia, Hawaii there's been some discussion, Alabama, but

nothing feels imminent at the moment. We'll see, because New York is going through a process, but that's been slow.

Then internationally, of course UAE is a very exciting market, but still somewhat trying to be understood. I would argue

investors haven't necessarily given Win full credit yet for that, although there's a lot of excitement for what that could

become for them and potentially other participants in the market. But the digital side of the business really garners a

lot of the growth focus. I think land-based investors look more at cash flow valuation, return of capital to investors,

and the growth element is really digital. We're well over 50% penetrated in the US for sports betting, but fairly

small from an online gaming perspective at the moment. So there is a question of is that an inevitability? Is

that just bound to happen at some point, especially with budget deficits coming in? The hiccup to that thesis is

a lot of investors forgot that legislatures might try to raise sports betting tax rates, before they went to iGaming,

especially when some of them realized they didn't accomplish some of their goals on the sports betting tax revenue side.

But ultimately, as I think about the next big buzz, it's just hard to give timing. It's really iGaming. You

can look to European markets, international markets and see what the opportunity set can be, and then think about the

US proliferation for gaming and come up with some fairly big numbers there. And then you look at valuations like

DraftKings and Flutter, implicit in their FanDuel valuation, and it's really exciting I would say. So there certainly is a

lot of exciting opportunities, domestic, international expansion online, but at the moment, people are just trying to make sense of

the macro and recognizing that tomorrow could be a much different story than today.

Nick Hogan:

And Barry, you had mentioned in your response there, you had mentioned something about the sweepstakes casinos that I've been

reading a fair bit about these lately. So is the view in financial services industries, do you really see these

sweepstakes casinos as placing legalization initiatives under some pressure? Like the states are looking at it and saying, "Boy, we're

missing out on some revenue here." What's your view of that whole thing?

Barry Jonas:

I think our companies view it as a threat. They view it as gray to illegal, and the silver lining,

if you will, would be that as they position to legislators like, "Hey, you guys don't want iGaming, but look,

you got it. You're not getting any tax revenue on it." They'll argue that there aren't protections for the consumer

that are appropriate. That's the push of, hey, you might as well regulate it. It's the same argument with illegal

markets as well. Let's get some tax revenues, let's do it right and put in protections for consumers. So I

think as I've spoken to companies, lobbyists, it's always been that it's an educational process to get there. Now at

the same time, there's clearly pushback from real estate-oriented companies, operators, REITs, that there's cannibalization concerns with iGaming as well

as sweepstakes, so that's something that people need to get a lot more comfortable with, which I think the data,

as we continue to see it in, does suggest there's some level of cannibalization to consider.

Nick Hogan:

Do you think that's single digits, double digits? Where are you pegging that overall?

Barry Jonas:

That's a tough question. I think it's evolved over time and it's somewhat market specific, but I think it's likely

a meaningful number. The question of course becomes what is the offset if that money is simply shifting to the

same operator with their digital business and that operator can use marketing strategies to extract bigger budgets from folks than

additive for the companies, it's additive for the player, what he's trying to accomplish or she's trying to accomplish, and

additive to the state? The complexity of course becomes when you have digital-only players and now the pie is being

split different ways, but you ask companies, you get different answers. Clearly, players like MGM, Caesar's are very pro iGaming

in most instances and suggest that the net-net is greater than any individual like-for-like losses. But then clearly, retail-only focused,

land-only focused players are somewhat against iGaming proliferation because they don't benefit anywhere.

But I've always thought that a consumer likely doesn't have a static budget when they're thinking about going to a

physical property and a digital property. But clearly, looking at states that have iGaming and land-based, you do see underperformance

relative to states that do not have iGaming in terms of gross gaming revenue trends.

Nick Hogan:

Yes. Gotcha, gotcha.

Lucien Wijsman:

I think the Netherlands might be interesting, Nick, here, because in the Netherlands, we had land-based gaming only and there

was no online. Clearly people were playing abroad a little bit, but after the introduction of the online casinos, which

dwarfs really the land-based market, so the online is double the size of land-based, I'd say that that affected land-based

by-

Nick Hogan:

It's already double in terms of gross gain? It's already double?

Lucien Wijsman:

Just about 1.7 billion next year, and we're talking 800 million for land-based. So the land-based has suffered, but it's

in the single digits. It's single digits. I think it's eight, 9%. I think they're complaining more about the increase

of taxes at the moment, which you said it's 25% increase in tax, which is going to put them out

of business. But the fact that we now have gaming spend which has tripled in the last four years, that's

amazing in my book.

Nick Hogan:

Yeah, no doubt about it. Okay. And Barry, you had referenced it earlier. I know we also discussed this on

your call last week, but no doubt you and your team there have been busy trying to assess the gaming-related

impacts of all these Trump administration tariff and immigration policies. So assuming that these policies remain in place, where are

you expecting the biggest shockwaves in gaming overall?

Barry Jonas:

Well, look, so far we've heard a few companies report earnings. We've spoken to some other companies and everyone's sort

of, at least from a US perspective, saying they're not seeing it just yet. They're hearing about the nervousness from

the consumer. Maybe the consumer sees, as I said, their portfolio, their stock portfolio lower and feels their wealth is

less. Maybe their mid to lower end player is starting to feel some inflation hits and questioning how much they

should be spending. But I don't know if you're seeing it in the numbers just yet, so that's something we

really need to see as some of those tariffs-related price increases make their way to the consumer. Clearly, smaller wallets

will impact spend to some degree, albeit we did discuss the escapism and maybe the trade-down benefits to casinos.

I think the suppliers, we haven't necessarily heard from them just yet. My sense is a lot of operators were

probably rushing orders in to beat some of the tariffs, so maybe near-term earnings could actually be fairly decent, but

that's going to be a fairly important job, the sourcing manager for some of these suppliers right now trying to

figure out how to minimize their exposure to the highest-tariff jurisdiction, which at this point, as of today is China.

Don't know if you can get that to zero just yet, but something that they're focused on. Now, can they

mitigate that? Possibly. We'll see. If it's just 10% for some components and you can try to offset that, we'll

see ultimately what that does to the demand.

What I do know is, and we've talked about this, I think post-COVID, there is a real, hopefully an understanding

by more and more operators that the gaming floor is not something you want to mess with. I distinctly recall

Gary Lovman in '08 saying, "I can either make an interest payment or buy a slot machine. I'm going to

make an interest payment." Well, balance sheets are much better today than they were going back to that period of

time, and I think operators understand you want to invest where you're making the most money, so hopefully we'll see.

I know a lot of your research supports that thinking, that newer better games drive revenue as opposed to leaving

in, as you like to say, the dogs, but it'll be interesting to see. When pressed with large increases, will

operators likely defer? I think yes. Will they shift to a higher participation mix? I would think some yes, some

no, really depending on just how good their balance sheets are and how much they're willing to wait it out.

So yeah, as of now, operators, it seems like the impact's limited for now, but that said, the market doesn't

look at now. The market thinks about what's happening in the future, and the market is basically saying that it's

concerned about guidance estimates having to come in and revenues having to come in with the consumer more and more

pressured.

Nick Hogan:

Yeah, absolutely. I agree with absolutely everything you said there, including those points about will deferrals occur if the prices

go way up. The one thing, and I'd said it on your call as well, the one thing I can't

see is operators increasing their slot capital to chase price increases. That just isn't going to happen. But indeed, I

would hope that they would keep... Let's say worst case scenario where they do have big material cost increases in

there, I would still hope that they would keep those lease fees where they are and maybe encourage some incremental

premium floor share out there too. As we've seen, that's been hugely additive generally.

Barry Jonas:

To the extent it helps, most operators we've spoken to, it doesn't sound like they're drastically cutting back on CapEx

at the moment, the lone exception being Churchill Downs did announce a temporary pause in some of their projects at

the Kentucky Derby, of course, that being a non-gaming specific asset, but other projects in the mix seem to be

full steam ahead and have not heard yet about any slot orders necessarily being canceled just yet. Obviously, there was

some noise about Alberta, and I know we haven't talked about impacts from a visitation perspective on the US just

yet, but that's something I'm sure we'll hear more about if that's still a tangible risk.

Nick Hogan:

And I believe a couple of other provinces have now taken a stance on that. I believe BC put out

something as well, and I believe Saskatchewan has also said, yeah, they're just not taking American slot machines for the

time being.

Barry Jonas:

Which opens the question of what is an American slot machine?

Nick Hogan:

What is an American slot machine indeed?

Barry Jonas:

Choose it, fly it somewhere else and ship it going outside of the US. That seems to be the question

that people ask to get out of this, are we really American or is anything in this machine American? So

I guess we'll wait and see what happens there.

Nick Hogan:

And I did personally ask the question of a few high place people in Canada a couple of weeks ago,

and I received as the answer, "We have not yet made that determination."

Lucien Wijsman:

As it goes. I've had this question brewing for half an hour now, because you're clearly the man in the

know and I don't have this opportunity very often, but I'm sure when you go to birthday parties, whatever, they

put you on the spot, so I'm going to do the exact same thing now. Tell me, are there any

companies, gaming or non-gaming, that have excited you especially at the moment?

Barry Jonas:

Yeah, look it a fair question. Given the uncertainty, the answer today, it might be different than the answer I

would've given three months ago, but I think you need to factor safety, security in the near term and longer

term assurances, just given there's so much uncertainty out there. As I think about our game being real estate investment

trusts, which is namely VICI and GLPI, really safe, secure businesses there. The landlords years ago, they split up a

lot into a real estate component and an operations component, the real estate being the bedrock of EBITDA. As I

gave those stats before, between EBITDA being hit in the great financial recession, the first 50% goes to the REITs

and that was safe as can be. So I think these guys get paid, they have a solid five-ish plus

minus dividend yield. They are my only stocks that are actually up year to date.

I think there still is some pipeline for both of them in the near term in terms of deals that

this deal has already been paid for for new projects and it's not really going to be impacted. So I

think you'll see growth here and very safe and stable cash flows. So that'd be GLPI and VICI, of which

we're both bi-rated.

On the operator side, look, I believe longer term that digital will be an inevitability. Now what the conditions are

to that, we'll have to see, but in that instance, we like both Flutter and DraftKings here. We think ultimately,

they've won the US market. Early days, we thought the omnichannels would have a much better opportunity to compete, and

maybe they will as iGaming matures. But from a sports betting perspective, I think it's really a two horse market

now, that being Flutter's FanDuel and DraftKings.

So as the market evolves more, as we see DraftKings potentially at some point move international, there just seems to

be a lot of optionality for both to grow, and what I like here is we're not necessarily fighting saturation.

There is a lot more potential growth here, and ultimately, we're also fighting against the illegal market, which I think

is probably a pretty noble cause to fight, to take something unregulated, untaxed, to being taxed and regulated. So given

their product superiority, I think those are two names that would be well-held for the long-term.

Nick Hogan:

Very good.

Lucien Wijsman:

Makes sense.

Nick Hogan:

Great. Well, I think, guys, we're running to the end of our allotted time for today. Lucien, did you have

any other questions for Barry for today?

Lucien Wijsman:

No, I find this super insightful. Happy to be here.

Nick Hogan:

I guess one quick one that I had for you, Barry, just going back to the Trump admin policies. To

what extent do these destination markets, are they exposed to big drops in international travel? Do you see that as

being a material factor or not?

Barry Jonas:

Look, I think it's certainly something that's going to be a focus. Canada and Mexico seem to be the biggest

near term risk, specifically Canada, and I think what you'll hear from companies like Caesars and MGM is that's manageable.

We do a forward room survey look at a lot of... We go property by property every week and we

look at how rates are trending, and they've mostly been stable for the most part since all this brouhaha started,

so if it was fairly meaningful, I think you'd see a bigger deceleration there. But again, I used this word

earlier, it would be naive to think that if this doesn't extend to more jurisdictions, that it wouldn't start being

more meaningful.

So is there an offset with folks in the US saying, "Okay, well, I'm not going to go to Canada

or I'm not going to go to Europe or Mexico. I'll just go to Vegas for my vacation," and maybe

that offsets it? That's a possibility, but yeah, I'd say much like '08, regional gaming was less impacted than Vegas.

That probably gives more cushion, focus on less destination, more drive to or more local regional destination as opposed to

something international focused like Vegas.

Nick Hogan:

Okay. Very good, very good. Now, I had spoken a little bit earlier with you, Barry, about anything you had

coming up that you wanted to promote and you said you didn't have anything off top. Lucien, I know you

have a big event coming up here in Slovenia in a couple of weeks. Do you want to say a

few words about that?

Lucien Wijsman:

Yeah, we're full. No, but it really is. So I think we've reached the maximum capacity of the property where

we are, and I'm very proud to say that no more sponsors, no more delegates. Fantastic.

Nick Hogan:

Okay. And so for the listeners, we're referring to the-

Lucien Wijsman:

It's a luxury, yeah, but it's still a problem, yeah.

Nick Hogan:

Yeah. So we're referring to the Casino Operations Summit that's coming up here in Slovenia in a couple of weeks,

and it should be a lovely event. One of my favorites in the industry where it's three days of all

kinds of talks and hanging out with people, that deep networking. Barry, you've been to some of the AGS things.

It's very similar to the AGS Game On format, same type of deal, so it's great. I can't wait to

go. I go to them myself and always love them, so it'll be great. Cool.

Barry Jonas:

That's great. Yeah, no, nothing. At this point really, G2E, but frankly with all the companies going private and others

talking about moving their listing internationally, we'll see if there are even any public listed equities by the time we

get to G2E, but just grinding away though.

Nick Hogan:

All right, very good. Well, gentlemen, thank you so much for joining us here. Barry, thanks. It's just always fascinating

to talk to. I always have a blast and always interesting, and yeah, thanks again guys, and just wish you

the best. We'll I'm sure be talking soon.

Barry Jonas:

Awesome. Really a pleasure. Thank you.

Lucien Wijsman:

Thank you, Barry. Thank you, Nick.

Nick Hogan:

Thanks.