Q4 2020 Penn National Gaming Inc Earnings Call
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Greetings and welcome to the Penn National Gaming fourth quarter conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session.
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Thank you Frank Good morning, everyone and thank you for joining Penn National gaming 2024th quarter Conference call.
And get to management's presentation and comments momentarily as well as your questions and answers, but as always I'll first review the safe Harbor disclosure and.
And additional historical facts or statements of current conditions. Today's conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. These statements can be identified by the use of forward looking terminology such as expects believes estimates projects intends plans seeks may will should already.
<unk> or the negative or other variations of these or similar words or by discussion of future events strategies or risks and uncertainties, including future plans strategies performance developments acquisitions and capital.
Penetration and operating results from <unk>.
And we're looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance.
As such actual results may vary materially from expectations.
And uncertainties associated with the forward looking statements are described in today's news announcement and and the company's filings with Securities and Exchange Commission, including the company's reports on form 10-K and form 10-Q.
Gaming 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 GAAP can be found in today's press release as well as the company's website.
With that it's now my pleasure to turn the call over to the company's CEO Jay Snowden Jay.
Thanks, Joe Good morning, everyone. Thanks for joining us for our fourth quarter earnings call. Unfortunately, we don't have our new Chief financial Officer of Felicia Hendrix onboard quite yet, though I know she's out there listening and eager to join the team here and a few weeks. We're excited for that so and her place I'll be providing a brief financial update this morning, following a high level here.
And review and some additional color on what was it really and exciting quarter for us and Q4 of 2020.
Here with me as usual are members of my executive team. This morning, and who can help answer your questions, including our head of operations, Todd George who will answer questions about our core business and Justin Sebastiano, Our SVP finance and Treasurer, who will tag team with me as needed on the finance side.
Also joining for the first time by Harper Ko, our new G C. Welcome Harper.
With that let me begin by saying that as we close the final chapter on one of the most difficult and cereal years for all of us from a personal and professional standpoint, I'm immensely proud of the way our team members at all levels of our organization came together weathered the storm and helped us emerge as a stronger company than ever before.
While we'll continue to adjusted the uncertainties of today's world until COVID-19 is behind US we used all the adversity and challenges thrown at us in 'twenty and 'twenty as catalysts to completely reevaluate and re imagine the way, we do business and we supercharge the digital transformation of our company at the same time.
Our team at Penn proved a lot and 2020 for me as I reflect the words agility and perseverance tenacity resilience creativity and change agents all come to mind.
Our result in 'twenty and 'twenty speak to the relentless focus and nimbleness of our best in class corporate and property management teams and they reflect the power of our incredible partnership with our great friends at Barstool sports.
While I am equally proud.
What I am equally proud of excuse me and looking back on 'twenty and 'twenty is how our company rose the occasion to support our team members and host communities and these times of great need and heightened social justice awareness.
Through our Penn National Gaming Foundation, we created a COVID-19 emergency relief fund for our team members and raised over $3 7 million from our board of directors and senior management team and our foundation. In addition, we provided $13 million and onetime holiday cash bonuses to our non executive team members company wide.
And the fourth quarter to help with the financial impact to their families from the pandemic. We also created the hurricane Laura relief funds with an initial contribution of two and a $5 million to help our community and team members impacted by the storm. In addition to provide and more than $6 million and full wages and benefits to our team members, while the bearers Lake Charles was closed.
And.
Most importantly, we joined Dave Portnoy latest mission at Barstool to help save and sustain small businesses across the country that have been impacted by COVID-19 contributed more than $4 6 million and counting to the barstool funds.
Finally on the social Justice from our diversity Committee announced a new 1 million dollar annual scholarship program to support team members from historically disadvantaged and underrepresented groups and we launched a series of new inclusion related initiatives to educate our team members across the organization and continue to foster a respectful and inclusive workplace.
Turning now to our fourth quarter results, both our revenues and adjusted EBITDAR were trending ahead of forecast before COVID-19 related closures, and Illinois, Michigan, and Pennsylvania, and increased restrictions and Ohio, and Massachusetts amongst a few other states began in mid November.
While revenues contracted 23% year over year adjusted EBITDA declined by only 9% for the same period, reflecting structural changes that we put that were put in place with the onset of the pandemic. These adjustments to our core business helped to expand adjusted EBITDA margins by 580 basis points relative to Q4 19 results.
Despite the aforementioned headwinds.
But by and improvement of 720 basis points and the South segment, which was the least affected by the COVID-19 restrictions. Despite the impact of Hurricane Lora and the fourth quarter and Lake Charles We remain convinced that these structural changes to our business will result in meaningful EBITDA growth when the volumes return to pre pandemic levels.
Trends in January thus far are very encouraging what's Todd can provide more color on during our Q&A session and fact, this past weekend and we saw our highest Friday Saturday combine and slot volumes across our company portfolio of properties since the first quarter of 'twenty and 'twenty. Our South segment has continued to be particularly strong with January.
Revenues, the highest and we have seen and the month of January and the last five years on a same store basis, leading to exceptional flow through to EBITDA.
We are continuing to see encouraging growth and the younger demographic tiers of our database and we believe the rollout of Covid Covid vaccinations and treatments will encourage more guests and all age segments of our database to return to our land based facilities when they deal. They will soon be met with the three CS are new cashless card less and contactless technology.
Which will improve efficiency and provide a guest experience in line with other industries historically frequented by younger demographics, which we expect also to drive further incremental revenue for us.
We're planning to launch the three CS and our Pennsylvania casinos and the first half of 'twenty, one subject to regulatory approval and we'll continue that rollout for the remainder of 2021 to other regions.
I'm sure Felicia would also want you to know that our cash balance stood at a healthy $1 9 billion at quarter and even after paying down $115 million of our term loan b.
And turn our net traditional debt decrease to approximately $578 million at December 31, 'twenty and 'twenty, bringing our lease adjusted net leverage to 4.7 based on 2019, adjusted EBITDAR compared to $5 seven at the end of 2019. Some of you may have also noticed and our financial statements that we recorded a sizable unrealized.
Gain related to our equity positions and points bat and the score which were received as part of our market access skin agreements. This is just an example of the significant value. We think we will realize over the next several years from our portfolio of leading market access partners.
Other highlights from the fourth quarter include the continued momentum we're seeing for our Barstool Sports book, App, and Pennsylvania, strong retention and CRM efforts and creative promotions, including our matching a first time deposits with donations to the Barstool fund to support small businesses throughout the state have led to increased handle and market share and most.
And they highlight our unique and unmatched approach to efficient customer acquisition.
More recently on January 22nd we introduced our Barstool Sports book Mobile App, and Michigan to very strong demand.
And importantly, as many of you know went to the University of Michigan, and he and Big Cat have a very loyal fan base there they've been hanging out at our Greektown property and Detroit generating a lot of excitement and awareness not just for the for our Barstool and mobile sports book and fully integrated I Casino, which we launched on Monday.
But also our retail sport retail Barstool sports book, and the Greektown Casino and general, which really highlights the power of our differentiated Omnichannel strategy. We think this strategy is share to only gain steam and a post COVID-19 environment.
And importantly, Michigan's long weekend and had 68% more first time depositors and Pennsylvania as initial weekend and the daily active users were nearly two thirds higher than the average daily active users and Pennsylvania during 'twenty and 'twenty all the more impressive when you consider the state of Michigan's population is only a little over 70% that of Pennsylvania.
And yet.
Also worth noting the attention and excitement from the Michigan launch has created a halo or spillover effect.
And the publicity surrounding our Michigan launch helped our registrations and daily active users climb and Pennsylvania as well.
We are just beginning to scale, but we are excited to see the early benefits from being live and our second state.
Our next launch state will be and Illinois, where we plan to go live prior to March madness pending regulatory approval of course and from there. We will continue to rollout and new states every three to five weeks or so until we are operational and 10 or more states by the end of 2021.
We achieved another milestone in Michigan with the launch of our Barstool branded I casino product on February one.
Although it's obviously early we have been extremely pleased with the initial results as nearly 15% or as of this morning over 15% now of our Michigan Sports book customers placed a wager on the Barstool casino during its first two days of operation and average daily users exceeded our more mature Hollywood branded casino product and Pennsylvania by more.
And then 70% over the same two day period.
Finally, we have now fully implemented our industry, leading my choice reward program across all of our properties and our online channels. This program of over 20 million members connects our land based casinos to our sports betting and casino products operating players a wide range of compelling incentives to consolidate play across our various platforms.
Our my choice player affinity program has become even more compelling as we recently announced a strategic partnership with choice hotels that provides for yet even more earning and redemption options for our most valued and loyal guests as well as an additional funnel to fill our nearly 10000 hotel rooms across the enterprise looking.
And looking forward, we are anticipating and exciting new year as we continue to introduce barstool branded retail and mobile sports books across our portfolio, including brand new builds that are two properties opening and Pennsylvania. During the second half of 'twenty. One we have already seen very strong results from our retail sports books with our Indiana property has seen meaningful increases in both game.
<unk> and non gaming revenues following their rebranding and Barstool sports books, we are incredibly optimistic about the opportunities to unlock further upside as we introduce additional barstool sports book and sports bars across the portfolio.
In the meantime on the Legislative front, we're focused on the enabling legislation for voter approved sports betting laws, and Louisiana, and Maryland, and we're aggressively lobbying in 'twenty and 'twenty, one for new opportunities for sports betting in Ohio, and New York, Texas, Massachusetts, and Missouri, among others, we believe our industry vast geographic footprint combined with the work.
We have done over the past year has set and set the stage for a very exciting and 'twenty, one and with that I'd like to ask Frank for you to please turn it over to the line of questions.
Thank you.
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Our first question comes from Joe Greff with Jpmorgan. Please proceed.
Good morning, Jay Good morning, everybody.
And Joe.
First question for you, Jamie you kind of talked about it.
Couple of different places in your prepared comments.
But we're all kind of thinking about the return of that.
Years old and older.
Database gaming segment can.
Can you remind us.
And when we when we think about spend per visit and visitation and margins.
Does that segment compared to the other segments of your database, how does that compare to that retail segment.
Is that something that could be.
Positive mix shifts driver for overall performance.
Yeah, I'm going to let Todd George answer that one Joe Hey.
Hey, Joe.
So traditional and Joe. This is this segment performed higher this is the group with more time and more cash.
So we're encouraged and Q4.
The trend has been positive and we're starting to see greater visitation from this group and we're seeing that.
Prior two quarters.
And this is also a group that is more actively engaged with us and starting to get into that age.
The age range, we're seeing more app downloads from the answers and starting to grasp technologies better.
And they're coming back out again and as Jay touched on in his opening remarks.
The group that was out and force this last weekend and through much of January.
Great. Thank you and then Jan on the sports betting side you were saying.
Not necessarily Pennsylvania.
Michigan, but just and other markets that the environment's gotten a little bit more promotional and.
And you kind of craziness with customer acquisition costs.
When you look at.
And the broad overall trends there.
How does that factor into your thinking on how you're going to market and promote and acquire customers. How has your thinking evolved maybe over the last year.
Year, or so that you've seen more experience and then how does that translate into what youre doing in Michigan and that's gone from Romania, which I know are both markets are kind of early days and then when you think about the initial performance and Michigan outperforming and Pennsylvania is it really just a function that Michigan and sort of a jump ball market share.
Everybody and and so therefore, youre, a little bit more and an even playing field and so therefore share and momentum, it's a little bit stronger, but love to hear your thoughts and all these things.
Sure Joe I'll tackle the second one and then the first one and the answer to the second question around the differences between Michigan and P. I would point to that is the primary reason, we've been pointing to Michigan for I don't know six months now ever since we knew that Michigan with a state that was gonna be ready to go sometime in the late fourth quarter.
Or early first quarter, because any other state that we could launch and out of the gate like Pennsylvania, you're playing catch up you know, we launched and Pennsylvania I think it was 14 or 15 months after sports betting and had gone live on a from a mobile standpoint, the Michigan for us with a great proving ground you know we're at the starting gate at the same time the gun goes.
Off and we're not playing catch up we can we can get out of the starting gate. The same way that everybody else can but of course, you know we definitely do things different we have this amazing partnership and that's fully integrated media strategy with what is the most compelling and fastest growing sports and lifestyle media company on the.
Internet. So you know you look at the popularity of Barstool, where it was when we announced our investment and Barstool a year ago to where it is today and you know it's it's it's been so robust it's beyond anything that any of us could have ever expected and so we're and that's really a great position, Joe where I think it's well documented.
That this is kind of tying into your first question customer acquisition costs. You know, it's I think most analysts have done a good job researching this and you know it's anywhere from 300 to $800 per customer for the space right. What I would tell you is that for Penn So far and the first four months and P. A despite all of the barstool.
Fund matching that we've done as well as in Michigan and our first month.
We are well below the bottom end of that range, we have so much room for so much cushion.
To be opportunistic and figure out what we wanted to do and how we want to do it and so we're starting to test. Some some paid media paid advertising and P E and Michigan, where does dabbling, we're happy with the early returns, but we're and this great spot, where we think we can generate meaningful market share and profitability John.
Relying on that Barstool media partnership and then anything else, we do above and beyond there is for US just to continue to grow outgrow our share and do it in a way that delivers a nice return on investment and I think that's a very different strategy than everybody else and the space.
Great. Thank you.
Thanks, Joe.
Our next question comes from Shaun Kelly with Bank of America. Please proceed.
Hi, Good morning, Jay Good morning, everyone.
Jay maybe to follow up on that last point I think as we're looking at the report that came through were sharing a little bit at the.
Corporate and other line and your reported financials and.
And does that number does seem to be coming in materially better than I think what we are probably the street had modeled theres a lot going on and that line item and what I'm kind of trying to get at is.
Are we seeing and actual material contribution on the profit side from some combination of Penn Interactive Barstool media and some of these other things that are going on some of the maybe the market access keys.
Can you help us understand that a little bit better because it seems like it almost entirely offset.
Your corporate costs and a quarter. If you could just help us unpack that a little bit.
Yeah, well, you're you're correct and and all of your assumptions there around what sort of packed into that other category and we will at the right time I would anticipate probably before the end of this year. This calendar year start to report pie out separately, we're not ready to do that yet, but you should assume that.
What drove the other results as everything associated with Penn Interactive and what comes with that we had a we had an amazing quarter and you know that's with <unk>.
And we've done everything that we intended to do from a marketing standpoint, and the fourth quarter, we haven't held back whereas at the point and hours what else do we want to do because our customer acquisition costs are so much lower than everyone else's, we can really be thoughtful around what we do how we do it when we do it and you know we've got partners that are just and <unk>.
No shortage of ideas all the time I don't know how many of you guys saw but for example, one of the things that we're doing this weekend and around the Super Bowl that you know I just don't see our competitors can do this because our our media partners and they're following and it's so compelling and so loyal but they've set up to where he's got five.
And that Barstool and Theres a contest throughout the day and the superbowl betting on the game throughout the game and whoever ends up with winning the most money if you bet $100 on our App on any bad on the Super Bowl you get randomly assigned to one of these five personalities and if you. If your personality ends up after the Super Bowl with the most money you get a thousand.
<unk> dropped into your account.
And it's just those are ideas that no one else really maybe has thought of but more importantly, they don't have the people and the following with them their media partnerships that would even make a difference and doing something like that and that's something that we're so excited about because we've got this list of you know dozens of ideas and we're just prioritizing.
Which ones make the most sense, which ones are Dave and big Cat and the team at Barstool and most excited about because you sense when they've got a great idea just how much energy they throw at it and so yeah. We think we're in a really good position and I think that what you see and that other line shy and as that.
And you're seeing really early on and profitability I'm not telling you that you should expect that every quarter because we may decide that as we launch we want to be more aggressive and some of the things that we're learning on the paid media side.
But as of right now we're spending on the things that we know move the needle and we're still able to look at our P&L and be really really impressed.
And Jay maybe just to kind of push.
Push it a little further since I mean, you've kind of alluded to it but maybe just to say directly.
Do we think is reinvestment really the first priority and you start really analyzing the customer acquisition costs and what you can do to maybe further drive and empower the brand and how should we think about kind of upstart and launch costs as we start to accelerate some of these new markets because I mean, you've done all of this you were I guess and <unk>.
Profitable and a quarter and you were.
Totally ready to ramp and ready to roll for forgetting going in and Michigan, which is a huge launch for you. So I mean, it's impressive and we're trying to think about how do we extrapolate these numbers and this trend line going forward.
Yeah, what I would say to sort of play out say, Sean is that and I've said this on a previous call that I think we could definitely be profitable in 'twenty, one and if we desire to be I'm not sure that that's really what our number one priority is right now we're trying to grow the funnel and really focus on as much on new customer.
And as acquisition and first time depositors as possible and all of these markets and what's interesting is that even as aggressive as we were and the way that we are aggressive and we matched over $3 million and Michigan and the first weekend on first time deposits and wagers and I sit back and I look at our customer acquisition.
And costs for the Michigan launch and it's still less than 200 Bucks right. So we have we have a lot of flexibility here in terms of what we want to do and how we want to do it I would assume that 'twenty and 'twenty. One maybe is sort of breakeven ish on the on the interactive side, but.
We clearly have a path to ramping up profitability faster than anybody else and I would expect to start to see that really rang true and 2022 and beyond from there.
Truly impressive thank you.
Thanks, John.
Our next question comes from Steve <unk> with Stifel. Please proceed.
Hey, Jay good morning.
So you talked about the typical acquisition cost that's out there today and that range of three to $800. I think is the range you referenced and.
You guys, you mentioned, you're well below the bottom end of that range and I guess the question is.
How far up that range could you guys go before you lose profitability what I mean by that is could you get all the way up to the high end of that range and still be profitable.
Today.
Steve I think at scale the answer is absolutely yes.
Remember with everything that we just talked about in terms of the fourth quarter and profitability and our great Michigan launch. We're in two states. So we have all this overhead costs, we've been ramping our Penn Interactive division around staffing and we now have over 250 people, we've got 100 product development and engineers and.
And that's all now being spread all of that cost is being spread across two states right. So you can imagine as you scale. This thing to tenant States 11 States 12 States, which is where we plan to be by the end of 'twenty. One you have all that much more dry powder to spend on growing the funnel and widening that funnel of acquisition. So.
You know, where we're testing things now and we spent some money on television advertising and P E and Michigan around AFC and NFC Championship weekend, not a lot, but we dabbled, we're really happy with what we saw and the returns on that but I think most of what youre going to see US do is just going to be you know around the fully integrated media strategy or strategies.
And you should expect what we do to be new different unorthodox, but super effective and Super high return.
Okay got you and then and then second question Jay This would.
And this would normally be the call where you guys.
<unk> guidance for the year, and obviously, we understand you're not going to provide guidance given the current backdrop, but is.
Is there a way for us to understand how you guys are thinking about the business. This year without explicitly giving guidance and I guess, what I mean by that is and I would assume you guys have modeled out multiple scenarios in terms of what the year could look like and just wondering what are some of the key items that you guys are watching which I assume most of it is tied to the virus and to.
<unk> and stuff like that but what are some of the things that you're watching it but would push you to either the low to high end or the low end and how the year could shake out and I hope that makes sense.
And it makes absolute sense, Dave and I, we've already talked about Penn Interactive. So I think you know for modeling purposes. If you assume breakeven and then somewhere in that range slightly positive slightly not but breakeven for the year.
It's probably the way to model it everything else and our business it boils down to Covid and so.
You know if if we assume from here through the remainder of the year that restrictions and closures and get no worse than they are today and you've mapped that out for the remainder of the year and the restrictions continue to ease every few months.
We look at the consensus number and say that number looks fine.
I just to your point to put a number out there right now when we don't have full.
Full control over our destiny the way you do and most years, we felt like it wasn't the right approach and I'd be surprised if many decided to do that.
But.
And it really does depend on sort of what decisions are being made at the state level and at the regulatory level in terms of how we can operate and when we can really see some loosening of these restrictions.
Got you thanks, guys I appreciate it alright.
Alright, Thanks, Steve.
Okay.
Our next question comes from John Decree with Union Gaming. Please proceed.
Good morning, everyone. Thanks for taking my questions.
Jay I wanted to ask a question about the core casino business and.
Since.
And just reopening of Covid.
Marketing and promotional spend has been something that the entire industry has has rationalized quite considerably and I was wondering as we navigated the fourth quarter with additional Lockdowns and then moving into January which it sounds like things are improving nicely have you seen across the industry given your footprint any change in.
And here or would you say the industry is still really focused on keeping that that level of promotional and marketing at the casino level rational.
Good morning, John and I'm Gonna, let Todd grab that one as well sure Hey, John.
Okay.
Coming out of the pandemic.
Every quarter has really been.
Change for the entire industry and in the beginning it was more driven by capacity restrictions and so there was it was pointless to market rather aggressively but I think what everybody is seeing with that model.
And the customers continue to come back and as long as you're offering.
And that's in demand as well and foodservice component.
Everybody has remained completely rational including going into this year and typically that Q1 number is.
And pretty robust number any wages.
Seasonality component as well as long as the weather stays.
Pretty.
Pretty reasonable.
Reasonable, but we have not seen anybody and really any market.
From away from the approach that they've had and through the pandemic and we're encouraged by that going forward.
Thanks, that's helpful color and Jay maybe one for you on some of the.
Barstool metrics that you've provided in your prepared remarks, I think you've mentioned about 7% of barstool registrations have come from from your my choice database.
Was wondering if you had any data or anecdotes yet on.
And maybe how many my choice customers that have been dormant have maybe found barstool and become reactivated or maybe standalone independent app customers that have found their way into a casino and and realizing it's early and and with restrictions, but kind of curious how the cross sell has gone and the other way into the casino.
Yeah. It's early so we don't have a whole lot to share there I'll give you what I, what I know, which is really around our real money gaming Hollywood Casino and P. A because that's now been live for the longest period of time, which is about 50% five zero of the users are users that.
Our active and our Pennsylvania casinos.
25% were brand new to the ecosystem and 25% were reactivated so they had gone dormant.
I think that that percentage will be less on the sports betting side, because you don't have a direct crossover correlation from casino and <unk>.
Ambler to a sports better.
But no question, we are reactivating some gas I just don't have any specifics for you as it relates to sports betting.
Understood.
Helpful. Thanks, Jay.
And it's not.
Our next question comes from Ryan <unk> with Craig Hallum Capital Group. Please proceed.
Great. Thanks for taking my questions guys.
And just curious on Michigan, if youre able to kind of bifurcate out maybe even just directionally because absolute numbers aren't out yet, but what your market share is there relative to kind of I started in Pennsylvania.
Yeah, that's a tough one Ryan and I don't you know I don't want to be on record of predicting what the first 10 days and Michigan came to I think there's already some numbers out there that people are tracking what related to G. O comply and the number of pings and things of that nature I would just say that I think you have to look at Michigan even.
With regard to pings differently than you have any other state launch because Michigan is the only state to date and the U S that went live on the same day with both sports betting and online casino and so you should expect that the number of paying realm.
Relative to other state launches was going to be higher in Michigan. We just none of US know how many of those were specifically for downloading and betting on sports betting vs downloading and betting on the online casino.
What I would you know we I think we did and our slides if you look at the look through those we tried to do a good comparison of the first weekend and into the first 10 days and Michigan vs. Pennsylvania, We all know what our market share has looked like and Pennsylvania from a handle standpoint, and that 12%, 13% range and really.
Ending the year in December with our best month to date.
And you look across the board and the Michigan metrics, whether youre looking at downloads registration and first time deposit daily active users number of wagers per day wagers per day.
It was all significantly higher and Michigan than it was and the state of Pennsylvania and back to one of the other questions. I think it has been at the starting day at the same time makes a huge difference we're not trying to convince sports betters to leave.
Leave the app, they've been betting on and download our App. That's the challenge that you run into when you're launching later than everybody else. This was it's fair game today is the first day and download Barstool and I think we're seeing really good results out of the gate.
Good day.
Difficult question to answer so helpful context and.
And then there's been a lot of conversation I guess about your hold percent reach.
Recently here it was significantly better than kind of industry average and everyone else and he can comment on what we're seeing and Pennsylvania, there as far as your hold growth.
Yeah, I mean look I would.
And this reminds me of questions, we would get out and volatility and blackjack and some months you get Lucky and you hold well and sometimes you don't and I think that for us and P E and we're continuing to build relationships with really good vips.
We're continuing to see more and more traction with the barstool exclusive that's and many of those are parlay that switch tend to hold better but there are a lot of fun. We had just to give you a quick a quick stat during AFC and NFC Championship weekend, when we launched and Michigan between Michigan, and Pennsylvania, We had 11.
And betters that on the can't lose parlayed with Big Kat.
And to get the free App right. So it just speaks to sort of what might drive over the long term that whole percentage I wouldnt overly read into December I don't think you should expect 20%.
Every month.
Maybe we end up above average over over the long term, but I would also remind everyone. We lost money and the first month, we launched in September. So it does go both ways and VIP play and how people do on parlays can really move that number significantly from one month to the next.
Great. Thanks, guys impressive early results I'll hop back in the queue. Thanks.
Thanks Ryan.
Our next question comes from Bernie Mcternan with Rosenblatt Securities. Please proceed.
Great. Good morning, Thanks for taking the question Jay and early point that you made evaluating kind of like what else you wanted to do given the early success in Pennsylvania, and Michigan and you clearly have proof of concept that barstool is working I'm interested and your thoughts and just adding other customer acquisition channels to supercharge what's current.
Going on so for example, free to play with Fox or Super sacks, It's routinely a top app and the iOS App store and their sports MSG networks today, just allowance announced they were launching from free to play.
And then also there was some recent M&A and the daily Fantasy section. So just wondering if theres any.
Kind of increased tolerance to or wanting to further leverage the barstool brand and other customer acquisition channels.
Yeah, Bernie I, it's a great question I'll tell you we talk about it non stop.
Around the office here and with our partners at Barstool and you can imagine.
And we.
We have a real appetite, we're just trying to make sure that we make the right decisions and I think we've we've really benefited from playing the long game and thinking about you know what was the right media company to align with and how to fully integrate that media company. We weren't the first to announce our media partnership, but I think when we got to announcing it and we're really proud of the one that we put.
Together and how it was structured and how both sides were incentivized and so we're not going to chase something because of what you read yesterday about what somebody else did I would tell you that.
We're maniacal about improving our strategy for the long term and yes, we're very interested and figuring out how we can widen the funnel from an acquisition standpoint.
Whether that's through media partnerships or social.
Social media Influencer partnerships, there's all sorts of things that we know we can do we've.
Just recently announced that we have relationships with Nick <unk>, Who's a video Gamer and Michigan on and Influencer basis, We just announced that we now have a partnership with and Influencer Logan Paul.
But we're really excited about that is just going to get going and obviously the more we scaled and more impactful that will be because it's a national influencers. So.
We're you know we're doing things, we don't necessarily do huge splash.
Announcements about some of the things that we do but the things that we're doing and we know are delivering great returns and we're going to continue to be really aggressive in terms of thinking through what might be next.
Great. Thanks, Jay.
Hey, Brian.
Our next question comes from Barry Jonas with Trust Securities. Please proceed.
Great Hey, Jay I guess I wanted to expand on.
And.
Inorganic growth or M&A.
Are there sort of jurisdictions you'd like to be and from an omni channel perspective.
And maybe M&A would allowed to accomplish are there any tack on verticals that you're exploring at the moment.
Yes, and yes.
And we're.
We've got a lot and the queue that we're looking at right now are New York, Obviously is a really important state for us to have and access solution for depending on how legislation works out there are some differences between what the Governor has said and what leading lawmakers and want to do and so we're staying close to that the nice thing about where we find out.
Yourselves today, Barry is that we've got a terrific balance sheets, and and almost $2 billion and cash we have.
And we've delivered and we're delivering now and our second state in terms of being a major player and online sports betting and we have this great footprint and all of these skins, and we still have lots of excess skin and so as we think about how to get access to a state or how we want to think about our partnership and M&A and New York and such.
Great example, we can acquire our way into access we can partner our way and to access.
And we can barter, our way and to access because of our excess skins and so we've got a lot of flexibility and that where are we.
We got a lot of conversations that are warm right now and we'll be hopefully.
You know announcing soon some of things that where we're currently working on with regard to access and M&A.
And we're looking at all sorts of Adjacencies because you just don't know how this is all going to come together and the out years Theres going to continue to be we believe a lot of industry convergence between gaming and sports betting media and tech and potentially video gaming and esports, there's there's a lot out there to consider and.
You know, Chris Rogers, and others and our team are very busy continuing to look at what all the potential options are for us to consider and it's great having partners like barstool, because they live and the Internet every day and they bring some really good ideas to us that could be really interesting down the road from an M&A standpoint as well.
Great and then I guess as a follow up.
What's your view on vertical integration here as it relates to sports betting or interactive and general.
It's in that list of things that we're considering Barry I would tell you that now that we've successfully launched and state too and we've now launched the fully integrated Barstool casino.
I have to say I could not be happier with our partners at White Hot gaming and camby.
It doesn't mean that we wont ever think about being more vertical and the tech stack down the road. It just means that I think there's there's pros and cons to both and we feel really good about.
And we're the I think it's safe to say the most important client they both have and the U S.
And we move their needle and we have their attention and we've got a lot of great resources, the relationships and a great place theyre extremely responsive and they've delivered.
So, we'll see more and more to come on that one I don't feel like we've got a gun to our head to figure that out and the next week or months. We've got time will be thoughtful and you know we'll.
And we'll be judicious, if we decided to do something.
Because we feel like we've got a lot of great options in front of us.
Great. Thanks, a lot day.
Thanks Barry.
Our next question comes from Ben Chaiken with Credit Suisse. Please proceed.
Hey, How's it going and thanks for taking my question.
And the sports betting segment it sounds like Illinois the next.
State to go live and how did you think about that vs, Virginia or another state and the context of the comments you made earlier Jay around.
The benefits of being there when the gun goes off so to speak is it just the size and opportunity of Illinois, but just just any more color you can provide there.
Well couple of things one.
There isn't another.
State right now that the guns about to go off and in Virginia, and kind of you know theres been operators kind of going live every five days or seven days and we're cautiously optimistic will be and that Q, some where they haven't announced all of their licenses up to this point so.
For us it was a pretty easy decision because you have to plan and these things out you can't just wake up one day and say well, let's do that state Tomorrow, you have got to work with the regulators and every state has different controls and regulations and rules around.
And on college versus not but and our local teams versus not what sports and so you have to build these things out now, Illinois for us is going to be we think and amazing state right.
Right behind Boston, and Theres, No city, and the country, where barstool is bigger than in Chicago and so.
Big Cats from there we've got a great. Following on the Barstool side, we have three casinos and the state and.
For US, Illinois was a no brainer, we won't be live before March madness, we're cautiously optimistic we'll be able to make that happen. We're just working with the regulators on date.
And after that you know, it's gonna be a mad rush to get as many lives as possible before football season that you from a pure sports viewing perspective of what's alive. Its not all that exciting over June July and August.
But it's all about being prepared for September when college and NFL football kicks back in so you should expect the Indiana's and the New Jersey, and and when we say New Jersey, both sports betting and online casino given that we just did both in Michigan and successfully will be ready to do both and New Jersey, when we go live there.
Colorado, Virginia.
West, Virginia, Iowa, Tennessee, I think that probably the line up there and we're in a spot where we've got and opportunity depending on what happens and how fast and Maryland moves and Louisiana moves.
Legislation gets going and in Ohio, and Massachusetts, we have a lot of flexibility on the second half of the year to continue to swap things in and out and.
And we think the bigger of the state population and.
The bigger the Barstool brand and our state are really big factors for us and of course being at the starting gate is probably going to be factor number one. So if we can be at the starting gate and that's probably going to move up from a prioritization standpoint.
Got you that's Super helpful. And then just one more on the on the land based side.
I think you mentioned that January had some positive trends I think you mentioned similar to <unk> 20, and the south segment even stronger.
Just as we think about the cadence, presumably <unk> had a lot of variation given the development of Covid.
With March closures et cetera, So does that come and equate to the first half of <unk> and the second half or just any more color. As you can just trying to bracket kind of where you guys standard. Thanks.
This is this is Todd I'll take that so I think what we're seeing.
If you can extrapolate the cell and and I'll, even throw in a state like Iowa.
Few restrictions as well.
The year over year comparisons are actually pretty favorable for us. So even looking at this last weekend, where Ohio from the ease restrictions just by moving the curfew back and our.
Tremendous and pick up there so I.
Illinois, and not being open and working through the restrictions that are as these states start to ease the restrictions, we're encouraged and we kind of look at the southern region and what we feel.
Every region and it looks like as we go forward so.
And again and keep in mind that last year Q1, and the end of Q1 is where we're starting to see the COVID-19 impacts so and.
We're optimistic about about the way Q1 kind of shakes out.
And I would just add that Todd and I were talking yesterday for a while about the pent up demand and.
It's real.
It's real and when we're seeing and states that to Todd's point loose and some of these curfews and restrictions.
See a bump the next calendar day.
People want to get out and how and I think as the Covid vaccinations continue to roll and treatments approved more and more effective the weather warms up because you remember most of our portfolio where costs over index concentrated and Midwest and northeast.
And you get to the March April May and if all of these things are still moving and the right direction I think youre going to see some real pent up demand like we're seeing and the south right now.
Got you and I appreciate it thank you.
And.
Our next question comes from Stephen Grambling with Goldman Sachs. Please proceed.
Hi, Thanks for getting me in on the media business, you noted solid revenue growth and a bunch of good stats on the following growing as well can you provide a little bit of incremental color on how the revenue mix may be shifting between the big buckets of advertising merchandise et cetera.
And make sure I got that question right, Steve and you're saying with regard to our sports betting results.
Within the JV, specifically I know that you referenced that the media brand keeps growing its presence and that feels like it might be an underappreciated part of the story. So I'm just curious how the revenue mix on the barstool media side might be evolving.
Got it sorry about that.
Yes.
I'll try and be thoughtful around what I can say because remember we're at 36% investors, we don't control our own majority today and I don't want to speak for Erika Nardini about too much about her business of course.
What I would say is that 2020 was last year and record.
The growth was unbelievable there was a little bit of a pocket and that March April like every other company and the U S and probably the world for that matter was like what's going to happen and you saw from pullback on advertising spend but.
Really from May through the end of the year every category very strong and.
And this is something that.
I actually don't think gets enough attention and I actually appreciate you asking the question Steven because we are going to own the majority if not all of barstool at the third anniversary, which is only two years away and you look at how there's been some really interesting transactions and the podcast space.
Sports Media, we got a call the other day about a tiny little sports media company and the asking price compared to what we're going to end up paying for potentially all of Barstool makes me feel really good about the value of barstool and it's interesting too.
We've talked about this with Dave and Erika and Dan a few times that.
Barstool sports by itself was probably worth X and have the potential to get to why sort of if they stayed on a standalone basis and.
And Penn maybe it was worth a and have potential to get to be but then you put the two companies together and it became exponential and terms of what the platform that each provided for one another and the exposure and access to different customer bases and they now have everybody on wall Street following them and we have you know everybody.
Not everybody, but so many and that 21% to 40 year old age group, following us and wary and Penn gear.
So it's there's so much synergy the companies were very complementary.
For one another and I think that value again without getting into too much detail and and I'm sure Erika we'll share whatever she's comfortable sharing at conferences.
That value is only going to continue to grow given all of the great things that they've done and how they've proven to be just so agile I mean, who would've thought that David day trader would be a thing let alone a huge thing and.
Unboxing promotions with millions of viewers every night and livestreams of them play and digital blackjack, and what Gartner so much attention but.
I say it all the time, you're probably sick of hearing me say, they're there, they're marketing and geniuses and we're really thrilled to be partnered with them and thrilled to be the future owners of that brand.
It makes sense and that's helpful and they've essentially become a platform for influencers.
And then unrelated follow up.
I think this is John's earlier question about the customer overlap between channels can you touch on what youre, seeing and expecting and converting sports betting customers casino.
Yeah happy to this is really early we're talking two and a half day as early but you know we had targets internally and I won't share what those were in terms of what percentage of our barstool online sports betters, we would be able to convert and two barstool casino customers and.
And we're really close to what our goal was after two and a half days and those days, where Monday Tuesday Wednesday.
Which makes me feel really good heading into the weekend, we're now over 15% conversion.
It's so smooth and and easy to find and the App, It's got its own.
It's all in place on the bottom as well as and the menu bar. It's a it's very intuitive. It's one wallet you get in place and blackjack or some roulette maybe at halftime of the game and I think this is where we can do things that are really differentiate it around and Dave and big Cat and the other barstool personalities, who maybe people are staying in the same tune tuned in.
Throughout the game as to what Theyre doing betting on sports, but then you've got halftime and what do they do and when they go play blackjack or tinkering around with new slot machines and.
We definitely.
One of the things that we will do I don't have to share how we're going to do it but we will do is we're definitely going to be and the business of creating our own gaming content around barstool and our own games around barstool, because they've got a lot of great ideas and we know that's something that would be really attractive to their followers.
That's helpful. Thanks Best of luck this year and let's go and take on Sunday.
Thanks, David.
Okay.
Our next question comes from Thomas Allen with Morgan Stanley. Please proceed.
Thanks, So starting off from the brick and mortar business I think you offered up Todd to talk more about the January trend and I guess fantastic question earlier, a little bit, but if you think about third quarter 'twenty and your EBITDA was up.
11% year over year fourth quarter, just now youre down nine and like.
And I was at try and kind of in between those or were seeing growth and I Remember January February 20th were really strong and so can you just put all of this into context, a little bit more thank you.
Sure. Thanks.
Let me start off by saying January just kind of wrapping up here, we're still going through the process, but we're encouraged right now with January being.
Really in line carried and in large part by the South region again, but being very much in line with prior year.
February.
As Jay spoke to Friday, and Saturday were the best volumes, we've seen from a from a supply standpoint, since Q1 of last year and even from a cable standpoint. It was the second best Friday Saturday and we've seen so.
And the storm wiped out and much of that and the northeast so.
I think if we look at where February is trending now and we can stay close and then there is potential upside from March so to be safe and I would say it's somewhere between.
But there is upside potential there.
Helpful.
And then Jay bigger picture you stated a number of times you expect to be a top three player and sports betting or you're increasingly confident in that and.
And how you're balancing kind of spending a lot, which youre not vs. Two.
Market share thanks.
Yeah.
Yeah, and the other one that we talk about a lot Thomas.
Are we satisfied with being number three everywhere forever no. We're not and we don't plan to be are we satisfied out of the gate that we've spent virtually well, we'll just say very little and paid media and we are at number three and P E and have been since we launched.
Every month.
And we think Michigan, we're off to a great start, we'll see where that has us from a market share standpoint.
Yeah, we were going to figure out as we go what are the best forms of widening and filling that funnel at the top and we got a lot of ideas that we're testing now and there's slew more a slew more to come. So we'll what I think you should assume is that we are going to be top three.
We said that before we ever launched and we're delivering on that.
And profitable faster than anyone else and we're <unk>.
Delivering on that and can continue to deliver on that pledge.
And again faster than anybody else and as we scale. We just end up with a lot more dry powder to be more aggressive and the areas of widening that funnel and customer acquisition that we believe is driving the best returns.
Makes sense. Thank you.
Thanks, Thomas will take one more question Frank.
What will be a question from David Katz with Jefferies. Please proceed.
Hi, good morning, everyone.
Congratulations.
Thanks for taking my question.
I know you've covered an awful lot and I wanted to go back to just the market entry.
What are the gating factors what other gating factors are there between the target of 10 markets. This year versus turning it into 12 or for that matter is it just regulatory getting the app right.
And I imagine, it's more than one thing and I'd love to talk about that list.
You've got most of it right David and there.
And we say at least 10 is because as we sit here today I don't know what 11, and 12 would be 12% and get 10 gets you through even states like West, Virginia, and Iowa, which are smaller population and it gets you into a state like Tennessee, which is not where we operate but it's an open market. It assumes that were alive and Virginia.
If we get the good news there, which we're again, we're cautiously optimistic that will happen. So.
Yeah, we have.
Net of pegged the 10 states that we know we can be live in it and our control and that we want to be live in.
The Big question would be what happens and this would be a good problem to have what happens, if Massachusetts, Missouri, Kansas and.
Name Your state, Ohio, Texas, if one of those legalized and can be ready by football season, and then we're gonna be figuring that out because we want to be at the starting gate so being at the starting gates really important by the population of state where population size of the state popularity of barstool and that given state.
Those are those are all factors for us, but you are right and that you can't just snap your fingers and be live in every state tomorrow. Because you have to you have a unique bespoke app and every one of these states that has to deliver on what the regulators want and what the rules are and what games you can bet on and all of that and some of them.
It just takes a little bit of time. So I think what you should expect is that you know that.
Cadence from here on out throughout the year is going to be much more rapid than what you saw from stateline to sito.
Perfect and if I could go back to just one comment from.
The release that you've talked about a little bit.
As the.
And the undervalued nature of the media platform, obviously, its popularity and proliferation are obvious but for week casino people.
To sit down and.
Try and pencil something.
Are we looking at comparable value transactions or is there some more detailed way that we could sit down and pencil some value to it which clearly is warranted.
Yes, I think the best thing you can do for now because their their financials arent arent public and you should assume that what we said they were at at time of awkward at time of investment a year ago. The financials have gotten a lot better and I think importantly, you just have to look at what sort of transactions have happened.
Since the time of our announcement and you know I would look at podcasting and I would look at media companies and.
And you can look at a multiple of revenue is probably the safest way to do it in any way that you play around with that math and sort of look at what's available from a comp standpoint, David.
Thank you would definitely come to the conclusion that it's worth a lot more than what we're gonna and pain.
No I appreciate that thank you very much.
Alright, Thanks, David.
Mr <unk>.
I will now turn the call back to you. Please continue with your presentation or closing remarks.
Great Yeah, no nothing else to share I really appreciate everybody dialing and this morning.
And you know real solid quarter, and more importantly off to a great start this year and our core business.
And with the launch and Michigan and lots of exciting updates to share with all of you on our future calls for the rest of this year and beyond so thank you very much talk to you soon.
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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