PENN Entertainment Q1 2022 Earnings Report

PENN Entertainment EPS Results

• Actual EPS: $0.29
• Consensus EPS: $0.45
• Beat/Miss: Missed by -$0.16
• One Year Ago EPS: $0.55

PENN Entertainment Revenue Results

• Actual Revenue: $1.56 billion
• Expected Revenue: $1.53 billion
• Beat/Miss: Beat by +$37.71 million
• YoY Revenue Growth: +22.70%

PENN Entertainment Announcement Details

• Quarter: Q1 2022
• Date: 5/5/2022
• Time: Before Market Opens
• Conference Call Date: Thursday, May 5, 2022
• Conference Call Time: 9:09AM ET

PENN Entertainment (NASDAQ:PENN) is a North American provider of integrated entertainment, gaming and sports betting. The company operates casinos, racetracks and hotels, offering casino gaming, sports wagering, dining, live entertainment and other hospitality services. Its property portfolio includes regional gaming destinations serving customers across the United States.

PENN also develops and operates digital gaming products, including online sports betting and iCasino services. Its digital operations have included the ESPN BET sportsbook, developed through a strategic relationship with ESPN, as well as theScore Bet, supported by the company’s acquisition of Canadian digital media and sports betting business theScore. Product availability varies by jurisdiction and is subject to local regulation.

The company was formerly known as Penn National Gaming and adopted the PENN Entertainment name in 2022 to reflect its broader entertainment and digital strategy. PENN’s brands have included Hollywood Casino, Ameristar, L’Auberge and M Resort. The company is headquartered in Wyomissing, Pennsylvania, and has been led by Jay Snowden, who serves as president and chief executive officer.

PENN Entertainment Q1 2022 Earnings Call Transcript

Key Takeaways

• Penn delivered record first-quarter revenues of $1.56 billion and adjusted EBITDAR of $495 million, up 23% and 11% year-over-year, driven by strong property performance and demographic reengagement.
• Interactive segment revenues grew 94% year-over-year (ex-tax), but the division reported a $10 million adjusted EBITDA loss in Q1 and expects a full-year loss of ~$50 million before reaching breakeven in Q4 and positive EBITDA in 2023.
• The launch of theScore Bet in Ontario on April 4 has exceeded early expectations, ranking as Canada’s #1 downloaded and top-rated sports betting app with 79% of bettors converting from theScore Media user base and a 10-year Blue Jays marketing partnership.
• The My Choice database grew by 355,000 new members in Q1 (over 1 million digital registrations since launch) and initial adoption of 3Cs (cashless, cardless, contactless) tech has driven 53,000 My Wallet downloads and $25 million in deposits.
• Management repurchased 3.8 million shares for $175 million at an average price of $46.04, leaving $574.9 million available under its $750 million authorization, reflecting confidence in the stock’s valuation.

Presentation

[Operator]

Greetings, and welcome to the Penn National Gaming First Quarter Conference Call. During the presentation, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach the operator, please press star zero. It is now my pleasure to turn the conference over to Joseph N. Jaffoni, Investor Relations. Please go ahead.

[Joseph N. Jaffoni, Founder and President at JCIR]

Thank you, Tina, and good morning, everyone, and thank you for joining Penn National Gaming's 2022 First Quarter Conference Call. We'll get to management's presentations and comments momentarily, as well as your questions and answers, but first, I'll review the safe harbor disclosure. In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. These statements can be identified by the use of forward-looking terminology such as expects, believes, estimates, projects, intends, plans, seeks, may, will, should, or anticipates, or the negative or other variations of these or similar words, or by discussions of future events, strategies, or risks and uncertainties, including future plans, strategies, performance, developments, acquisitions, capital expenditures, and operating results.

[Joseph N. Jaffoni, Founder and President at JCIR]

Such forward-looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance. As such, actual results may vary materially from expectations. The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and Form 10-Q. PENN Entertainment assumes no obligation to publicly update or revise any forward-looking statements. Today's call and the webcast will include non-GAAP financial measures within the meaning of SEC Regulation G. When required, a reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release, as well as on the company's website.

[Joseph N. Jaffoni, Founder and President at JCIR]

Thank you for your patience with that, and it's now my pleasure to turn the call over to company CEO, Jay Snowden. Jay, please go ahead.

[Jay Snowden, CEO and President at PENN Entertainment]

Thanks, Joe. Good morning, everyone. Here with me this morning is our CFO, Felicia Hendrix, and our Head of Operations, Todd George, as well as several other members of our executive team, should you have any questions for them. We did provide a link to the investor presentation in our earnings release, so I'd encourage you to either print that out or pull it up and maybe reference it while we're talking because we'll speak to a few of the slides in the investor deck. We did talk on our last earnings call about what sets Penn apart from the competition and what our strategic objectives and expectations are for the first quarter in terms of our core business, our interactive segment, investing in new technology, and the launch of theScore Bet in Ontario.

[Jay Snowden, CEO and President at PENN Entertainment]

I'm proud to say our corporate property and interactive teams have delivered on all fronts in the first quarter. I want to begin this morning by thanking our team members at all levels of the organization for their continued hard work and dedication in delivering best-in-class products and services to our guests. We don't always do this, but I'm gonna take a few minutes to call out a few of our top performers and some highlights across the company. I'll start in Louisiana, where our properties, led by Harold Bevis, Barry Regula, Kim Ginn, and Dan Kennedy, continue to post robust results in what are some of the most competitive markets in the U.S.

[Jay Snowden, CEO and President at PENN Entertainment]

Their team's focus on profitable revenue drivers, guest service enhancements, and a more efficient cost structure has resulted in market share gains across the board and margins that are the best in all of the property's history. I couldn't be more proud of all of our team members in the state of Louisiana. Two of our properties under competitive pressure due to new build-outs and expansions in Black Hawk, Colorado, and East Chicago, Indiana, led by Sean Demeule and Ryan Coppola, have quickly reimagined the way in which we run the business and compete. These properties are both pacing to deliver EBITDAR in the same range, if not higher, than what they generated in 2019, despite the new competition, which is not an easy feat. Hats off to them as well.

[Jay Snowden, CEO and President at PENN Entertainment]

In Las Vegas, Hussain Mahrous and our creative team at the M Resort are now generating more EBITDA per quarter than what the property did annually just a few years ago. With the growing population in that part of the Las Vegas Valley, we expect to see those results only get stronger in the coming years. In St. Louis, Mike Jurecki and Steve Peet and their teams are finally again able to compete on a level playing field after the elimination of COVID mandates that were much more restrictive for our properties operating in a different county versus the nearby competition and are back to profitably growing market share and breaking EBITDA records along the way.

[Jay Snowden, CEO and President at PENN Entertainment]

Our teams in central Pennsylvania, led by Dan Im, Ruben Warren, and Marc Costello, have successfully opened two new properties in the last year and have done a terrific job growing the overall database for the company and ensuring we are looking at all three businesses and our results there on an incremental basis. Cannibalization in central Pennsylvania has been minimal, and early combined results have been very encouraging. Lastly, our interactive businesses, led by Jon Kaplowitz and the Levy family in Toronto, continue to demonstrate that there is a different way to approach the online vertical in North America. Disciplined organic marketing, omni-channel cross-sell, great products, and owning our media strategy with our friends at Barstool Sports and theScore has led to growth in our net gaming revenue market share results in the first quarter.

[Jay Snowden, CEO and President at PENN Entertainment]

We believe our differentiated approach will benefit us going forward as the relationships we have and continue to build with our customers are based on delivering great products and customer service, media integration, branded and experiential events and promotions, and a direct connection to our users via live streams and social media engagement with our content creators, led by Dave Portnoy and Big Cat. We don't lead with discounts. These structural advantages are already proving themselves out real-time and will deliver what we believe will be best-in-class margins over the long term. I'm super fortunate to be working alongside so many talented people every day, and we collectively couldn't be more excited about our future prospects. Now transitioning to our first quarter results.

[Jay Snowden, CEO and President at PENN Entertainment]

You'll see on Slide five, we achieved record first quarter revenues of $1.56 billion and adjusted EBITDA of just under $495 million, which grew 23% and 11% respectively over 2021 levels, driven primarily by strong property-level performance across all segments, including the older core demographic, who are re-engaging through both increased visitation levels and spend per visit. We're also encouraged by the ongoing visitation of our younger demographic. We remain focused on reimagining our properties and offerings to enhance the entertainment appeal to this steadily growing segment of customers. Now turning to slide 8, during the quarter, our industry-leading myChoice customer database grew across all worth segments, and we also added 355,000 new members to our ecosystem.

[Jay Snowden, CEO and President at PENN Entertainment]

Life to date, we have increased our database by over 1 million from digital registrations alone for the mychoice app, providing valuable cross-sell opportunities. More specifically, we've seen 28% year-over-year growth in our VIP segment and 11% in our core segments, driven by our new online and retail sports book offerings and our recently opened Hollywood Casino properties in York and Morgantown, Pennsylvania. On Slide nine, you'll see we're starting to realize early benefits from our 3 C's, which as a reminder is cashless, cardless, and contactless technology, which powers our mywallet experience. We have exceeded 53,000 mywallet downloads and more than $25 million in deposits. The 3 C's technology is now live at nine properties in three states and has increased the value of our guests in terms of visitation frequency and time on device.

[Jay Snowden, CEO and President at PENN Entertainment]

We plan to introduce the 3 C's in an additional 14 properties in eight states over the next two quarters, of course, pending regulatory approvals. As noted on Slide 10, our interactive segment grew revenues year-over-year by 94%, exclusive of tax reimbursements from our third-party skin partners, led by strong growth in online sports betting, iCasino, and media. We remain focused on profitable growth with our integrated media retail operations helping to deliver the lowest customer acquisition costs in the industry. In addition, during the quarter, we introduced our market-leading retail Barstool Sportsbook at Penn National Race Course in Pennsylvania and at L'Auberge Casino Resort Lake Charles in Louisiana. We plan to roll out additional Barstool Sportsbooks at six more properties throughout the remainder of the year.

[Jay Snowden, CEO and President at PENN Entertainment]

Slide 12 shows the benefits of our integrated retail Barstool Sportsbooks and gaming areas, which are helping to maximize cross-sell opportunities on table game play, particularly in the younger segments. Comparing first quarter of this year to first quarter of 2019, we've seen a 53% increase in table fee for ages 21 to 44 at our properties with retail sportsbooks. On Slide 13, you'll see sports betting in Louisiana has been a great story for us, and our market-leading properties and partners at Barstool Sports are a huge reason why. Dave and Big Cat hosted a Super Bowl watch party at L'Auberge, Lake Charles. Louisiana natives Ben Mintz and Megan MakinMoney embarked on a Mintzy tour around the state to help promote our Barstool Sportsbook app. This powerful combination of Barstool talent and our best-in-class retail sportsbook offerings underscores the benefits of our differentiated strategy.

[Jay Snowden, CEO and President at PENN Entertainment]

Notably, we secured more than 6,000 preregistrations from our casino database and generated almost 11% NGR with limited external marketing spend. Our interactive segment had an adjusted EBITDA loss of $10 million this quarter. Later this month, we expect to make a second $12.5 million installment towards the California Sports Betting Initiative. While not originally contemplated in our interactive segment guidance for 2022, we remain on track, however, to generate an EBITDA loss of approximately $50 million from this segment in 2022 as we continue to scale operations and infrastructure. Following our first quarter results, we anticipate the most significant losses will occur in the second and third quarters as we continue to ramp in our new markets and prepare our products and tech stack for football season. Fourth quarter will likely be closer to break even.

[Jay Snowden, CEO and President at PENN Entertainment]

By 2023, we expect to be generating positive adjusted EBITDA as we start to realize the benefits of our wholly owned tech stack. In addition to the successful launch of our Barstool Sportsbook app in Louisiana on January 28, which became our 12th state, excuse me. One of the top highlights of the quarter is undoubtedly the launch of the theScore mobile app in Ontario on April 4. As highlighted on Slide 18, while still early, theScore Bet's performance thus far in Ontario has exceeded our expectations, due in large part to theScore's incredible brand recognition and media footprint, as well as the support from Barstool Sports and the popular team from Spittin' Chiclets, the number one hockey podcast in Canada.

[Jay Snowden, CEO and President at PENN Entertainment]

As a reminder, with a population of 15 million people, Ontario would rank as the 5th largest state in the U.S. on a population basis. Since launch, theScore Bet ranks as Canada's No. 1 most downloaded sports betting app and the No. 1-rated betting app in the iOS store. Early results reflect strong cross-sell opportunities. Currently, 79% of all bettors in Ontario are theScore media app users, and 50% of theScore's sportsbook users have wagered on the iCasino products. Just after launch, theScore announced an exclusive 10-year gaming partnership with the Toronto Blue Jays. This deal grants theScore Bet national marketing rights that extend across all gaming categories, including sports betting, casino, online casino, and fantasy sports.

[Jay Snowden, CEO and President at PENN Entertainment]

The Toronto Blue Jays and theScore Bet also plan to create a branded premium 365 days a year flagship sports bar and restaurant at the Rogers Centre that will serve as an entertainment hub and destination for fans. The theScore Bet app is built on theScore's state-of-the-art player account management system, excuse me, and bonus engine, which provides highly customized features and seamless integration into theScore media app. In the third quarter, we expect to transition as planned theScore Bet in Ontario to theScore's proprietary risk and trading platform as well, which will allow us to significantly bolster the product's features and capabilities, including expanded betting markets and parlay options.

[Jay Snowden, CEO and President at PENN Entertainment]

Meanwhile, we remain on track to transition the Barstool Sportsbook to theScore's PAM and trading platform in the third quarter of 2023, as previously communicated, which will provide meaningful cost and revenue synergy opportunities. We are excited to have two very strong sports brands in our portfolio in theScore and Barstool Sports. As we mentioned on previous calls, we plan to lead with theScore Bet in Canada, given its strong brand equity there, while focusing on the Barstool Sportsbook brand in the U.S. We feel the best way to maximize the value of both brands in the U.S. is to fully integrate the Barstool Sportsbook app into theScore media app, which will occur during the second half of this year.

[Jay Snowden, CEO and President at PENN Entertainment]

As noted on Slide 14, the Barstool Sportsbook app has gained market share in the three states that report net gaming revenue by operator, despite our spending a fraction of what our competitors do on promo and paid media. We continue to believe NGR is a more relevant measure of performance as opposed to handle market share, which doesn't mean as much when revenues are largely diluted by marketing and promotional expenses. While our popular Barstool Sportsbook app is tied for first on the Apple iOS store amongst sports betting apps with an average customer rating of 4.8 on a scale of 5, we are continuing to add new features to drive further adoption.

[Jay Snowden, CEO and President at PENN Entertainment]

You'll see on Slide 15, we introduced MLB same-game parlay plus option and will launch new withdrawal methods, including Mastercard and Apple Pay, in the second quarter of this year. Notably, approximately 90% of our withdrawals are now instant, which we're very proud of. Finally, we expect to add a search function and the ability to use my cash as currency later this summer. Meanwhile, our Barstool branded iCasino business continues to grow as we improve our products, add new games, and leverage our casino database and creative marketing by Barstool Sports. For example, Barstool recently launched an iCasino-focused Twitch channel called The Coin Boys, which already ranks in the top 1% of all Twitch programming, with an average of 5,000 viewers per stream and a staggering average view time of just under two hours.

[Jay Snowden, CEO and President at PENN Entertainment]

Flipping ahead to Slide 17, we're also excited about the initial slate of games from our Penn Game Studios, which are drawing rave reviews and have contributed nearly 30% of Barstool Casino's online handle across Michigan, New Jersey, and West Virginia. We have high expectations for our first batch of games in Pennsylvania, which launched last week. On the media front, we continue to build momentum as theScore grew revenue 42% year-over-year in the first quarter and continues to garner high levels of engagement. Barstool has also continued to expand its audience and reach while pursuing new outside-the-box growth opportunities. On March 18, the second standalone Barstool sports bar opened in Philly to very strong demand, and two additional locations are under development in major metropolitan locations.

[Jay Snowden, CEO and President at PENN Entertainment]

In addition, in April, Frankie and Trent from the Barstool Golf Podcast attended the Zurich Classic of New Orleans, providing video commentary which garnered 4 million views and over 100,000 engagements. On May 7, Barstool will broadcast an alternative commentary to the Canelo fight on DAZN, representing a further extension of the Barstool brand into live sporting events. Looking forward, we believe there is significant upside for the media business, and we'll talk a lot more about that in coming quarters as we begin to realize the benefits of cross-promotion with Barstool Sports and additional monetization opportunities with both Barstool and theScore. With that, I'll turn it over to Felicia.

[Felicia Hendrix, EVP and CFO at PENN Entertainment]

Thanks, Jay. As Jay mentioned earlier, we reported record first quarter revenues of $1.56 billion and adjusted EBITDA of $494.7 million, which grew 23% and 11% year-over-year, respectively. I'm happy to report the robust demand that Jay described in the first quarter has continued quarter to date. Overall, the competitive environment has largely remained stable, and further, we continue to work on mitigating inflationary pressures by adjusting our offerings and pricing strategies to keep costs in line.

[Felicia Hendrix, EVP and CFO at PENN Entertainment]

As we look toward the remainder of the year and take note of our growing mychoice database, the tangible benefits of our technology investments at our retail properties and our momentum in our interactive segment, we are increasing our prior 2022 revenue guidance range to $6.15 billion-$6.55 billion and our EBITDA to a range of $1.875 billion-$2 billion. We continue to believe that our property-level EBITDA margins are sustainable at 37%. Now looking at our first quarter 2022 cash expenses. In the first quarter, corporate expense inclusive of cash settled stock-based awards was $24.7 million. Our cash rent payments to our REIT landlords were $229.3 million. Cash interest on traditional debt was $30.8 million. Cash taxes were $1 million.

[Felicia Hendrix, EVP and CFO at PENN Entertainment]

Total CapEx was $65.6 million, of which $54.6 million was a combination of maintenance and return-generating projects, including the 3 C's and our Barstool Retail Sportsbook. The balance was project CapEx associated with our new Hollywood, York, and Morgantown projects in Pennsylvania. As of March 31, 2022, we had 183.4 million fully diluted shares outstanding. Regarding certain 2022 modeling metrics for your free cash flow forecast, we expect 2022 corporate expense of $98.8 million, inclusive of our cash settled stock-based awards. Total CapEx remains roughly $300 million, of which $100 million is return-generating discretionary projects. We forecast 2022 cash interest expense of $98.3 million. Cash taxes will be $110 million net of refunds received.

[Felicia Hendrix, EVP and CFO at PENN Entertainment]

For the full year, fully diluted shares are expected to be 183.4 million shares, which is before any incremental share repurchases. Now, talking about share repurchases, we were quite active in the quarter under our share repurchase authorization, given our view that the market was undervaluing our shares. We repurchased 3.8 million shares of our common stock in open market transactions for $175.1 million at an average price of $46.04 per share. There is $574.9 million remaining under our $750 million authorization. As I mentioned on our fourth quarter earnings call, our balance sheet gives us the flexibility to be opportunistic in a dynamic marketplace and to return capital to shareholders.

[Felicia Hendrix, EVP and CFO at PENN Entertainment]

We continue to see a dislocation between where we value our shares and where they are currently trading, and we expect to allocate capital accordingly if this dislocation persists. Now, I'd like to call your attention back to Slide seven of our earnings deck. We remain very proud of our balance sheet, which provides us with a great deal of flexibility. The statistics on the page speak for themselves. On May third, we entered into a second amended and restated credit agreement with our various lenders, which provides for a $1 billion revolving credit facility undrawn at close and upsized from our prior $700 million revolver and a five-year, $550 million term loan A facility and a seven-year, $1 billion term loan B facility.

[Felicia Hendrix, EVP and CFO at PENN Entertainment]

The proceeds from the credit facilities were used to repay the existing term loan A facility and term loan B1 facility balances. The transaction was leverage neutral and strengthens our balance sheet even further as pro forma for the refinancing, our liquidity is $2.78 billion, and our earliest maturity is now 2026. With that, I will turn it back to Jay Snowden.

[Jay Snowden, CEO and President at PENN Entertainment]

Thanks, Felicia. On April 26, in conjunction with the filing of our proxy, we published our 2021 corporate social responsibility report, which highlights the many ways Penn is continuing to live up to its commitment to being a good corporate citizen. I'm really proud of the report, which shines a spotlight on the tireless efforts of our team members at all levels of our organization to support those in need in our communities, to further our diversity, equity, and inclusion efforts, and to help preserve our finite natural resources. Some notable examples include the launch of a $4 million STEM scholarship fund and internship program at historically black colleges and universities in states where we operate.

[Jay Snowden, CEO and President at PENN Entertainment]

We also contributed more than $7 million to help fund COVID-19 and hurricane relief efforts, as well as supporting worthwhile charities and civic organizations around the country with thousands of hours of volunteer work by our team members in addition to our financial donations. Most recently, on March 23rd, members of my executive team and I hosted Louisiana Governor John Bel Edwards and other local and state dignitaries at the annual Metanoia Gala at our L'Auberge Casino & Hotel in Baton Rouge to help raise funds to support adolescent victims of human trafficking. It was a very emotional evening having visited this group's one-of-a-kind shelter for girls aged 11 to 18 years old, where they are provided care for their mental, physical, and spiritual well-being, as well as instruction in academics, life skills, and job training.

[Jay Snowden, CEO and President at PENN Entertainment]

We're super proud to support this organization's critically important mission today and going forward. At Penn, we also spent the month of March celebrating women's history, which included a Women Behind the Score Bet virtual panel to recognize the critical role our female team members played in the development of theScore Bet app. I look forward to continuing to update you on our ongoing ESG efforts throughout the year. With that, Tina, we'll open it up to questions.

[Operator]

Thank you. If you would like to register a question or comment, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. One moment, please. The first question comes from Joe Greff of JPMorgan. Please go ahead.

[Joe Greff, Managing Director at JPMorgan]

Good morning, everybody. I have a two-part question on interactive and then one on the land-based casino side. On Barstool iCasino, can you talk about from here the plan to launch new games and titles for the rest of the year, and then how that rate of growth in new games and titles translates into rate of growth in iCasino GGR? Should that be moving in similar trajectories? You've seen the slide deck, thank you for doing it, you know, what the GGR for iCasino has been. Can you talk about how that translates into NGR? I'm assuming that's EBITDA positive right now, that segment.

[Joe Greff, Managing Director at JPMorgan]

Can you talk about the margins and maybe the scale benefits and the impact to margins as you introduce new titles and game introductions from here?

[Jay Snowden, CEO and President at PENN Entertainment]

Do you wanna throw out the land-based question also, and then we'll just tackle them all, Joe?

[Joe Greff, Managing Director at JPMorgan]

Sure. In case we repeat them, I won't remember it. But obviously, one casino operator this week talked about seeing slight softness in that lower-end consumer on the land-based side. Can you talk about what you're seeing at the lower end of your database, and for that matter, any degradation in the other segments? Yeah, that might be worth calling out. I know you have in a slide deck a lot of data on the VIP and that core customer, which looks like it's pretty stable and not being impacted by whatever pick your poison macro factor that's out there. Thank you.

[Jay Snowden, CEO and President at PENN Entertainment]

Yep. Thanks, Joe. Todd, you wanna tackle the last question first, and then I'll hit the first couple?

[Todd George, EVP of Operations at PENN Entertainment]

Sure. Thanks, Jay. Thanks, Joe. You know, we've really dug into this in understanding everything that's going on with the economy and the world right now, but I'm very happy to say that we've seen very little falloff in that lower end segment. Frankly, when we really started to dig into the numbers, it's a combination of a couple of things. Some of those consumers are actually moving up into the right, moving into our kind of mid-core level customers. Maybe a little bit reduced frequency, but higher value when they come in. Then some of those, you know, the way we structure our marketing and program incentives, some of those are frankly moving into an unrated play segment.

[Todd George, EVP of Operations at PENN Entertainment]

When we look at this, and again, as you know, not really a high profitability segment to begin with. We're very strategic in the way we reinvest in this group. What we've seen is that they've moved either up into the right or frankly into unrated, where they're actually more profitable for us.

[Jay Snowden, CEO and President at PENN Entertainment]

Great. Thanks, Todd. The first couple of questions on interactive, Joe, I'll provide some detail. We haven't provided all of the detail publicly that you've asked for. We will in time, obviously. We're still in the very early days in this nascent business. On the Barstool iCasino side, and we do have a slide, as you mentioned, that our Penn Game Studios, we continue to put out really good content, and we're now up to 30% of the handle in iCasino in the states where we've launched those games, which is West Virginia, Michigan, and New Jersey, of total handle. When we first launched, obviously, we were in the single digits. I think last call we mentioned it was up to 20% of handle. Now it's up to 30%.

[Jay Snowden, CEO and President at PENN Entertainment]

We did just launch that entire batch of games that's been live in the three states. We just launched those in Pennsylvania on the Barstool iCasino offering as well a couple of days ago. We would expect the percentage of play on our games to continue to grow in Pennsylvania now that those games are in market. We also have a slide that shows you what the momentum on a sequential basis looks like from a GGR perspective in iCasino. We continue to move up into the right. We're not satisfied, obviously, with where we are on online casino. Most of our energy and focus and resources for the first, you know, year and change that we've been live has been toward making sure that we had online sports betting products that was gonna be competitive.

[Jay Snowden, CEO and President at PENN Entertainment]

I think we've definitely delivered on that, both here in the U.S. as well as in Canada. You should expect to see our online casino products continue to improve. The number of games in the library continue to grow, both from, you know, well-known third-party providers as well as our own games. I think you're gonna see that happen in all of the states that we're live in. We really prioritized online sports betting first because it's just you have so much more scale, legal across so many more states, and it really serves as such a great acquisition tool for online casino, as well as for our retail casinos. Todd highlighted in our earnings release as well as in the slides just how rapidly we've been growing our database. Then there's all of these great omni-channel cross-sell opportunities.

[Jay Snowden, CEO and President at PENN Entertainment]

Online sports betting for us is so valuable, not just because of the sort of standalone P&L, which we feel good about and is only gonna get better in time as we have more scale and get better and also owning our own technology. You think about the cross-sell to online casino and the cross-sell to our brick-and-mortar casinos and elsewhere, it's very exciting. I think the last part of your question was around GGR to NGR. What I would tell you is that the correlation between GGR and NGR is very tight in online casino. There's very little promotion and discounting that goes on there. It's not like the delta you see in the states that report GGR and NGR on the sports betting side, where there is more of a delta, and it's very volatile.

[Jay Snowden, CEO and President at PENN Entertainment]

You don't see that on the online casino side. We typically don't have to discount much to convert GGR to NGR in online casino.

[Joe Greff, Managing Director at JPMorgan]

Great. Thank you. Then one final question regarding the Ontario launch. You have a bunch of metrics on there regarding downloads and registrations and average daily active users. Can you actually talk a little bit maybe in relation to Pennsylvania and Michigan, you know, handle and GGR performance? Do you think Ontario's development or growth as a market is impacted by the transition from a gray market to a legitimate developed market?

[Jay Snowden, CEO and President at PENN Entertainment]

Yeah, there's a lot to go through on Ontario, all of which we feel really good about. It's still early days, but we shared some stats. You should assume that handle results look very favorable compared to other states that we've launched in, much like the DAU that we've provided there. One of the neat things about what we've seen in Ontario, a bit different than what we've seen in the U.S., is that one, we had a couple of weeks to work on pre-registration. Our friends at Barstool Sports and of course theScore were very successful in getting a lot of downloads and registrations done before the go-live date of April fourth. That was something that worked really well for us that we hadn't done as much in the U.S.

[Jay Snowden, CEO and President at PENN Entertainment]

The other thing I would say is that when we went live on April fourth, we were obviously really pleased with the volume we were seeing in downloads, registrations, and first-time deposits. What's been interesting in Canada, and I had attributed this just to having, you know, a little bit of a different strategy than in the U.S. In the U.S., you know, really relying organically, mostly with our partners at Barstool. When our partners at Barstool announced to their audience that we're live in a state, you just see such a huge influx on the first day or two, and that's the bulk of what you're gonna get in those first few weeks.

[Jay Snowden, CEO and President at PENN Entertainment]

You still continue to grow downloads, registrations, and first-time deposits on, you know, week 2 and week 3, but you do see it fall off a little bit faster because the audience follows so quickly. In Ontario, what we've seen is that even since the day of launch on April 4, every day thereafter, we continue to see significant, we're talking in the high hundreds in terms of first time deposits and in the thousands in terms of downloads every day, incremental to what we saw on the first day. We're continuing to build that business. We're seeing new users download the app and deposit and bet every single day. The churn has been low. We feel really good about the products. We're obviously live on our own player account management and bonus engine already.

[Jay Snowden, CEO and President at PENN Entertainment]

We're halfway there on the tech stack, and we'll be live on the remainder of the managed trading services platform this summer before football season. So far so good. We'll share a lot more detail about Ontario in the future. I don't wanna speak much more about the details of our numbers only because we don't know what everyone else's looks like at this point. The last part of your question around it being a gray market, we didn't really know what to expect because people have been playing with gray market operators and apps for many years in Canada. Given our ability to quickly penetrate and convert people from the media app to the betting app and to grab people through our other relationships throughout Ontario, we've been very pleased.

[Jay Snowden, CEO and President at PENN Entertainment]

I can't really compare it to anything within market because we don't know how everyone else is doing other than you know, there's been some publicly reported number of downloads of the app and things of that nature, which we obviously have scored very well. I would tell you all of the other metrics are consistent with what's been reported publicly.

[Shaun Kelley, Managing Director and Senior Research Analyst at Bank of America]

Great. Thanks, Jay.

[Operator]

Thank you. The next question comes from Shaun Kelley, Bank of America. Please go ahead.

[Shaun Kelley, Managing Director and Senior Research Analyst at Bank of America]

Hey, good morning, everyone. Jay, a lot of ground's already been covered. I don't know if this is for you or maybe for Todd, but if we can go back to, you know, a couple of the comments on the core consumer. If I was gonna kinda, you know, summarize what we've heard from other operators, I think some have hinted there could be some softness at the very low end of the database amongst the consumer. Others have largely said, you know, there's really nothing to see here.

[Shaun Kelley, Managing Director and Senior Research Analyst at Bank of America]

Could you just really summarize that for us and then maybe take us through a slight walk around a handful of the regions where, you know, you might be seeing some regional differences, particularly in the South, you know, maybe out West, where it actually sounds like trends are really good in the locals market, but maybe just a couple of highlights there would be really helpful for everyone?

[Jay Snowden, CEO and President at PENN Entertainment]

Yeah. I'll let Todd answer that one as well.

[Todd George, EVP of Operations at PENN Entertainment]

Hey, thanks, Sean. You know, I put us in the camp with really nothing to see here. You know, even going into April and now into May, just based on where our properties are and you know, I guess, to give a little more color to what Joe asked as well, that lower end, so look at it, you know, kinda that 0-49, that's really down less than 0.5%, 0.3%. Really we're making that up on the 50-99, which is up 3.7%, the unrated, which is up 5.4%. We're seeing really positive visitation when we kinda slice and dice our database and look at not only the worth segments, but also kind of the geolocation.

[Todd George, EVP of Operations at PENN Entertainment]

We are seeing, you know, anyway that most of our customer base is within 50 miles, just based on where our properties are located. Everything in there is actually trending very well. We also are seeing a little bit more growth at some of our more destination-type properties. I think you start looking at the Midwest, the South, and we're seeing really decent growth across all segments. Now that we're getting into those summer months where we're increasing the entertainment options, we're located next to some bigger entertainment and sports options and everybody going back out to these events. Again, we're seeing different growth patterns than what some of the industry has seen. Really, we couldn't be happier with what we've seen right up into May.

[Shaun Kelley, Managing Director and Senior Research Analyst at Bank of America]

Super. Very clear. Maybe just as my follow-up, you know, Felicia, one of the highlights you called out was around the stock repurchase. Obviously, we knew the authorization was out there, but you put some of it to work. Can you just help us think about parameters around that? You know, I think a lot of this should be you know, self-funding out of Free Cash Flow, but maybe just help us think about the balance and sort of, you know, programmatic versus opportunistic, you know, the sort of operative words for us on Wall Street.

[Felicia Hendrix, EVP and CFO at PENN Entertainment]

Yeah. Thanks, Sean. Yeah. I think that we're gonna continue to be opportunistic. So, you know, as you know, we've already repurchased 175.1 million shares. And if you go back to the K, I think we reported that we did about 107. So we were, you know, obviously active in March for as long as we could be, which got us to that average price of roughly $46. You know, with our stock where it is now, I think it's fair to say that if we thought our stock was undervalued at $46, we think it's undervalued, you know, in the high 30s. And so we'll be in the market again, but it's going to be opportunistic. I talked about our, you know, our strong balance sheet and our liquidity.

[Felicia Hendrix, EVP and CFO at PENN Entertainment]

We're just in a really fortunate place to be able to be nimble and take advantage of the dislocation that we see.

[Todd George, EVP of Operations at PENN Entertainment]

Thank you very much.

[Operator]

Thank you. The next question comes from Barry Jonas, Truist Securities. Please go ahead.

[Barry Jonas, Managing Director at Truist Securities]

Great. Thank you. Jay, can you maybe give some more color about how you plan to reimagine your properties for that younger demographic? I'm kind of interested how you think about balancing that with retaining interest from the older demographic.

[Jay Snowden, CEO and President at PENN Entertainment]

Yeah. Todd, do you wanna tackle that one as well?

[Todd George, EVP of Operations at PENN Entertainment]

Thanks, Joe. And thanks for the question, Barry. So you see that we touched on a lot of this in the slide presentations. Really a lot of this is being done through technology, our food and beverage offering, the design of our hotel rooms. As we start to get into this year, you look at Greektown, a L'Auberge Lake Charles, and the new hotel offerings that we're putting out there, I think are going to be best in class, best in market. We've all been extremely fortunate, and we've talked about this on numerous calls, doing away with the dated, completely dated buffet concept, which you know is very fortuitous now, obviously with rising prices.

[Todd George, EVP of Operations at PENN Entertainment]

Using that space in a much better way, creating more interactive venues that can kind of change with the seasons, venues that can kind of change a lot easier than a buffet that had been around for decades. The real big impact for us is trying to look at the guest experience, the consumer experience, and remove friction. A lot of that being done again through technologies with the 3 C's that Jay mentioned. Just kind of imagine the process in going through the casino from just five years ago and thinking about the queuing and the lines and what we've done is try to move away from that. For all consumers, and that's not something that just the younger demographics like. It's really something that applies to everyone coming into a casino.

[Todd George, EVP of Operations at PENN Entertainment]

We want to make it easier for everyone coming in to really start enjoying their experience and enjoying their visit.

[Jay Snowden, CEO and President at PENN Entertainment]

I was just gonna add one thing. I agree with everything Todd said. I'm highly encouraged. We were just looking at our age trends, age segment trends in the database for April, for example. Last year at this time, there was a lot of stimulus money rolling through the economy. There were still very few things for people to be able to do for fun, to go out. There was no concerts. Restaurants had restrictions. You couldn't go to bars, or if you did, they were closed early. You couldn't go to the movies. You can do all of that now. I was actually reading an article this morning that talks about how customer behavior has so quickly returned back to 2019 in, like, the last couple of months.

[Jay Snowden, CEO and President at PENN Entertainment]

You consider that all of those options are now available to people who love all of those options and have been a part of those options for many, many years. Yet, what we're seeing is that that younger demo that we were able to bring into our ecosystem over the course of the last couple of years when there was less to do, but our buildings were open, our offerings were open, we're still seeing sizable growth. As you saw in the Q1 results, April looks just as good on a year-over-year basis off of a very, very large base of growth over 2019 last year.

[Jay Snowden, CEO and President at PENN Entertainment]

It's not as though we brought these younger demos in and they didn't like the experience, but it was the only thing to do, and then it was mass exodus as soon as they could go back to concerts and sporting events. We're growing on top of significant growth from last year. As you look at Q1 of this year versus Q1 of 2019, the growth in those younger segments is super robust.

[Todd George, EVP of Operations at PENN Entertainment]

Yeah. I, you know, to Jay's point, that 21-34, Barry, is up 883% compared to 2019. You know, the big problem that everybody was trying to solve pre-pandemic was, how do we attract the younger demos? How will they engage with us? What games will they play? Again, this created that unique opportunity, this moment in time where they came in, looked around and found something that they liked and we're continuing to evolve as they are. We're holding onto them, and a lot of that is kind of incorporating the entertainment that they're looking for.

[Barry Jonas, Managing Director at Truist Securities]

That, that's really helpful. Then just a question on the guidance raise. Can you maybe talk a little bit about what underscores the raise? Is it kind of less concern about the macro economy and inflation, maybe less concern about new supply cannibalizing you in the back half of the year? I would just add, I think the implied margin actually went down at the midpoint, so any color there would be helpful.

[Jay Snowden, CEO and President at PENN Entertainment]

If it did, that's not intended. I mean, we've committed to what we can do, Barry, on the land-based side at 37%. We said that the last quarter. We obviously delivered on that this quarter. Look, this is delicate, right? I mean, we put ourselves out there a little bit doing guidance at the beginning of the year when most of our competitors did choose not to, and I wasn't sure if that was the right decision or not when we did it. We felt like we had enough visibility, and we felt confident that what we were able to do in the second half of last year from a land-based perspective, we'd be able to take into 2022. We've done that.

[Jay Snowden, CEO and President at PENN Entertainment]

I mentioned at the beginning of the call, and I highlighted a couple of our properties and markets where we have seen that new competition, and of course, you're impacted by that in Black Hawk, Colorado, our Ameristar property there and our Ameristar property in East Chicago with the new Hard Rock opening. Our properties have made quick adjustments. Our leadership teams, Todd and Erin Chamberlin and Rafael Verde and our GMs and our property teams there have made adjustments. We're able to raise guidance because we feel like we have visibility into our business at this point in time. We feel like we understand the competitive impacts from the new supply in some key markets.

[Jay Snowden, CEO and President at PENN Entertainment]

The only other market where we know there's new supply coming is Nebraska, which will have some impact on Council Bluffs, but that is looking like it's a ways off. There's gonna be temporary casinos for a while before permanent. You know, if you look at the guidance raise, we're taking all of the consensus beat for the first quarter. We're sticking to what we had said at the beginning of the year for the remainder of the year. If trends that we're seeing today continues, then that's likely a conservative position to take.

[Todd George, EVP of Operations at PENN Entertainment]

Yeah, I would only add, Jay, you talked about this, that 55+ to 65+, definitely, they have been lagging behind. You heard others in the industry talk a little bit about the coronavirus impact in January. That has kept them a little behind, and we feel there's upside definitely there. Then with some of the capital projects that Felicia has mentioned, as those come online, we feel that there's really good momentum at a lot of our properties.

[Barry Jonas, Analyst at Truist Securities]

Okay. Thanks, guys, and congrats on a great quarter.

[Jay Snowden, CEO and President at PENN Entertainment]

Thanks, Barry.

[Operator]

Thank you. The next question comes from Thomas Allen, Morgan Stanley. Please go ahead.

[Thomas Allen, Managing Director at Morgan Stanley]

Thanks. Just a follow-up on the guidance. Super encouraging that you guys increased it. I did think it was interesting that we're now one quarter into the year and you widened the range. Is that because of macro uncertainty or something else? Thanks.

[Jay Snowden, CEO and President at PENN Entertainment]

It's not really due to anything. We just tried to, you know, provide a guidance range that took into account the beat for Q1. I wouldn't read into that, Thomas. We feel obviously good about the midpoint of that new range, which is higher than what we had out there at the beginning of the year. Look, the only thing we don't know is, you know, macro impacts of things. There's a lot going on in the world today. I would also add that, you know, we haven't seen impacts from higher gas prices, but we've also been down this road before. I mean, our regional businesses, you look at the catchment areas, you're talking about, you know, a 20-minute drive. This is not gonna break the bank.

[Jay Snowden, CEO and President at PENN Entertainment]

You're not gonna be spending a lot of money on gas to go to a casino once a week, or a couple of times a month, whatever your habits are. So we feel good based on what we see, what we have visibility of, the trends as recent as today, I mean, yesterday's results. I mean, we're looking at this every day and, we feel good about the guidance we had out there. We feel good about the guidance we just raised, but I wouldn't read into the range meaning anything.

[Thomas Allen, Managing Director at Morgan Stanley]

Perfect. Then just on the interactive side, you know, could you give us how much revenue you expect to generate this year? If you're not comfortable with that, just like qualitative commentary, are you more optimistic than you were last quarter around the amount you can generate this year?

[Jay Snowden, CEO and President at PENN Entertainment]

Yeah. We haven't given that number, but I would say our optimism continues to grow. Ontario is off to a great start. I had high expectations. We're doing better than I thought we would do in Ontario, which is, it feels great to say. You know, we're continuing to grow our online casino business. I think, you know, football season, it's gonna be our second real full season of football at scale. We learn every month, every quarter what works, what doesn't. I think our partnership with Barstool just gets stronger in terms of how we communicate and what we do promotionally and through events and live streams and all that. Yeah, momentum is good and, you know, our confidence continues to grow in terms of the future prospects.

[Thomas Allen, Managing Director at Morgan Stanley]

Perfect. Thank you.

[Operator]

Thank you. The next question comes from Ryan Sigdahl of Craig-Hallum Capital. Please go ahead.

[Jay Snowden, CEO and President at PENN Entertainment]

Hey, Ryan.

[Ryan Sigdahl, Senior Research Analyst at Craig-Hallum Capital Group]

You've talked a lot about revenue, kind of the demand side, but curious if you're willing to break out the cadence of property-level EBITDAR margin by month in the quarter, kind of January versus, you know, March, and then if you're willing to comment on April has trended?

[Jay Snowden, CEO and President at PENN Entertainment]

You should just assume for Q1 that it got sequentially better. Omicron impacted January to some extent. February was really good, March was better, and April was very good. You have to remember, and I always try to be transparent about these things, there were five full weekends in April, so you should expect April's margins to be really good. Any time historically that your April margins are anything like March, that's very rare, even when you have calendar benefit. March is typically the best month of the year, and momentum in the business right now is very good. Todd, I don't know if you wanna add anything to that.

[Todd George, EVP of Operations at PENN Entertainment]

Well said, Jay. The only thing I would add, you know, Jay and I were talking about this. March is always one of the best months traditionally. April is always one of the tougher months, based on holidays and taxes and everything else. The actual growth from 2019 to 2022, April to date, it has been one of our strongest months from a margin standpoint. Really happy with where we're trending.

[Ryan Sigdahl, Senior Research Analyst at Craig-Hallum Capital Group]

Great. If you add up where you've launched 3 C's and then the coming properties over the next two quarters, you're at 23. How many total properties do you anticipate today will be allowed by regulations? Secondly, on that, you gave some good qualitative metrics, but anything you can share about the financial impact, thinking revenue uplift, margin impact, et cetera?

[Jay Snowden, CEO and President at PENN Entertainment]

The regulatory meetings we've had have gone great. Richard Primus, who heads up our tech team, and a bunch of his folks have done a great job working with the properties and the regulators. Every time the regulators see what our offerings are, there is this kind of, "Oh, we get it and we see it." I think, you know, our goal is to be at, say, 30 properties depending on regulatory schedules. You know, not all that will arguably happen this year just based on getting in front of regulators, making sure that we can roll everything out.

[Jay Snowden, CEO and President at PENN Entertainment]

The impact you're looking at very much in its infancy as we move across states, but we are seeing a good lift that as we get more people into the ecosystem, we should be able to share some really good data points. I think we're probably a few quarters away on that.

[Ryan Sigdahl, Senior Research Analyst at Craig-Hallum Capital Group]

Great. One last one for me. Just MGM went through a rebrand, expanded their loyalty rewards program earlier this year. How do you feel about the breadth, depth, and really brand of your mychoice program?

[Jay Snowden, CEO and President at PENN Entertainment]

I would say stay tuned.

[Ryan Sigdahl, Senior Research Analyst at Craig-Hallum Capital Group]

Great. Thanks, guys. Good luck.

[Jay Snowden, CEO and President at PENN Entertainment]

Thanks, Ryan.

[Operator]

Thank you. The next question comes from Bernie McTernan of Needham & Company. Please go ahead.

[Bernie McTernan, Senior Research Analyst at Needham & Company]

Great. Good morning. Thanks for taking the questions. Jay, I was hoping you could just zoom in on the tech stack launch in Ontario with your PAM and bonus engine. How is that experience? Maybe if you can compare it to the launch in some of the U.S. states where you're using someone else's technology, anything that you could call out that you were able to do that you hadn't in other state launches. Then just you talked about a little bit, but just the roadmap from here in terms of the three key rollout of your tech and trading platforms, and then it's just kind of a test period in Canada until the launch in the U.S. next year. Just want to make sure we have it right and anything else to think about the tech stack. Thanks.

[Jay Snowden, CEO and President at PENN Entertainment]

Yeah. The second one's easy, Bernie McTernan. The roadmap hasn't changed. Our plans haven't changed. We actually have a slide. I believe it might be in the appendix of the presentation if you haven't seen it, which just reinforces what we said day one when we announced we were acquiring theScore in terms of key quarterly milestone dates and what we plan to do in those quarters. It takes you out through the end of 2023. So that one is status quo, which is great. Everything's as planned. Our engineering teams are working great together between Penn Interactive and theScore and product design people. We're really excited. It's these are fun days.

[Jay Snowden, CEO and President at PENN Entertainment]

I would say on the launch on our own PAM and bonus engine in Ontario, it's obviously early days. I was thrilled that we really knocking on wood, we didn't have a hiccup. I mean, it was so smooth and seamless. We handled it under a tremendous volume and stress at the launch with in Ontario was the NCAA National Championship game was the first day of launch. There was a lot of volume and handled it great. The team at theScore Bet, the Levy family, everybody there, we just we're really happy with how that's gone so far.

[Jay Snowden, CEO and President at PENN Entertainment]

I think probably the biggest things that are noteworthy, and we highlighted these, Benjamin Chaiken, but, you know, for us, being able to have your sports betting offerings fully embedded and integrated into your sports media offering is super powerful, especially given how popular the theScore media app is throughout Canada. It's probably worth a trip for some of you guys on the sell side to get up there and actually try it out. It's really amazing. You can populate your bet slip, do everything within the media app, and then when you're ready, it just seamlessly takes you over to the betting app. You deposit your bet and off you go.

[Jay Snowden, CEO and President at PENN Entertainment]

Owning your own PAM allows that to happen and allows it to happen in the exact way that you want it to happen, which is sometimes challenging when you're working with third parties because the third parties are always gonna look at, you know, least common denominator of what all of their B2B clients are looking for. In this case, we get to control the entirety of that product experience and roadmap. On the bonus engine side, again, still very early, but you should think about the benefits really being that we can personalize and customize offers. When you're thinking about CRM opportunities, and I think the online industry in the U.S. and Canada is still so new. I don't think any of us currently are doing that well.

[Jay Snowden, CEO and President at PENN Entertainment]

I think mostly the marketing efforts, whether it's promotional or media, it's kind of a shotgun approach and everybody gets whatever the offer is. What we're able to do now that we have our own promotional engine is customize offers based on individual behavior. That's obviously super powerful. I think we've become quite sophisticated at being able to do that at our land-based businesses. To be able to apply that same science and knowledge and know-how and apply it to our online businesses is gonna be really powerful. Yeah, we're feeling really good. Managed trading services, as you'll see on that timeline that I referenced earlier in the slide deck, that's still planning to be launched before football season this year in Ontario.

[Jay Snowden, CEO and President at PENN Entertainment]

Obviously, what comes with that is just an expanded library of betting markets when you think about same game parlays and all sorts of different parlay options. We can be a lot more flexible on pricing and how we think about exclusive bets, whether just in Canada or Canada and the U.S. with our friends at Barstool. There's meaningful cost savings with all of this because today, or up until recently, theScore had third-party providers for their PAM as well as managed trading services, much like we currently do in the U.S. As those costs roll off and you're on your own technology, there's real meaningful cost synergies to go along with the revenue synergies that I referenced.

[Bernie McTernan, Senior Research Analyst at Needham & Company]

Understood. Jay, maybe just one follow-up, 'cause admittedly I haven't taken the field trip up to Canada yet. If you were to isolate competition to just product, and so you're obviously competing against a whole bunch of new operators with the gray market operators in the U.S., how does just the competitive landscape feel from a pure product standpoint relative to the U.S.? Do you think the U.S. operators are ahead of maybe those gray market operators? Obviously, there's bet365 there too, which is generally considered to be one of the better operators globally.

[Jay Snowden, CEO and President at PENN Entertainment]

Yeah, it's a great question, and I think it really boils down to, you know, the individual end user and, you know, what are they looking for? What are they accustomed to? There's gonna be some people in Ontario that have been betting with bet365 in the gray market for a long time, and that's what they're just gonna continue to do because that's what they've been doing. I'm confident that people who have been betting with, you know, gray market operators, they take the opportunity to download our app and to register and deposit. We're very confident that they're gonna continue to come back to us, at least as one of their options as we move forward, because the player experience and how seamless everything is integrated between media and sports betting makes what we're doing there and obviously here very, very unique.

[Jay Snowden, CEO and President at PENN Entertainment]

Our plan, and again, I mentioned in the slides that 80% or 79%, given rounding up, of our users on theScore Bet in Ontario were known on theScore media app. There's obviously a lot of value in being able to convert and being able to make this seamless on the media applications, and we're gonna be doing the same thing here in the U.S. and bringing the Barstool Sportsbook offering and fully integrating that into theScore media app throughout the United States, second half of this year. I'm not sure if that'll be beginning or middle of football season, but sometime during football season. Given what we're seeing in Ontario, we think that'll be another nice shot in the arm for our business here in the U.S.

[Bernie McTernan, Senior Research Analyst at Needham & Company]

Got it. Thanks, Jay.

[Operator]

Thank you. The next question comes from Chad Beynon of Macquarie. Please go ahead.

[Chad Beynon, Managing Director at Macquarie]

Hi, good morning. Thanks for taking my question. Jay, wanted to ask about California. I think there's been some confusion from investors this week because there's two separate measures on the ballot in November. Do you have a sense of where California's support is on the bill that you're supporting? Understanding that there will be a lot of communication on the airwaves and in person between now and the election. Then secondarily on California, is your database proportional in California to the U.S. population, or do you have, you know, a higher percentage of stoolies in California? Thanks.

[Jay Snowden, CEO and President at PENN Entertainment]

I'll tackle the second one first, Chad, and then I'm gonna ask Eric Schippers, who heads up gov relations and public relations for us, because he's super close to what's going on in California and can tackle some of the more detailed parts of the question that you had. In terms of database and popularity, if you look at it across the country, the Northeast, obviously Barstool is strongest because that's where it started. But it's now such a national brand, very strong in the Midwest. We can't wait to get launched in Ohio. It's one of the most popular states in the country for Barstool Sports, and we obviously have four great casinos in Ohio as well. Down South, very, very strong and out West, strong.

[Jay Snowden, CEO and President at PENN Entertainment]

Dave actually spends quite a bit of time out in California for a variety of business things. Yeah, you should assume that what we've been able to do in some of the larger population states, that would be our expectation for what we could deliver in California as well.

[Eric Schippers, SVP of Public Affairs and Government Relations at PENN Entertainment]

In terms of the polling, there has been, you know, some competing polls out there, but we're pretty confident in the strength of our polling, which shows that 59% of respondents support our ballot initiative, which would open up the market to mobile gaming. The other initiative, which is on the ballot, would be for retail only. They're not really competing. They're actually complementary. If both were to be approved, you know, we can go down the road and be very successful there. If only ours is approved, the tribes still have an opportunity through partnerships with us to participate. I think the key thing here and what is driving the popularity of our initiative is the fact that 85% of the revenues are gonna go to support mental health issues, and that is wildly popular in California.

[Chad Beynon, Managing Director at Macquarie]

That's great. Thanks for that detail. Then just wanted to ask the question you get from time to time on the Strip. It appears that there's still a few assets for sale out there. What's your appetite for looking at properties on the Strip at this time?

[Jay Snowden, CEO and President at PENN Entertainment]

Not much interest. We're not kicking the tires right now on anything, Chad. Occasionally we have in the past, if it's a really unique opportunity and a really unique asset, great location, and we're not looking at anything currently.

[Chad Beynon, Managing Director at Macquarie]

Thank you very much. Congrats on the results.

[Jay Snowden, CEO and President at PENN Entertainment]

Thanks, Chad. We'll take one more question, Tina.

[Operator]

Thank you. The final question comes from David Katz of Jefferies. Please go ahead.

[David Katz, Managing Director and Senior Equity Research Analyst at Jefferies]

Hi, good morning. Thanks for working me in under the wire. If you could just share some thoughts on how we look at theScore in conjunction with Barstool and the degree to which, you know, those customer populations, you know, overlap, don't overlap, fit together, and, you know, where the opportunities are, you know, if there are any to sort of cross over between those two.

[Jay Snowden, CEO and President at PENN Entertainment]

Yeah, happy to, David. I would tell you that the demographics are a bit different. If you look at Barstool, it definitely skews mostly people in their twenties into their thirties. If you look at The Score, it's more in your thirties and forties. There's obviously it runs the gamut, but in terms of you're looking at, like, the core demo, that's what it would look like. There is obviously some crossover here in the U.S. as well as in Ontario, but what we've seen is that when we have activated Barstool efforts, we tend to get a different response than when we activate The Score efforts, which tells you that there's a lot that's incremental between the two customer bases.

[Jay Snowden, CEO and President at PENN Entertainment]

I think, you know, when you think about the opportunities from a pure media perspective, we're already starting to dabble, and we're seeing that there's a lot of opportunity as you think about advertising partnerships and partners that we have at Barstool that have never been introduced to theScore, and vice versa. Both have many Fortune 100 companies as advertising partners who maybe weren't familiar or hadn't been made the introduction to the other media company that we have in our portfolio. I think we're already starting to see that there's a lot of upside in thinking about sales and revenue management and advertising partnerships differently. There's obviously a lot we can do on the commerce and merchandise side.

[Jay Snowden, CEO and President at PENN Entertainment]

theScore is just starting to dabble now, and we're encouraged by what we're seeing there. I think you should expect to hear more from us. There's a number of things that we're looking at right now. Chris Rogers and I were just on a call yesterday about some ideas that we have with our media partners that is, you know, new, different verticals, but really exciting as you think about the loyalty of the audiences we have in our ecosystem and products and services that they're maybe using today outside of our ecosystem that they're not really excited about, but they would love to be more involved in our ecosystem. I would just say, you know, stay tuned, particularly when we close on full ownership of Barstool Sports in Q1 of 2023.

[Jay Snowden, CEO and President at PENN Entertainment]

I think it'll probably become a bigger part of our messaging from there going forward.

[David Katz, Managing Director and Senior Equity Research Analyst at Jefferies]

Got it. That, that's great. In the context of all of the information, you know, we have, and there's so much water under the bridge since we started this discussion, how should we or should we at all think about market share or market share targets for what you have today?

[Jay Snowden, CEO and President at PENN Entertainment]

Yeah. We talk about this a lot internally. We've talked about, you know, our feelings on handle market share versus NGR market share. I wish every state shared NGR market share because the ones that do, we, not surprisingly, score a lot higher in terms of market share overall. NGR is where you start to pay the bills. Handle doesn't pay bills. GGR does not pay bills. NGR, you can start to pay the bills, and so that's all we care about is NGR market share. You should expect that when the market becomes more rational and you don't have as much discounting and buying of the business, which we do not participate in to the extent that most of the rest of the competition does today.

[Jay Snowden, CEO and President at PENN Entertainment]

If you look at what we invest in promos as a percentage of handle, promos as a percentage of revenue, paid media, those spend levels from the competition have to come down or else no one will ever make money, and I think everyone's been very clear about that. As those spend levels from the competition come down, I think that whoever has the best product, the best brand, the best relationship with the end users is going to continue to grow their market share, and we feel very good about our positioning in all of those areas.

[David Katz, Managing Director and Senior Equity Research Analyst at Jefferies]

Got it. Thanks very much. Appreciate it.

[Jay Snowden, CEO and President at PENN Entertainment]

Thanks, David. Thank you, everybody, for dialing in and joining us this morning. We went a little bit over, but hopefully that was of value. We look forward to speaking with all of you again next quarter.

[Operator]

Thank you. This does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you, and have a good day.

Participants

Executives

• Jay Snowden, CEO and President
• Felicia Hendrix, EVP and CFO
• Todd George, EVP of Operations
• Eric Schippers, SVP of Public Affairs and Government Relations

Analysts

• Joseph N. Jaffoni, Founder and President at JCIR
• Joe Greff, Managing Director at JPMorgan
• Shaun Kelley, Managing Director and Senior Research Analyst at Bank of America
• Barry Jonas, Managing Director at Truist Securities
• Barry Jonas, Analyst at Truist Securities
• Thomas Allen, Managing Director at Morgan Stanley
• Ryan Sigdahl, Senior Research Analyst at Craig-Hallum Capital Group
• Bernie McTernan, Senior Research Analyst at Needham & Company
• Chad Beynon, Managing Director at Macquarie
• David Katz, Managing Director and Senior Equity Research Analyst at Jefferies