Q1 2021 Penn National Gaming Inc Earnings Call

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Please continue to standby the conference will begin shortly we do appreciate your patience and I thought you. Please remain on the line today's conference will begin shortly.

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Greetings and welcome to the Penn National Gaming first quarter conference call. During the presentation, all participants will be and a list and the only mode. Later, we will conduct a question and answer session.

That time, if you have a question. Please press the one followed by the four on your telephone if at any time during the conference you need to reach the operator. Please press star Zero and is now my pleasure to turn the conference over to judge a pony. Please go ahead.

Thank you Tina and good morning, everyone and thank you again for joining Penn National Gaming 2021, first quarter conference call and we'll get the management's presentation and comments momentarily as long as your questions and answers, but first of all review the safe Harbor disclosure.

And Additionally, historical facts or statements and current conditions. Today's conference call contains forward looking statements and within the meaning of the private Security 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 Billy's estimates projects and Ken's plan seeks may will should.

Or anticipate or the negative or other variations of these or similar words or by discussions of future events strategies or risks and uncertainties, including future plans strategies performance developments acquisitions capital expenditures and operating results.

Such forward looking statements reflect the company's current expectations and beliefs, but are not guarantee of future performance as such actual results may vary materially from expectations.

The risks and uncertainties associated with a forward looking statements are described and today's news announcements and and the company's filings with the Securities and Exchange Commission, including the companies reports on form 10-K and form 10-Q Penn.

Penn National gaming as soon as no obligation to publicly update or revise any forward looking statements.

<unk> thousand 19, while adjusted EBITDAR accelerated 29% to $410 million and EBITDAR margins increased 650 basis points to nearly 40%.

We also note that spend per visit is much higher than it was pre COVID-19 and fast our visitation is now at or near 2019 levels and most of our markets and.

Importantly, the younger demographic continues to view gaming as a compelling entertainment option, while the 55 and over age group had been steadily returning to our casinos.

We illustrate this point and our slide deck on page seven where you can see that our 55 plus age segment continues to gain momentum and particularly in April while growth from our younger age segments, 21% to 44 has accelerated since the beginning of the year.

Further unrated play is demonstrating unprecedented growth, which has provided us with the opportunity to convert these players to our my choice loyalty program through new member programs and incentives.

Our rated play trend continued to accelerate this strong topline demand coupled with the structural changes we've put in place at the start of the pandemic has resulted in remarkable and sustainable margin improvement even as our interactive business continues to scale.

As it relates to our partners at Barstool sports they've been able to maintain their incredible momentum from 2020 and to the new year with strong financial performance and audience growth.

Barstools promotion of Penn National's retail sports books has driven significant awareness and visitation to our land based properties. This is especially true of those properties that have introduced barstool branded sports books, and we plan to open six more of them by the end of this year. In addition, and progress continues on the development of several Standalone bar.

Store branded sports bar locations, we're really excited about these projects and will providing much more information along with our partners at Barstool and the next couple of months.

On March 11th and we successfully launched the Barstool Sports book App, and Illinois ahead of the 2021 NCWA basketball tournament and just ahead of the return and thank goodness for us on timing of the in person and registration requirement and the state.

The initial results for the first 30 days of operations exceeded our expectations. Thanks in large part to the loyal following of <unk> and the Chicago land area with better first time deposit conversions relative to what we had generated and Pennsylvania or Michigan.

And that and monthly uniques place a wager on our I casino product during the month of March which was above our initial expectations as.

As we highlight on flight 17, and our experienced and Michigan has shown that our customers value increases significantly when they play on multiple channels, which highlights the benefits of our 100 per cent owned and controlled Omnichannel strategy with the introduction of online gaming, we've been able to generate twice as much combined revenue.

As we have traditionally generated at Greek town by engaging with consumers on our digital products. In addition to the physical property.

We are really excited about yesterday's launch of the Barstow I casino product and Pennsylvania, which we believe will greatly expand our penetration and aggregate revenue and the state, particularly the and the Philadelphia MSA, where we currently do not have a land based presence.

Although we are pleased with the initial results of our first generation Barstow I casino products, we're really just scratching the surface of our potential and the space.

Over the next few months, we will be adding significantly more a third party content to our Barstools Sports book, App, which will increase help increase conversion of our my choice database and both Michigan and Pennsylvania. And addition, we recently acquired Hitpoints Studios, which will serve as the centerpiece of our newly formed Penn game Studios and.

And allow us to create customized barstool seemed as well as casino branded content that we believe will lead to and even greater cross-sell opportunities.

Before I hand, it over to Felicia for a summary of our first quarter results and a review of our financials and I wanted to call special attention to the continued strides we're making on the E. S. G. From as you know this is a topic that's very personal to me and I know our board of directors and my executive team share my same level of commitment and enthusiasm on taking care of our people our host communities and our plan.

And it highlights from this quarter include the launch of a new 1 million dollar annual diversity scholarship program. We're looking forward to providing up to 65, two and four year scholarships. This year to the children of our team members, which reflects our commitment to equity and post secondary education and.

In addition, we implemented a supplier diversity initiatives with the goal of developing new opportunities for minority owned businesses and last month, we hosted companywide days of learning days of listening excuse me to gather feedback from our team members on all matters of diversity and inclusion finally on May 15th which is armed forces day will be launched and and.

A new initiative to honor our active duty military veterans and first responders were call on at the my Heroes program, which is an exclusive fully integrated extension of our my choice rewards program and it's to provide our nation's heroes access to exclusive discounts and offers and all of our properties across the country with that I will pause and.

And turn it over to Felicia and gay, it's great being here and being part of this tremendously talented team over the past few months I've been asked by many if you like the biggest surprise Ms. From me once I joined Penn having covered the company Forever 20 years, I would say that they were more pleasant discoveries and surprises and three standout.

The first is it that's as a bench across the entire company and level of talent creativity and commitment to excellence had panic scene and every aspect of the company and at every level.

And if transparency James commitment to transparent communication is well known and respected by the ethnic community and that ethos is no different eternally and finally, Penn commitments and diversity and inclusion and community service is certainly inspiring and with that being said, we're very proud of our first quite a results, especially given clothing related closures.

On January and the late and the quite a reopening and see it park revenues of 1.27 billion and adjusted EBITDA of 447 million after corporate overhead of 24 million, which as you know is reported and the other segment represented 94% of 2019 revenues and.

And 107 per cent of 2019, EBITDAR pro forma for a full quarter of Greek town, which is above I previously stated golf pro forma margins increased 400, and 434 basic point and.

And I, just think for the COVID-19 related closures and excluding Penn Interactive are EBITDA flow EBIT dark flow through with even more impressive and they are adjusted EBITDA increased 12% compared to the first quarter of 19, and and 9% decline and revenues and they suggested basis pro forma EBITDA margins increased more than just.

700 basis points.

Midwest and south regions reported record EBITDA and margins and the quarter, despite clothing and related closures and January and uncharacteristically harsh weather and the south and February or performance and the South segment with particularly noteworthy and for the region generated margin improvement at 1100 basis points compared to the same period and the first quarter of 19.

And while cost savings efficiencies and irrational marketing and promotion on environment, certainly benefited results and less restricted COVID-19 with protocols drove revenue growth as compared to the first quarter of 19, which bodes well for the remainder of our portfolio and regions continue to reduce restrictions and open back up last week for it.

Example, and Mississippi removed on mandatory restrictions and the state and.

And the Midwest adjusting for our property closures and and the first quarter.

That segment also reported and impressive EBITDA margin gain of nearly 900 basis points, despite competitively unfavorable clothing restrictions and certain market.

A balance sheet remains a key strength for us total liquidity as of March 31st 2021 was 2.7 billion consisting of over 2 billion and cash and a fully on John resolve her traditional net that was 353 million compared to 578 million as of 12 31 2020 at least suggested net.

Average was 4.5 times based on 2019 adjusted EBITDA.

[noise] Capex and a quarter was 25 7 million of which 9.1 million pertain to our Hollywood York Project that we expect to open and August and 1.7 million for a Hollywood Casino Morgan, Kansas element that we plan to open by the end of the year.

Despite the ramping vaccine distribution and the U S remains and a pandemic, which creates uncertainty as sexually will continue our pause on providing guidance, which we will reevaluate quarter to quarter on that and turn it back to Jay.

And Felicia in addition to these impressive results we had many other notable accomplishments and the quarter, including me and added to the S and P 500, and just last week Moody's upgraded our senior secured right and one notch and moved our outlook stable as I look ahead I remain excited about really every aspect of our business. The recovery is well underway and a land base 'cause.

He knows as evidenced by the strong trends, we saw on March which continued into the second quarter. Meanwhile, It barstool they remain focused on driving top of the funnel growth.

Differentiated strategy is or and dust market, leading positions and Michigan and Pennsylvania in terms of handle G. G. R and N G. R and we remain on track to be alive, and eight states by football season, and 10 or more states before the end of this year.

Further we remain busy at work on a variety of growth initiatives, all with a focus on driving shareholder value well into the future with that thing I'd like to turn it over to you and open the line up for questions.

My pleasure, if you would like to register a question or comment. Please press. The one followed by the four on your telephone.

You hear a street home prompt to acknowledge a request. If your question has been answered and you would like to withdraw your registration. Please press. The one followed by that's three my mom and please for our first question.

And.

First question comes from Joe Grass, and that's J P. Morgan. Please go ahead.

Good morning.

J on the digital side and it just.

Just kind of start with you'll need to what you have learned over the last several months here and the state's and what you've launched with respect to customer engagement acquisition and promotion.

And what have you learned about the technology components side of things and and.

And the views of acquiring we're bringing that technology and house.

Sure things of good morning, and thank you for the for the question well if there's been there's been a lot of learning. We just went live as you know and September and so we've got through our first first football season, our first March madness, and we're not a Y a and three states, we're gonna be alive, and Indiana here and a couple of weeks and time for the Indy 500.

And for the N B, a playoffs, which we're really excited about and a total of eight states by football season. So we're gonna be on a much different position by the time, we get to football season, and 21 versus where we were in September of 20.

Some of them are and is that come to mind, we know that based on our differentiated approach and are fully integrated media partnership with Barstool, we have the best CPA is and the industry and it's it's not even close our cpas's are running well under $100 right now across all three states that we operate and which set you up so well for the law.

Long term as it relates to having dry powder and you know we're gonna be a lot more aggressive in terms of spending to acquire customers as we head into football season and 21.

And then we weren't and football season, and 20, because we now have scale and we were we were launching and one states.

A year ago football season, and start September and this year, we're gonna be in a day. So we're gonna take advantage of that of that great margin profile that we have I think sometimes it gets lost with all the noise and the old the focus right now is on monthly handle and I think the focus should be much more focused on what is the real strategic differentiation between.

And these approaches what does that margin profile look like and the short term medium term and long term, we've skilled or skilled our business up and we have hundreds of people on Penn Interactive and we're alive and three states and you look at our Q1 results and we generated obviously nice revenue growth.

And interactive from Q4 to Q1, and we broke even nobody else can say that and and I'm not saying that we're gonna break even every quarter, it's gonna be quarter to quarter and certainly we're gonna be opportunistic as it relates to what we want to do especially come football season, and terms of spending more money to drive more acquisition. So T V D, but the fact that.

Where you know alive and and three states and have ramped up our staff the way that we have and all the expenses that come with launch and and states and you can still break even and an entire quarter. When every every other major competitors burning hundreds of millions of dollars I think says a lot.

We have a very different customer mix. If you look at the online offerings, our customer mixes a lot younger the lion's share of our audience is 21 to 2007 years old I think that bodes really well for the future prospects of Penn.

Both online as well as and our brick and mortar casinos I highlighted earlier some of the success that barstool branded retail sports books and you see what it's doing not just in terms of driving market share as it relates to the retail sports book where Indy.

Indiana as an example, we have to talk to retail sports books, and the face, but we're also picking up casino market share and so just bring it on and all of these younger customers you'll be provided a slide that shows age statement growth and we're really thrilled about what we see there one of the things that we've all obviously learned as well is that.

We have a very differentiated approach as it relates to unique promotions and contents and the way that we engage and focus on retention is different than others and the space and I think that's great for us long term.

We've done a lot of work at Penn looking at the U K.

Model, because it's been around for a long time and.

And you look at what Sky that was able to do from kind of 2000, and a 2010 that range to where they are today and you know they had a very differentiated approach that probably wasn't as appreciate it and the early day as as it turned out to be and I think that their approach and our approach are quite similar.

We spent a lot of time on that and you know, we're really modeling ourselves on sky about and what they were able to do overtime and the UK and and that that approach was being difference and.

And then last but not least.

We're very focused on on product improvement and our tech stack I think we have to really good be to be partners and can be and white hat gaming I don't envy be to be businesses. It's always tough because you don't know and it but you hear about every problem that ever comes up and I think there's certain aspects of our tech stock that we definitely.

And I have more control over over the long term that doesn't mean, something that's M and and it just means that we're learning a lot as we're still on the infancy and there are certain things that make more sense to have control and ownership of especially as it relates to anything that touches the end user and we're very active right now part of why you see the the growth and corporate.

<unk> from Q4 to Q1 is that I've got Chris Rogers, and our business development folks really busy looking at potential opportunities as it relates to M&A and partnerships and we also of course I guess as it relates to the corporate overhead growth from Q4, two Q1, we're very busy lobbying right now and states like new.

Dark and Florida to make sure that we have an opportunity to operate when all of a said and done and the dust settles. So I think at a high level, Joe It's kind of a simple question with a long answer, but we have a differentiated approach I think it's gonna really prove out here as time goes and the fact that we're able to have low teen market share and the state's that we've.

Launched in and we're not losing money and we're still scaling the business I think bodes really well for the future.

Great. Thank you and then I just have a follow up yes $2.7 billion of liquidity.

And incredibly little leverage.

How do you how do you use that to your advantage are there larger scale acquisitions, I mean and that things like Perry zone, but something that's more needle moving which areas you know.

Are are there are potential external growth opportunities driven by him and and.

Yeah, I and please feel free to jump and here as well.

I love the position that we're in right now as it relates to the balance sheet, but we've never been and a possession like that certainly since we spun off our real estate and to have net traditional leverage of like $300 million is is amazing and to have our leverage.

Leverage levels at four and a half times. So we have you know we're out.

And we're busy right now Joe and I think that there's a few boxes that we'd still like to check as it relates to technology stack, there's some opportunities that could be small medium or large depending on what you're looking at and we're looking at all right now there could potentially be something that's international that comes along with that technology approach that could be.

Compelling over the long term and.

And we're gonna continue to look at if there's any other potential sort of widening and broadening of the funnel opportunities as it relates to acquisition. The Barstool partnership has paid and spades for us and I think there's some other potential media.

Organizations and offerings that could make a lot of sense if connected to us with what we're doing and just make that most that we've built a little wider and a little deeper. So we're actively kicking tires on a lot of things I think you should expect us to be relatively active this year head and into next year.

Thank you.

And and and Joe and Thanks for the question on a on a balance sheet because.

I mentioned and my prepared remarks, and things that were pleasant discoveries and and a few on it you know comment on one either that and really evident to me and a short time that I've been here and I just I honestly don't think it's something that investing community thinking and that's about it and and currently that's the power of our operating leverage and our market meeting.

Levels of free cash flow conversion, which is only going to get stronger as we grow revenues and EBIT and so if you think of that it based on our minimum and stable cash needs today, and as increasing revenue drive tire EBITDA, a free cash flow shade rarely even faster and that further bolsters, our balance sheet and puts us and even stronger.

Physician to both reinvest and our business and then to proceed a strategic growth opportunities that J just talked about.

Thank you.

The next question comes from Barry Mckinnon need them and code. Please go ahead.

Good morning, and thanks for taking my question, just just a follow up and J, you mentioned being more aggressive to acquire customers and the upcoming NFL season, and I was wondering if you could just provide any color on what you expect us to to me and you mentioned the virtual sports book early on and your prepared remarks, but does this mean more promo television.

Other external marketing.

Or something else.

Sure thing and Burny I look I think less traditional as what you should have continued to expect from US I think there are you know.

For us unorthodox, but really effective ways, we talked about the barstow branded sports books and the casino, we've talked about Standalone sports bars, and key markets TBD, we're gonna have more to share on that very soon and.

Investing at bar stool, and new talents potentially.

Potentially new vertical and.

And potential media partnerships and or acquisitions, and I think we're gonna be more aggressive and how we think about locking up more influencers and affiliates.

And I think there's some sponsorship and partnership opportunities out there that can make a lot of sense for us as it relates to both digital and our core business.

That's the nice thing about having this omnichannel approach, where you control and and one 100 per cent of it because you know once we just want to get people and to the ecosystem and so you can invest and your core business you can invest and stand alone on prime and you can invest and digital media and as long as it widens the final and brings more people and the ecosystem.

We just want to keep them there and we're confident we're gonna be able to drive really healthy margins and all aspects of our business. So we really don't care, where people decided to spend the majority of their time and wallet with us.

Would not Bernie expect us to be there.

Linear television and radio competitor to to the others I'm in Pennsylvania, This week and when I'm here habits, and the sports talk radio and I'm, a sucker, so I watched the sixers, even though they let me down every year and the play offs and I will tell you that every commercial is noise about sports betting and I mean.

It is it's overwhelming and you don't even know who's advertising to you, where we're not going to play and that space. I think that is very low ROI return and I'm, a big believer that that creates zero loyalty I think you're moving promiscuous customers around for chase and the next promo and.

And the switching costs and this is actually something and I'm going on a bit of a tangent and burny, but I think it's important to bring up.

Lifetime value is something that's thrown around a lot and it's interesting because people are calculated and lifetime value as a customer is going to be loyal to you forever.

This is not like switching cell phone and this is not going from your Apple phones, Android and Apple touches every element of your life and I'm I'm stuck with Apple Forever I can't switch switching costs with sports betting apps and takes about three minutes and.

And you download the App you Register your deposit and then you Gamble and.

And I think what's gonna happen over time is that.

The winters that have a real strategic structural advantages and media integration and loyal audiences, whether that some combination of a daily fantasy sports database or a casino database or a very strong and following of a media asset like Barstool I think those are the ones that are gonna have sort of bullet.

Roof.

Market share as time goes and all of this really aggressive spend on commercials and linear I don't think that's gonna be the business that sticks around it and that's gonna be the business and continues to jump from from App to App. So that's my perspective, but yes, we're going to be more aggressive. We finally have scale as we head into football season, but we'll be doing and different ways.

Oh, great I appreciate that and I do think this is it the sixers will probably get the better of myself fix for what for what it's worth.

And then just just to follow up on on I gaming do you think there's the same opportunity to kind of let's call it and bar stool eyes I gaming, if we think of sports betting and Illinois, 54% and betters using the bar stool exclusives, so showing the content driven and accurate strategy acquisition strategy is working and sports betting is there.

And that same opportunity and I gaming like I'd imagine some sort of live dealer with bar stool personalities could be pretty interesting or has the opportunity really about converting the my choice customers Yep will burn and you you could've been sitting and our boardroom as we have these conversations and you saw late last week that we announced the formation of.

And it was Monday actually the formation of Penn Studios, and our acquisition of hip point, that's exactly what we have and minds and we've been actually working with hit point, while we were working on getting the deal done on developing really bespoke content with our partners that Barstools. So yes, you should anticipate.

Dave Portnoy, Blackjack games, and big Cat, Craps, and roulette and their dealers and their players and they're interacting and talking with you and there's all sorts of fun and stuff that we have we have planned and I think the other thing to keep and mine is that you know, we we launched I casino and Michigan because.

And they didn't want to Miss out and we want to make sure that we're giving people an opportunity to convert from sports and to casino.

We will be the first to say I casino product is not today, where it needs to be and it's a little bit bare bones. I think we have 60 different titles and slot and table games that we offer like one fifth to 110th of what our competitors offer and we're gonna get that ramped up and I think by football season. This upcoming to call at September of this year you're going on.

See the bar stool I casino is going to be not just offering more well known contact from the side games and igt's of the world, but you're going to see some some content that we've created ourselves through our studio and I think case in point and if you heard that MGM talk about how much what percentage of their sports that an odd.

And they've converted over and I casino, we're not there yet we're at 50% and if they're like 70 or 80 or 90 years. So it's a very high percentage and we need to have better content and that's what we're working on but yes, you should expect us to do much like on the sports that inside we're gonna do things differently and really you know take advantage of tapping into that loyalty that come.

With the Barstool names.

Got it thanks, thanks for taking the questions and if money.

Thank you. The next question comes from Sean Kelly and think of America. Please go ahead.

Hi, Good morning, everyone and welcome and Felicia good to hear your voice.

And.

Shoot J two things I wanted to touch on first just to stick with online and.

And digital on you know you talked about the low team market share and and I think we've all day and kind of staring at some of the sequential market share patterns on.

And and.

And I just wanted to get your kind of thoughts on when you guys and launch and some of these can and.

And new markets, you seem to do exceptionally well given the barstool penetration and we tend to see things kind of level out a little bit.

Over time, just get a net where you are in market versus not and and probably some of the follow through there and you know just how are you kind of thinking about that pattern on as it moves over time as you start to gain a little bit more scale across markets and.

And and what should investors expect kind of as you look at it what key pieces are you watching to really judge how your assets are performing yep.

Yeah, no. It's a great question sigh and we obviously.

And we talk about this every day and there's a couple of things to keep in mind one.

Michigan is an example, it's Uber Uber expensive from a marketing and standpoint right now everybody is just it's a gold rush.

For how much you can spend to drive the more promiscuous customers around from App to App and we're not playing on that game right now and we obviously headed into football season, 21, and they're gonna have more scale as I mentioned earlier and so it makes a lot more sense for us to spend more and be more aggressive when you have scale and you can work.

On more regional and national marketing approaches as opposed to very localized very expensive with very little long term ROI.

So that's one number two.

I think every market is going to be a bit different if you look at our results and Pennsylvania, they've been remarkably consistent we've been and that.

Oh teen 12% to 15% market share whether you're looking at handled G. G. R. N G are pretty much every month since we launched and September and so you really don't see the volatility and Pennsylvania, it's been pretty much clockwork.

To month for the most part and the other thing that I would mention is that and I don't think this will surprise anybody, but the barstool folks, especially when you're talking about portnoy and big Cat.

On their top sport is football and I think that will hurt us and Michigan is we launched right at the very and a football season, and we got basically the AFC NFC Championship weekend, a little bit and the Superbowl and then we headed into basketball and hockey, which you know is gonna be I think we're gonna be competitive, but I think we're probably going to be most competitive.

During the September through January months, because of football season, and so the drop off and Michigan.

I think you're gonna see that start to self correct as you get back into football season, and especially with some more marketing spend and efforts to get it ramped up once we have more scale. So we're.

We're not you know I continued to go back to what what matters over the long term and I think that there seems to be you know and overreaction to monthly handle and I think you need to take a step back and really look at the strategy the margin profile the business model and what does it look like over a.

Period of much more than a month or two and let's get through another football season, and give us a second full season to get through we've learned a lot and we're confident with where things are going to check out.

And and maybe just switch gears, but we've made it this far without talking too much about the kind of core brick and mortar business and I think.

And what investors are asking us a lot about is just trying to understand how much of what we're seeing in March and April is truly sustainable and in our eyes versus a lack of entertainment option and some of the stimulus funding, possibly some sort of one time pent up demand you guys seem to have a lot of data arrau.

And that you broke in and out by cohorts for us. So I just wanted to your thoughts and if he kind of tailored to those little revenues and and a little bit on the margin from two just trying to kind of get our arms around and what's real and repeating versus watch one time yep.

How did you Wanna grab that one texture sexual on a great question and and I think it's what everyone has been asked and our industry is we we've kind of gone through this so obviously, we're encouraged by the revenue and the EBITDA performance strength.

Revenue I, it's a combination of many things there is obviously, a pent up demand there's stimulus money and the marketplace. There's there's a lot of things driving that as well as as you acknowledge the the lack of entertainment offerings, but I would I would also point to we're seeing and across all different groups and that's everyone from unrelated all the way.

To the high and customers, which are more your core gamers.

Q1, and definitely March and April the trends are even more encouraging.

And the south Mississippi as they removed really any restrictions we're seeing volumes visitation.

Handle drop well over 100 per cent of of 2019 numbers and and similar and Louisiana. There was a group of US last week that went to Louisiana and visited.

Four of our properties and Louisiana and it was amazing to see if it was you know there's and a big way you wouldn't even realize that there was a pandemic going on and so it was really encouraging to see people out there enjoying themselves, having a great time being at the pool.

Spending time and tables dining and restaurants. So it was it was really where we see the rest of the country going on.

To your point on margin and.

And the past, we've kind of provided a framework of 9100 and with a goal of saying that on 90 per cent of 2019 volumes, we could get through 100 per cent of 2019, EBITDA, which really when you. When you do the math equates to about 350 basis point margin improvement.

Obviously feel that that that number is now a little conservative. This has been discussed internally and maybe more than any other performance metric coming out of the first quarter I think we all got to a point, where we feel the margin performance will continue to be driven by volumes and and as we're holding on to the younger demographic.

As we're seeing that 55 plus come in and after vaccines those volumes remains steady and through the first now five days of of May the trend continues from April so.

Very optimistic very encouraged as we move into the rest of the year, yeah, well satisfied.

And I taught sort of highlighted it is you should anticipate our margin profile look and a lot like it does right now as long as the revenues continue to be what they've been and the last couple of months and you know what that's what we're seeing right now it's tough to predict what's going to be in this environment and three months six months 12 months 15 months from now.

But the margin profile things to Todd and the and the operations came out and the field and.

And we feel great about how sustainable it is as well as long as the volume to there.

Thank you very much.

Thank you.

And the next question.

And comes from John Decretive Union Gaming. Please go ahead.

Good morning, everyone and thanks for taking my question and congratulations Felicia for hopping on the the other side of this conference call.

Yeah Jay.

And there's a a slide and your deck talks about your G. G R market share.

And a couple of properties, where you have rebranded bar stools Sports book and it was I was wondering.

If you could talk a little bit about if you've seen anything early on the crossover play from retail sports betting to online sports betting places, where you have Ah rebranded sports, but are you seeing those customers gray in the retail location and then go home and play online or are they two very different cause.

Estimates and I know, it's early but I was wondering if you could kind of talk about the value of that does that retail sports book presence.

Yeah, and Todd you can help me with this one.

Here's here's what we're seeing is that customers that are coming in Tibet and these barstool granted retail sports books and.

Many of them most of them have never been to the property and while they're on property, they're engaging and table games, mostly a little bit and slots actually and a lot and food and beverage not surprisingly I think what's most interesting for US is that one of the things we have not been able to do really.

At all since we acquired Barstool and this is something that Dave and Erica and Big Cat and others. A burst of are the most excited about as are we is this on prem activation of their audience. So even though we have open. These barstool branded sports books, it's still with very limited capacity Blackjack games that are every other seat and.

[noise] slots or every other slot and bars or have shut down or entirely shut down and so when do you think about we're seeing early results that are very encouraging, but I get a lot more excited and thinking about how how much stronger that those volumes can be when we can really activate the audience.

Well said J, the only thing I would add John.

Really the stickiness to to your question now that everybody is into my choice programs or whether you're you're spending time with this online or or actually at the property.

And you're you're earning royalty, you're earning and rewards. So we've seen a nicer uptick from there. So obviously the brand loyalty.

I think as people find their way back into the casinos and they are and over indexing, if they're gambling with us online as well as in the sports book. So it's a real encouraging trend and definitely saw and nice increase after everything was full of into the loyalty program.

And that's grants great helpful color, if I could ask one more J and Felicia on a high level going back to you.

No wonder Felicia's comments before as revenue ticks up and and recovery EBITDAR will pick up and and ultimately your free cash flow accelerated and where the balance sheet is today and a position that.

And it hasn't been and as long as we can remember.

And I think you were pretty clear and and where you would spend investment dollars and and of unique kind of stuck in acquisitions like your content acquisition earlier this week, but big picture of the amount of cash flow that we see you guys being able to generate and our model. How do you think about uses of cash and deploying that cash the different buckets and and.

Is there an opportunity to.

Continue to grow and invest and your digital business and perhaps think about shareholder returns or.

On dividends or you can pay down a little bit of that you have just want to kind of get your senses as cash flow accelerates here, how you look to deploy it and in addition to reinvesting in the digital business.

Yeah. Thanks, John you know I think for now and you know you've all had Jake have many times and and also today right about investing and the business and that's inclusive of growing our online chat on and solving for our tech back so.

That's really where we are today and our cash balance certainly get and that's what I had a dry pattern to pursue and number a different growth strategy, but overtime regarding return on capital that's definitely something will consider down the road and something Scott, but right now and it's very much focused on our growth.

And if you look at John and if you look at you know we don't provide this level of detail month by month, but the March April results, we sort of provided a slide you know you're looking at roughly a little over $200 million at the corporate level of EBITDAR and close to 100 million and free cash flow each of those two months I'm not saying you should run right all of that.

Because you know marches, a strong month, and we don't know how long and what we're seeing now state but the.

The operating leverage of this business is tremendous and the EBITDAR to felicia's point earlier and earlier EBITDAR to free cash flow conversion I think it's gonna be maybe tops or close to talk to the industry.

Thanks, James Thanks Felicia.

Thank you.

The next question comes from Stephen gambling of Goldman Sachs. Please go ahead.

Thanks, J you gave the sky that analogy on the on line Sports book as you look at your metrics and that segment across things like size at that frequency and customer concentration without perhaps disclosing this not specifically how do you think you compare to peers and the market and can you provide any.

And how you think about how fragmented your customer bases and.

As we think about more of a mass market customer and versus perhaps peers more concentrated.

Yeah, Great question, and I I sort of know what I know just based on what we have visibility and what we hear from our competitors. Stephen So some of this would just be speculation, but in terms of what we know ourselves as that I mentioned earlier, we know that the lion's share of the sports bettors and our ecosystem are young.

They're younger than 30 call at 21 to 29.

They over index, there more than what I'm hearing competitors say about where their average age is maybe more on the 30 to 35 ours is 25 I was on average age and.

And the average bet size not surprisingly for us as a bit lower.

Especially in Michigan, we're seeing there it's.

On the way and Pennsylvania, it's sort of where we thought it would be Michigan and the average that size has been lower but you're seeing our hold rates and Michigan higher and so we're getting a lot of parlay bets and Michigan lot of casual bedding recreational bedding and I think that's great.

That's what Sky bet has been doing and the UK for a long time and if you look at Sky bets hold percentage over the last seven or eight years, they tend to over index on hold and and Jgr versus handle it's still early to say exactly how that's all going to play out for us, but based on you know sort of life to date.

And the states that we've been in and now, including Illinois or hold rates are higher than the competition and I think that's because we have a younger and more casual better and when you think about lifetime value I'd, rather have an average better at twenty-five than anything older than 25, because they are and the ecosystem. So I don't know exactly how that compares to everybody else.

Just based on what I've heard what I've read from our competitive set and then what we've seen internally that's what I think the differences and how we how we really do lineup quite well to this guy that model and the U K.

Yeah, and that's helpful. And then a follow up this is perhaps asking Sean question on the sustainability of results and a different way and thank you had previously talked about achieving 2019 levels of EBITDA 10 per cent lower revenues and that's still how we should think about maybe it's sustainable levels of of margin improvement or has your view.

Changed longer term, given what you've seen and the business.

I'm thinking Todd said, it pretty well Stephen earlier that now feels conservative based on what we're seeing and the business and if revenue levels are sort of app, where they're at now and that sustained and I think you're gonna see us pumping out margins like we're pumping out now that's the way you should think about it.

Awesome Best of luck next and.

And Stevens.

And keep the next question comes from Barry Jonas That's true. Please go ahead.

Oh, Hey, guys. Thanks, Thanks for all the color and I had a question about Vegas with the salad Tropicana together operator, how do you think about the needs to be back and that market longer chair.

Yep.

Yeah, We I think Vegas strip is a great market and I think when you look at the Penn story could you envision down the road there being a sort of hub and spoke as it as it relates to our on prime retail strategy absolutely. It has to be the right outside at the right location and it has to be and ask that.

And that we feel like is representative of a destination that we want to send people to and we have some struggles with trough and that's in the rearview mirror and it wasn't for a lack of you know try and and database conversion and all of that and I think we actually executed quite well, but they on the day.

You need to have a property that had a great location and as competitive from and amenities standpoint, So I would say based on everything that we have going on as a company and it's not imperative. It's not something that we feel like has to be die and and we have a timeline associated with that.

But we will absolutely be taking a look if there's quality assets for sale and Vegas, and with our balance sheet and with our database and I think we'd feel very comfortable making an investment if it was if it was the right opportunity for us, but not something that is Eminem and we're not out there making offers to people, but if there's a good asset on the market will definitely be taking a look.

Okay, Great and then just as a follow up you know I could get a few quarters ago you mentioned.

And bedding was lagging smoked some of your eternal go over that.

And I actually I think it was felicia's crushed and.

Curious where that is now.

I didn't make that out very I'm, sorry can you repeat that.

Yeah, I said, a few quarters ago, you mentioned live any day Betty was lagging your internal goals and just curious where you. Thank god that stands now yeah. So I think probably for the market as you look at how popular and game betting is over in Europe, and I I don't think we get to those levels and the last thing and part of.

White and game is so popular there cause soccer is the most popular sport which is.

Lends itself to and game bedding basketball would blow your head off trying to do and game and football with hurry up offense can be more challenging as well, but I do think that you are probably going to end up somewhere north of 50 per cent and game and we're not there. We're more on that 35 per cent right now, which is a little higher than the last time.

We reported but I think I'm gonna take a little bit of time and honestly I think it's gonna take you know, having great contents and great products and we talked about creating.

More specialized so content and both within and I Casino and sports now that we have created a studio and so you know that's going to be very focused on and game over time and I think you'll see those numbers continue to grow.

Great. Thanks, so much deck and I'm sorry.

Thank you.

The next question comes from Ryan and Saddam is Craig Hallum Group. Please go ahead.

Good morning, and thanks for taking our questions.

J you mentioned sub 100 C. P. A very impressive there relative to the industry. I guess, you just want a break that down and I know we've talked a lot about this will be very clear I guess, because there's a lot of misinformation I think about promotions reported by states on a monthly basis versus external marketing. So how do you think about <unk>.

And between those two promotions and external marketing and then as your strategy change their verse. Your initial expectations kind of from your early learnings and Pennsylvania, and Michigan, Illinois et cetera.

Yeah, no how happy to share that I mean look I I view those two is very different I mean by definition CPA is cost per acquisition and so that's very much focused on how much did you have to spend to get that customer to download your app and too and to place a bet and I think that from our standpoint, the promotional spend as much.

More about retention.

We are laser focused on retention and that's why I think you're you'll see us maybe spend a little bit more on promos as it relates to a percentage of G. G. R.

Also very tax efficient and a number of these markets and as you're looking at spending hard cash on paid media that maybe is attracting and a little bit more of a promiscuous customer versus investing and somebody who is already and your ecosystem and making sure they have compelling reasons and compelling content and compelling promotions.

To stay within the ecosystem, we view those two things very differently.

So CPA for us obviously be and as low as it is begs the question of well what should it be I think it should be higher but we just want to make sure that we're being thoughtful around what we spend wherever you spend it and that it's gonna create long term ROI will be as aggressive as we need to be as long as we believe we're attracting.

Customers that we can keep within our ecosystem.

Great and then just on New York Mobile sports betting a fairly complex and confusing licensing structure. There also expensive I guess do you think there's and RLI opportunity for a competitive bid and the state.

And I think you said it well Ryan.

And we view it the same way it is it's a conundrum and we'll have to see how this plays out we're very active right now and talking to a number of our cops that because the way that this was structured you can actually go in on bids with multiple platform providers and.

So it is complicated I think money can be made but the tax rate, obviously is going to be hugely important and we'll have to see how how that plays out I would say that if anybody can sort of monetize and and environment like that I think.

That were set up better than anybody because of our low CPA and and the fact that we have such a loyal audience that we don't have to spend money attracting to get into our ecosystem. So I don't want on high tax rate Trust me and I don't think and high tax rate benefits the state at all.

But if it's a higher than average tax rate I think that is and environment. We know we can still create long term value and profitability.

Thanks, and good luck guys that's right.

Let's go with one more question and places.

Perfect. Our final question comes from Steve, which and ski and Stifel. Please go ahead.

Yeah. He guys. Thanks. Good morning, Thanks for the screen, you and Felicia welcome and I'm shocked you know what I'm talking about cruise operators anymore and this environment.

So you know so anyway, J and when I ask a bigger and bigger picture question around sports betting and there. There's obviously can't and estimates out there that are I mean, they're they're all over the map and you know my question specifically around the the the great market money you know my my question and actually you know how did you guys think about a tacky that that gray market and converting nose.

Looks from a green market type of setup and do a legal and would you like like yourselves or somebody else and now do you see this is a risk longer term that converting those like those folks might be more difficult than originally expected.

It's great question and I and I think that's that's and industry question, even more than it is a Penn question and I think that certainly our competitors are doing their part by advertising all day every day and the markets that are legal to make sure people understand that it is now legal and pretty easy as I mentioned at the three minute transaction.

So I think we all have to some of those illegal operators have really good products. They they've had them out there for decades and so we all collectively have to continue to create a really good UI you Act and make sure that we have features and functionality that are as good if not better and.

And then some of those offshore operators and I think you know if you when you pull people HVA has done this we've done it internally at Penn as well and you ask people you know would you prefer to bet with legal versus illegal it's not like people want Tibet and a lotta people don't know and so I think some of this over time, but.

Levada is that an option and I think people over time are gonna realize that which ones are legal and regulated and which ones aren't but.

It's not going to happen overnight I, just think what you're gonna see is our ability to convert sort of gray market betters into black market, you're gonna see that just continue to grow and get better over time, especially as more states legalize we have more scale. The industry has more scale and it becomes more sort of.

Common knowledge as to where it's legal and where it's not.

But I think thats and interest industry effort more so than it is even necessarily a penn effort.

Got it and then and then J I thought it was and and if he talked about this earlier and I apologize, but I missed it but I thought it was and still you talked about or.

You guys wrote and the release about being you talked about being a disruptor to the gaming industry and you know to me that almost sounds like a threat. So yeah I I I guess can you expand a little bit more about what you guys actually meant by that statement.

I well I don't view it as a threat so I'll be clear on that I view it as the way that we look at the space and.

We we were a first mover and a lot of areas and we were first mover and created and the industry's first routes. We were a first mover on and investing and social casino businesses, and we were first mover and pursuing route operations when it was at its infancy.

When we acquired Barstool.

That raised a lot of eyebrows and Wow is that going to work and so I think what we're saying Steve or attempting to say is that we've been disruptive we're going to continue to be disruptive and I think the current environment.

Of convergence of different industries, and vertical is a very comfortable place for us we like when it's sort of chaotic and somebody's got to step through the chaos and figure out how to create a compelling and strategy and vision.

We think we're set up really well as a team to do that.

And we live and breathe. This every day and when I say that that's not just gaming and it's sports It's entertainment It's media Tech it's.

All of the adjacent industries that we see coming together and we think we're set up really well and we've got some ideas on how we can really like I said, you know sort of you know make the moat that we built wider and deeper and you should be expecting to hear more from us on that.

Okay, great. Thanks, I appreciate it.

And Steve.

Yeah.

Thank you I'll turn on a call back over to if any closing on my X.

That's all I have really appreciate everybody, taking the time to join US This morning, and we'll be in touch with all of you soon and thank you.

Thank you that does conclude the conference on for today, we thank you for your participation and assets you. Please disconnect. Your line and thank you and have a good day.

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And.

Uh-huh.

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Greetings and welcome to the Penn National Gaming first quarter conference call. During the presentation. All participants will be in a listen only mode. Later, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone if at any time during the conference you need.

To reach the operator, please press star zero and it is now my pleasure to turn the conference over to judge a phony. Please go ahead.

Thank you Tina and good morning, everyone and thank you again for joining Penn National Gaming 2021 first quarter conference call.

And the management's presentation and comments momentarily as well as your questions and answers, but first I'll review the safe Harbor disclosure.

In addition to historical facts or statements of current conditions. Today's conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095, which involve risks and uncertainties. These statements can be identified by the use of forward looking terminology such as expects believes estimates projects intends plans seeks may will should.

Or anticipates or the negative or other variations of these or similar words or by discussions of future events strategies or risks and uncertainties, including future plans strategies performance developments acquisitions capital expenditures and operating results.

Such forward looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance and as such actual results may vary materially from expectations.

The risks and uncertainties associated with the forward looking statements are described in today's news announcement and and the company's filings with Securities and Exchange Commission, including the company's reports on form 10-K and form 10-Q Penn.

Penn National Gaming assumes no obligation to publicly update or revise any forward looking statements.

Today's call and webcast will also include non-GAAP financial measures within the meaning of SEC regulation G and when.

And 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 on the company's website.

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

Thank you Joe Good morning, everyone and thanks for joining us here with me and why I'm missing for her first official Penn earnings call at least on this side as our new CFO Felicia Hendrix, So welcome Felicia.

We also have Todd George our head of operations here to help answer questions about our core business as well as other members of my executive team, who can help respond to your follow up questions as needed.

As you can see from our earnings release, our core business results are very strong and still ramping actually as we sit here and the second quarter.

And while our new online and retail Barstool sports books, and I casino offerings, and Michigan, and Pennsylvania continue to perform very well.

Further we managed to fully integrate our industry, leading and my choice player loyalty program across all of our retail and digital offerings and time to take advantage of this momentum which has significantly bolstered our unique omnichannel strategy and competitive advantages and.

And our land based operations and momentum has continued following the rollout of vaccines and the ongoing relaxation of COVID-19 related restrictions across the country. Our record first quarter results highlight the robust recovery and our land based business.

Benefiting from many actions taken in 2020, we generated adjusted EBITDAR growth of 7% on a revenue decline of 6% over <unk> and 19, despite COVID-19 related property closures and January at a handful of our Midwest and northeast properties.

A full closure of Zia Park, and new Mexico, and some harsh winter weather and the South and February.

More impressive is our performance in March and April which reflects the additional easing of restrictions and an increase and the percentage of people vaccinated revenues grew 8% over the same two month period and 2019, while adjusted EBITDAR accelerated 29% to 410 million and EBITDAR margins increase.

650 basis points to nearly 40%.

We also note that spend per visit is much higher than it was pre COVID-19 and fast our visitation is now at or near 2019 levels and most of our markets.

Importantly, the younger demographic continues to be a gaming as a compelling entertainment option, while the 55 and over age group had been steadily returning to our casinos. We illustrate this point and our slide deck on page seven where you can see that our 55 plus age segment continues to gain momentum and particularly in April while growth from our younger.

Aid segment and 21% to 44 has accelerated since the beginning of the year.

Further unrated play and is demonstrating unprecedented growth, which has provided us with the opportunity to convert these players to our my choice loyalty program through new member programs and incentives.

All right and play trend continued to accelerate this strong topline demand coupled with the structural changes we've put in place at the start of the pandemic has resulted in remarkable and sustainable margin improvement even as our interactive business continues to scale.

As it relates to our partners at Barstool sports they've been able to maintain their incredible momentum from 2020 and to the new year with strong financial performance and audience growth.

Barstools promotion of Penn National's retail sports books has driven significant awareness and visitation to our land based properties. This is especially true of those properties that have introduced barstool branded sports books, and we plan to open six more of them by the end of this year. In addition, and progress continues on the development of several Standalone bar.

Store branded sports bar location, we're really excited about these projects and we're providing much more information along with our partners at Barstool and the next couple of months.

On March 11th and we successfully launched the Barstool Sports book, App, and Illinois ahead of the 2021 and see double a basketball tournament and just ahead of the return and thank goodness for us on timing of the in person and registration requirement and the state.

The initial results for the first 30 days of operations exceeded our expectations. Thanks in large part to the loyal following and I'm still leaves and the Chicago land area with better first time deposit conversions relative to what we had generated and Pennsylvania or Michigan.

During this period, we registered and 54007 hundred new customers and generated total handle and gaming revenue of 67.

Phase and the power of Barstool, social media reach was on full display upon the reinstatement of the and person registration requirement and Illinois.

And they were able to help us drive an incredible 20000 and registrations during just a 36 hour period.

Meanwhile, Barstools creative promotions exclusive that custom parlays have led to a leading position in Pennsylvania, and Michigan and based on handle G. G. R and N G. Our life to date market share Despite limited external marketing spend.

We expect our low customer acquisition costs strong retention rates unique promotions exclusive betting features and high adoption among casual betters will drive outsized profitability over the long term, we continue to over index. The bed on G. G R and N G R as compared to handle and we anticipate this continuing to be a trend and the agri.

Yet over the long term.

The power of our my choice customer base combined with the fierce loyalty barstool audience has allowed us to successfully cross sell our online offerings and Michigan for for example over 50% of our online sports betting monthly uniques placed a wager on our I casino product during the month of March which was above our initial expectations.

As we highlight on slide 17, our experience and Michigan has shown that our customers value increases significantly when they play on multiple channels, which highlights the benefits of our 100% owned and controlled Omnichannel strategy with the introduction of online gaming, we have been able to generate twice as much combined revenue.

As we have traditionally generated at greektown by engaging with consumers on our digital products and in addition to the physical property.

We are really excited about yesterday's launch of the Barstool casino product and Pennsylvania, which we believe will greatly expand our penetration and aggregate revenue and the state, particularly in the Philadelphia MSA, where we currently do not have a land based presence.

Although we are pleased with the initial results of our first generation Barstool casino products, we're really just scratching the surface of our potential in this space.

Over the next few months, we will be adding significantly more third party content to our Barstool Sports book, App, which will increase help increase conversion of our my choice database and both Michigan and Pennsylvania.

In addition, we recently acquired <unk> studios, which will serve as the centerpiece of our newly formed Penn game Studios and allow us to create customized barstool themed as well as casino branded content that we believe will lead to an even greater cross sell opportunities.

Before I hand, it over to Felicia for a summary of our first quarter results and a review of our financials I wanted to call special attention to the continued strides we're making on the ESG front as you know this is a topic that's very personal to me and I know our board of directors and my executive team share my same level of commitment and enthusiasm on taking care of our people our host communities and our planet.

Highlights from this quarter include the launch of a new $1 million annual diversity scholarship program. We're looking forward to providing up to 65, 2% and four year scholarships. This year to the children of our team members, which reflects our commitment to equity and post secondary education.

In addition, we implemented a supplier diversity initiative with the goal of developing new opportunities for minority owned businesses and last month, we hosted companywide days of learning days of listening and excuse me to gather feedback from our team members on all matters of diversity and inclusion and finally on May 15th which is armed forces day, we'll be launching.

And new initiatives to honor our active duty military veterans and first responders, we're calling it the my heroes program, which is an exclusive fully integrated extension of our my choice rewards program and it's to provide our nation's heroes access to exclusive discounts and offers at all of our properties across the country with that I'll pause.

And turn it over to Lisa Thanks day, it's great being here and being part of this tremendously talented team over the past few months I've been asked by many of you what the biggest surprises for me and once they join Penn having covered the company for over 20 years I would say that they were more pleasant discoveries and surprises and three standout.

The first is the depth of the bench across the entire company the level of talent creativity and commitment to excellence at Penn as seen in every aspect of the company and at every level.

Second is transparency chase commitments and transparent communication is well known and respected by the investment community and that ethos is no different entirely and finally, hence commitments and diversity and inclusion and community service and certainly inspiring and with that being said, we're very proud of our first quarter results, especially given COVID-19 related closures.

And January and the late and the quite a reopening of Zia Park revenues of 1.27 billion and adjusted EBITDA of $447 million after corporate overhead of $24 million, which as you know is reported and the other segment represented 94% of 20 and 19 revenues.

And 107% of 2019, EBITDA pro forma for a full quarter of Greektown, which is above our previously stated golf pro forma margins increased 400, and 434 basis points.

Adjusting for the COVID-19 related closures and excluding Penn interactive our EBITDA flow through on EBITDAR flow through was even more impressive as our adjusted EBITDA increased 12% compared to the first quarter of 19, and and 9% decline in revenues on this adjusted basis pro forma EBITDA margins increased more than just that.

100 basis points.

Our Midwest and South regions reported record EBITDA and margins in the quarter, Despite COVID-19 related closures and January and uncharacteristically harsh weather and the South and February our performance and the South segment was particularly noteworthy as the region generated margin improvement of 11 100 basis points compared to the same period and the first quarter of and.

19, while cost savings and efficiencies and irrational marketing and promotional environment, certainly benefited without the less restricted COVID-19 protocols drove revenue growth as compared to the first quarter of 19, which bodes well for the remainder of our portfolio and regions continue to reduce restrictions and open back up last week.

<unk> for example, and Mississippi removed all mandatory restrictions and the state in the Midwest adjusting for a property closures and the first quarter.

That segment also reported an impressive EBITDA margin gain of nearly 900 basis points. Despite competitively unfavorable COVID-19 restrictions in certain market.

Our balance sheet remains a key strength for us total liquidity as of March 31, 2021 and that was $2 7 billion consisting of over 2 billion and cash and a fully undrawn revolver traditional net debt was $353 million compared to 578 million as of 12, 31, 'twenty 'twenty or at least suggest.

Net leverage was four five times based on 2019 adjusted EBITDA.

Capex in the quarter was $25 7 million of which $9 1 million pertained to our Hollywood York Project that we expect to open in August and $1 7 million for a Hollywood Casino Morgantown development that we planned to open by the end of the year.

Despite the ramp and vaccine distribution and the U S remains in a pandemic, which creates uncertainty as such we will continue our pause on providing guidance, which we will reevaluate quite a good quarter on that turned it back to Jay.

Thanks, Felicia in addition to these impressive results we had many other notable accomplishments and the quarter, including being added to the S&P 500, and just last week Moody's upgraded our senior secured rating one notch and moved our outlook to stable and I look ahead I remain excited about really every aspect of our business. The recovery is well underway at our land based casino.

And I was as evidenced by the strong trends, we saw in March which continued into the second quarter.

Meanwhile, at Barstool, they remain focused on driving top of the funnel growth. Our differentiated strategy has earned us market, leading positions and Michigan and Pennsylvania in terms of handle a G. G R and N G. R and we remain on track to be live and eight states by football season, and 10 or more states before the end of this year.

Further we remain busy at work on a variety of growth initiatives, all with a focus on driving shareholder value well into the future with that team and I'd like to turn it over to you and open the lineup for questions.

My pleasure, if you would like to register a question or comment. Please press. The one followed by the four on your telephone you.

And here are three to them prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration. Please press. The one followed by this three one mom and please for our first question.

Yes.

And that first question comes from Joe Greff of J P. Morgan. Please go ahead.

Good morning.

Jay on the digital side.

And kind of start with you maybe.

What you have learned over the last several months here.

And the states in which you've launched with respect to customer engagement acquisition and promotions.

Have you learned about the technology components side of things and any.

Abuse of acquiring we're bringing that technology in house.

Sure thing Joe Good morning, Thank you for the question.

Theres been on there's been a lot of learnings are we just went live as you know in September and so we got through our first football season, and our first March Madness, and we're now live in three states, we're gonna be alive, and Indiana here and a couple of weeks and time for the Indy 500 and for the NBA playoffs, which we're really excited about and our total day today.

And by football season, and so we're gonna be on a much different position by the time, we get to football season in 'twenty, one versus where we were in September of 'twenty.

Some of the learnings that come to mind are we know that based on our differentiated approach and are fully integrated media partnership with Barstool, and we have the best Ppas and the industry and it's not even close our cpas are running well under $100 right now across all three states that we operate in which set you up so well for the long.

Term as it relates to having dry powder and you know we're gonna be a lot more aggressive in terms of spending to acquire customers as we head into football season in 'twenty one.

And then we Werent and football season, 'twenty, because we now have scale and we were we were launching and one states.

A year ago football season start September and this year, we're gonna be and eight state. So we're going to take advantage of that of that great margin profile that we have I think sometimes it gets lost with all the noise and all the focus right. Now is on you know monthly handle and I think the focus should be much more focused on what is the real strategic differentiation between.

And these approaches.

And what does that margin profile look like and the short term medium term and long term.

And we've scaled our we scaled our business up we have hundreds of people on Penn Interactive and we're live in three states and you look at our Q1 results and we generated obviously nice revenue growth and interactive from Q4 to Q1, and we broke even.

Nobody else can say that and and I'm not saying that we're gonna breakeven every quarter, it's gonna be quarter to quarter, and certainly we're going to be opportunistic as it relates to what we want to do especially from football season in terms of and spending more money to drive more acquisition. So TBD, but the fact that were you know alive in three states and have ramped up our staff the way that we have.

And all of the expenses that come with launching and states and you can still break even and an entire quarter win every every other major competitors Bernie and hundreds of millions of dollars I think says a lot.

We have a very different customer mix. If you look at the online offerings and our customer mix is a lot younger the lion's share of our audience is 21% to 27 years old I think that bodes really well for the future prospects of Penn.

Both online as well as and our brick and mortar casinos and.

I highlighted earlier some of the success that barstool branded retail sports books, and you see what it's doing and not just in terms of driving market share as it relates to the retail sports book, where Indiana. As an example, we have the top two retail sports books and the state, but we're also picking up casino market share and so just bring it on and all of these younger customers.

We provided a slide that shows age segment growth and we're really thrilled about what we see there.

One of the things that we've obviously learned as well as that you know we have a very differentiated approach as it relates to unique promotions and content and the way that we engage and focus on retention is different than others and the space and I think that's great for us long term we.

We've done a lot of work at Penn and looking at the U K.

Model, because it's been around for a long time.

And you look at what Sky bet was able to do from kind of $2 and a 2010 that range.

Where they are today and you know they had a very differentiated approach that probably wasn't.

And as appreciated and the early days as it turned out to be and I think that their approach and our approach are quite similar we've spent a lot of time on that and you know, we're really modeling and ourselves on sky bet and what they were able to do over time, and the U K and and that that approach was being different.

And then last but not least.

We're very focused on product improvement and our tech stack I think we have two really good partners and camby and White Hot gaming I don't envy BW businesses, and it's always tough because you don't own it but you hear about every problem that ever comes up and I think there are certain aspects of our tech stack that we definitely want to have.

More control over over the long term that doesn't mean, something that's M. And then it just means that we're learning a lot as were still on the infancy, and there's certain things that make more sense to have control and ownership of especially as it relates to anything that touches the end user and we're very active right now and part of why you see the the growth and corporate expense from.

Q4 to Q1 is that I've got Chris Rogers, and our business development folks really busy looking at potential opportunities as it relates to M&A and partnerships and we also of course I guess as it relates to the corporate overhead growth from Q4 to Q1 were very busy lobbying right now and states like New York and.

Florida to make sure that we have an opportunity to operate when all of a sudden done and the dust settled so I think at a high level, Joe It's kind of a simple question with a long answer, but we have a differentiated approach I think it's going to really prove out here as time goes and the fact that we're able to have low teen market share and the states that we've launched in.

And we're not losing money and we're still scaling the business I think bodes really well for the future.

Great. Thank you and then just a fee.

Follow up yes, $2 $7 billion on liquidity.

And so incredibly low leverage.

How do you how do you use that to your advantage what are their larger scale acquisitions I mean.

Things like you know parizeau, but something that's more needle moving and and which areas.

Or are there potential external growth opportunities driven by M&A.

Yeah, I and Felicia feel free to jump in here as well.

I love the position that we're in right now as it relates to the balance sheet, but we've never been in a position like this certainly since we spun off our real estate and to have net traditional leverage of like $300 million is amazing and to have our.

Leverage levels at four five times.

We have you know we're out we're busy right now Joe and I think that there are few boxes that we'd still like to check as it relates to technology stack theres some opportunities that could be small medium or large depending on what you are looking at we're looking at all right now.

And there could potentially be something that's international that comes along with that technology approach that could be compelling over the long term.

And you know we're going to continue to look at if there's any other potential sort of widening and broadening of the funnel opportunities as it relates to acquisition you know the barstool partnership as you know paid and space for us and I think theres some other potential media.

Organizations and offerings that can make a lot of sense if connected to us with what we're doing and just make that moat that we've built a little wider and a little deeper. So we're actively kicking tires on a lot of things I think you should expect us to be relatively active this year heading into next year.

Thank you Franz and they add and.

And Joe and thanks for the question on our balance sheet, because you know.

And I mentioned in my prepared remarks, and things that we're placing discoveries and and I do want to comment on when either and that's been really evident to me and the short time that I've been here and I. Just I also don't think it's something that the investment community and thinking and after that and and currently that's the power of our operating leverage and our market leading <unk>.

And free cash flow conversion, which is only going and get stronger as we grow revenues and EBIT that so if you think about it based on our minimal and stable cash needs today, and as increasing revenue drives higher EBITDA or free cash flow share grow even faster and that further bolsters, our balance sheet and puts us and even stronger.

Fishing to both reinvest in our business and then to pursue the strategic growth opportunities that Jay just talked about.

Thank you.

The next question comes from Bernie Mcternan of Needham and co. Please go ahead.

Good morning, Thanks for taking the question I'm, just just a follow up and Jay you mentioned being more aggressive to acquire customers and the upcoming NFL season, and I was wondering if you could just provide any color on what you expect this to mean you mentioned the virtual sports book early on in your prepared remarks, but does this mean more promo TV spot.

And other external marketing or.

Or something else.

Sure thing Bernie I look I think less traditional is what you should continue to expect from US I think there are.

For us on the Orthodox, but really effective ways, we talked about the barstool branded sports books and the casino, we talked about Standalone sports bars, and key markets. You know TBD, we're going to have more to share on that very soon.

Investing cash barstool and new talent.

New verticals.

And potential media partnerships <unk> acquisitions, I think we're gonna be more aggressive and how we think about locking up more influencers and affiliates.

And I think theres, some sponsorship and partnership opportunities out there that can make a lot of sense for us as it relates to both digital and our core business.

That's the nice thing about having this omnichannel approach, where you control and own 100 per cent of it because you know.

Once we just want to get people into the ecosystem and so you can invest in your core business you can invest and Standalone on Prem you can invest and digital media and as long as it widened the funnel and brings more people into the ecosystem. We just want to keep them there and we're confident we're going to be able to drive really healthy margins and all aspects of our business. So we really don't.

Care, where people decided to spend the majority of their time and wallet with us I would not Bernie you expect us to be.

The linear television and radio competitor to to the others, I'm and Pennsylvania. This week and what I'm here I listen to sports talk radio and I'm, a sucker, so I watch the sectors, even though they let me down every year and the playoffs and I would tell you that every commercial is noise about sports betting and I mean it.

It's overwhelming and you don't even know who's advertising to you, where we're not going to play on that space. I think that is very low ROI return and I'm, a big believer that that creates zero loyalty I think you're moving promiscuous customers around for chase and the next promo.

And the switching cost and this is actually something I know I'm going on and a bit of a tangent Bernie but I think it's important to bring up.

Lifetime value, it's something that's thrown around a lot and it.

It's interesting because people are calculating and lifetime value is that that customer is going to be loyal to you forever.

This is not like switching and cell phone. This is not going from your Apple phones, Android and Apple touches every element of your life and I'm I'm stuck with Apple Forever I can't switch switching costs with sports betting apps. It takes about three minutes and.

To download the App you Register your deposit and then you Gamble.

And I think what's going to happen over time is that the winners that have a real strategic structural advantages and media integrations and loyal audiences, whether that's some combination of a daily fantasy sports database or our casino database or a very strong and following up.

Asset like Barstool I think those are the ones that are going to have sort of bullet proof.

On market share as time goes.

And all of that's really aggressive spend on commercials and linear I don't think that's going to be the business that sticks around it and that's to me the business that continues to jump from from App to App. So that's my perspective, but yes, we're going to be more aggressive. We finally have the scale as we head into football season, and but we'll be doing it and different ways.

Great appreciate that.

And how do you think this is the six years, we'll probably get to better myself. Thanks for what for what it's worth.

And then just just a follow up on on eye gaming do you think there's the same opportunity to kind of let's call. It bar stool is I gaming and if we think about sports betting and Illinois, 54% and better using the barstool exclusives, so showing the content driven acro strategy acquisition strategy is working and sports betting is there.

And that same opportunity and I gaming like I'd imagine some sort of live dealer with barstool personalities could be pretty interesting or is the opportunity really about converting the my choice customers Yep, well Bernie you you could've been sitting in our boardroom as we have these conversations and you saw late last week that we announced the formation of.

Sales and it was Monday actually the formation of Penn Studios, and our acquisition of hip point, that's exactly what we have and minds and we've been actually working with Hep point, while we were working on getting the deal done on developing really bespoke content with our partners at Barstool. So yes, you should anticipate.

Dave Portnoy, Blackjack games, and Big Kat, Craps, and roulette and their dealers and their players and they're interacting and talking with you and Theres all sorts of fun stuff that we have we have planned and I think the other thing to keep in mind is that we.

We launched <unk> casino and Michigan, because we didn't want to Miss out and we want to make sure that we're giving people an opportunity to convert from sports and casino.

We will be the first and I'll say, our eye casino product is not today, where it needs to be at a little bit bare bones. I think we have 60 different titles and slot and table games that we offer it's like one fifth of 110th of what our competitors offer and we're going to get that ramped up I think by football season. This upcoming so call. It September of this year youre going on.

The Barstool casino is gonna be not just offering more well known content from the <unk> games and Igt's of the world, but youre going to see some some content that we create ourselves through our studio and I think case in point and if you heard that MGM and talk about how much what percentage of their sports betting and Audi.

And so they've converted over and I casino, we're not there yet we're at 50% I think they were at like 70, or 80 or 90, or so it's a very high percentage and we need to have better content and that's what we're working on but yes, you should expect us to do much like on the sports betting side, we're going to do things differently and really take advantage of tapping into that loyalty that come.

And with the Barstool names.

Got it thanks, Jay Thanks for taking my questions and Bernie.

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

Hi, good morning, everyone and welcome and Felicia and good to hear your voice.

Thanks, Joe.

So two things I wanted to touch on first just to stick with online.

And digital on.

You talked about the low teen market share and I think we've all day kind of staring at some of the sequential market share patterns on.

And I just wanted to get your kind of thoughts on when you guys and launch and some of these and so many.

New markets, you seem to do exceptionally well.

And we're still penetration and we said tend to see things kind of level out a little bit.

Over time, just given that you know where you are in market versus not and and probably some of the follow through there.

How are you kind of thinking about that pattern on.

Is it moves over time as you start to gain a little bit more scale across markets and what should investors expect kind of as you look at it what kpis are you watching to really judge how your assets are performing.

No. It's a great question, sorry, and we obviously are we talk about this every day and there's a couple of things to keep in mind one.

Take Michigan as an example.

Mover Uber expensive from a marketing and standpoint right now everybody is just it's a gold rush.

For how much you can spend to drive the more promiscuous customers around from App to App and we're not playing in that game right now and we obviously heading into football season, 'twenty, one and we're gonna have more scale as I mentioned earlier and so it makes a lot more sense for us to spend more and be more aggressive when you have scale and you can work.

On more regional and national marketing approaches as opposed to very localized very expensive with very little long term ROI.

So that's one number two.

I think every market is going to be a bit different if you look at our results and Pennsylvania, they've been remarkably consistent we've been in that low teen 12% to 15% market share whether you are looking at handle G. G. R. N G are pretty much every month since we launched in September and so you really don't see the volatility and Pennsylvania, It's Ben.

Much clockwork.

And to month for the most part.

And the other thing that I would mention is that.

And I don't think this will surprise anybody, but the barstool folks, especially when you're talking about portnoy and big Kat.

Their top sports football and I think that will hurt us and Michigan as we launched right at the very end of football season, and we got basically the AFC and NFC Championship weekend, a little bit and Super Bowl and then we headed into basketball and hockey, which you know is going to be I think we're gonna be competitive, but I think we're probably going to be most competitive.

During the September through January months, because of football season, and so the drop off and Michigan.

I think youre going to see that start to self correct as you get back into football season, and especially with some of our marketing spend and efforts to get it ramped up once we have more scale. So we're.

We're not you know I continue to go back to what what matters over the long term and I think that there seems to be an overreaction to monthly handle and I think you need to take a step back and really look at the strategy the margin profile of the business model and what does it look like over a.

Period of much more than a month or two and let's get through another football season, and give us a second full season to get through and we've learned a lot and we're confident with where things are going to shake out.

And maybe just to switch gears, but we've made it I think this far without talking too much about the kind of core brick and mortar business.

And what investors are asking us a lot about is just trying to understand how much of what we're seeing in March and April is truly sustainable and in our eyes versus a lack of entertainment options and some of the stimulus funding, possibly some sort of onetime pent up demand you guys seem to have a lot of data around.

And that you broken it out by cohorts for us. So I just wanted your thoughts and if you can kind of tailor to boats, a little revenues and a little bit on the margin front to just trying to kind of get our arms around what's real and repeating versus what's onetime yep.

And Todd you want to grab that one extra thanks, Sean Great question, and and I think it's what everyone who has been asked and our industry as we've kind of gone through this so obviously, we're encouraged by the revenue and the EBITDA performance trends.

Revenue I, if a combination of many things there is obviously, a pent up demand there's stimulus money and the marketplace. There's there's a lot of things driving that as well as as you acknowledged the lack of entertainment offerings, but I would I would also point to we're seeing and across all different groups and that's everyone from unrated all the way.

To the high end customers, which are more of your core gamers.

Q1, and definitely March and April the trends are even more encouraging.

And the south Mississippi as they removed them.

And really any restrictions, we're seeing volumes visitation and handle drop well over 100% of of 2019 numbers and and similar and Louisiana. There was a group of US last week that went to Louisiana and visited.

Four of our properties in Louisiana, and it was amazing to see if it was you know theres and a big way you wouldn't even realized that there was a pandemic going on so it was really encouraging to see people out there enjoying themselves, having a great time being at the pool.

Spending time and tables dining and restaurants. So it was it was really where we see the rest of the country going.

To your point on margin.

And the past, we've kind of provided a framework of 9100 and with a goal of saying that on 90% of 2019 volumes, we could get through 100 per cent of 2019, EBITDA, which really when you. When you do the math equates to about a 350 basis point margin improvement.

And we obviously feel that that that number is now a little conservative.

This has been discussed internally and maybe more than any other performance metric coming out of the first quarter I think we all got to a point, where we feel the margin performance will continue to be driven by volumes and as we're holding on to the younger demographic as we're seeing that 55 plus come in after vaccines.

And those volumes remained steady and through the first.

And now five days of May the trend continues from April so.

Very optimistic very encouraged as we move into the rest of the year.

So I'd touch on what I would add and I.

Todd sort of highlighted it is you should anticipate our margin profile look and a lot like it does right now as long as the revenues continue to be what they've been and the last couple of months and you know what.

What we're seeing right now it's tough to predict what's going to be in this environment three months six months 12 months 15 months from now but.

But the margin profile of things to Todd and.

And the operations team out in the field we.

And we feel great about how sustainable it is as well as long as the volumes are there.

Thank you very much.

Thank you.

Yeah.

The next question comes from John Decree of Union Gaming. Please go ahead.

Good morning, everyone and thanks for taking my question and congratulations Felicia for harping on the other side of this conference call.

Jay.

There's a.

A slide in your deck that talks about your day.

<unk> market share.

And a couple of properties, where you have a re branded barstool sports book and it was I.

I was wondering.

If you could talk a little bit about and if you've seen anything early on the crossover play from.

From retail sports betting to online sports betting places, where you have a rebrand and sports but are you seeing those customers play in the retail location and then go home and play on line.

Or are they two very different customers and I know, it's early but I was wondering if you could kind of talk about the value of that does that retail sports book President.

Yeah, and Todd you can help me with this one.

Here's a little here's what we're seeing is that customers that are coming in Tibet and these barstool branded retail sports books met many of them most of them have never been to the property.

And while they are on property, they're engaging and table games, mostly a little bit and slots actually and a lot and food and beverage not surprisingly I think whats most interesting for US is that one of the things we have not been able to do really at all since we acquired Barstool and this is something.

And that Dave and Erika and Big Cat and others at Barstool are the most excited about as are we is this on prem activation of their audience. So.

Even though we've opened these barstool branded sports books, it's still with very limited capacity Blackjack games that are every other seat and slots or every other slot and bars or have shut down or entirely shut down. So when do you think about we're seeing early results that are very encouraging, but I get a lot more excited and thinking about how how much stronger.

And those volumes can be when we can really activate the audience.

Yeah, well said, Jay the only thing I would add John.

The stickiness to to your question.

Now that everybody is into my choice programs or whether you're spending time with us online are or actually at the property.

And you're earning royalty, you're earning and rewards. So we've seen a nice uptick from there. So obviously the brand loyalty.

As people find their way back into the casinos and they are.

And our over indexing, if they're gambling with us online as well as in the sports book. So it's a really encouraging trend and definitely saw a nice increase after everything was pulled into the loyalty program.

And that's great. That's great helpful color if I can.

Could I ask one more day and Felicia on a high level.

And going back to felicia's comments before as revenue picks up and our recovery EBITDAR will tick up and and ultimately your free cash flow accelerated and where the balance sheet is today and the position that.

And it hasn't been as long as we can remember.

And I think you were pretty clear and where you would spend and investment dollars and and a unique kind of tuck in acquisitions like your content acquisition earlier this week, but big picture the amount of cash flow that we see you guys being able to generate and our model.

How do you think about uses of cash and deploying that cash.

The different buckets and is there an opportunity to continue.

Continue to grow and invest and your digital business and perhaps think about shareholder returns or.

Dividends or.

Pay down a little bit of that you have just wanted to kind of get your sense is as cash flow accelerates here.

And how you would look to deploy it and in addition to reinvesting in the digital business.

Yeah, Thanks, John and I.

And I think for now and you have all.

Jay talked many times and and also today right about investing and the business and that's inclusive of growing our online channel and and solving for our tech stack. So you know.

And that's really where we are today and our cash balance certainly gives us a lot of dry powder to pursue and number of different growth strategies and over.

And over time, you know regarding return of capital that's definitely something we will consider down the road, it's something the Scott, but right now we're very much focused on our growth and if you look at it John If you look at you know we don't provide this level of detail month by month, but the March April results, we sort of provided a slide you know you're lucky.

At roughly a little over $200 million at the corporate level of EBITDAR and close to a $100 million of free cash flow each of those two months I'm not saying you should run rate all of that because March is a strong month and we don't know how long what were seeing now state but.

The operating leverage of this business is tremendous and the <unk>.

EBITDAR to Felicia's point earlier EBITDA to free cash flow conversion I think is going to be maybe tops, there's close to talk to the industry.

Thanks, Jan Thanks Felicia.

Thank you.

The next question comes from Stephen Grambling of Goldman Sachs. Please go ahead.

Thanks, Jay you gave the sky that analogy on the online sports book and.

And look at your metrics in that segment across things like size of that frequency and customer concentration without perhaps disclosing those non specifically how do you think you compare to peers and the market and can you provide any color on how you think about how fragmented your customer bases.

As we think about more of a mass market customer versus perhaps appears more concentrated.

Yeah, Great question, and I I sort of know what I know just based on what we have visibility and what we hear from our competitors' Stephens. So some of this would just be speculation, but in terms of what we know ourselves is that I mentioned earlier, we know that the lion's share of the sports betters and our ecosystem are young they're you know they're there.

Younger than 30 call it 21% to 29.

And they over index, there more than what I'm hearing and competitors say about where their average age is maybe more on the 30% to 35 ours as you know twenty-five eyes and average age.

And the average bet side and not surprisingly for us is a bit lower.

Especially in Michigan, we're seeing there.

Illinois, and Pennsylvania, it's sort of where we thought it would be in Michigan and the average bet size has been lower but youre seeing our whole rates and Michigan higher and so we're getting a lot of parlay that and Michigan lot of casual betting recreational betting and I think thats great.

And what Sky bet has been doing and the U K for a long time and if you look at Sky bet hold percentage over the last seven or eight years. They tend to over index on hold and and G. G. R versus handle it's still early to say exactly how that's all going to play out for us, but based on sort of life to date and this.

States that we've been in and now including Illinois.

Our hold rates are higher than the competition and I think that's because we have a younger more casual better and when you think about lifetime value I'd, rather have an average better at 25, then anything older than 25, because they are and the ecosystem. So I don't know exactly how that compares to everybody else, but just based on what I've heard what I've read from our competitive.

And then what we've seen internally, that's what I think the differences and how we how we really do lineup quite well to the Sky bet model and the U K.

Yeah. That's helpful and then as a follow up this is perhaps asking sean's question on the sustainability of results and a different way I think you had previously talked about achieving 2019 levels of EBITDA, 10% lower revenues.

Is that still how we should think about maybe at sustainable levels of margin improvement or has your view changed longer term given what you've seen on the business.

Hum.

And Todd said, it pretty well, Steve and earlier.

That now feels conservative based on what we're seeing and the business and if revenue levels are sort of at where they're at now and that sustained I think youre going to see us pumping out margins like we're pumping out now that's the way you should think about it.

Awesome Best of luck next Thanksgiving.

Thank you. The next question comes from Barry Jonas of Truth. Please go ahead.

Oh, Hey, guys, thanks, and thanks for all the color.

And I had a question about Vegas with the sale of Tropicana to another operator, how do you think about the needs to be back on that market longer term sort of distress.

Yeah.

I think Vegas strip is a great market and I think when you look at the Penn story could you envision down the road there being a sort of a hub and spoke is as it relates to our on Prem retail strategy absolutely.

It has to be the right outside at the right location and it has to be an asset that we feel like is representative of a destination that we want to send people to and we had some struggles with trough and that's and in the rearview mirror and.

It wasn't for lack of trying and database conversion and all of that and you know I think we actually executed quite well, but they're on a day.

You need to have a property that set a great location and as competitive from an amenity standpoint, So I would say based on everything that we have going on as a company. It's not imperative, it's not something that we feel like has to be done and we have a timeline associated with that.

But we will absolutely be taken a look if theres quality assets for sale and Vegas and.

With our balance sheet and with our database I think we'd feel very comfortable making an investment if it was if it was the right opportunity for us, but not something that is imminent and we're not out there making offers to people, but if theres a good asset on the market will definitely be taken a look.

Okay, Great and then just as a follow up you know I think a few quarters ago, you mentioned lives and.

Betting was lagging some of your internal goals.

And I actually I think it was felicia's question, but just curious where that is now.

I didn't make that out very I'm, sorry can you repeat that.

Yeah, I said, a few quarters ago, you mentioned live any day.

That was lagging your internal goals and I'm, just curious where you think that stands now yep.

So I think probably for the market as you look at how popular in game betting is over in Europe, and I don't think we'd get to those levels and the U S and part of why and game is so popular there cause soccer is the most popular sport which is less.

Lends itself to in game betting basketball would blow your head off trying to do and game and football with hurry up offense can be more challenging as well, but I do think that you're probably going to end up somewhere north of 50% and game and we're not there we're more on that 35% right now which is a little higher than the last time.

We reported.

But I think I'm gonna take a little bit of time and honestly I think it's going to take you know, having great content and great products and we talked about you know creating.

More specialized bespoke content and both within and I Casino and sports now that we have created a studio and so that's going to be very focused on and game over time, and I think youll see those numbers continue to grow.

Yeah.

Great. Thanks, so much Jack and Greg.

Thank you.

The next question comes from Ryan and Thank all of Craig Hallum Group. Please go ahead.

Good morning, Thanks for taking our questions.

Jay you mentioned sub hundred CPA very impressive there relative to the industry I guess I just wanted to break that down and I know we've talked a lot about this will be very clear I guess, because theres a lot of misinformation and think about promotions reported by states on a monthly basis versus external marketing. So how do you think about spend.

Tween, those two promotions and external marketing and then has your strategy changed there versus your initial expectations kind of from your early learnings and Pennsylvania, Michigan, and Illinois et cetera.

Yeah, no happy to share that I mean look I I view those two it's very different I mean by definition CPA or cost per acquisition and so that's very much focused on how much did you have to spend to get that customer to download your app and to and to place a bet and I think that from our standpoint, the promotional spend is.

Much more about retention.

We are laser focused on retention and that's why I think you'll see us maybe spend a little bit more on promos as it relates to a percentage of G. G. R.

It's also a very tax efficient and a number of these markets and as you're looking at spending.

Hard cash on paid media that maybe is attracting a little bit more of a promiscuous customer versus investing and somebody who's already and your ecosystem and making sure they have compelling reasons and compelling content and compelling promotions.

And to stay within the ecosystem, we view those two things very differently.

CPA for us obviously being as low as it is begs the question of well what should it be I think it should be higher but we just want to make sure that we're being thoughtful around what we spend where we spend it and that it's going to create long term ROI will be as aggressive as we need to be as long as we believe we're attracting customers.

And we can keep within our ecosystem.

Great and then just on New York Mobile sports betting on.

Fairly complex and confusing licensing structure. There also expensive I guess do you think there is an ROI opportunity for a competitive bid on and the state.

And I think you said it well Ryan.

At the same way it is it's a conundrum.

And we'll have to see how this plays out we're very active right now and talking to a number of our cops that because the way that this was structured you can actually go in on bids with multiple platform providers and.

So it is complicated.

I think money can be made.

But the tax rate, obviously is going to be hugely important and we'll have to see how and how that plays out I would say that if anybody can sort of monetize and in an environment like that I think that we're set up better than anybody because of our low CPA and the fact that we have such a loyal audience that.

We don't have to spend money attracting to get into our ecosystem. So I don't want a high tax rate Trust me and I don't think a high tax rate benefits the state at all.

But if it's a higher than average tax rate I think that is an environment. We know we can still create long term value and profitability.

Thanks, Jay and good luck guys. Thanks Ryan.

Let's go with that.

One more question please.

Perfect. Our final question comes from Steve <unk> of Stifel. Please go ahead.

Yeah, Hey, guys. Thanks. Good morning, Thanks for squeezing me and Felicia welcome I mean, im shocked and I'm talking about cruise operators anymore on this environment.

And so so anyway and I wanted to ask a bigger and bigger picture question around sports betting and there Theres, obviously Tam estimates out there that are.

They're all over the map and.

My question, specifically around the great market money.

My question and actually as you know how do you guys think about attacking that that great market and converting those folks from a great market type of setup and do a legal entity like like yourselves or somebody else and.

Do you see this as a risk longer term that converting those flow those folks might be more difficult than originally expected.

It's a great question and I and I think that's a that's an industry question even more than it is a Penn question and I think that and <unk>.

Our competitors are doing their part by advertising all day every day and the markets that are illegal to make sure people understand that it is now legal and pretty easy as I mentioned, it's a three minute transaction.

So I think.

We all have to some of those illegal operators have really good products they've had them out there for decades, and so we all collectively have to continue to create a really good UI UX and.

And make sure that we have features and functionality that are as good if not better than some of those offshore operators and I think you know if and when you pull people HCA has done this we've done it internally at Penn as well and you ask people you know would you prefer to have that with legal versus illegal. It's not like people want to bet a lot that we don't know and so I think so.

And this over time.

BARDA is that and option and I think people over time are going to realize that you know, which ones are legal and regulated and which ones aren't but it's not going to happen overnight I just think what youre going to see is our ability to convert sort of gray market betters into black market youre going to see that just continue to grow and <unk>.

Better over time, especially as more states legalize we have more scale. The industry has more scale and it becomes more sort of common knowledge as to where it's legal and where it's not.

But I think that's and interest industry effort more so than it is even necessarily a penn effort.

Got it and then and then Jay I thought it was and if you talked about this earlier I apologize if I missed it but I thought it was interesting you talked about or.

You guys wrote and the release about being you talked about being a disruptor to the gaming industry and to me that almost sounds like a threat. So I.

And I guess can you expand a little bit more about what you guys actually meant by that statement.

I don't view it as a threat so I'll be clear on that I view it as the way that we look at the space and.

We were a first mover and a lot of areas. We were a first mover and creating the industry's first rates. We were a first mover on and investing in social casino businesses. We were a first mover and pursuing route operations when it was at its infancy.

And when we acquired Barstool.

And that raises a lot of eyebrows of Wow is that going to work and so I think what we're saying Steve or attempting to say is that we've been disruptive we're going to continue to be disruptive and I think the current environment.

Of convergence of different industries, and verticals is a very comfortable place for us.

Like when it sort of chaotic and somebody's got a step through the chaos and figure out how to create a compelling and strategy and vision.

Think we're set up really well as a team to do that.

We live and breathe. This every day and when I say this it's not just gaming and its sports and entertainment and media and Tech.

All of the adjacent industries that we see coming together and we think we're set up really well and we've got some ideas on how we can really like I said sort of make the moat that we built wider and deeper and you should be expecting to hear more from us on that.

Okay, great. Thanks, I appreciate it.

And Steve.

Yeah.

Thank you I'll turn the call back over to you for any closing remarks.

That's all I had really appreciate everybody taking the time to join US This morning, and we'll be in touch with all of you soon and thank you.

Thank you that does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your lines. Thank you and have a good day.