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spk08: Please continue to stand by. Your conference will begin momentarily. We thank you for your patience. Greetings and welcome to the Penn Entertainment fourth quarter 2023 results conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the one fallback four on your telephone. If at any time during the conference, you need to reach an operator, please press star zero. I would now like to turn the conference over to Mr. Joe Giafoni, Invest Relations. Please go ahead.
spk20: Thanks, Frank. Good morning, everyone. And thank you for joining Penn Entertainment's 2023 fourth quarter conference call. We'll get to management's presentation and comments momentarily, as well as your questions and answers. During the Q&A session, we ask that everyone please limit themselves to one question and one follow-up. Now we'll review the safe harbor disclosure. Today's discussion contains forward-looking statements. Forward-looking statements involve risks, assumptions, and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors. With that, it's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go ahead.
spk05: Thanks, Joe. Good morning to everyone on the call. As usual, I'm joined here in Wyoming Missing by our CFO, Felicia Hendricks, and our head of operations, Todd George, as well as other members of the executive team. We provide a link to our investor presentation along with our earnings release this morning. If you haven't already opened or printed it out, I would suggest you do that now as our prepared remarks will reference several of those slides as we go along. At a high level, 2023 was another transformational year for Penn Entertainment. We are the only company in the industry that has a fully integrated sports media and sports betting platform, along with an omni-channel base of assets with which to drive cross-play and synergies as the database continues to grow at a rapid pace. The future looks very promising given our unique position and long-term strategic advantages. On the retail side of the business, we generated more than $2 billion in property level EBITDA in 2023 from our industry-leading portfolio of regional gaming assets and impressively delivered on our property level margin goals despite an uncertain macroeconomic environment thanks to our -in-class operators and leaders across the country. We also broke ground on four exciting new retail growth projects in Illinois, Ohio, and Nevada, which we expect to complete by the first half of 2026. As a reminder, we anticipate these will deliver a 15-plus percent return on the aggregate investment. The continued strength of our retail business provides a solid foundation as we continue to invest in our high-growth digital business, which will create significant long-term shareholder value.
spk04: Speaking of the digital business,
spk05: earlier this month we announced that the founding family behind the score, John, Benji, Aubrey, and Noah Levy will be transitioning from their leadership of the score and Penn Interactive. John departed earlier this week, while Benji, Aubrey, and Noah will be leaving in early April. We have been working closely with the Levy's over the last several months on this plan and timing to ensure a smooth operational transition. Their departure comes at a natural inflection point for our interactive business. We've achieved a lot over the last several years, including the completion of our proprietary tech stack, the successful launch of the score bet in Ontario, the migration of our tech stack into the U.S., and now the launch of ESPN bet. Even more importantly, we have developed an incredibly deep bench across Penn Interactive, and we have several talented leaders ready to take on more responsibility in the coming months. I want to extend my sincere thanks to John, Benji, Aubrey, and Noah for all of their hard work and contributions to Penn Interactive's success. We are near the conclusion of the month-long search process for the new head of Interactive, and look forward to sharing an update on that with you in the near future. Turning to slide six in our investor presentation, on November 14th we successfully and seamlessly launched ESPN bet simultaneously in 17 states across the U.S., a first in the industry and no doubt a testament to the strength of our technology teams. Bolstered by the number one brand in sports media, the launch resulted in much higher than expected registrations, generating over one million new signups to our industry-leading Penn Play Rewards program and expanding our digital database by over 50%. In fact, we acquired as many first-time depositors and bettors in the first two months as we had anticipated we would generate in the first full year post-launch. Importantly, approximately one-third of these customers are located within 50 miles of one of our more than 43 retail properties, which sets up well for cross-selling and monetization as part of our omnichannel strategy. In addition, we saw our average monthly active users grow from nearly 190,000 in the third quarter to more than 770,000 in the fourth quarter. Our early success bodes well for our planned launches in North Carolina and New York this year, which I'll talk about in a moment. Given the early success in customer acquisition and retention, we now expect the digital segment to inflect to roughly break even in 2025 and start generating meaningful EBITDA and free cash flow in 2026 and beyond. Turning to slides seven and eight, you'll see that strong early retention and consistent user acquisition have led to steady -over-month increases in cash handle, even as our promotional expenses have started to normalize. Our January cash handle was 289% higher than pre-launch cash handle in October of 23, while our promotional expenses as a percentage of handle went down from .2% in November to .8% this January. According to the latest sensor tower data, which is similar to other data sources you may have seen, such as Aptopia, we have consistently held the number three ranking and share of weekly active users amongst our top providers, providing a foundation for even greater handle and GGR share gains as we grow our share of wallets and monetization per user. The ESPN numbers on the chart on slide eight show steady acquisition and retention across the board, even as our promotional expense began to taper. On our initial promo offer at launch was right in line with our competitors, and we lowered that by 50% in advance of the Super Bowl, given the more recreational play surrounding the game. Meanwhile, the total time spent on ESPN bed, according to the sensor tower data, also continued to ramp nicely as we added new features and integrations, which will only accelerate now that we can focus more of our product and engineering team's energy on product improvements, especially in the areas of same-game parlays, player props, and live betting, as opposed to time-consuming migrations and launches, something we are all very excited about. All of this is very promising as it relates to both top of funnel demand for ESPN bet and early retention success. The important takeaway here is the ESPN bet app is proving to be sticky in the early days as a result of our strong brands and UI UX, which will improve from here with product enhancements and deeper integrations with ESPN in the coming quarters. As you'll see, on slides nine and 10, ESPN bet has helped us reach new demographics of sports fans that are incremental to our digital database, resulting in a 63% greater -over-year parlay mix and higher volumes for non-NFL games, particularly the NBA. While these parlay results are a clear improvement from where we were pre-launch, we still have a long way to go in this area, and you'll see significant improvements throughout 2024. We also saw a 35% increase in our percentage mix of females in our digital database. These data points demonstrate the potential for ESPN bet to help broaden the appeal of sports betting to the more casual better and grow the overall market, an important goal of ours from day one. Notably, before the launch of ESPN bet, overall market handle grew by more than 17% -over-year from January to October 2023 in the states with publicly available data in our market analysis. After ESPN bet, overall market handle is up nearly 30% -over-year from November through December 2023, and it's up over 25% even when you exclude ESPN bet. ESPN bet has and continues to bring new sports fans and bettors into the sports betting ecosystem. ESPN bet has also helped boost our Hollywood-branded iCasino business, which has seen a nearly 280% increase in monthly active users, providing a platform for future growth, with new proprietary content continuing to roll out from our pen game studios. As we've emphasized in the past, when customers engage with us across multiple channels, their value goes up more than six times over those who engage via only one channel, and we continue to see a lot of upside as we improve our iCasino offerings. As illustrated on slide 13, in connection with the launch, ESPN implemented an initial wave of exclusive bet mode integrations across the ESPN ecosystem, which includes our six-pack odds integration. This provides for a seamless click-through from the ESPN Gamecast to a customer's desired bet on the ESPN bet app. This is very powerful, as there are over 28 million monthly active users on the ESPN media app. You should expect more bet mode integrations throughout ESPN's platform by 2024. I set up the outset of our partnership with ESPN that we'd be getting significant value for our marketing dollars by allocating our $150 million per year to the single best brand and platform in the U.S. to reach sports fans and potential bettors. We're already seeing that with the robust menu of promotion and integration across all of ESPN's platforms, including traditional linear advertising, digital media, in-program integration, odds attribution, database marketing opportunities, and access to some of the biggest personalities in sports media for special events, promotions, and social media engagement. As I mentioned, we have just scratched the surface on these integrations, and there's substantially more to all included as part of our deal that we will unveil throughout 2024 and into 2025. Our initial ESPN bet advertising campaign was headlined by SportsCenter anchors Scott Van Pelt and Elle Duncan. We then added spots with NBA legend Kendrick Perkins, the host of Get Up, Mike Greenberg, followed by our most recent commercial with sports betting analyst Aaron Dolan that launched during Super Bowl week. This campaign with Aaron is our first product and integration focused campaign, which we expect will help drive continued awareness of ESPN bet and our direct integration with the ESPN media app. Meanwhile, Elle Duncan and Aaron Dolan hosted a Super Bowl party at the M Resort at our property in Las Vegas, and I'm happy to announce we'll be hosting ESPN bet events throughout the year in our retail sports books. We look forward to additional ESPN bet retail launches at key properties as we continue to create meaningful cross-sell opportunities. Looking ahead to the rest of 2024, we are excited to introduce ESPN bet in North Carolina, which is expected in March, and New York expected prior to football season, in each case, of course, subject to regulatory approvals. While the economic model in New York is indeed challenging, we look forward to bringing ESPN bet to the largest regulated online sports wagering market in North America. These two new jurisdictions will be extremely efficient for us. As highlighted on slide 16, our ESPN annual national marketing spend per capita will be reduced by 20% with the addition of North Carolina and New York, which will take our addressable online sports betting U.S. population from 37% to 46% and significantly expand our reach and scale. Very important for us as most of our ESPN and off-channel marketing spend is nationally focused. As noted in the release this morning, the interactive segment, EBITDA losses for the fourth quarter were higher than expected. The majority of that miss was driven by the high volume of customers acquired through ESPN bet, which resulted in elevated promo expense that negatively impacted net revenues and to a lesser extent unfavorable hold due to customer-friendly sports results. The first two weeks following the launch of ESPN bet in November happened to be two of the lowest hold percentage weeks of the entire NFL season. Looking ahead, we expect that first quarter 2024 interactive EBITDA losses will be roughly half of our fourth quarter 23 interactive EBITDA results and for Q1 to be the largest EBITDA loss quarter of the year for us in 2024. For the entire year of 2024 on a same store basis, we anticipate an EBITDA loss commensurate with what we saw in Q4 at around $330 million, demonstrating the top line momentum and efficiencies on the cost side. Due to the two state launches this year in North Carolina and New York, which we announced on Tuesday, we are forecasting a total EBITDA loss in 2024 of approximately $400 million. As mentioned earlier, we now anticipate 2025 being around break even and 2026 to deliver meaningful positive EBITDA and free cash flow. Before turning it over to I would like to thank our property leaders and all of our team members for delivering another quarter of really solid property level performance. Notably, 10 properties spread across our portfolio achieved their highest ever fourth quarter revenue. These outperformers helped offset the impact of supply pressures in a few of our key markets as well as continued softness in our South region. This further demonstrates the benefits of our geographic diversity and unique omnichannel strategy. The introduction of new technologies and our ongoing reimagination of our properties while providing a best in class customer experience is continuing to drive demand for Penn. As you know, our industry leading customer loyalty program, Penn Play, is supported by our 3Cs technology, which is now deployed at 21 properties, collectively representing approximately 70% of our total retail EBITDA. During the quarter, we've also grown our total Penn wallet customers to 110,000 and we've received $300 million in total Penn deposits. As we've often said, those guests who use the digital wallet demonstrate superior loyalty through increased visitation, time on device, and total theoretical.
spk15: Our property level segments reported another solid year. Fourth quarter 23 EBITDA results of 476 million exceeded the implied guidance we provided on our third quarter call despite headwinds of roughly $10 million from the Detroit union negotiations and road closures. And as Jay highlighted, our interactive segment is showing early signs of strong momentum. As usual, you will find on page 12 of our earnings release a table that summarizes our cash expenditures in the quarter, including cash payments to our REIT landlords, cash taxes, cash interest, and total cap X. Of our total $152 million in cap X in the quarter, $16 million was project cap X primarily related to our four retail growth projects. We ended 2023 with total liquidity of $2.1 billion, inclusive of $1.1 billion in cash and cash equivalents. We expect our liquidity to remain strong throughout 2024 and we have no debt maturities until 2026, which are our $330 million convertible notes. As we previously guided on our third quarter earnings call, we continue to expect our lease adjusted net leverage to peak in the third quarter of 24. While third quarter leverage will be higher than initially anticipated given the demand-based strength of our ESPN bet launch in the fourth quarter, 23, this increase is temporary and we will also delever more quickly. By year end 2025, we will return to pre-ESPN bet leverage levels and in 2026, we will generate meaningful EBITDA and free cash flow from the interactive division. Thinking about this another way, our path to record free cash flow is very clear. Following a year of investment in 2024 and delevering in 2025, 2026 will be an exciting inflection point for us given the high EBITDA of free cash flow conversion of our interactive business, which when combined with the free cash flow generated by the existing core business, plus the four retail growth projects that will be coming online in early 2026, will position us extremely well to drive shareholder value. I will now provide guidance for our retail and interactive segments. For the full year 2024, we expect retail revenues to range from 5.6 billion to 5.75 billion dollars and adjusted EBITDA to range from 1.905 billion dollars to 2.025 billion. Our guidance factors in extreme January weather, new supply in Nebraska, Illinois, and Louisiana, road construction in a couple of markets, and moderate upward wage pressure. For the interactive segment in 2024, we expect to generate revenues of 1.28 billion to 1.415 billion and an adjusted EBITDA loss range of 420 million to 380 million. These ranges include our launches in North Carolina and New York. On a same store basis, we anticipate an adjusted EBITDA loss of around 330 million. To help you with modeling the interactive segment revenues, you should assume that our 2023 tax gross up of roughly 400 million remains flat year over year in 2024, and other revenues inclusive of skins, social gaming, and media is roughly 200 million in 2024. As Jay mentioned earlier, in the first quarter of 2024, we expect the interactive segment adjusted EBITDA loss to be roughly one half of our fourth quarter interactive EBITDA results. For the first quarter 24 to be the largest EBITDA loss quarter of the year. We expect 2024 corporate expense of roughly 105 million dollars, inclusive of our cash settled stock based awards. Total CAPEX for 2024 is approximately 500 million, inclusive of 275 million dollars of project CAPEX for our four development projects. For cash interest expense, we forecast 170 million dollars for the full year after roughly 13 million dollars of interest income. For cash taxes, we are projecting to be in a refund position of roughly 15 million dollars. And as you think about our share count for 2024, our basic share count as of the end of 2023 was 152 million, and we typically have roughly 15 million of diluted diluted shares inclusive of the 14 million share dilution from the converts. And with that, I'll turn it back to Jay.
spk05: All right, thanks, Felicia. As you saw in our release, we're continuing to expand on our corporate social responsibility efforts. As we look back on you on the year, I'm very proud of the continued growth of our diversity, equity and inclusion initiatives, which are deservedly gaining a lot of attention. Newsweek named Penn one of America's greatest workplaces for diversity, and Forbes named us for the third straight year as one of America's best employers for diversity. Time Magazine went so far as to name us one of the world's best companies for 2023. Meanwhile, on the community front, we provided more than 7 million in support to local charities and veterans focused organizations, and more than 17 million in economic development grants in 2023. In addition to the more than 8000 volunteer hours from our team members to help those in need. On the environment and on the environmental side, we completed our inaugural scope three greenhouse gas inventory and established carbon abatement targets for 2024 and beyond. You can read more about these all of these initiatives in our 2023 CSR report, which is to be published in April in conjunction with our proxy filing. In closing, we're continuing to see a stable consumer environment and healthy operating trends in our retail businesses. And on the digital side, I want to reiterate that our partnership with ESPN is not your typical media sports book commercial agreement. Ours is an exclusive strategic long term alliance that, as I mentioned, has the potential to deliver unique products, experiences and integrations that are unmatched. And of course, with that will come attractive returns for our shareholders. We had three primary goals with ESPN bet for the first several months post launch. Number one, execute on a successful launch, both in terms of top of funnel demand and app stability, competitiveness and performance. Number two, grow the market given the strong brand equity and reach of ESPN, along with the media integrations. And number three, provide a differentiated experience and value proposition to ensure lasting relationships and product retention. So far, we're off to a great start on all three and have built a tremendous foundation for our upcoming launches in New York, North Carolina and beyond. So with that, Frank, we'll open it up for questions.
spk08: Thank you. If you would like to register a question, please press the one 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 fall by the three. We ask that you limit to one question and one followup only. One moment, please, for the first question. Our first question comes from Joe Gref with JP Morgan. Please proceed.
spk22: Good morning, everybody. I have two questions, not surprisingly, on interactive. First, maybe an easier one. Can you talk about the search for leading interactive and why one hasn't been announced? I don't think the lead is leaving and the timing was all that surprising. Maybe what was surprising was that there wasn't someone named to head it upon their name. They were planning to depart. And then a second question, looks like right now your share maybe in January is sort of in the 7% range. I know the goal is to grow beyond 7, 10 and higher, but if we look at two years from now and OSB and I casino will be 25, 30% higher in two years than it was when it was run rating presently, if you are at a 7% market share level two years from now, obviously a bigger market, can your digital business be EBITDA positive? And you can share with us how you think of profitability, bigger market, 7% share, what that margin range would be. I think that would be hopeful looking at things kind of a couple of years out versus the investment that people are focusing on this morning. Thank you.
spk05: Yep, good questions, Joe. And starting off with the search for the new head of interactive. Look, we've been working with the leavees for months really throughout fourth quarter of 2024 thinking through we have a very deep bench at Penn and who can step up as they exit within the team. And we feel like we've got some great answers to that question. We actually spent a lot of time in Toronto a couple of weeks ago and we've got such a deep bench on the engineering side and on the product side, great marketers in the business. So a lot of this is that we needed the time to make sure that we have a plan in place that by the time the leavees depart that people are already communicated to and stepping up. We also started a quiet search in the fourth quarter because we didn't want this to get out in advance and create uncertainty. And we're very far along in that process. I can't comment on exactly where we are, but you should rest assured that we're very deep in the process. We're very close and we're very excited. The level of talent that we are considering is incredible. And I think the market will see it that way when we announce what we're doing, but I just can't communicate any further on that today. We feel good about the timeline with the leavees leaving in April that we should have something announced obviously before that. We're working to have this be a super seamless transition where the new head of interactive would be there at that time, maybe a little sooner, maybe a little after, but not have a gap in leadership. So that's the plan right now and we'll continue to communicate when we can publicly more about that. The second part of your question is a good one, the 7% share that we're seeing currently and what does that look like a couple of years out? I'll take a step back for a second because I think there's, you know, as we sit here today and how we're thinking about the business, we're three months into this ESPN bet post launch and there's a lot of positives that you can see in those first three months. First, obviously ESPN and the strength of that brand is on full display and they've been amazing partners. They've continued to under promise over deliver. We think getting something in February, it shows up in December. They give us a lot of extra value add beyond what they're required to in our $150 million marketing partnership, which is great. We saw really strong app performance and stability and we've had very good early ratings in the iOS app store. We launched in 17 states simultaneously, the first time that's ever been done. And we also just went through our first Super Bowl with tremendous load and we got through their knock on wood because the teams did such an amazing job preparing and we had no hiccups, 100% uptime. So, feel really good about those two things. Obviously, we shared in the number of slides that our customer acquisition has been very, very strong. That's what drove the promo cost being so much higher than we anticipated with over a million downloads and deposits and bettors in the first two months. We thought it would take us a year to get to that. That speaks to very, very efficient customer acquisition costs in those first two months, something that we never could have imagined. And then, of course, on the retention side, we're in a great spot. If you look at slides seven and eight in our presentation, you can see that we're already in a very, very strong position, a very firm number three position with regard to weekly active users in online sports betting. And obviously, we've picked up significant MAUs in online casino as well. And so, what we're seeing there also is that our cash handle as a percentage of total handle has grown month over month over month from November to December to January, which means that people are weaning off of those early promos, they're dipping into their wallets, making deposits, and continuing to play with us. And we're growing the market. We have a couple of slides on that as well. And I think as we sit here today, the opportunity, of course, is to close the gap of the market share, handle market share that you referenced of 7% and what we're seeing on our share of weekly active users, which is more like double that number. And so, the fact that we're seeing weekly active users at a very stable level means that we've got a lot of people that have downloaded, deposited, and bet. They like the app. They're coming back to the app on a regular basis. But we just don't have our fair share of the market yet in terms of how much time they're spending in the app. But I view that as a positive because we know that our ability to grow our share of wallet and improve the monetization of our users is going to come from two things, which is product enhancements. We're very well on our way. We've been so busy, as I mentioned in our initial opening comments with launches and migrations, that our teams haven't had the ability to really focus on features and functionality. And now we can because we've got most of that behind us. We get North Carolina launched, but we've done so many state launches that's not going to be as time consuming. So, we need to enhance our same game parlay offerings, player pops, live betting, in-game and, of course, deeper integrations with ESPN. And that's happening and will continue to happen. More with the ESPN media app, more with the fantasy app. So, that's what's in front of us. And we believe that if we can be at 7% handle market share in the early days with these things that we know are sort of at first inning or second inning of a game, we feel really good about where those are going to take us over the course of the next 12 months, 18 months, 24 months. So, we don't anticipate that 7% is going to be as good as it gets by any means. We think that the market share is going to be growing steadily as we continue to make product improvements and add more deep integrations with ESPN. And to your question, if we were to be at 7% a couple of years out, could we be profitable? The answer to that is yes. What we don't know as we sit here today is how many more states will legalize from a sports betting and online gaming perspective. But you should feel as though 7% and above is a level that we could definitely generate a profit. Obviously, we would want to have our iCasino market share close to those levels as well. So, that's the way that we, as we sit here today, that's the way that we view things after the first three months. It's really early, obviously, but the number one focus was all the things I mentioned and we're thrilled to see that retention looks really good after three months.
spk08: Our next question comes from Joel Stoff with Susquehanna. Please proceed.
spk13: Thank you. Good morning. Jay, I wanted to ask about kind of the media integrated offering, you know, especially with ESPN's media app. You know, the six-pack link out, I think, was available kind
spk14: of mid
spk13: -January. You know, how long do you expect before that really is, you know, like a kind of a relevant source of new incremental customers for you? And I know, you know, it's obviously early, but in Ontario, I think approximately 72% in terms of what you said of your customers in real betting in Ontario come from the app. What's the right way to think about, you know, again, through that conversion?
spk05: Yeah, the way we think about it, Joe, is that if we can get the level of integrations between media and sports betting in the US between ESPN and the fantasy app, of course, and into ESPN bet that we should be able to get those percentages to be about the same here. So, we're on it. There's really, there aren't disagreements or lack of alignment between us and ESPN on what those integrations will be. Obviously, we're looking forward to bet slip integrations. We're looking forward to fantasy integrations. We think we'll have a lot of that complete by the time we get to football season. It's hard to peg today if it's all going to be done by September. Some of it's going to be in the fourth quarter, but we feel really good and we have a lot of alignment with ESPN on just how important it is. I continue to be really impressed at how many resources that they are putting against ESPN bet. This is a big part of a growth opportunity for ESPN and they're as excited about it as we are, but we should be able to duplicate here in the US the stats that you're referencing in Ontario, Joe. Thanks.
spk08: Our next question comes from Carl Santarelli with Deutsche Bank. Please proceed.
spk03: Hey, everyone. Thank you. Jay, as you think about the guidance parameters you set forth with and interacted for 2024, obviously, if we put the two launches, New York and North Carolina aside, what is underlying that assumption in terms of promo reinvestment? To the extent you could answer that, but where do you imagine promo as a percentage of handle, as a percentage of GDR, however you choose to think about it? What's embedded in that assumption at this point?
spk05: Yeah, I would say, Carlo, without giving exact detail that we anticipate promo as a percentage of handle going forward to be really at market levels. We're not anticipating being the highest. We're not anticipating being the lowest. It probably will fluctuate a little bit month to month depending on what we have going on around March Madness integrations with ESPN. Because remember, a lot of that is driven by top of funnel. The more successful you are in driving people into the ecosystem, you're going to peak in that particular month. There's probably not going to be a lot of volatility during the late spring and summer months with basically MLB, but I think it depends on how successful we are in North Carolina. It could drive that number higher, of course, in March. When we launch in New York, I would expect it to bump, of course. But pretty steady otherwise to be right at market. Our goal is not to be higher or lower than where most others are, which is depending on the state, right around 3%, 2.5%, 3%, .5% right in that range.
spk03: Great. Thank you. Then if I could, just two questions on clarifications on things you guys said relating to the brick and mortar business. First, Jay, you talked about the four projects currently underway, first half of 26. Will there be, I think, late 2025 is the expectation for some? Is that all of them will now be first half of 26 or you will complete the fourth in the first half of 26?
spk05: Yeah, we didn't mean to be confusing there, but we'll have all four done and open in the first half of 26. Could one or two of them hit late 25? Yes. So we really haven't changed. We just thought it would be clearer to say you should expect all four to be open and operating in the first half of 26, but it will be opening the four of them between late 25 and mid 26.
spk08: Our next question comes from Sean Kelly with Bank of America. Please proceed.
spk02: Hi. Good morning, everyone. Jay, I'm hoping you could just help us break down maybe the applied revenue forecast for 2024 a bit more granularly. If we back into it on the digital side, it seems to imply roughly, and again, it'll depend on everybody's TAM here, but maybe 6% to 7% OSB market share. So that's pretty consistent with where we're at today, albeit on a national level, so probably including New York and maybe North Carolina. So I guess the question is, is that right? Is that kind of like run rating about where you are on a same state basis, all you need to be successful and hit your revenue target in 2024 on digital, or do you need a pickup or materially better monetization or product mix as we move through the year from here?
spk05: No, I think your back of the envelope math is right, Sean, and that's a level that gets us to this interactive result on the EBITDA line. We anticipate that it's going to continue to ramp as we get toward the end of the year in football season. We've got a lot of product enhancements and deeper integrations with ESPN planned over the course of the next three, four, five, six months, really targeting September to be ready for football season. So I would expect that fourth quarter should be a quarter that you see that start to really come together, and I think we would be exiting 2024 with real momentum from a handle market share perspective given the enhancements to the overall experience that I mentioned earlier. So that's the math. We're not really super focused on where we are today on market share. It's where are we going to be in September and beyond. I think it'll probably fluctuate around where we're at now, given the stability that we've seen in daily, weekly, and monthly active users. We make more enhancements to the products. I think it becomes more sticky. You start to get more share of wallet. Some of the newer players you've brought into the ecosystem, I think they spend more time on the product. They go from betting once a week to twice a week. And so we think that's really going to ramp up. And we've picked up so many new users. We covered that a couple of times that it takes the pressure off of us to feel like we need to continue at that pace. It's probably not possible, but we have two state launches, 9% of the US population. We can continue to be sort of at market with regard to our new player, new deposit sign up. We're not looking to lead the market, but certainly be at market and let the ESPN brand and all the integrations take care of the rest. That's a recipe that we think makes a lot of sense and it's tremendously efficient as we go. But you're correct in your back of the envelope, although we expect to be ramping toward the end of the year to 25.
spk02: Super. And then sort of maybe drilling down a layer, probably the best way for us to gauge some of your success and improvement on the product side is going to be watching some of your implied bet mix and really your theoretical or your hold rate improve as we move through the year. Could you just talk a little bit about where your theoretical sits today? We hear numbers, obviously, for the best of breed guys now, easily approaching double digit, maybe even low teens. Where are you today, just given your mix of customers, your casual better, and how do you expect? When do you expect us to start to see some more measurable improvement in that? Again, I'm putting this in the context of some of the data we've received where some of the state level hold rates in January have been really, really low relative to market. So maybe just help us put those pieces together.
spk05: Yeah, I'll talk about high level where we think we are and where we want to be. I'll let Todd jump in on what's been happening in the last couple of months because a lot of that's been done with focus and intention as we continue to drive top of funnel demand. I think today, based on the mix, we're seeing a higher parlay mix today than we've ever seen, which is great. But we're still below market. And we know that our parlay mix, though, it's continuing to get better. We've got a little ways to go on prepackaged, pre-populated parlay offerings and a parlay lounge that you can go to, much like the top competitors of ours have today. That's something that we actually feel like is all upside from here. So we're probably more at that 7% to 8% theoretically today. But we'll be continuing to gradually build that up to double digit. I think it's just a matter of time, Sean, before we get that parlay mix, and especially on the same game side, which is where we're not as strong today, but we're going to continue to put a lot of focus and energy there from a product enhancement standpoint between now and football season, that we should be able to catch the others over time. But it may not be done in 2024, but I don't think it's going to go beyond 2025, given that we can now focus so many of our resources on product enhancements and features and UI UX as opposed to deploying resources around state launches and migrations. Todd, do you want to speak a little bit about what we've seen so far?
spk19: Yeah, thanks, Jay, and thanks, Sean. The only thing I would add to that, as we are going out there and growing our database that we touched on multiple times, you've got this mix of promo spend that everybody does, but you also have odds boosts at your disposal that become a great acquisition tool and get people into the ecosystem.
spk18: So what
spk19: we
spk18: were able to
spk19: do through use of odds boosts is bring people in during the, especially during the playoffs, and then carry that over through the Super Bowl and get people into the ecosystem. Also, I would say that the trends right now looking a lot like early years for some of the competitive set. So we're very comfortable with the progress we're making and expect going into next year with a lot of the work that's being done as we sit here today, that we'll see that progress. The number of people that are taking advantage of the parlays and finding those to be really attractive is encouraging for us as we move into the next phase.
spk08: Our next question comes from Barry Jonas with Truist Securities. Please proceed.
spk07: Hey guys, good morning. ESPN just announced plans with Fox and Discovery for a new streaming service, JB. Any sense yet if and how ESPN could participate?
spk05: Yeah, Barry, we've gotten that question quite a bit. The way to think about that is, this is the way I was described by Disney. I'm not speaking for them, but just repeating what they said on their call. This is really about content distribution. It's about getting in more households and on more devices as people have continued to move away from cable. This is another option to have a streaming package that would include ESPN and ESPN content. You should anticipate that if you're watching ESPN today, whether that's digitally streaming or you're watching that on linear, that as you see integrations in the shows on ESPN, that that would carry over to this new streaming platform as well. Sports Center is still Sports Center, and Get Up is still Get Up, and the integrations in those shows would be as they are today. It's just a matter of providing more access to ESPN to more people in the country.
spk07: That's great. Then I just wanted to ask one on the land-based business. Curious to get your thoughts on expanding the land-based portfolio, whether that's M&A or Greenfield. In the past, we've talked about interest in the strip, and I believe some new jurisdictions are looking at legalization. Thanks.
spk05: Yeah, I mean, look, our position is we'll continue to be looking at opportunities, whether those are acquisitional opportunities or Greenfield, as those opportunities present themselves. That hasn't changed. That won't change. If there's a great opportunity and we think we can generate value in an investment, then that's something we're going to strongly consider. Sometimes that's easier said than done. Las Vegas strip, there's very limited opportunities and nothing really hot at the moment. If there's a new state, that's something we would be taking and have been taking a hard look at. Obviously, nothing is imminent at the moment, but we're continuing to kick the tires. That won't change.
spk08: Our next question comes from Brent Montour with Barclays.
spk09: Please proceed. Hey, good morning, everybody. Thanks for taking my question.
spk10: First question is on the non-ESPN marketing spend budget that we heard about from you three months ago. Has the outlook for that spend bucket changed at all based on what's happened with ESPN and sort of your efficacy there in the first few months, and what have you baked in in that 24 guidance?
spk05: So you should assume, Brent, that what we said previously is consistent with how we feel today. It's going to be roughly matching the on-channel spend with ESPN. That's a number that obviously we can flex, but we think that's a good target. That's sort of what's built into our modeling for 2024. It gives us plenty of dry powder to utilize for state launches. You should think about that spend as being much more performance-based marketing spends and probably more targeted. Obviously, the ESPN spend is almost entirely national. Some of the off-channel is national as well, but a lot of it is performance and more local and regional focus.
spk10: Thanks for that. Then just to follow up, good to see, obviously, cash handle moving upward. I think one of the things that people are concerned about out there is third-party data providers suggesting that deposit share hasn't moved up and is tracking below your handle share. I guess the question is, are you seeing similar improvements in cash deposits?
spk05: I think the deposit information that you're referencing goes back to what I mentioned. You can see in the weekly active user numbers, monthly active user numbers, we've got engagement. That's not an issue. We've got really good ratings on the iOS store app. We feel really good about that. I think our job is to continue to improve the products and get deeper integrations with ESPN and eliminate friction so that we can get people more seamlessly from ESPN's ecosystem, whether that's media, fantasy, and the like, over to ESPN bet when they're ready to engage in betting. I think the deposits is really a function of we don't have our share of wallet yet. We're getting the deposits. We're probably not getting the same size of deposits as we are with maybe the top competitors, but I'm confident in saying that we're one of three or maybe four apps on their phone, and they're on our app, and they're placing wagers. I think they're waiting for more enhancements, and I think that that's okay. Our ability to keep people engaged is taking care of itself now, and I think that any that will have gotten dormant by the time we get to football season next year, we can reactivate quickly because of our relationship with ESPN, and the product is going to continue to get better and better. We feel great. We have over a million new people in the database. Most of them are engaged with us on a regular basis, as you can see on slide eight, and we just have to build out the relationship, the loyalty, and earn more share of wallet as we go, and I think you'll see deposit growth come along with that.
spk01: Our next question comes
spk08: from Chad Bunyan
spk01: with
spk08: Macquarie. Please proceed.
spk17: Morning. Thanks for taking my question. First one on the bricks and mortar business, so the margin guidance of 34 to a little bit over 35 assumes some slippage from what you produced in 2023. Felicia, you called out some competition and obviously the weather. As we think about kind of same store margins, is it safe to assume that properties that aren't being hit by competition could drive the same margins, or is there a major reason why you would expect for margins to decline in 2024? Thanks.
spk19: This is Todd. I'll take that. Yeah, that's basically everything that's modeled in there from a same store basis, putting January behind us, looking at very strong stable margins. I think the variables that Felicia provided are everything that's modeled in there, but we don't see that changing.
spk17: Okay, thanks. Then for 24, in terms of stock buybacks, can you remind us what's left on the program and if there could be opportunities given where the stock is right now to buy back shares at these levels?
spk15: Thanks. Yeah, thanks Chad. We do have $750 million remaining on our stock repurchase authorization, but look, as Jay and I talked about in our prepared remarks, this is a year of investment as we focused on growing and building out ESPN bet. You probably won't see share repurchases in 2024, but as we transition from the growth phase of our interactive segment towards profitability and a free cash flow phase, we'll have plenty of opportunities to consider return of capital to shareholders, but again, this year we're focused on investment.
spk05: Yeah, I mean, look, we have a pretty recent history of buying back shares when it makes sense for us, and that's the best use of capital allocation. Right now, as we've covered in this call, we're investing in a high growth business that's going to generate a lot of value for our shareholders long term, so that's the priority. It doesn't mean that you can't do or won't do anything else. It just means that right now
spk01: that is the number one priority. Our next question comes from
spk08: Steve Wozinski with Stiefel.
spk06: Hey guys, good morning. Jay, so we think about the 1.2 million new members to your database that you called out, and you talked about 90% of those are ESPN bet customers. I know it's still early, but can you give us an indication of how many of those new members have visited one of your brick and mortar casinos and or have used your iGaming platform? I guess what we're trying to figure out here is kind of what that cross traffic play has looked like as your ecosystem continues to grow.
spk05: Todd will have some comments on this as well. We're in the very early stages, as you built up a really nice database. We know where they live. We know how the proximity is. We talked about one third of them within 50 miles of one of our retail businesses, so we're going to start working on that now. That's not something that we've had a lot of time to get going on, but we're very excited about the cross-sell opportunities. It's a lot of new people into the database. Our overall database is now approaching 30 million people. It feels like just yesterday we were at 25, so that's a big opportunity for us. Todd, anything that you want to add overall?
spk19: Yeah, Jay. The only few items I would add, and Jay gave the data point around how many people are so close to our property, when you expand that kind of concentric circle around our properties, that number grows significantly. Then just based on what we did through some promotions at year end with some of our properties, moving these people to a property, we see such a great multiple, especially in that low to mid customer that's engaging with us online. When they get to a property, we're seeing great play, great engagement, as well as additional spend on the other amenities. That will be in the playbook as we move forward, and it will be a key component this year and all the years as we move forward.
spk05: I think just your other part of the question on cross-sell to iCasino, you can see from the monthly active user slide that we have on Hollywood Casino that cross-sell has been great. Again, it's one of those. Our product today, I would say, is good, but it's got to be great. We're working on that diligently as well with our product team. We think that we can see our market share from a handle perspective continue to grow, probably to what our daily active and monthly active user share is.
spk06: Okay, gotcha. Thanks for that. Then this is probably for Todd. Going back to your embedded guidance on the top line for the brick and mortar side of the business, I guess, Todd, can you maybe give us a little bit of color of how you guys are thinking about your core customer this year in terms of spend levels and maybe what gets you to the low end range versus the high end of that range?
spk19: Yes, Steve, great question. For us, especially this last quarter, maybe the last two quarters, we did see tremendous engagement return from that 65 plus customer, which has traditionally always been strong for us, but just took quite some time to come back into our property. Looking at those positive trends, those continue into this year, and then our core customer, looking at that mid-range high-frequent customer, we are still seeing a little bit of elevated spend per trip and slight increase in trips in Q4. Looking at how that continues through this year in almost every region, that remains strong. I would say that slight fall off maybe in the 21 to 34, which has been running hot for a long time, but we make that up in the 65 plus.
spk05: Frank, why don't we have one more question,
spk08: please? We have a question from Bernie McNairn with Needham and Company. Please proceed.
spk21: Great. Thanks for taking the questions. Good morning. Just want to ask on that slide 8, the weekly active users. I know the commentary in terms of what the embedded guidance is for market share this year, but do you think there's a structural difference in terms of what your weekly active users would be versus what your handle or GGR share would be? Just trying to get at if it's a more casual user, if there should be that difference maybe if they're lower spend, or if right now you're a second or third app that someone's using and the goal is to migrate that to the primary app over time and just how you're thinking about navigating that customer journey.
spk05: Yeah, Bernie, we think it's both. We definitely have a lot of new users. We feel strongly we've grown the market, and so that's going to take a little bit of time to grow their play to be commensurate with maybe somebody that's been betting on online sports betting for the last three or four years. I think most of it, however, though, is a share of wallet that we are one of the apps people have on their phone. They're using the app. They're on the app. We see all of that in the data, and we're getting a smaller portion of their wallet than we are of how many people are actually using the app. On a percentage basis, I think this is exciting for us. Slide eight I think says a lot about where we think we can get to, and it's not going to take us a really long, that's not a five-year journey. We think that's something that we can accomplish in the next couple of years if we really get our product to where it needs to be. Of course, the deeper integration with ESPN, we think integrations with the fantasy app with ESPN is going to be a huge shot in the arm. We anticipate that happening before the end of the year, obviously targeting football season. We'll see if we can get there, but it's a combination of the two, but the fact that people have the app, they're using the app, we just need to build more loyalty with those users over time.
spk21: Great. Thanks, Jay.
spk05: Thanks, Bernie. Thanks, everybody, for joining us, and we look forward to sharing more with you next quarter.
spk08: Thanks. That does conclude the conference call for today. We thank you for your participation and ask that you please
spk01: disconnect your line. Have a great day, everyone.
spk08: Thank you. Greetings and welcome to the Penn Entertainment fourth quarter 2023 results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the one fallback four on your telephone. If at any time during the conference, you need to reach an operator, please press star zero. I would now like to turn the conference over to the next speaker, Joe Giafoni, Invest Relations. Please go ahead.
spk20: Thanks, Frank. Good morning, everyone, and thank you for joining Penn Entertainment's 2023 fourth quarter conference call. We'll get to management's presentation and comments momentarily, as well as your questions and answers. During the Q&A session, we ask that everyone please limit themselves to one question and one follow-up. Now we'll review the Safe Harbor Disclosure. Today's discussion contains forward-looking statements. Forward-looking statements involve risks, assumptions, and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors. With that, it's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go ahead.
spk05: Thanks, Joe. Good morning to everyone on the call. As usual, I'm joined here in Why I'm Missing by our CFO, Felicia Hendricks, and our Head of Operations, Todd George, as well as other members of the executive team. We provide a link to our investor presentation, along with our earnings release this morning. If you haven't already opened or printed it out, I would suggest you do that now, as our prepared remarks will reference several of those slides as we go along. At a high level, 2023 was another transformational year for Penn Entertainment. We are the only company in the industry that has a fully integrated sports media and sports betting platform, along with an omni-channel base of assets with which to drive cross-play and synergies as the database continues to grow at a rapid pace. The future looks very promising, given our unique position and long-term strategic advantages. On the retail side of the business, we generated more than $2 billion in property-level EBITDA in 2023 from our industry-leading portfolio of regional assets and delivered on our property-level margin goals despite an uncertain macroeconomic environment, thanks to our -in-class operators and leaders across the country. We also broke ground on four exciting new retail growth projects in Illinois, Ohio, and Nevada, which we expect to complete by the first half of 2026. As a reminder, we anticipate these will deliver a 15-plus percent return on the aggregate investment. The continued strength of our retail business provides a solid foundation as we continue to invest in our high-growth digital business, which will create significant long-term shareholder value.
spk04: Speaking of the digital business,
spk05: earlier this month we announced that the founding family behind the score, John, Benji, Aubrey, and Noah Levy will be transitioning from their leadership of the score and Penn Interactive. John departed earlier this week, while Benji, Aubrey, and Noah will be leaving in early April. We have been working closely with the Levy's over the last several months on this plan and timing to ensure a smooth operational transition. Their departure comes at a natural inflection point for our interactive business. We've achieved a lot over the last several years, including the completion of our proprietary tech stack, the successful launch of the ScoreBet in Ontario, the migration of our tech stack into the U.S., and now the launch of ESPN-Bet. Even more importantly, we have developed an incredibly deep bench across Penn Interactive, and we have several talented leaders ready to step up and take on more responsibility in the coming months. I want to extend my sincere thanks to John, Benji, Aubrey, and Noah for all of their hard work and contributions to Penn Interactive's success. We are near the conclusion of the month-long search process for the new head of Interactive, and look forward to sharing an update on that with you in the near future. Turning to slide six in our investor presentation, on November 14th, we successfully and seamlessly launched ESPN-Bet simultaneously in 17 states across the U.S., a first in the industry and no doubt a testament to the strength of our technology teams. Bolstered by the number one brand in sports media, the launch resulted in much higher than expected registrations, generating over one million new signups to our industry-leading Penn Play Rewards program, and expanding our digital database by over 50%. In fact, we acquired as many first-time depositors and bettors in the first two months as we had anticipated we would generate in the first full year post-launch. Importantly, approximately one-third of these customers are located within 50 miles of one of our more than properties, which sets up well for cross-selling and monetization as part of our omnichannel strategy. In addition, we saw our average monthly active users grow from nearly 190,000 in the third quarter to more than 770,000 in the fourth quarter. Our early success bodes well for our planned launches in North Carolina and New York this year, which I'll talk about in a moment. Given the early success in customer acquisition and retention, we now expect the digital segment to inflect, to roughly break even in 2025 and start generating meaningful EBITDA and free cash flow in 2026 and beyond. Turning to slides seven and eight, you'll see that strong early retention and consistent user acquisition have led to steady -over-month increases in cash handle, even as our expenses have started to normalize. Our January cash handle was 289% higher than prelaunch cash handle in October of 23, while our promotional expenses as a percentage of handle went down from .2% in November to .8% this January. According to the latest sensor tower data, which is similar to other data sources you may have seen, such as Aptopia, we have consistently held the number 3 ranking and share of weekly active users amongst our top peers, providing a foundation for even greater handle and GGR share gains as we grow our share of wallets and monetization per user. The ESPN vet numbers on the chart on slide eight show steady acquisition and retention across the board, even as our promotional expense began to taper. Our initial promo offer at launch was in line with our competitors, and we lowered that offer by 50% in advance of the Super Bowl, given the more recreational play surrounding the game. Meanwhile, the total time spent on ESPN bet according to the sensor tower data also continued to ramp nicely as we added new features and integrations, which will only accelerate now that we can focus more of our product and engineering team's energy on product improvements, especially in the areas of same-game parlays, player props, and live betting, as opposed to time-consuming migrations and launches, something we are all very excited about. All of this is very promising as it relates to both -of-funnel demand for ESPN bet and early retention success. The important takeaway here is the ESPN bet app is proving to be sticky in the early days as a result of our strong brands and UI UX, which will improve from here with product enhancements and deeper integrations with ESPN in the coming quarters. As you'll see on slides 9 and 10, ESPN bet has helped us reach new demographics of sports fans that are incremental to our digital database, resulting in a 63% greater -over-year parlay mix and higher volumes for non-NFL games, particularly the NBA. While these parlay results are a clear improvement from where we were pre-launch, we still have a long way to go in this area, and you'll see significant improvements throughout 2024. We also saw a 35% increase in our percentage mix of females in our digital database. These data points demonstrate the potential for ESPN bet to help broaden the appeal of sports betting to the more casual better and grow the overall market, an important goal of ours from day one. Notably, before the launch of ESPN bet, overall market handle grew by more than 17% -over-year from January to October 2023 in the states with publicly available data in our market analysis. After ESPN bet, overall market handle is up nearly 30% -over-year from November through December 2023, and it's up over 25% even when you exclude ESPN bet. ESPN bet has and continues to bring new sports fans and bettors into the sports betting ecosystem. ESPN bet has also helped boost our Hollywood-branded iCasino business, which has seen a nearly 280% increase in monthly active users, providing a platform for future growth, with new proprietary content continuing to roll out from our pen game studios. As we've emphasized in the past, when customers engage with us across multiple channels, their value goes up more than six times over those who engage via only one channel, and we continue to see a lot of upside as we improve our iCasino offerings. As illustrated on slide 13, in connection with the launch, ESPN implemented an initial wave of exclusive bet mode integrations across the ESPN ecosystem, which includes our six-pack odds integration. This provides for a seamless click-through from the ESPN Gamecast to a customer's desired bet on the ESPN bet app. This is very powerful, as there are over 28 million monthly active users on the ESPN media app. You should expect more bet mode integrations throughout ESPN's platform by 2024. I set up the outset of our partnership with ESPN that we'd be getting significant value for our marketing dollars by allocating our $150 million per year to the single best brand and platform in the U.S. to reach sports fans and potential bettors. We're already seeing that with the robust menu of promotion and integration across all of ESPN's platforms, including traditional linear advertising, digital media, in-program integration, odds attribution, database marketing opportunities, and access to some of the biggest personalities in sports media for special events, promotions, and social media engagement. As I mentioned, we have just scratched the surface on these integrations, and there's substantially more to all included as part of our deal that we will unveil throughout 2024 and into 2025. Our initial ESPN bet advertising campaign was headlined by SportsCenter anchors Scott Van Pelt and L. Duncan. We then added spots with NBA legend Kendrick Perkins, the host of Get Up, Mike Greenberg, followed by our most recent commercial with sports betting analyst Aaron Dolan that launched during Super Bowl week. This campaign with Aaron is our first product integration-focused campaign, which we expect will help drive continued awareness of ESPN bet and our direct integration with the ESPN media app. Meanwhile, L. Duncan and Aaron Dolan hosted a Super Bowl party at the M Resort at our property in Las Vegas, and I'm happy to announce we'll be rebranding Greectown's market-leading sports book to ESPN bet just in time for the NFL draft in Detroit. In addition, ESPN regional radio talent will be hosting events throughout the year in our retail sports book. We look forward to additional ESPN bet retail launches at key properties as we continue to create meaningful cross-sell opportunities. Looking ahead to the rest of 2024, we are excited to introduce ESPN bet in North Carolina, which is expected in March, and New York expected prior to football season, in each case, of course, subject to regulatory approvals. While the economic model in New York is indeed challenging, we look forward to bringing ESPN bet to the largest regulated online sports wagering market in North America. These two new jurisdictions will be extremely efficient for us. As highlighted on slide 16, our ESPN annual national marketing spend per capita will be reduced by 20 percent with the national marketing spend in North Carolina and New York, which will take our addressable online sports betting U.S. population from 37 percent to 46 percent and significantly expand our reach and scale. Very important for us as most of our ESPN and off-channel marketing spend is nationally focused. As noted in the release this morning, the interactive segment EBITDA losses for the quarter will be required through ESPN bet, which resulted in elevated promo expense that negatively impacted net revenues and to a lesser extent unfavorable hold due to customer-friendly sports results. The first two weeks following the launch of ESPN bet in November happen to be two of the lowest hold percentage weeks of the entire NFL season. Looking ahead, we expect that first quarter 2024 interactive EBITDA losses will be roughly half of our fourth quarter 23 interactive EBITDA results and for Q1 to be the largest EBITDA loss quarter of the year for us in 2024. For the entire year of 2024 on a same store basis, we anticipate an EBITDA loss commensurate with what we saw in Q4 at around $330 million, demonstrating the top line momentum and efficiencies on the cost side. Due to the two state launches this year in North Carolina and New York, which we announced on Tuesday, we are forecasting a total EBITDA loss in 2024 of approximately $400 million. As mentioned earlier, we now anticipate 2025 being around break even and 2026 to deliver meaningful positive EBITDA and free cash flow. Before turning it over to I would like to thank our property leaders and all of our team members for delivering another quarter of really solid property level performance. Notably, 10 properties spread across our portfolio achieved their highest ever fourth quarter revenue. These outperformers helped offset the impact of supply pressures in a few of our key markets as well as continued softness in our South region. This further demonstrates the benefits of our geographic diversity and unique omnichannel strategy. The introduction of new technologies and our ongoing reimagination of our properties while providing a best in class customer experience is continuing to drive demand for Penn. As you know, our industry leading customer loyalty program, Penn Play, is supported by our 3Cs technology, which is now deployed at 21 properties, collectively representing approximately 70 percent retail EBITDA. During the quarter, we've also grown our total Penn wallet customers to 110,000 and we've received $300 million in total Penn deposits. As we've often said, those guests who use the digital wallet demonstrate superior loyalty through increased visitation, time on device, and total theoretical.
spk15: Our property level segments reported another solid year. Fourth quarter, EBITDA results of $476 million exceeded the implied guidance we provided on our third quarter call despite headwinds of roughly $10 million from the Detroit union negotiations and road closures. And as Jay highlighted, our interactive segment is showing early signs of strong momentum. As usual, you will find on page 12 of our earnings release a table that summarizes our cash expenditures in the quarter, including cash payments to our REIT landlords, cash taxes, cash interest, and total cap X. Of our total $152 million in cap X in the quarter, $16 million was project cap X primarily related to our four retail growth projects. We ended 2023 with total liquidity of $2.1 billion, inclusive of $1.1 billion in cash and cash equivalents. We expect our liquidity to remain strong throughout 2024 and we have no debt maturities until 2026, which are our $330 million convertible notes. As we previously guided on our third quarter earnings call, we continue to expect our lease adjusted net leverage to peak in the third quarter of 24. While third quarter leverage will be higher than initially anticipated given the demand-based strength of our ESPN bet launch in the fourth quarter, 23, this increase is temporary and we will also delever more quickly. By year end 2025, we will return to pre-ESPN bet leverage levels and in 2026, we will generate meaningful EBITDA and free cash flow from the interactive division. Thinking about this another way, our path to record free cash flow is very clear. Following a year of investment in 2024 and delevering in 2025, 2026 will be an exciting inflection point for us given the high EBITDA free cash flow conversion of our interactive business, which when combined with the free cash flow generated by the existing core business plus four retail growth projects that will be coming online in early 2026 will position us extremely well to drive shareholder value. I will now provide guidance for our retail and interactive segments. For the full year 2024, we expect retail revenues to range from $5.6 billion to $5.75 billion and adjusted EBITDA to range from $1.905 billion to $2.025 billion. Our guidance factors in extreme January weather, new supply in Nebraska, Illinois, and Louisiana, road construction in a couple of markets and moderate upward wage pressure. For the interactive segment in 2024, we expect to generate revenues of $1.28 billion to $1.415 billion and an adjusted EBITDA loss range of $420 million to $380 million. These ranges include our launches in North Carolina and New York. On a same store basis, we anticipate an adjusted EBITDA loss of around $330 million. To help you with modeling interactive segment revenues, you should assume that our 2023 tax gross up of roughly $400 million remains flat year over year in 2024 and other revenues inclusive of skins, social gaming, and media is roughly $200 million in 2024. As Jay mentioned earlier, in the first quarter of 2024, we expect the interactive segment adjusted EBITDA loss to be roughly one half of our fourth quarter interactive EBITDA results and for the first quarter 24 to be the largest EBITDA loss quarter of the year. We expect 2024 corporate expense of roughly $105 million inclusive of our cash stock based awards. Total cap X for 2024 is approximately $500 million inclusive of $275 million of project cap X for our four development projects. For cash interest expense, we forecast $170 million for the full year after roughly $13 million of interest income. For cash taxes, we are projecting to be in a refund position of roughly $15 million. As you think about our share count for 2024, our basic share count as of the end of 2023 was $152 million and we typically have roughly $15 million of diluted shares inclusive of the $14 million dilution from the converts. With that, I will turn it back to Jay.
spk05: Thanks, Felicia. As you saw in our release, we are continuing to expand on our corporate social responsibility efforts. As we look back on the year, I'm very proud of the continued growth of our diversity, equity, and inclusion initiatives which are deservedly gaining a lot of attention. Newsweek named Penn one of America's greatest workplaces for diversity and Forbes named us for the third straight year as one of America's best employers for diversity. Time Magazine went so far as to name us one of the world's best companies for 2023. Meanwhile, on the community front, we provided more than $7 million in support to local charities and veterans focused organizations and more than $17 million in economic development grants in 2023 in addition to the more than 8,000 volunteer hours from our team members to help those in need. On the environmental side, we completed our inaugural scope three greenhouse gas inventory and established carbon abatement targets for 2024 and beyond. You can read more about all of these initiatives in our 2023 CSR report which is scheduled to be published in April in conjunction with our proxy filing. In closing, we are continuing to see a stable consumer environment and healthy operating trends in our retail businesses. On the digital side, I want to reiterate that our partnership with ESPN is not your typical media sportsbook commercial agreement. Ours is an exclusive strategic long-term alliance that, as I mentioned, has the potential to deliver unique products, experiences, and integrations that are unmatched and, of course, with that will come attractive returns for our shareholders. We had three primary goals with ESPN bet for the first several months post launch. Number one, execute on a successful launch both in terms of top of funnel demand and app stability, competitiveness, and performance. Number two, grow the market given the strong brand equity and reach of ESPN along with the media integrations. And number three, provide a differentiated experience and value proposition to ensure lasting relationships and product retention. So far, we're off to a great start on all three and have built a tremendous foundation for our upcoming launches in New York, North Carolina, and beyond. So with that, Frank, we'll open it up for questions.
spk08: Thank you. If you would like to register a question, please press the 1-4 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 1 followed by the 3. We ask that you limit to one question and one follow-up only. One moment, please for the first question. Our first question comes from Joe Gref with JP Morgan. Please proceed.
spk22: Good morning, everybody. I have two questions, not surprisingly, on interactive. First, maybe an easier one. Can you talk about the search for leading interactive and maybe why one hasn't been announced? I don't think the lead is leaving and the timing was all that surprising. Maybe what was surprising was that there wasn't someone named to head it upon their news that they were planning to depart. And then a second question, it looks like right now your share maybe in January is sort of in this 7% range. I know the goal is to grow beyond 7, 10 and higher, but if we look at two years from now and OSB and iCasino will be 25, 30% higher in two years than what it's run rating presently, if you're at a 7% market share level two years from now, obviously a bigger market, can your digital business be EBITDA positive? And you can share with us how you think of profitability, bigger market, 7% share, what that margin range would be. I think that would be hopeful looking at things kind of a couple years out versus the investment that people are focusing on this morning. Thank you.
spk05: Yep. Good questions, Joe. And starting off with the search for the new head of interactive, we've been working with the Levy's for months really throughout fourth quarter of 2024 thinking through we have a very deep bench at Penn and who can step up as they exit within the team. And we feel like we've got some great answers to that question. We actually spent a lot of time in Toronto a couple of weeks ago and we've got such a deep bench on the engineering side and on the drug side, great marketers in the business. So a lot of this is that we needed the time to make sure that we have a plan in place that by the time the Levy's depart that people are already communicated to and stepping up, we also started a quiet search in the fourth quarter because we didn't want this to get out in advance and create uncertainty. And we're very far along in that process. I can't comment on exactly where we are, but you should rest assured that we're very deep in the process. We're very close and we're very excited on the level of talent that we are considering is incredible. And I think the market will see it that way when we announce what we're doing, but I just can't, I can't communicate any further on that today. We feel good about the timeline with the Levy's leaving in April that we should have something announced obviously before that. And we're working to have this be a super seamless transition where the new head of the business is not going to be a leader after, but not have a gap in leadership. So that's the plan right now and we'll continue to communicate when we can publicly more about that. The second part of your question is a good one. The 7% share that we're seeing currently, and what does that look like a couple of years out? I'll take a step back for a second because I think there's, you know, as we sit here today and how we're thinking about the business, we're three months into this ESPN bet post launch. And there's a lot of positives that you can see in those first three months. First, obviously ESPN and the strength of that brand is on full display. And they've been amazing partners. They've continued to under promise over deliver. We think we're getting something in February. It shows up in December. They give us a lot of extra value add beyond what they're required to in our $150 million marketing partnership, which is great. We saw really strong app performance and stability. And we've had very good early ratings in the iOS app store. We launched in 17 states simultaneously, the first time that's ever been done. And we also just went through our first Super Bowl with tremendous load. And we got through their knock on wood because the teams did such an amazing job preparing. And we had no hiccups, 100% uptime. So feel really good about those two things. Obviously, we shared in the number of slides that our customer acquisition has been very, very strong. That's what drove the promo cost being so much higher than we anticipated with over a million downloads and deposits and bettors in the first two months. We thought it would take us a year to get to that. That speaks to very, very efficient customer acquisition costs in those first two months, something that we never could have imagined. And then, of course, on the retention side, we're in a great spot. If you look at slides seven and eight in our presentation, you can see that we're already in a very, very strong position, a very firm number three position with regard to weekly active users in online sports betting. And obviously, we've picked up significant MAUs in online casino as well. And so what we're seeing there also is that our cash handle as a percentage of total handle has grown month over month over month from November to December to January, which means that people are weaning off of those early promos. They're dipping into their wallets, making deposits, and continuing to play with us. And we're growing the market. We have a couple of slides on that as well. And I think as we sit here today, the opportunity, of course, is to close the gap of the market share, handle market share that you referenced of 7 percent, and what we're seeing on our share of weekly active users, which is more like double that number. And so the fact that we're seeing weekly active users at a very stable level means that we've got a lot of people that have downloaded, deposited, and bet. They like the app. They're coming back to the app on a regular basis, but we just don't have our fair share of the market yet in terms of how much time they're spending in the app. But I view that as a positive because we know that our ability to grow our share of wallet and improve the monetization of our users is going to come from two things, which is product enhancements. We're very well on our way. We've been so busy, as I mentioned in our initial opening comments with launches and migrations, that our teams haven't had the ability to really focus on features and functionality. And now we can because we've got most of that behind us. We get North Carolina launched, but we've done so many state launches that's not going to be as time consuming. So we need to enhance our same-game parlay offerings, player pops, live betting, in-game betting, and, of course, deeper integrations with ESPN. And that's happening and will continue to happen. And more with the ESPN media app, more with the fantasy app. So that's what's in front of us. And we believe that if we can be at 7 percent handle market share in the early days with these things that we know are sort of at first inning or second inning of a game, we feel really good about where those are going to take us over the course of the next 12 months, 18 months, 24 months. So we don't anticipate that 7 percent is going to be as good as it gets by any means. We think that the market share is going to be growing steadily as we continue to make product improvements and add more deep integrations with ESPN. And to your question, if we were to be at 7 percent a couple of years out, could we be profitable? The answer to that is yes. What we don't know as we sit here today is how many more states will legalize from a sports betting and online gaming perspective. But you should feel as though 7 percent and above is a significant number. So we definitely generate a profit. Obviously, we would want to have our iCasino market share close to those levels as well. So that's the way that we, as we sit here today, that's the way that we view things after the first three months. It's really early, obviously, but the number one focus was all the things I mentioned, and we're thrilled to see that retention looks really good after three months.
spk08: Our next question comes from Joel Stoff with Susquehanna. Please proceed.
spk13: Thank you. Good morning. Jay, I wanted to ask about kind of the media integrated offering, especially with ESPN's media app. The six-pack link out, I think, was available kind of mid-January. How long do you expect before that really is like a kind of a relevant source of new incremental customers for you? And I know it's obviously early, but in Ontario, I think approximately 72 percent in terms of what you said of your customers in real betting in Ontario come from the app. What's the right way to think about, again, through that conversion?
spk05: Yeah, the way we think about it, Joe, is that if we can get the level of integrations between media and sports betting in the US between ESPN and the fantasy app, of course, and into ESPN bet that we should be able to get those percentages to be about the same here. So we're on it. There's really, there aren't disagreements or lack of alignment between us and ESPN on what those integrations will be. Obviously, we're looking forward to bet slip integrations. We're looking forward to fantasy integrations. We think we'll have a lot of that complete by the time we get to football season. It's hard to peg today if it's all going to be done by September. Some of it's going to be in the fourth quarter, but we feel really good and we have a lot of alignment with ESPN on just how important it is. I continue to be really impressed at how many resources that they are putting against ESPN bet. This is a big part of a growth opportunity for ESPN and they're as excited about it as we are, but we should be able to duplicate here in the US the stats that you're referencing in Ontario, Joe. Thanks.
spk08: Our next question comes from Carl Santarelli with Deutsche Bank. Please proceed.
spk03: Hey, everyone. Thank you. Jay, as you think about the guidance parameters you set forth with and interacted for 2024, obviously, if we put the two launches, New York and North Carolina, aside, what is underlying that assumption in terms of promo reinvestment? To the extent you could answer that, but where do you imagine promo as a percentage of handle, as a percentage of GDR, however you choose to think about it? What's embedded in that assumption at this point?
spk05: Yeah, I would say, Carlo, without giving exact detail that we anticipate promo as a percentage of handle going forward to be really at market levels. We're not anticipating being the highest. We're not anticipating being the lowest. It probably will fluctuate a little bit month to month depending on what we have going on around March Madness integrations with ESPN. Because remember, a lot of that is driven by top of funnel. The more successful you are in driving people into the ecosystem, you're going to peak in that particular month. There's probably not going to be a lot of volatility during the late spring and summer months with basically MLB, but I think it depends on how successful we are in North Carolina. It could drive that number higher, of course, in March. When we launch in New York, I would expect it to bump, of course. But pretty steady otherwise to be right at market. Our goal is not to be higher or lower than where most others are, which is depending on the state right around 3%, 2.5%, 3%, .5% right in that range.
spk03: Great. Thank you. And then if I could, just two questions on clarifications on things you guys said relating to the brick and mortar business. First, Jay, you talked about the four projects that are currently underway, first half of 26. Will there be, I think, late 2025 is the expectation for some? Is that all of them will now be first half of 26 or you will complete the fourth in the first half of 26?
spk05: Yeah, and we didn't mean to be confusing there, but we'll have all four done and open in the first half of 26. Could one or two of them hit late 25? Yes. So we really haven't changed. We just thought it'd be clearer to say you should expect all four to be open and operating in the first half of 26, but it will be opening the four of them between late 25 and mid 26.
spk08: Our next question comes from Sean Kelly with Bank of America. Please proceed.
spk02: Hi, good morning, everyone. Jay, I'm hoping you could just help us break down maybe the implied revenue forecast for 2024 a bit more granularly. If we back into it on the digital side, it seems to imply roughly, and again, it'll depend on everybody's TAM here, but maybe 6% to 7% OSB market share. So that's pretty consistent with where we're at today, albeit on a national level, so probably including New York and maybe North Carolina. So I guess the question is, is that right? Is that kind of like run rating about where you are in the same state basis, all you need to be successful and hit your revenue target in 2024 on digital, or do you need a pickup or materially better monetization or product mix as we move through the year from here?
spk05: No, I think your back of the envelope math is right, Sean, and that's a level that gets us to this interactive result on the EBITDA line. We anticipate that it's going to continue to ramp as we get toward the end of the year in football season from, you know, we've got a lot of product enhancements and deeper integrations with ESPN planned over the course of the next three, four, five, six months, really targeting September to be ready for football season. So I would expect that, you know, fourth quarter should be a quarter that you see that start to really come together, and I think we would be exiting 2024 with real momentum from a handle market share perspective, given the enhancements to the overall experience that I mentioned earlier. So that's the math. We're not really super focused on where we are today on market share. It's where are we going to be in September and beyond. I think it'll probably fluctuate around where we're at now, given the stability that we've seen in daily, weekly, and monthly active users. We make more enhancements to the products. I think it becomes more sticky. You start to get more share of wallet. Some of the newer players you've brought into the ecosystem, I think they, you know, spend more time on the product. They go from, you know, betting once a week to twice a week, and so we think that's really going to ramp up, and we've picked up so many new users. We covered that a couple of times that it takes the pressure off of us to feel like we need to continue at that pace. It's probably not possible, but we have two state launches, 9% of the US population. We can continue to be sort of at market with regard to our new player, new deposit signup. We're not looking to lead the market, but certainly be at market, and let the ESPN brand and all the integrations take care of the rest. That's a recipe that we think makes a lot of sense, and it's tremendously efficient as we go, but you're correct in your back of the envelope, although we expect to be ramping toward the end of the year into 25.
spk02: Super, and then sort of maybe drilling down a layer, probably the best way for us to gauge some of your success and improvement on the product side is going to be watching some of your implied, you know, bet mix and really your theoretical or your hold rate improve as we move through the year. Could you just talk a little bit about where your theoretical sits today? Kind of, you know, we hear numbers obviously for the best of breed guys now, you know, easily approaching double digit, maybe even low teens. Where are you today, just given sort of your mix of customers, your casual better, and, you know, kind of how do you expect, you know, when do you expect us to kind of start to see some more measurable improvement in that? You know, again, I'm putting this in context of some of the data we've received where some of the state-level hold rates in January have been really, really low relative to market, so maybe just help us put those pieces together.
spk05: Yeah, I'll talk about kind of high level where we think we are and where we want to be, and then all Todd jump in on sort of what's been happening the last couple of months because a lot of that's been, you know, done with focus and intention as we continue to drive top of funnel demand. I think today based on the mix, we're seeing a higher parlay mix today than we've ever seen, which is great, but we're still below market and we know that our parlay mix though it's continuing to get better. We've got a little ways to go on prepackaged, pre-populated parlay offerings and sort of a parlay lounge that you can go to and much like the top competitors of ours have today. That's something that we actually feel like is all upside from here, so we're probably more at that, you know, seven to eight percent kind of theoretically today, but we'll be continuing to gradually build that up to double digit. I think it's just a matter of time, Sean, before we get that parlay mix and especially on the same game side, which is where we're not as strong today, but we're going to continue to put a lot of focus and energy there from a product enhancement standpoint between now and football season that we should be able to catch the others over time, but it, you know, it may not be done in 2024, but I don't think it's going to go beyond 2025 given that we can now focus so many of our resources on product enhancements and features and UI UX as opposed to just deploying, you know, state launch, deploying resources around state launches and migrations. Todd, you want to speak a little bit about what we've seen so far?
spk19: Yeah, thanks, Sean. The only thing I would add to that as we are going out there and growing our database that we touched on multiple times, you've got this mix of promo spend that everybody does, but you also have, you know, odds boost at your disposal that become a great acquisition tool and get people into the ecosystem.
spk18: So what we were able to
spk19: do through use of odds boost is bring people in during the, especially during the playoffs and then carry that over through the Super Bowl and get people into the ecosystem. Also, I would say that the trends right now looking a lot like early years for some of the competitive set. So we're very comfortable with the progress we're making and expect going into next year with a lot of the work that's being done as we sit here today, that we'll see that same progress. The number of people that are taking advantage of the parlays and finding those to be really attractive is encouraging for us as we move into the next phase.
spk08: Our next question comes from Barry Jonas with Truist Securities. Please proceed.
spk07: Hey guys, good morning. ESPN just announced plans with Fox and Discovery for a new streaming service, JB. Any sense yet if and how ESPNBET could participate?
spk05: Yeah, Barry, the way we've gotten that question quite a bit. The way to think about that is, you know, this is the way I was described by Disney. I'm not speaking for them, but just repeating what they said on their call. This is really about content distribution. It's about getting in more households and on more devices as people have continued to move away from cable. This is another option to have a streaming package that would include ESPN and ESPN content. You should anticipate that if you're watching ESPN today, whether that's digitally streaming or you're watching that on linear, that as you see integrations in the shows on ESPN, that that would carry over to this new streaming platform as well. Sports Center is still Sports Center and Get Up is still Get Up. The integrations in those shows would be as they are today. It's just a matter of providing more access to ESPN to more people in the country.
spk07: That's great. Then I just wanted to ask one on the land-based business. Curious to get your thoughts on expanding the land-based portfolio, whether that's M&A or Greenfield. In the past, we've talked about interest in the strip and I believe some new jurisdictions are looking at legalization. Thanks.
spk05: Yeah, I mean, look, our position is we'll continue to be looking at opportunities, whether those are acquisition opportunities or Greenfield as those opportunities present themselves. That hasn't changed. That won't change. If there's a great opportunity and we can generate value in an investment, then that's something we're going to strongly consider. Sometimes that's easier said than done. Las Vegas Strip, there's very limited opportunities and nothing really hot at the moment. If there's a new state, then that's something that we would be looking and have been taking a hard look at. Obviously, nothing is imminent at the moment, but we're continuing to kick the tires. That won't change.
spk08: Our next question comes from Brent Montour with Barclays.
spk09: Please proceed. Hey, good morning, everybody. Thanks for taking my question.
spk10: First question is on the non-ESPN marketing spend budget that we heard about from you three months ago. Has the outlook for that spend bucket changed at all based on what's happened with ESPN and your efficacy there in the first few months and what have you baked in in that 24 guidance?
spk05: You should assume, Brent, that what we said previously is consistent with how we feel today. It's going to be roughly matching the on-channel spend with ESPN. That's a number that obviously we can flex, but we think that's a good target. That's what's built into our modeling for 2024. It gives us plenty of dry powder to utilize for state launches. You should think about that spend as being much more performance-based marketing spends and probably more targeted. Obviously, ESPN spend is almost entirely national. Some of the off-channel is national as well, but a lot of it is performance and more local and regional focus.
spk10: Thanks for that. Then just to follow up, good to see, obviously, Cash Handle moving upward. I think one of the things that people are concerned about out there is third-party data providers suggesting that deposit share hasn't moved up and is tracking below your handle share. I guess the question is, are you seeing similar improvements in cash deposits?
spk05: I think the deposit information that you're referencing goes back to what I mentioned. You can see in the weekly active user numbers, monthly active user numbers, we've got engagement. That's not an issue. We've got really good ratings on the iOS store app. We feel really good about that. I think our job is to continue to improve the products and get deeper integrations with ESPN and eliminate friction so that we can get people more seamlessly from ESPN's ecosystem, whether that's media, fantasy, and the like, over to ESPN when they're ready to engage in betting. I think the deposits is really a function of, we don't have our share of wallet yet. We're getting the deposits. We're probably not getting the same size of deposits as we are with maybe the top competitors, but I'm confident in saying that we're one of three or maybe four apps on their phone, and they're on our app, and they're placing wagers. I think they're waiting for more enhancements. I think that that's okay. Our ability to keep people engaged is taking care of itself now. I think that any that will have gotten dormant by the time we get to football season next year, we can reactivate quickly because of our relationship with ESPN, and the product is going to continue to get better and better. We feel great. We have over a million new people in the database. Most of them are engaged with us on a regular basis, as you can see on slide eight. We just have to build out the relationship, the loyalty, and earn more share of wallet as we go. I think you'll see deposit growth come along with that.
spk08: Our next question comes from Chad Bunyan with Macquarie. Please proceed.
spk17: Morning. Thanks for taking my question. First one on the bricks and mortar business. The margin guidance of 34 to a little bit over 35 assumes some slippage from what you produced in 2023. Felicia, you called out some competition and obviously the weather. As we think about same store margins, is it safe to assume that properties that aren't being hit by competition could drive the same margins, or is there a major reason why you would expect for margins to decline in 2024?
spk19: Thanks. This is Todd. I'll take that. Yeah, that's basically everything that's modeled in there from a same store basis, putting January behind us, looking at very strong, stable margins. I think the variables that Felicia provided are everything that's modeled in there. We don't see that changing.
spk17: Okay, thanks. Then for 24 in terms of stock buybacks, can you remind us what's left on the program and if there could be opportunities given where the stock is right now to buy back shares at these levels?
spk15: Thanks. Yeah, thanks Chad. We do have $750 million remaining on our stock repurchase authorization. Look, as Jay and I talked about in our prepared remarks, this is a year of investment as we focused on growing and building out ESPN bet. You probably won't see share repurchases in 2024, but as we transition from the growth phase of our interactive segment towards profitability and a free cash flow phase, we'll have plenty of opportunities to consider return of capital to shareholders. Again, this year we're focused on investment.
spk05: Yeah, I mean, look, we have pretty recent history of buy and back shares when it makes sense for us and that's the best use of capital allocation. Right now, as we've covered in this call, we're investing in a high growth business that's going to generate a lot of value for our shareholders long term. That's the priority. It doesn't mean that you can't do or won't do anything else. It just means that right now that is the number one priority. Our next question comes
spk08: from Steve Wozinski with Stiefel.
spk06: Hey guys, good morning. Jay, so we think about the 1.2 million new members to your database that you called out. You talked about 90% of those are ESPN bet customers. I know it's still early, but can you give us an indication of how many of those new members have visited one of your brick and mortar casinos and or have used your iGaming platform? I guess what we're trying to figure out here is kind of what that cross traffic play has looked like as your ecosystem continues to grow.
spk05: Sure. I mean, look, Todd will have some comments on this as well. We're in the very early stages as you referenced. I mean, we're three months here, so we've built up a really nice database. We know where they live. We know how the proximity is. We talked about one third of them within 50 miles of one of our retail businesses. So we're going to start working on that now. That's not something that we've had a lot of time to get going on, but we're very excited about the cross-sell opportunities. That's a lot of new people into the database. Our overall database is now approaching 30 million people. It feels like just yesterday we were at 25. So that's a big opportunity for us. Todd, anything that you want to add overall?
spk19: Yeah, Jay. You know, the only few items I would add, and Jay gave the data point around how many people are so close to our property. When you expand that kind of concentric circle around our properties, that number grows significantly. And then just based on what we did through some promotions at year end with some of our properties, moving these people to a property, we see such a great multiple, especially in that low to mid customer that's engaging with us online. When they get to property, we're seeing great play, great engagement, as well as additional spend on the other amenities. So that will be in the playbook as we move forward, and it will be a key component this year and all the years as we move forward.
spk05: And I think just your other part of the question on cross-sell to iCasino, you can see from the monthly active user slide that we have on Hollywood Casino that cross-sell has been great. Again, it's one of those. Our product today, I would say, is good, but it's got to be great. And we're working on that diligently as well with our product team. And we think that we can see our market share from a handle perspective continue to grow probably to what our daily active and monthly active user share is.
spk06: Okay, gotcha. Thanks for that. And then this is probably for Todd, going back to your embedded guidance on the top line for the brick and mortar side of the business. I guess, Todd, can you maybe give us a little bit color of how you guys are thinking about your core customer this year in terms of spend levels and maybe what gets you to the low end of that range versus the high end of that range?
spk19: Yes, Steve. Great question. So for us, especially this last quarter, maybe the last two quarters, we did see tremendous engagement return from that 65 plus customer, which has traditionally always been strong for us, but just took quite some time to come back into our property. So looking at those positive trends, those continue into this year. And then our core customer, looking at that mid-range high-frequent customer, we are still seeing a little bit of elevated spend per trip and slight increase in trips in Q4. So looking at how that continues through this year in almost every region, that remains strong. So I would say that slight fall off maybe in the 21 to 34, which has been running hot for a long time, but we make that up in the 65 plus.
spk05: Frank, why don't we have one more question,
spk08: please? We have a question from Bernie McNearlin with Needham and Company. Please proceed.
spk21: Great. Thanks for taking the questions. Good morning. Just want to ask on that slide 8, the weekly active users. And I know the commentary in terms of what the embedded guidance is for market share this year, but do you think there's a structural difference in terms of what your weekly active users would be versus what your handle or GGR share would be? Just trying to get at if it's a more casual user, if there should be that difference maybe if they're lower spend, or if it's right now you're a second or third app that someone's using and the goal is to migrate that to the primary app over time and just how you're thinking about navigating that customer journey.
spk05: Yeah, Bernie, we think it's both. We definitely have a lot of new users. We think we feel strongly we've grown the market. And so that's going to take a little bit of time to grow their play to be commensurate with maybe somebody that's been betting on online sports for the last three or four years. I think most of it, however, though, is a share of wallet that we are one of the apps people have on their phone. They're using the app. They're on the app. We see all of that in the data and we're getting a smaller portion of their wallet than we are of how many people are actually using the app. And so on a percentage basis, I think, you know, this is exciting for us. Slide 8, I think, says a lot about where we think we can get to and it's not going to take us a really long. That's not a five year journey. We think that's something that we can accomplish in the next couple of years if we really get our product to where it needs to be. And of course, the deeper integrations with ESPN, we think integrations with the fantasy app with ESPN is going to be a huge shot in the arm. We anticipate that happening before the end of the year, obviously targeting football season. We'll see if we can get there. But it's a combination of the two. But the fact that people have the app, they're using the app, we just need to build more loyalty with those users over time.
spk21: Great. Thanks, Jay.
spk05: Thanks, Bernie. Thanks, everybody, for joining us and we look forward to sharing more with you next quarter. Thanks.
spk08: That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.
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