Q2 2020 Penn National Gaming Inc Earnings Call
Please standby the conference call will begin momentarily. We thank you very much for your patience and we ask that you. Please remain on the line.
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Greetings and welcome to the Penn National Gaming second quarter 2020 conference calls.
The presentation, all participants will be to listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question piece, but the once all the by the four I know telephone if at any time during the conference you need to each an operator, please best I would do.
As a reminder, this conference is being recorded Thursday August six 2020, I would now like to turn the conference over to Georgia Phony Investor Relations. Please go ahead.
Thank you Kelly good morning, everyone and thank you for joining can national Gaming's, 2022nd quarter Conference call.
Imagines presentation comments momentarily as well as your questions and answers, but first I'll review the safe Harbor disclosure.
In addition, historical facts or statements of current conditions. Today's conference call contains forward looking statements within the meetings in the private Securities Litigation Reform Act like 95, which involve risks uncertainties.
Statements can be identified by the use of forward looking terminologies such as expects believes estimates projects. Okay and plan seeks may will should or it tends to page or the negative or other variations abuse or similar words or by discussions a future events strategies or risks and uncertainties, including future plans strategy.
These performance developments acquisitions capital expenditures and operating results.
Such forward looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance.
Actual results may vary materially from expectations.
It's gonna uncertainties associated with forward looking statements are described in today's news announcement and the company's filings with Securities Exchange Commission.
During their companies reports on form 10-K and form 10-Q.
And natural gas assumes no obligation to publicly update or revise any forward looking statements.
Today's call and webcast will include non-GAAP financial measures within the meaning of FCC regulation G.
When required a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with gap.
Can be found in today's press release as well as in the company's website.
With that it's my pleasure and now I'll turn the call over the company CEO Jay Snowden Jay. Please go ahead.
As Joe Good morning, everyone and thanks for joining us for our second quarter earnings call. We hope you on your families are remaining healthy and safe.
As you'll see from the strong results were released this morning, we definitely come a long way since our last earnings call when all of our property for shot down.
But do you continue to be uncertain times for all about center heartfelt things go out of all the healthcare workers first responders.
We're still out there on the frontline battling the pandemic every day.
Got it was that with me this morning, as our Chief Financial Officer, Dave Williams, who as you know joined US on March 3rd from Apple and had been on this roller coaster ride with whatever sets.
I'm also joined this morning by their members of our senior executive team, who are here and available to help answer your question.
To begin with I want to emphasize how proud I am of the way, our corporate and property leadership teams and all of our team members have responded to the unprecedented challenges presented to us over the last several months.
Since our last Paul we've managed to resume operations at more than 95% of our properties and with yesterday's opening a breakout in Detroit all the Zia Park in New Mexico, and Tropicana resort in Las Vegas or operational today.
And everyone has worked tirelessly alongside our state regulators and public health officials to implement comprehensive health and sanitation protocols that put the safety of our team members and valued gas first.
Our team members are truly the life a lot of our company and well some remain furloughed given the ongoing capacity restrictions and limited amenities at our properties, we recently announced that we've extended their medical and pharmacy benefits through August 31st.
In addition, our cobot 19 emergency really fine for which we raised more than $1.7 million has provided financial assistance to more than 1000 team members and remains available to help others a need.
I would like to thank all of our team members and valued stakeholders for their continued support dedication and patience during this difficult time.
Before I hand, it over today for a summary of our second quarter results in a quick review of our financials I want to highlight our company's commitment to inclusion and diversity, which we referenced in our press release. This is a topic that's very personal to me and I know my executive team here shares my same level of commitment.
We have always been proud to operate in diverse communities throughout the country and we strive to ensure that our properties are reflective of those communities.
We also support numerous local nonprofit and social welfare organizations, who are helping to assess disadvantaged in underrepresented individuals in the areas in which we do business.
We believe that actions speak louder than words, and this year and celebration of June team, we committed to spend $1 million annually on a host of new diversity and inclusion initiatives, including a scholarship program for underrepresented team members and increased recruitment efforts and supportive historically black colleges and universities, among others, which you can read about.
On our website.
We've also formed a new diversity committee chaired by just in Carter, Our general manager in a real dynamic leader at our Hollywood Casino in Toledo to help on that our initiatives and to ensure we have a mechanism in place to listen to team members about ongoing social justice issues, we plan to provide updates on our progress going forward.
With that I'll turn it over to that that thanks, Jay and good morning, everyone.
Well our properties were closed in April and the beginning of May we took decisive actions to solidify to solidify our liquidity position materially reduce costs and reimagine Har properties could operate.
When we began reopening our properties in May we opened with a more efficient and profitable operating model built out our properties and at corporate.
Well may and June results May have benefited in part from pent up demand. We continue to be highly encouraged by revenue in EBIT dark trends in July and August.
Despite the continuation of safety protocols, including capacity restrictions and social distancing mandates.
During the respective reopening periods through June 30, our properties, our cumulative 1300 basis points EBITDAR margin expansion.
And a 33% growth in adjusted EBITDAR compared to the prior year.
These results were driven by stronger than expected revenues, coupled with an aggressive reduction in operating expenses across the company.
I'm extremely impressed by our highly talented operating teams who are delivering exceptional performance during these challenging times.
Although all but two of our casinos are now open we will continue to be disciplined in our capital expenditures, we spent $14.5 million on maintenance Capex in Q2, and approximately $16 million on project Capex related to Morgantown in New York.
We anticipate resuming construction at both Morgantown in New York later this year with a projected opening date for both in the second half of 2021.
This quarter, we issued $330.5 million of convertible debt and an additional $345 million in an equity raise which significantly improved our balance sheet and provided additional liquidity.
Since reopening I am pleased to report that each of our properties has generated positive EBITDAR and as of early June the company as a whole began generating positive free cash flow and continues to grow cash balances as a result of our operations.
Our ending Q2 cash balance was approximately $1.2 billion with a net debt balance of $2.0 billion.
This improved liquidity provides well over 12 months of operating cash in the very unlikely event of another full company closure in zero revenue environment.
We're also confident that our improved balance sheet provides ample liquidity to support the launch of our interactive products over the coming months with that I turn it back over to Jay.
Thanks, Dave.
Outstanding results today that our reopen properties highlight our unique strategic position as a best in class operator at market, leading regional properties, which have rebounded more quickly than casinos in destination markets. Although visitation has yet to returned to pre coded levels in large part due to state mandated cat capacity restrictions and limited amenities.
Spend per visit has been notably strong up 45%, resulting in better than expected revenues.
And importantly, we've seen a significant increase in unrated play and growth from a younger demographic. This coincides well with our efforts to implement cashless and contact with initiatives and other technology enhancements at our properties as soon as possible.
Dave mentioned, the strength of our margins driven by our operating inefficiencies importantly, we believe a meaningful portion of these margin improvement will be recurring as we continue to make fundamental changes to improve our offerings and efficiencies across our organization on our last call. We stated that we needed to achieve approximately 95% of 2019 revenue.
Now to achieve approximately 100% of 2019 EBITDAR given the continuing cost mitigation efforts and our Reimagine operating model. We now believe that we can achieve 2019 EBITDAR level with just around 90% of 2019 revenues.
And while we're very pleased with our property property operating performance. We're most excited about the potential for significant long term growth and value creation through our highly differentiated omnichannel strategy.
That ends we look forward to the launch of our Barstool Sports book Mobile App in September here in Pennsylvania, We think barstools loyal followers and our existing casino gas Walgreens, Unlike anything in the market today.
Meanwhile, our Hollywood branded real money I casino product in Pennsylvania continues to grow nicely even after the reopening of our casinos. The last couple of months with a meaningful portion of our revenues coming from our inactive database.
Our proven ability to convert our casino database together with our partnership with Barstool sports will provide significant organic customer acquisition and cross sell opportunities.
In sum, we believe we are extremely well positioned to capture an outsize share of the growing U.S. sports betting add I casino market.
In closing, let me say that despite the ongoing uncertainties with this pandemic, we're extremely excited for the future and believe all the seeds. We planted throughout 2020 will provide a strong foundation for new growth an opportunity ahead, so with that I'd like to open up the call the question.
Thank you if you like to register question. Please press the one followed by the floor on your telephone you will hear what we told prompt technology request. If your question has been at today, you would like to they try your registration piece. That's the one followed by this fee. Once again, it's one for if you would like to register for a question.
Our first question comes from Joe Greff with JP Morgan You May proceed with your question.
Good morning, everybody.
And next results to you all.
Jay you mentioned in the press release earlier that so far in July and August we're adults were encouraging.
I was hoping maybe you can break that out in two pieces for it.
And maybe in relation to how you described reopen properties in June form it to the to the property that reopened in June let's call them. The phase one property. The revenues were down 6% EBITDA of 33% in that you need in June.
How did they perform relative to those metrics in July and for those properties that opened up in July.
At their respective periods, let's call them the phase two properties headed they perform relative to that EBITDA and revenue performance that you referenced in June.
Sure Joe and the numbers that we quoted in the release are really those are may and June combined. So there are some properties, Mississippi, Louisiana that opened in May so thats the.
The period of time, they were opened whether it was may June or just June year over year for that quarter.
Here's what I would say that to answer. Your question is that we continue to be encouraged it I've been really.
Loan away at just how stable the ongoing operating performance has been across the portfolio with very few exceptions.
Fourth of July weekend was a little light and I think that policy was just due to you know a fear of being in big crowds and so when you look at you know fourth of July is typically a busy busy weekend for us.
And.
This year it was not it did not match up well to last year, but as soon as fourth of July weekend was over we are right back for the rest in July and so far on August looking very much like what we saw in the month of May and June.
The numbers are going to match up perfectly because you have properties that that opened in June and then that opened in July and the gaming tax rates are different in the competitive set is different and so it's not going to be exactly what you saw from in June but a lot closer to what you saw in May and June we put in our release.
And maybe what others had in mind that there was going to be the significant drop off after the first week of the first two weeks our properties honestly that had been opened the longest which has Mississippi and Louisiana. Our steel are still producing some of the strongest result in the portfolio on a year over year basis.
Helpful and.
Do you actually open reopened the Tropicana and others, maybe gave you can help us split.
The monthly cash burn at the Trop, India Park, as well as our corporate and that'll do it for me. Thanks.
Yes, so we we plan Joe right now to.
Opened the Tropicana property in September there's a lot of moving parts everyday we're learning and our team on the ground. There is continuing to do competitive assessments in terms of.
80, our and Rev par occupancy and so we're going to be really thoughtful around when and how we reopened as of right now September feels right, but we have several more weeks to nail down an exact date and if it's not right then we'll wait a little bit longer to reopen until it is right.
These are fluid times everything is dynamic and I'm not sure Dave if we have the exact cash burn for trough in Zia Park, but feel free to jump in there will yeah, Jay and thanks, Joe well, we don't really give.
Specific property answers so what I will tell you is that even with those property closed as a company where cash flow positive.
Thank you.
Thanks, Joe.
Our next question comes from Felicia Hendrix with Barclays. You May proceed with your question.
Hi, Thank you so much and good morning, and gave we'll start with you and if you just look at the Opex per day in your various segments is there any significant difference if there any way we should look at it differently or can we could you just similar metrics across the board and if you could just talk about that now that you're right.
And running I know you gave us the 33 basis point improvement kinda back into it but if you can add anything to that would be great. Thanks.
Hey, Felicia to grab that one because I figured this question might come up and it has on previous calls of our competitors and here I think we've given you guys everything you need when we say that one we've given you. The results for May June, which I think is helpful and then.
I think more importantly, as you're looking at how to model. That's as you move forward I said in my prepared remarks that we believe we can get to 100% of pre cobot level or call. It 2019 level EBITDAR on 90% or approximately 90% of pre covert level. Our 2019 revenue so I think.
I'm going to give you everything that you need to back into an opex per day or whatever you need for modeling purposes.
Okay.
Thanks, and then and then Jay.
On a lot of these causing everyone has been asking the performance you're seeing is sustainable and I think you talked about that.
Got it talks about that so I just have a bit of it a different question and that is you know as you mentioned you know may and June were what they were and other than July four things are kind of continuing on but what does it take too.
An increase in this environment or should we just kind of makes the expected stability for now and I know it.
Oh, good fix but have you seen any change at all since the unemployment insurance benefits has essentially engaging Congress passed new program.
It's a great question and I don't know that any of us truly no. The answer Felicia in terms of what what needs to happen for this to get better or what needs to happen for the trends to change to the downside and what happens if the stimulus chuck's stop or or or reduced from where they've been over the last several months and we.
No the answer either I think theres a lot of factors in play here, there's no doubt that the unemployment benefits are a tailwind.
I think we're also obviously benefit end because one of the things that we're seeing polices that are unrated business is up almost 15% year over year on a large base of business.
So there's a lot of new customers coming in and when you look at the rate at database, we have and you look between 21 and 45 years old. That's also what we're seeing very strong growth of 25% year over year. So there's a lot of new people coming into our facilities were obviously very active and getting a card in their hands.
And we feel like there is an opportunity for us as we move forward to convert those guests into long term loyal customers and we're taking advantage of this time, where there really are more limited entertainment options. You know movie theaters are an open and sporting events are with no with no crowd and there is no concert.
And so you're looking people are looking for things to do and I think that's part of why the spend per visit in time per visit has been so strong as when people get out of the house and they're in a safe environment and they can do something find their spending more time and more money doing that we've actually seen our oldest segments of the database over 55 years old.
Our the softness in our database and so I think to the extent and I figure question like this will come up where what happens at the time that there is a vaccine what happens when there's effective treatments and do.
Those and when sporting event start, allowing fans again in concert get going do you lose those customers that today are showing up at unrated or this growth in your younger segments and I think we keep a lot of them I think what we're hearing solicited unsolicited is that many of these folks have never been to what casino or when they went to casinos. It was always jump on an.
Airplane go to Vegas, now, they're staying closer to home and they realize these are really high quality experiences even in this current environment, It's a really fun experience and they're spending time with us and.
Even if we lose some of that business down the road I think you also look at you have to look at that's probably around the same time that people who were older and that we're seeing declines in today are probably going to feel more comfortable coming back to casinos and leaving their home and spending more time with us. So there's a lot of variables there.
I don't know, which one to point to and extrapolate what that means of this one gets better or that one gets worse I would just reiterate what I said earlier that I've been really pleasantly surprised.
That we've seen such stability not just the first day or the first week month, two and now it's in some months three for some of our properties like I said, Mississippi, Louisiana, and we don't have any reason to believe that thats going to fall off anytime in the near future because it's been sustained now even through early August.
In Jay with these younger visitors that you're converting to mychoice sneakers in their hands.
How does that tie into your expectations that you put out in that Omnichannel presentation in may when you're talking about.
The barstool acting in your goal to convert 5 million kind of the ordering at 5% isn't barstool audience and 5 million at your active nitrogen and various which had an asked about 25% you're not.
Seems a little <unk> kind of.
Not optimistic, but maybe not super easy right. So now that you have kind of the younger folks coming into that make you feel better about their objective.
I I always felt good so I guess it just reinforcing how I felt.
And here's what I would say about that fully so you know the Mychoice program and pod George on our team Jennifer Weisman, our Chief Marketing Officer, Eric and Ardine at Barstow, We're talking regularly about the evolution of my choice and my choice. We believe is going to be it's close now, but we believe that's going to be the strongest loyalty.
Program in the space, because it's going to the only program that is wholly owned by the operator and we deploy on wholly owned channels.
Channels of business, it's going to be deployed and all of our brick and mortar casinos Greektown. We're going to go live in October. So then will be 41 at a 41.
My choice has already connected to our social gaming products, it's already connected to our online casino real money wagering in Pennsylvania and by the end of this calendar year, we're going to have it also part of our Barstool sports book out that won't be at launch, but it will be before the end of this calendar year.
So as you think about how that program of all it's not going to be maybe at most loyalty programs into the casino space has been for many many decades, where it gets you freebies, it's a free buffet or its cash back at the machine.
And I think you're going to see the offerings and the experiences that we're allowing people to use their earn points to redeem are going to be tied and very well we love. The name Mychoice because it really is whatever you want you can get and there is going to be barstool merchandise and opportunities to go to special events with barstow personalities and so that's younger demographic that were.
Seen sign up for cards, and we're seeing growth in their rated play right now and that's really without the barstool connection in place as it relates to the Mychoice program. So.
We're very bullish on Omnichannel, we're very bullish on our loyalty program and how barstool fits into that overall strategy and as one last point that I would make that I think is very compelling with regard to why were such big believers and Omnichannel and this is with regard to what we're seeing in Pennsylvania over the last several months so.
During the time that our properties were closed in Pennsylvania. As you know we have a real money I casino product, Paul Hollywood Casino Dotcom or you can download the app of course.
There were approximately 20000 customers during the time that our properties were close between late March in late June early July 20000 customers that engaged with us on Hollywood Casino products real money in Pennsylvania, and if you look at what's happened to our database and pencil.
Vein post reopening of the properties about a month ago.
What you'll see is that the customers that have only ever gone to the casino. So they've never engaged with US online there just pure brick and mortar casino goers their place since weve reopen is down about 20%, which as I understand from what the regulators said yesterday that sounds like about what it's going to be for the whole state I think slots were down 20% approximately.
If you look at the customer the 20000 that we're engaged with US online their combined play between going back to the brick and mortar casinos and their continued play on Hollywood Casino Dot com and on our App is up over 40% year over year right. So you just think about the power of on the Omnichannel we've been too.
Talking about that's for like Tommy Fine they get to start proving this out we're highly encouraged by what we're seeing so far and all of that as without barstow in the mix, which were planning to launch that App next month, and we think those trends are only going to prove out to be better.
Thank you so much that was great color I appreciate it.
Thanks Lisa.
Our next question comes from Thomas Allen with Morgan Stanley You May proceed with your question.
Thank you and congrats on the strong execution in the quarter I'm just a few questions on the Barstool Sports book.
As you get close to the lawn care, just talking about sort of things you're most excited about.
Also.
What what's holding it back from launching I think there was some hope it was going to launch in August and obviously, the NFL season openers September 10th hopefully.
What's stopping you from from coming out earlier thanks.
Well, let me, let me start with the second part first Thomas.
We watch what's important to us is getting Thats right I would tell you that the beta of the App is in my hands and my executive team hands and the exact that Barstools hands right now.
I was on that way too late last night and joined myself, it's a fantastic product.
So.
What we want to make sure that we launched this and that you get one chance to make a first impression so what's more important rushing it to get to some MLB and NVCA games in August.
Or doing this right launching it in September when we know it's going to deliver a great experience you why you Alex for the end user that's where we're in this for the long game. So the difference between August and September would it be nice to be open now or be live now because there is some pent up demand sure and by the way we're seeing.
Great pent up demand in our retail sportsbook.
Last week, and I think our sport our sport betting handle was up 16% year over year for the two days over the weekend. So that demand is going to be there and if we miss a few games in August, but we're ready for football season in September while MLB is still going knocking on wood of course and be a play off a this is.
A heck of a time to be launching your app because we're launching others have have had there is launched and we're very bullish about how our app is going to compare to the top app in the marketplace.
And what do we most excited about.
Look we are we're excited that we've taken our time to launch because we're going to lots of very competitive product with things like traveling wallet.
I think our that slip experiences second to none the intuitiveness of how to use the app and importantly, the exclusive betting options as really with the differentiation that we're going to I think be able to deliver it's going to get better over time, but even day one.
And I'm not going to get too much detail here, because we'll let you see it when we launch it youre going to see a lot of opportunities to engage with Dave Portnoy, and big Cat and brand and Walker and Marty motion and many other that barstool. If you wanted that with them or you want if that against them. If you want to fade there but.
These are things around be able to do day, one and.
I think you should imagine that the content and the branding integration into our App with Barstool, it's just going to get better and better and better every time, we do a version release and we think that we'll be able to do a new version release, probably every six weeks after we launch and so I mean.
Excited about everything.
Theres really we're not launching and holding our breath like while we wish we would have done. This by the time, we launched we could have launched this app in Q1 or Q2, but it wouldn't have been a competitive product.
We're confident is going to be very competitive when we launch next month.
Thanks, I think we're all excited and if you need to more tester each of the beta that over.
Some follow up.
Just on the on the I Casino customers. You are seeing you did talk a little bit about what they're playing and any other thoughts are recent thoughts and kind of the cross sell opportunity between I casino and Sportsbook customers. Thank you.
Yeah well.
Great question and.
We've been surprised honestly, because the I casino customer skews younger than our brick and mortar customer brick and mortar customers more that 55 average age range and we're seeing for online casino is closer to 45, we've been surprised that the percentage of play on slots versus tables has been pretty similar to.
Our brick and mortar casinos, we thought it would skew a lot more.
People game centric and we haven't seen that yet so.
We're encouraged by that because I think theres some newer slot product that obviously is not just targeting customers over 55, but theres Gen xers that are engaging with the slot products as well.
And this is something the second part of your question as you know this is our strategy right and we think that if you're excited about the stock Ipos of Draftkings for example, which is a pure sports betting online play.
We bring omni channel to the table, which we feel really good about for the reasons I mentioned earlier and then recently there's been a couple of stock Ipos, which are much more focused on online casino that being Golden Nugget and Rush Street.
The beauty of Penn strategy in our partnership and ownership structure with Barstow as that you really get the best of all of that we have a very compelling sports brands to lead Wes we have a database and access to 66 million sports enthusiasts over 60% of which we know that on sports.
And over 40% or Abbott sports that are those that are at a significant barstool loyalists today and so you think about our ability like I think draftkings and Fanduel have successfully done in new Jersey to convert those sports better to online casino products.
Works and we've seen at work in New Jersey were seen at work in Pennsylvania.
We only today in Pennsylvania have online casino and we are running north of 10% market share just because of our marketing approach with our database of getting inactive as to engage with us and some of our active customers new customers that are friending their friends on Facebook and introducing them to our product. So if you.
10% with casino only what does that look like when you and when you think about the launch of Barstool sports betting app in our ability to convert those customers in that case more table game customers.
Two are all like casino products and that's why.
We decided to launch in Pennsylvania, first because its sports and I casino and we're very focused on Michigan, because that sports and I casino when Michigan's ready, we think that will be probably sometime in Q4.
And a new Jersey sports and I casinos and be very high on our list because we think that we really have the ability to do a great job of converting not just brick and mortar to online in all lines of brick and mortar, but online sports to online casino and in some cases online casino to online sports and we have great products that again, I'll say that the millions on our wholly.
Oh and by pad, that's a real differentiator when you're talking about pen strategy with parcel.
Thank you.
Thanks on it.
Our next question comes from Steve Lozinski with Stifel. You May proceed with your question.
Yes, good morning, guys.
You talked about how that revenue base now needs to be at 90% of of 2019 levels.
Obviously thats down from 95%. So I guess the question is.
Where could that number go and what levers do you still have to pull to drive that number lower if you can get a lower and I understand it's not going to get.
Let's say into the sixties, given the rental payments, but is that a number that could eventually get into the mid eightys as time goes on.
Well, let's say Steve.
Let's see how this plays out Todd and I talk about this daily.
And.
We wouldn't put 90 out there if we weren't comfortable with 90, so, let's let's sort of leave it at that and.
There are a lot of that Theres a lot of variables right. It depends on what how how great can margins be well. It depends what are your sustained revenue levels look like we have a good sense as to what our cost structure is going to be as we move forward and I look at our major competitors and regional gaming and I think that listening to their earnings.
Calls and what they're saying publicly theres, a big focus on margin improvement and really taking this opportunity to create structural change and to reimagine. What the industry has always done you know those orthodoxies of hot you have to have a buffet and you have to comp the buffet, it's open everyday for three mills and promotional.
Credits you have to do this and you have to reinvest that these percentages I think.
Whiteboard at everything I think our competitors are doing going through a similar exercise.
And so it's not to say that in a particular market, where we compete against a privately owned operator.
They do something different we may have to think about what we do there, but as you think about broadly across our portfolio of properties. Most of these changes that we've made with very few exceptions. We believe we can carry forward into the future and not look back and we're encouraged by that that's obviously, how we think about vendor relationships than what we've learned.
One more properties were shut down in how we can enhance those vendor relationships.
How we think about marketing and acquisition costs.
How we think about advertising spend promotional spend and of course, how we staff our businesses and we were really excited we're actually having for the first time ever great conversations with regulators and a number of states about cardless contact list and cashless technology that we've been looking out for years, it's been.
Deployed and pretty much every other industry, but gaming and.
It's now it's a customer expectations, particularly what the younger customers that were seeing come in as unrated and are already rated and hoping to see that great growth between 21, and 45 years old. There's an expectation that you don't have to go to an ATM.
As a bunch of numbers that you might not want to be touching.
Get cash out pay a fee to get your on cash our go to a table and transact with cap. It's just not how you know Gen xers millennial Gensix, it's very foreign and I think regulators get that and the conversations we've had to date have been really productive and I was just reading yesterday.
The new casino and downtown Las Vegas is already.
Launching or circa they're going to be launching with cashless table games fantastic I think thats, where you're going to see that industry had and I think it will be you know market by market and jurisdiction by jurisdiction.
We obviously it I've mentioned this before also we still spend almost $20 million a year in direct mail.
Helping anybody, especially the last three months is waiting for the mailman to show up no disrespect to before they decide what to do today and that was the case 10 years ago and in 15 years ago and that the idea that we can get offers to our consumer or just to the end user faster more efficiently and in a way that.
They want it packaged up and delivered and that's the way to incentivize going forward well, there's a lot of efficiencies there and there's an enhanced consumer experience as well and so is there more of course, there's more.
If I read it.
Articulate today, which I won't what where were generate where we're at in terms of revenue generation and EBIT our generation as of yesterday from the time to properties reopened obviously, 90% still looks conservative, but there's a lot of moving parts and so 90%. The number we feel comfortable with today and that's something that we'll continue to update.
All of you as we move forward.
Gotcha, Thanks, and specifically with marketing and advertising obviously.
Those remains.
Very depressed right now in terms your spend levels, but.
I Wonder how you guys think about turning that back on when do you actually make that decision to start getting more aggressive on those fronts and.
Then that brings the next question, though do you see or that all the sudden certain markets.
Start to get overly promotional.
I just Steve again, as we sit here today based on how how we're thinking about the business and what I'm hearing generally in the space.
I, just don't see that happening I'm, not going to say ever but do I see that happened in the next year two years.
I don't.
And yeah, I think that even in terms of advertising and promotional spend a lot of that was done and paid media.
Maybe and radio and I, just you know there's more efficient ways to do business and we're much more focused on.
Sort of surgical digital opportunities, that's where eyeballs are that's where we want to be and Odyssey Barstool has really helped us think differently about that and there are a sports and digital media company. They know they understand digital advertising as well as any company on the planet and so we're.
Thinking about things differently, not just for our brick and mortar but of course, the launch of our sports betting app and our online casino apps and products. So.
Yes, I think me. This is a it's really as a true re imagining I think this is a once in a career opportunity for companies to really.
Challenge and question everything they've historically done and figure out what's the best model going forward and we're certainly doing that at pad.
Gotcha. Thanks, I appreciate it thanks, Dave.
Our next question comes from Shaun Kelley with Bank of America. You May proceed with your question.
Thanks, everyone.
Jay.
Totally going to beat the dead horse here. So please can you just answered maybe.
Shorter, but just just I'm going ask seem question. It then I think Steve just asked but slightly differently. So if we look at 90% number that you gave.
I think the way we back into it that sort of implies.
300, 350 basis points of sort of margin improvement on those 2019 levels. So.
The question I want ask is like if we're seeing 1300 basis points at granite. Some just a select number of properties that are reopen today, yet we're sort of thinking that 300 or 400 might be sustainable what's the difference is it primarily.
Marketing dollars, because we haven't really already in any of those promotions and some of those will naturally come back or is it operating expenses because.
Visitation levels are lower we're just getting this much much higher productivity that you don't think a sustainable.
Or is it something else just just kind of specifically what what's the difference in.
Okay. That's still seems like it's pretty pretty wide margin differential if we think about it the way we laid it out.
Yes, It is Sean and I think your math is right I would say theres really there's two things I think about for why we're a stick with 90 today and we'll update you as we move forward is that.
It's early it's been in some cases, one month in some cases, two months and and the best case, it's been three months in the case of Mississippi and Louisiana. So that it's just it's early I don't want to us to get over our skis and make promises that we can't keep so we felt like we could we could make a commitment today to 90% and.
We'll see where it goes.
And then number two you are seeing spend per visit up 45% do I think thats going to last forever I don't I think you're probably going to see a higher spend per visit as we move forward for a lot of reasons that we've talked about today, but is it going to be 45%.
I don't know that would be great. If it is and youre going to eventually see.
More volumes of customers come back I think your undersea visitation levels at some point, whether it's when there is a vaccine or effective treatments or whatever those variables are you going to be visitation continue to grow and when there's more bodies in the building natural your cost structure is going to creep up a little bit.
Those are the primary reasons I wouldn't get hung up on why only this and put it be that.
Let's let's see how things play out you know where we were for May and June We've said July and August have looked a lot like may in June with the exception of the fourth of July weekend, and well keep you posted as we look forward.
Great that's perfect and then.
A follow up question I had is on obviously you've talked a lot as we talk about barstool, you talked a lot about the 66 million unique.
There was some commentary now just continued I think strong engagement on some of the podcasting efforts in in the press release.
No that I've already think that 66 million numbers is fairly aided on any chance, we could get an update on what that looks like today or any other color shopper color you can provide if we can't get the hard data.
Well.
Great question, that's the number weve been use nemer and continue to use I think we all know that barstool brand has grown since the time that we started using that number at the Nielsen number and at changes daily it depends on what they have going on a particular day or particular month, so I wouldn't I wouldnt change that number as we sit here today.
What I can share I think these stats are pretty amazing as you look at.
The social platforms for Barstool.
This is for the month of June of this year.
Instagram followers up 49% year over year to 46 million followers.
Twitter up 49% to 23 million followers.
Talk it didn't even.
They weren't engaged with last year 'cause tick tock was just launching 16 million followers on tech talk in the month of June for Barstool podcast up 40% to 9 million.
Snapshot up 37% so.
This is a brand that we knew.
Was.
Great from a from a partnership standpoint from a loyalty a fan standpoint and.
Who would have known day importantly, the interviewing the president the United States.
And Davy day trader and the brand has just gotten bigger and big cats, playing video games with hundreds of thousands of people watching during coded quarantine.
There are so creative and.
They are just maniacal about entertainment and trying to make sure that they bring some level of levity not everyone loves it but they do bring levity and it's a rent and its satirical often times, but they are really talented and I think they have done an amazing job during a time when there were no sports.
Growing their brand and significant ways.
So I would tell you and sort of where your question was leading the numbers obviously bigger than when it was we first started using that number I just don't have anything in fishel official in front of me to share with you on what it is today.
Great. Thanks very much.
Thanks, John.
Our next question comes from Barry Jonas Twist Securities. You May proceed with your question.
Great. Thanks, just to start with the follow up on margins.
Really strong margin expansion just curious.
The ranges but properties.
Wide are there any call outs, whether its geography property.
The other characteristics.
Barry.
Think about that margin expansion.
Yeah, I'm very I would say, there's you know theres some outliers to the get into the bad but what we're sharing with you is on within a very tight range for the vast majority of our properties.
And there is competitive reasons, why some might be higher and some might be lower but if you were to look across the portfolio. I think you would see that you know, 50% to 65% of them or within a very tight range within very close to what we shared today on the revenues down sex and EBITDAR up 33.
And margins up 1300.
It's not that's not being driven by one or two properties, it's really being driven by the bulk of the portfolio.
Fantastic and then just on the cash flows.
Contactless initiatives.
What are your expectations longer term about from the medium and longer term about adoption by players you think that to really additive or worst substitute for cash.
Well I.
I think at some well there's a lot of ways to answer that I. There are there are very few places that you go to today and your life.
Grocery stores forms of entertainment bars, restaurants, where people are transacting in cash and when I say people, that's not 21 year old Thats, not 44 year old Thats, not 58 year old if not 72 year old everybody everybody has debit cards and credit cards and I think it's just an expectation.
And so this is something that we have to do as an industry or else, it's going to hurt our opportunity to engage with younger customers and to keep our existing customers.
The days of going to ATM to getting cash out to buy into the blackjack table I love plant blackjack than doing it for my.
Adult life I'll say over 21.
No I don't know when enjoys going through an ATM in doing that.
So I think that this is something customers are asking for its something that regulators are very open to and I think certainly see in the light now more than ever because they're hearing that from customers too I don't want to deal with cash.
And we spend millions and millions and millions and millions of dollars across the company moving cash tracking cash.
Sending cash collecting cash storing cash every day and on you can imagine the sort of efficiencies that it creates while at the same time, making it about a better guest experience we can't move fast enough on this as an industry.
Great. Thank you.
Barry.
And our next question comes from Chad Beynon with my Clammy you May proceed with your question.
Hi, good morning, Thanks for taking my question.
Wanted to go back to spore Tonight gaming Jay I know in the past you've talked about.
Central goals about more vertical integration around the tech stack and I know, it's early in your resources, which can be in white had on the Onboarding side, I think I've been pretty successful, but I know you're building out your stuff in house with with engineers or there are places in the tech stack, where you might find.
More vertically integrated opportunities, whether it's on the casino content side with slots are blackjack or or anything else on the sports side to call. Thanks.
Great question Chad.
Our focus right now as you can imagine as less launched this app in Pennsylvania next month as successfully as possible and we feel like we have the right technology partners and can be in white Hot we felt like we have a fantastic team of engineers and product developers and operators.
Customer service folks that are going to support.
The launch in the further development of that App and so that's really the focus right now are there opportunities down the road to think about vertical more vertically integrating technology absolutely.
We have those conversations.
But it's not something that we're focused on imminently, we've been our approach on the Chad has been and again why we took as long as we did to launch the opposite that one we didn't want an off the shelf product that wasn't going to be competitive we want to take the time to make sure. We had proprietary features and functionality and content integration.
And with Barstool that differentiated our products and we want to own.
Any aspect of what touches the end user and that's what we're doing today now does it make sense to go even more vertically on sort of backend and risk management trading services.
Maybe maybe not maybe that's an area that we say others can just do it better than we can and so we'd rather not expend energy and resources on that.
But we feel we feel good about the strategy and the tech stock today, I think more more to come in future quarters in terms of how that thinking evolve.
Okay. Thank you.
And then on the land based side do you have the best estimate in terms of what percentage of units.
I've been active since your properties of.
Have reopened and you do you believe you have the right amount of product.
Too much too little how does this kind of folded into.
How the casino floor on the land based side will will look from a product standpoint.
Post pandemic, thanks, well.
I think I've said this a couple of times and past calls that.
50% of capacity limitation.
Really only becomes an issue for us on the busiest of hours on weekends or a busy holiday weekend like fourth of July certainly it was a factor, but if you look at sort of day in day out it's a it's as a non issue on weekdays across the company and it's really a non issue on most of the weekend other than those peak hours of set.
One to 10 PM on Friday, and Saturday night.
So.
No we're thinking about it is.
Love our properties they were built decades ago and they were built within a very different competitive environment. There was a lot less supply in state and neighboring state So our casino floors or plenty big.
To handle the busiest days the busiest of hours on new year's Eve, and then sub and so our ability to continue to take product off the floor, let's say, even if we had the ability to reopen 100% of our floors I think you'd find that our focus is going to be on.
Comfort and safety and maybe you don't end up reopening a 100% of your game you open up 100% your floors, but you space everything out and social distancing or more socially distanced approach and experience is what we create.
Todd NRG assumes that our regionals are working on that every day, we've done that somewhat so far theres a lot more opportunity to enhance the experience for people. Once we don't have those limitations or they have been relaxed more than they are today.
Thank you very much appreciate it.
With that.
All right Mr. Snow and then I'll turn the call back over to you for any final remarks.
No final remarks, there I think well why don't we take one more question I think we're a few minutes before the hour and let's just do one more if we have someone to them no.
Of course no problem. Our next question comes from John Decree with Union Gaming Group You May proceed with your question.
Good morning every London, Jay Thanks for taking the final question.
I think you covered pretty much and also ground. So forgive me if it's a little bit more granular, but you had spoken earlier about the database engagement in Pennsylvania on the Hollywood real money product I was wondering if you could give us a little context, I think you've mentioned, maybe 20000 or so customers.
Played online curious if thats.
Pass with a large portion of the customers you've seen come through the Hollywood casino since launching and it's only been a short time, but I'm curious how that stats out to your expectations and.
The overall mix of either users or revenue coming from the database so far.
Yeah, no. It's a great questions on its still early early innings, obviously right. So we're we're learning and analyzing the data as we go here is the way to think about it.
A little bit off on these percentages, but roughly one third of the gap of that 20000 are.
Database customers that were in active or dormant.
Roughly one third where database customers that were active with us at our brick and mortar casinos and roughly one third that engaged with us that 20000 over the corn teen period, only online or new customers and we're obviously getting cards in their hands as we go so.
We've been.
I would say pleasantly surprised given that our paint media behind Hollywood Casino online in PA is virtually nothing we've really focused on.
Activating our database.
Activating app the properties to enhance the.
Exposure of Hollywood Casino online and so the fact that two thirds of are engaged users are were either dormant for our new to the company is really I think encouraging.
And the the one third of customers that we're engaged with us actively at the casinos and are now engaged with US also online.
We're seeing their total spend with Penn significantly higher than it was when it was only spend at the brick and mortar. So there year over year spend much like I shared in the stats that I mentioned earlier as a lot higher when you combine their online.
Revenue as well as the brick and mortar revenue and spend so yes, I would say we're encouraged I mean, it's early it's one state. It's just online casino, we haven't launched barstool, yet and what does it look like when you start cross selling your sports betters to online casino.
We'll learn a lot more I think your questions a good one and we have limited to share, but we'll share more on future calls.
I appreciate all the additional color I think you answered my follow up on on marketing So I'll leave it at that thanks, again and congratulations on all the work you've done so far.
Great job. Thank you for your questions and that's it for our call. Thank you for dialing in I know, it's a challenging times, we're like everyone else with the company figured out how to navigate this as we go I'm could not be more proud of how the company has stepped up.
From top to bottom everybody in the company no complaints what can I do to help us move forward and couldn't be more proud to be leading this company. So thank you for dialing in and we look forward to speaking with you next quarter.
That does conclude the conference call for today, we thank you for your participation and we ask that you. Please disconnect your lines.
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