PENN Entertainment, Inc.

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 1 followed by the 4 on your telephone. If at any time during the conference you need to reach the operator, please press star 0. It is now my pleasure to turn the conference over to Joe Jaffone, Investor Relations. Please go ahead.

Thank you, Tina. 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 involved 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. 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 National Gaming 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. And 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. 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.

Thanks, Joe. Good morning, everyone. Here with me and why I'm missing this morning is our CFO, Felicia Hendricks, 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 the score bet in Ontario. And I'm proud to say our corporate property and interactive teams have delivered on all fronts in the first quarter. And I want to begin this morning by thanking our team members at all levels of the organization for their continued hard work and dedication and delivering best in class products and services to our guests. And we don't always do this, but I'm going to 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 Roland, Barry Regula, Kim Ginn, and Dan Kennedy, continue to post robust results in what are some of the most competitive markets in the US. Their teams 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 Blackhawk, Colorado and East Chicago, Indiana, led by Sean Demule and Ryan Coppola, have quickly reimagined the way in which we run the business and compete. These properties are both pacing to deliver EBITDA in the same range, if not higher, than what they generated in 2019, despite the new competition, which is not an easy feat. So hats off to them as well. In Las Vegas, Hussein Marous 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. And 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 Julecki and Steve Peat 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. Our teams in central Pennsylvania led by Dan Ime, Ruben Warren, and Mark Costella 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. And then lastly, our interactive businesses led by John 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, omnichannel cross-sell, great products, and owning our media strategy with our friends at Barstool Sports and The Score has led to growth in our net gaming revenue market share results in the first quarter. 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, 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 reengaging 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 eight, during the quarter, our industry-leading My Choice customer database grew across all worth segments, and we also added 355,000 new members to our ecosystem. Life to date, we have increased our database by over a million from digital registrations alone for the My Choice 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 sportsbook 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 three Cs, 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 3Cs 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. We plan to introduce the 3Cs 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 Racecourse in Pennsylvania and at LaBear's Lake Charles in Louisiana. And we plan to roll out additional Barstool Sportsbooks at six more properties throughout the remainder of the year. 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 19, we've seen a 53% increase in table theo 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 LaBerge Lake Charles, and Louisiana natives Ben Mintz and Megan Making Money embarked on a Mincy 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. 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. 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 28th, which became our 12th state, excuse me, one of the top highlights of the quarter is undoubtedly the launch of the Score mobile app in Ontario on April 4th. As highlighted on slide 18, while still early, the score bet's performance thus far in Ontario has exceeded our expectations, due in large part to the score's incredible brand recognition and media footprint, as well as the support from Barstool Sports and the popular team from Spit and Chicklets, the number one hockey podcast in Canada. As a reminder, with a population of 15 million people, Ontario would rank as the fifth largest state in the U.S. on a population basis. Since launch, The Score bet ranks as Canada's number one most downloaded sports betting app and the number one rated betting app in the iOS store. Early results reflect strong cross-sell opportunities. Currently, 79% of all bettors in Ontario are the Score media app users, and 50% of the Score sportsbook users have wagered on the iCasino product. Just after launch, the Score announced an exclusive 10-year gaming partnership with the Toronto Blue Jays. This deal grants the Scorebet national marketing rights that extend across all gaming categories, including sports betting, casino, online casino, and fantasy sports. The Blue Jays and the Scorebet also plan to create a branded premium 365 days a year flagship sports bar and restaurant at the Rogers Center that will serve as an entertainment hub and destination for fans. The Scorebet app is built on the Score's state-of-the-art player account management system, excuse me, and Bonus Engine, which provides highly customized features and seamless integration into the ScoreMedia app. In the third quarter, we expect to transition as planned the ScoreBet in Ontario to the Score'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. Meanwhile, we remain on track to transition the Barstool Sportsbook to the Score'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 the SCORE and Barstool Sports. As we mentioned on previous calls, we plan to lead with the SCOREbet in Canada, given its strong brand equity there, while focusing on the Barstool Sportsbook brand in the US. We feel the best way to maximize the value of both brands in the US is to fully integrate the Barstool Sportsbook app into the ScoreMedia app, which will occur during the second half of this year. 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. And 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 five, we are continuing to add new features to drive further adoption. You'll see on slide 15, we introduced MLB Same Game Parlay, Parlay Plus option, and we'll 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. 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 the score 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 18th, the second standalone Barstool Sports Bar opened in Philly to very strong demand, and two additional locations are under development in major metropolitan locations. In addition, in April, Frankie and Trent from the Barstool Golf Podcast attended the PGA Zurich Classic, providing video commentary, which garnered 4 million views and over 100,000 engagements. On May 7th, 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 the score. And with that, I'll turn it over to Felicia.

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. As we look toward the remainder of the year and take note of our growing My Choice 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 to $6.55 billion, and our EBITDA to a range of $1.875 billion to $2 billion. We continue to believe that our property-level EBITDA margins are sustainable at 37%. Now, looking at our first quarter 22 cash expenses, In the first quarter, corporate expense inclusive of cash-shuttled 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. And total CapEx was $65.6 million. of which 54.6 million was a combination of maintenance and return generating projects, including the three Cs and our Barstool retail sportsbooks. The balance was project capex associated with our new Hollywood York and Morgantown projects in Pennsylvania. As of March 31st, 2022, we had 183.4 million fully diluted shares outstanding. Regarding certain 2022 modeling metrics for your free cash flow forecast, we expect 22 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, and for the full year, fully diluted shares are expected to be 183.4 million shares, which is before any incremental share repurchases. 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. We continue to see a dislocation between where we value our shares and where they're 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. And on May 3rd, 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 a prior $700 million revolver and a five-year $550 million Term Loan A facility and a seven-year $1 billion Term Loan B facility. 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 leveraged 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. And with that, I will turn it back to Jay.

Thanks, Felicia. On April 26th, 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. 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 La Berge Casino and 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. 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 Scorebet virtual panel to recognize the critical role our female team members played in the development of the Scorebet app. I look forward to continuing to update you on our ongoing ESG efforts throughout the year. And with that, Tina, we'll open it up to questions.

Thank you. If you would like to register a question or comment, please press the 1 followed by the 4 on your telephone box. 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 graf of jp morgan please go ahead um good morning everybody um i have a two-part question on interactive and then one on the land-based casino side um

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? And then you put in 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? And then I'm assuming that's EVA.positive right now, that segment. Can you talk about the margins and maybe the scale benefits and the impact margins as you introduce new titles and game introductions from here?

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

Sure. If you ask me to 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 any other segments that might be worth calling out? I know you have in the 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.

Yep. Thanks, Joe.

Todd, you want to tackle the last question first, and then I'll hit the first couple?

Sure. Thanks, Jay. And thanks, Joe. So, 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 fall off in that lower end segment. And 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. And 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. So when we look at this, and again, as you know, not really a high profitability segment to begin with. So we're very strategic in the way we reinvest in this group. And what we've seen is that they've moved either up and to the right or frankly into unrated where they're actually more profitable for us.

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. But on the Barstow Eye Casino 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, a total handle. And so 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%. 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. So 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 and to the right. We're not satisfied, obviously, with where we are in online casino. Most of our energy and focus and resources for the first year and change that we've been live has been toward making sure that we had online sports betting products that was going to be competitive. I think we've definitely delivered on that, both here in the US as well as in Canada. And you should expect to see our online casino products continue to improve. The number of games in the library continue to grow, both from well-known third-party providers as well as our own games. And I think you're going to 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. And Todd highlighted in our earnings release, as well as in the slides, just how rapidly we've been growing our database. And then there's all of these great omni-channel cross-sell opportunities. So 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 going to get better in time as we have more scale and get better and also owning our own technology. But you think about the cross-sell to online casino and the cross-sell to our brick and mortar casinos and elsewhere. Very exciting. I think the last part of your question was around GGR to NGR. And 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. 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.

Great, thank you. And 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 about handle and GGR performance, and 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?

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 DAUs 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, well, one, we had a couple of weeks to work on preregistration, and so our friends at Barstool Sports and, of course, the SCORE, we really were very successful in getting a lot of downloads and registrations done before the go-live date of April 4th. So that was something that worked really well for us that we hadn't done as much in the U.S. The other thing I would say is that when we went live on April 4th, we were obviously really pleased with the volume we were seeing in downloads, registrations, and first-time deposits. But what's been interesting in Canada, and I attribute this just to having a little bit of a different strategy than in the U.S. In the U.S., really relying organically mostly with our partners at Barstool And 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 going to get in those first few weeks. You still continue to grow downloads, registrations, and first-time deposits on week two and week three, but you do see it fall off a little bit faster because the audience follows so quickly. And in Ontario, what we've seen is that even since the day of launch on April 4th, 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. So we're continuing to build that business. We're seeing new users download the app and deposit and bet every single day, and the churn has been low. So we feel really good about the product. We're obviously live on our own player account management and bonus engine already. So 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, so far so good. We'll share a lot more detail about Ontario in the future. I don't want to 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, Um, we didn't really know what to expect because people have been playing with gray market operators and apps for many years in Canada. Um, but given our ability to quickly penetrate and convert people from the media app to the bedding app and to grab people, um, through our other, uh, relationships throughout Ontario, we've been very pleased. I don't, I can't really compare it to anything within market because we don't know how everyone else is doing. other than there's been some publicly reported number of downloads of the app and things of that nature, which we obviously have scored very well. And I would tell you all of the other metrics are consistent with what's been reported publicly.

Great. Thanks, Jay.

Thank you. The next question comes from Sean Kelly, Bank of America. Please go ahead.

Hey, good morning, everyone. Jay, a lot of ground has already been covered. I don't know if this is for you or maybe for Todd, but if we can go back to a couple of the comments on the core consumer. If I was going to 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 there's really nothing to see here. 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.

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

Hey, thanks, Sean. So, you know, I'd 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, kind of that zero to 49, that's really down less than half a percent, 0.3%. But really we're making that up on the 50 to 99, which is up 3.7%. The unrated, which is up 5.4%. We're seeing really positive visitation when we kind of slice and dice our database and look at not only the work segments, but also kind of the geolocation. We are seeing anybody that most of our customer base is within 50 miles, just based on where our properties are located. So 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. So I think you start looking at the Midwest, the South, and we're seeing really decent growth across all segments. And 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. So again, we're seeing different growth patterns than what some of the industry has seen. But really, we couldn't be happier with what we've seen right up into May.

Super. Very clear. And then Maybe just as my follow-up, 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? I think a lot of this should be self-funding out of free cash flow, but maybe just help us think about the balance and sort of programmatic versus opportunistic, the sort of operative words for us on Wall Street.

Yeah, thanks, Sean. Yeah, I think that we're going to 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 in the high 30s, and so we'll be in the market again. But it's going to be opportunistic, and I talked about our strong balance sheet and our liquidity, and so we're just in a really fortunate place to be able to be nimble and take advantage of the dislocation that we see.

Thank you very much.

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

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

Todd, do you want to tackle that one as well?

Thanks, Jeff. 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. And as we start to get into this year, you look at a Greek town, a LaBerge like 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, we've talked about this on numerous calls, doing away with the completely dated buffet concept, which is very fortuitous now, obviously, with rising prices. But using that space in a much better way, creating more interactive venues, 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. But 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 three Cs that Jay mentioned. But 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. So 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. We want to make it easier for everyone coming in to really start enjoying their experience and enjoying their visit.

I was just going to 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. And 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 the last couple of months. And you consider that all of those options are now available to people who love all of those options and who have been a part of those options for many, many years. And 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. So 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. And as you look at Q1 of this year versus Q1 of 2019, the growth in those younger segments is Super robust.

Yeah. But I, you know, to Jay's point that 21 to 34, Barry is up 83% compared to 2019. So, 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? And again, this created that unique opportunity in 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. But we're holding on to them and a lot of that is kind of incorporating the entertainment that they're looking for.

That's really helpful. And then just a question on the guidance raised. 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 concerned about new supply cannibalizing you in the back half of the year. And I would just add, I think the implied margin actually went down at the midpoint, so any color there would be helpful.

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, it's delicate, right? We put ourselves out there a little bit doing guidance at the beginning of the year when most of our competitors chose not to, and I wasn't sure if that was the right decision or not when we did it, but 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. And so we've done that. And 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. But our properties have made quick adjustments. Our leadership teams, Todd and Aaron Chamberlain 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. 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 going to be temporary casinos for a while before permanent. If you look at the guidance raised, 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. And if trends that we're seeing today continue, then that's likely a conservative position to take.

Yeah, I would only add, Jay, and Jay, you talked about this, that 55 plus to 65 plus, definitely, they have been lagging behind. You heard others in the industry talk a little bit about the coronavirus impact in January. So that has kind of kept them a little behind, and we feel there's upside definitely there. And 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.

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

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

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. It's not really due to anything. We just tried to provide a guidance range that took into account the beat for Q1. I wouldn't read into it widening. 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. And look, the only thing we don't know is macro impacts of things. There's a lot going on in the world today. But I would also add that we haven't seen impacts from higher gas prices, but we've also been down this road before. Our regional businesses, you look at the catchment areas, you're talking about 20-minute drives. This is not going to break the bank. You're not going to be spending a lot of money on gas to go to a casino once a week or a couple 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.

Perfect. And then just on the interactive side, could you give us how much revenue you expect to generate this year? And 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?

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 feels great to say. And, you know, we're continuing to grow our online casino business. I think, you know, football season, it's going to 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. So, yeah, momentum is good, and, you know, our confidence continues to grow in terms of the future prospects.

Perfect. Thank you.

Thank you. The next question comes from Ryan Isigdal of Craig Hallam Capital. Please go ahead.

Good morning. Thanks for taking our questions. Hey, Ryan. Curious on – so 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 EBITDA margin by month in the quarter, kind of January versus March, and then if you're willing to comment on April as trended.

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. 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. But 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 want to add anything to that.

Well said, Jay. And the only thing I would add, you know, and 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. But the actual growth from 2019 to 2022 is April to date, it has been one of our strongest months from a margin standpoint. So really, really happy with where we're trending.

Great. And then if you add up where you've launched, CCC, 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? And then secondly... On that, you gave some good qualitative metrics, but anything you can share about the financial impact, thinking revenue uplift, margin impact, etc.?

The regulatory meetings we've had have gone great. Rich 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. So I think our goal is to be at, say, 30 properties depending on regulatory schedules, but not all that will arguably happen this year just based on getting in front of regulators, making sure that we can rule everything out. But 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. But I think we're probably a few quarters away on that.

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?

I would say stay tuned.

Great. Thanks, guys. Good luck. Thanks, Ryan.

Thank you. The next question comes from Bernie McCarran of Needham & Co. Please go ahead.

Great. Good morning. Thanks for taking the questions. Jay, I was hoping you'd just zoom in on the tech stack launch in Ontario with your PAM and bonus engine. How was 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 had in other state launches. And then just, you talked about it a little bit, but just the roadmap from here in terms of the 3Q 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.

Yeah, the second one's easy, Bernie. 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 the score in terms of key quarterly milestone dates and what we plan to do in those quarters, and it takes you out through the end of 2023. That one is status quo, which is great. Everything's as planned. Our engineering teams are working great together between Penn Interactive and the SCORE and product design people. We're really excited. These are fun days. And 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, I'm knocking on wood, we didn't have a hiccup. It was so smooth and seamless. We handled it under tremendous volume and stress at the launch. In Ontario, the NCAA National Championship game was the first day of launch. There was a lot of volume and handled it great. The team at the score bet, the Levy family, everybody there, we're really happy with how that's gone so far. I think probably the biggest things that are noteworthy, and we highlighted these, Bernie, but for us, being able to have your sports betting offering fully embedded and integrated into your sports media offering is super powerful, especially given how popular the Score Media app is throughout Canada. And it's probably worth a trip for some of you guys on the Zelle 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, you bet, and off you go. So 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 least common denominator of what all of their B2B clients are looking for, and in this case we get to control the entirety of that product experience and roadmap. And 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. So when you're thinking about CRM opportunities, and I think the industry, online industry in the U.S. and Canada is still so new, and I don't think any of us currently are doing that well. 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, and what we're able to do now that we have our own promotional engine is customize offers based on individual behavior. And that's obviously super powerful. I think we've become quite sophisticated at being able to do that at our land-based businesses. And so to be able to apply that same science and knowledge and know how and apply it to our online businesses is going to be really powerful. So yeah, we're feeling really good. And then 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. 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. And there's meaningful cost savings with all of this because today, or up until recently the score had third-party providers for their PAM as well as managed trading services, much like we currently do in the U.S. And 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've referenced.

Understood. And, Jay, maybe just one follow-up, because admittedly I haven't taken the field trip up to Canada yet, but if you were to isolate competition to just products, And so you're obviously competing against a whole bunch of new operators with the gray market operators that aren't in the U.S. How does 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.

Yeah, it's a great question, and I think it really boils down to the individual end user and what are they looking for, what are they accustomed to. There's going to be some people in Ontario that have been betting with Bet365 in the grey market for a long time, and that's what they're just going to continue to do because that's what they've been doing. And so I'm confident that people who have been betting with grey market operators They take the opportunity to download our app and to register and deposit. We're very confident that they're going to 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. Our plan, and again, I mentioned in the slides that 80% or 79% gets rounding up. of our users on the Scorebet in Ontario were known on the ScoreMedia app. And so 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 going to be doing the same thing here in the US and bringing the Barstool Sportsbook offering and fully integrating that into the ScoreMedia 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. And 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.

Got it.

Thanks, Jay.

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

Hi, good morning. Thanks for taking my question. Jay, I 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? And then secondarily on California, is your database proportional in California to the U.S. population, or do you have a higher... percentage of stoolies in California.

Thanks. I'll tackle the second one first, Chad, and then I'm going to ask Eric Shippers, who heads up 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. 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. And Dave actually spends quite a bit of time out in California for a variety of business things. So, 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 can deliver in California as well.

And then in terms of the polling, there has been 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. And so they're not really competing. They're actually complementary. And if both were to be approved, 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. And 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.

great thanks for that detail and 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 not much interest we're not we're not kicking the tires right now on anything Chad

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.

Thank you very much. Congrats on the results.

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

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

Hi. Good morning. Thanks for working me in under the wire. If you could just share some thoughts on how we look at the score 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.

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 20s into their 30s. And if you look at the score, it's more in your 30s and 40s. There's obviously, it runs the gamut, but in terms of if 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. I think 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 a barstool that have never been introduced to the score 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. So I think we're already starting to see that there's a lot of upside and thinking about sales and revenue management and advertising partnerships differently. There's obviously a lot we can do on the commerce and merchandise side. The score is just starting to dabble now, and we're encouraged by what we're seeing there. So 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 new, different verticals, but really exciting as you think about the loyalty of the audiences we have in our ecosystem. 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. So I would just say stay tuned, particularly when we close on full ownership of Barstool Sports in Q1 of 2023. I think it'll probably become a bigger part of our messaging from there going forward.

Got it. That's great. And in the context of all of the information that 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?

Yeah, we talk about this a lot internally. And 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 are we not surprisingly score a lot higher in terms of market share overall. So NGR is where you start to pay the bills. Handel 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. And 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. If you look at what we invest, 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 those areas.

Got it. Thanks very much. Appreciate it.

Thanks, David. And 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.

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.