PENN Entertainment, Inc. Q2 FY2021 Earnings Call

Greetings and welcome to the Penn National Gaming Second Quarter Earnings and Acquisition of the Score Media and Gaming Conference Call. I would now like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead.

Thank you, Rita. Good morning, everyone, and thank you for joining Penn National Gaming's conference call to review the company's 2021 second quarter results and today's announcement that Penn National has agreed to acquire Score Media and Gaming. There are investor presentations on the Penn National website for both the quarterly results and the transaction news. We'll get to management's presentation and comments momentarily as well as your question and answer, but first, I'll review the safe harbor disclosure. In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. These statements can be identified by the use of forward-looking terminologies 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 discussion of future events, strategies or risks and uncertainties, including future plans, strategies, performance, developments, acquisitions, capital expenditures and operating results. Such forward-looking statements reflect the company's current expectations and beliefs but are not guarantees of future performance. As such, actual results may vary materially from expectations. The risks and uncertainties associated with the forward-looking statements are described in today's news announcements and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and Form 10-Q. Penn National Gaming assumes no obligation to publicly update or revise any forward-looking statements. Today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G. 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 now it's my pleasure to turn the call over to Penn's CEO, Jay Snowden. Jay, please go ahead.

Thanks, Joe. Good morning, everyone. Thanks for joining us for our second quarter earnings call and, I would say, more importantly, the exciting announcement of the acquisition of Score Media and Gaming. I have with me here in Wyomissing our CFO, Felicia Hendricks; our Head of Operations, Todd George; as well as other members of my executive team. And later on, John Levy, Founder and CEO of theScore, will join me to discuss our exciting new partnership that we announced this morning. We'll also be joined in a bit by Barstool founder, Dave Portnoy, and Barstool Sports CEO, Erika Nardini, to get their perspective on the deal as well. But first, I'll begin today's call with the highlights of our record financial results this quarter, which exceeded our preannounced ranges. This is a reflection of the ongoing recovery in regional gaming, and it speaks more specifically to the outstanding job that Todd and his operating teams, both here at corporate and at the property levels, are doing to help drive our continued margin improvement and boost higher spend per visit from our existing 55-plus age group, while finding new ways to attract younger patrons looking for alternative entertainment options. We also saw impressive revenue growth and near breakeven EBITDA results across our Penn Interactive segment. We're preparing to launch the Barstool Sportsbook app in 4 or 5 more states by the start of NFL season next month. And by the end of this calendar year, we expect to be live in at least 10 states while also introducing several new features to the app, such as same game parlay and shareable bet slip, which we're really excited about. With greater operating scale and leverage, improved products and unique value-creating marketing strategies, we believe we are extremely well positioned for a strong fall as we roll into Barstool Sports' favorite time of the year, football season, which provides a nice segue to our pending acquisition of theScore, which is the #1 sports app and sports media name in Canada and the third most popular sports app and sports media name in North America. When we add theScore's unique integrated media and betting platform and modern state-of-the-art technology to the massive audience of Barstool Sports and its wildly popular personalities and content, we'll be creating North America's leading digital sports content, gaming and technology company. Under the terms of the agreement, which have been unanimously approved by the Boards of the Directors of both companies, we'll be acquiring theScore for approximately $2 billion in cash and stock. TheScore's shareholders will receive $17 in cash and 0.2398 shares of Penn National common stock for each of theScore share, which implies a total purchase consideration of USD 34 per theScore share based on Penn National's 5-day volume-weighted average trading price as of July 30, 2021. We are uniquely positioned to seamlessly serve our customers with the most powerful ecosystem of sports, gaming and media in North America, ultimately creating a community that does not exist today. This transaction will allow us to provide state-of-the-art mobile sports betting and iCasino with highly customized bets and enhanced in-game wagering opportunities, along with highly engaging, personalized sports and media content and real-time scores, stats and videos. We believe this powerful new flywheel will result in best-in-class engagement, retention and loyalty, and this larger cross-promotion ecosystem will provide us with multiple growth channels that transcend our current business verticals. In the near term, we'll just be scratching the surface of where we can ultimately take this company. The transaction also provides us with a path to full control of our own tech stack with a deep pool of engineering talent. TheScore has developed a modern player account management system and is currently in the process of finishing up the development of an in-house managed risk and trading service platform built specifically for the North American market that should lead to significant savings in third-party platform costs and, more importantly, allow us to broaden our product offerings, providing the missing piece for operating at what we believe will be industry-leading margins. In fact, we expect to realize margin improvement of 500 basis points or more over time for Penn Interactive. But more important than cost synergies, we believe the transaction will provide us with significant incremental revenues, not just in Canada but also in the U.S. The financial benefits of this transaction are very compelling. Despite significant planned investments in technology and new launches, we anticipate that the acquisition of theScore will provide adjusted EBITDA accretion by year 2 and an incremental $200 million medium-term adjusted EBITDA opportunity with a $500 million incremental long-term adjusted EBITDA upside. Our perspective is that operators that have achieved early online market share have done so primarily through first-mover advantage, leveraging existing customer databases and significant paid media spend. We believe the long-term winners will be defined by best-in-class products, bespoke content, efficient customer acquisition, multi-platform reach and broad market access, all of which we have in spades. Before turning it over to John, I want to speak for a minute about our excitement to be entering the Canadian gaming market, which represents a compelling revenue growth and talent acquisition opportunity. Canada, and particularly Toronto, is known for its deep pool of world-class engineering and technology expertise, and we and theScore intend to tap into that pool to expand theScore's tech team there as the business continues to scale. I also want to reinforce that we intend to operate theScore as a stand-alone business, much like we have with Barstool, which will remain headquartered in Toronto. Finally, it goes without saying that this transaction reflects the deep respect we have had for theScore brand over the years and what John and his family have created. We have known the Levy family for years and, like our Barstool acquisition, we don't want to come in and change who they are, which is what has made them so successful. A large part of what we love about both Barstool and theScore is their authentic voice, scrappy nature and entrepreneurial spirit. We want theScore to keep on doing what it does best and are proud to have John and his entire team and family bring their unique perspective to our Penn National family. This is going to be a long-term partnership. So with that, I'd like to turn it over to John Levy.

Thank you, Jay. As Jay noted, we've been strategic partners with Penn in the U.S. since 2019, and it has been a pleasure getting to know Jay and his team, who share our culture and are proud disruptors. We soon recognized our shared vision and approach to the rapidly expanding media gaming opportunity across North America. We have admired how Penn has built their business strategically, and when this opportunity presented itself, it was evident that there was a strong alignment. This deal unites two companies with large and dedicated customer bases. We are eager to collaborate with Penn and harness our strengths to create a leading sports media, gaming, and content company in the market. Together, we will establish a groundbreaking company that integrates world-class technology, engaging sports content, and extensive reach, allowing us to serve users uniquely. Penn has a significant retail presence throughout the U.S., and their online gaming approach is equally compelling. Like us, Penn has chosen to structure their gaming operation around a strategy that combines media and betting. Through Barstool, leveraging their influential content, we see how effective this strategy can be. Our focus on integrating media and betting with technology aligns with this goal in a complementary manner. We look forward to working with Dave, Erika, and the Barstool team as we utilize our unique brands and large audiences to enhance the sports experience. I also want to thank theScore team for their dedication in building this remarkable organization. Over the years, the team has focused on enhancing the fan experience, which has fueled our innovation and success across sports media, esports, and gaming. This unified effort has propelled us into the regulated gaming industry, taking a different route than traditional media companies and establishing ourselves as a sportsbook. We recognized a better way to serve sportsbook bettors. In just a few years, we have created an innovative, technology-driven media and gaming operation that positions us for success across North America, especially with the upcoming launch of commercial sports betting in our home market. Our potential and ability to execute have energized our partners at Penn, and their shared vision excites us. This includes opportunities in Canada. With support from Penn, we will keep investing in our Canadian operations, expanding our presence and workforce, including our technical capabilities. Mobile technology has always been central to our organization, which began with apps. We have developed a world-class technology platform and will continue to innovate in this area, setting benchmarks for digital sports, media, and gaming. Now, with Penn, we have the chance to elevate it on a much larger scale. This partnership creates a unique leadership position in media, gaming, and technology, and we are thrilled about the future. Personally, I want to thank Penn for being a fantastic partner over the past few years and express how much Benjie and I look forward to working more closely with them as we lead theScore as part of this new combined entity.

Thanks, John. Now I'd like to turn it over to Dave Portnoy and Erika Nardini to say a few words as well. Dave, it's all yours.

I'm really excited about this opportunity. It feels like everything has come full circle. Even before our partnership with Jay and Penn, I recognized theScore as a company that could significantly enhance what we do. Erika and I met with John a long time ago, but we didn't have the resources back then to move forward. What drives Barstool's success and our relationship with Penn is our deep understanding of the market, especially in the gambling and sports gambling space. I've been a user of theScore for many years, probably around 10 to 15. We're thrilled about this synergy and share a vision of controlling the media landscape where people can access scores, information, and place wagers seamlessly. This collaboration aligns perfectly with our philosophies about the convergence of media and sports gambling, and I'm incredibly excited about the future.

And then this is Erika, just jumping on top of that. We have so much respect for John, his entire family and what theScore has become and the business they've created. Dave is exactly right. The first company we met with after PASPA was repealed was theScore. We have such a profound respect for what they've created in Canada. I'm so blown away by how they think about community, the type of tech that they're creating, the way they're innovating around information and betting. And we believe that those things, coupled with Penn's strengths and footprint and our brand, can create a company that will have an incredible amount of synergy. We also couldn't be more excited to be partnering with a Canadian company, and we're ready to go to the moon.

Thank you, Erika and Dave. Before we move to questions, I want to emphasize a few points. We've heard a strong, unified vision from John Levy, Dave, and Erika about our direction, which clearly diverges from the current landscape. This partnership and transaction are not solely focused on sports betting, media, technology, or gaming; it encompasses all of these areas and goes beyond them. To achieve the best-in-class status and establish a successful flywheel, it’s essential to have a diverse range of content, a modern technological infrastructure, cross-channel assets, talented engineers, and top-notch marketers. We firmly believe that the combination of theScore, Barstool Sports, and Penn National meets all these criteria. Today, we are affirming our commitment to this winning strategy. Through this partnership, we aim to strengthen and expand the competitive advantage we have built. We are eager to answer your questions, and with that, Rita, we turn it over to you.

Our first question comes from Joe Greff with JPMorgan.

My questions have changed going into today. So obviously, it's all related to today's theScore acquisition news. First question related to this, Jay, you referenced in the slide deck and the press release cross-marketing or rather cross-promotions between theScore and Barstool Sports. Are you planning to lead with one over the other, depending if you're looking at the U.S. markets versus the Canadian market? How integrated will the brands be on the front end for consumers?

Yes. No, great question, Joe. And as you can imagine, we've spent quite a bit of time talking about this as a group. We actually had really good productive discussions with the Levy family and Dave and Erika and Big Cat a couple of weeks ago in New York. And there's really strong consensus that leading with theScore brands in Canada, of course, makes tremendous sense, and we're all excited to do that. We think that much of the Barstool audience is already familiar with theScore. I know Dave and Dan, they were super excited, and you heard Dave talk about it. They've been following theScore, and they've known the Levy family and have been using their app over ESPN or any of the alternatives for a long time. And so leading with theScore brands in Canada makes a lot of sense. And of course, there'll be a lot of cross-promotion and really get an opportunity to market to that Barstool audience that we are also theScore leading in Canada. And I think in the U.S., Barstool, of course, is a super strong brand. It's going to be our lead brand in the U.S. But we do have nice optionality. We have a number of states where theScore has already launched, and they're continuing to build out their market share. I think they're live in 4 or 5 states already in the U.S. And so we've got a lot of options. I think that what's most exciting, Joe, from my perspective, and I think that John and Erika and Dave would all echo this, that we feel like we have 2 of the premier sport media brands in North America. And our business model is a bit different than everyone else's. I sort of look at what the competitors are doing in this space, and it feels to me like a rental model. And we're planning to buy and to build and to do something that's really differentiated, but it's built for the long term. We have built-in structural advantages that we've talked about before, whether it's access and now it's totally vertical tech stack, integrated media and betting capabilities and engagement, and we've got 2 amazing brands. So we'll see how this plays out. But for sure, the lead brand in Canada will be theScore and the lead brand in the U.S. will be Barstool.

Great. And then on Slide 17, you have some illustrative scenarios for market share and revenues and margins, and that's for North America as a whole. Within that, what are your underlying assumptions for the Canadian market and market share, which I would imagine, given theScore's presence, the fact that it's the hometown team and its historical presence there, would give you a higher market share than sort of that 10% top 3 that you've been targeting in North America?

If you look at Slide 18 and 19, we've estimated a North American total addressable market of $30 billion. This figure is a midpoint assessment, considering the variability in the market and factoring in various pending opportunities across U.S. states and Canadian provinces. The $30 billion includes both sports betting and iCasino. We have outlined several scenarios regarding margin improvement potential, estimating a 500 basis points increase with market shares ranging from 8% to 19%. Our target market share has consistently been around the midpoint of 13%, which we believe is attainable for us both in the U.S. and Canada. These slides provide a solid framework for understanding our position. In addition to market share and margin improvements, the overall total addressable market and our expected market share are clearly presented. This transaction brings about natural and straightforward cost synergies. Moreover, the revenue potential is exciting; our assumptions on these slides do not account for media opportunities or other verticals that we believe Penn National will explore in the future. What we are creating here extends beyond our current verticals, and its scope is much larger.

Great. And then 2 final quick ones here. There's a reference to EBITDA-accretive in year 2 after a period of investments. What level of investment are you thinking about right now once the deal closes in that first year or 2? And then you referenced in the medium term, $200 million of incremental EBITDA. How much of that comes from increased share in Canada versus the margin benefit just from bringing the tech stack in? I know you have it broken out between $90 million and $110 million. I think that $90 million includes other things beyond just the benefits of controlling the tech stack.

Yes. So from a synergy standpoint, and that's laid out pretty well I think on Slide 17, you can see the breakdown of where we see cost synergies versus revenue synergies. So it's sort of like 40% of cost synergies and 60% of revenue synergies, I think is the best way to look at it. And then can you remind me of your first question, Joe?

Just in terms of how much of that $200 million or of the $110 million of the $200 million comes from what you think the opportunity is in Canada with enhanced share with theScore in the fold?

Understood. Yes. You also inquired about the investments we plan to make over the next year, given our goal of being EBITDA-accretive by year two. We are preparing for an exciting football season this year, and for the first time, we will have real scale. Last year, during the first week of football, we were only live in zero states, managed to enter Pennsylvania in week two, and entered Michigan at the very end of last season. Football is a favorite sport at Penn and Barstool, and we anticipate that this year's scale will make a significant difference. Therefore, we plan to invest more nationally in marketing. As you may have seen, we announced last week, via Dave and Erika, our role as both title sponsor and holder of distribution and broadcast rights for the Arizona Bowl. Having scale allows us to secure such opportunities that were not previously feasible when we were active in only one state. Additionally, Dave has a golf match scheduled with Brooks Koepka in September, and we will also be the lead sponsor for the upcoming Jake Paul fight at the end of August. Importantly, these opportunities will not just feature the Barstool or theScore logos; they will be deeply integrated into our content. Our creators, including Dave and Big Cat, will enhance the events to create an entertaining experience for our audience. As we gear up for the football season, we are increasing our marketing investments to expand our market share. Over the past few months, we have focused primarily on preparing to launch in four or five more states in time for the football season, as it has been a slow sports calendar. However, we are now ready for football season at Barstool, and we believe theScore is also prepared, with expectations for Ontario to go live around December, January, or February. Significant investments will be made in Ontario as theScore prepares for launch, and we are committed to enhancing our products and capabilities both in the U.S. and in Canada. Despite these investments, we remain confident in our structural advantages and anticipate breakeven for the combination of Penn Interactive and theScore in 2022. Following that, we expect to see a notable increase in EBITDA in 2023 and beyond.

Our next question comes from Bernie McTernan from Needham & Company.

Great. John and Jay, congrats on the deal. Just a big-picture question for me. There's a lot of moving pieces with Barstool and Penn Media assets. It's early days, but as you mentioned, media right to the Arizona Bowl, partnerships with influencers and athletes like Logan Paul, all the content that Dave and team are putting out with Barstool, sports betting apps leading media app now in sports. I'm sure there's going to be more added to the mix, but can you just take some time and just show where your focus and what your vision is for kind of what Barstool and Penn will look like as sports betting and sports media continue to converge?

Well, I can tell you that what we are experiencing is a significant evolution. The initiatives we announced last week were not even being discussed two months ago. This presents a fantastic opportunity for our company, especially with the esteemed brands of Barstool and theScore. The potential is truly limitless. From my perspective, Barstool stands out as the premier top-of-funnel brand in the U.S. regarding sports, media, and entertainment. They have an exceptional ability to engage audiences and attract customers. The expertise in this area lies with Dave, Erika, Big Cat, and the Barstool team. Similarly, theScore excels at customer acquisition and is even stronger in engagement and retention by providing personalized content. I've been using theScore app for years as a Yankee fan, and their real-time, customized experience is remarkable. Once users access their app through a headline or highlight, the experience is seamless; they can place bets directly through theScore bet. This integration of media and betting is something we believe we can execute better than anyone else because we control the entire ecosystem and experience. When you combine Barstool's acquisition capabilities and brand strength—continuously growing in sports, media, and entertainment—along with theScore's strengths, we are confident that we are building a best-in-class platform that is unique and can't be replicated.

Got it. And then at the time of the Barstool acquisition, you went over a lot of details on the Barstool demographics of the core users or the stoolies. Any sense in terms of what the overlap is between the core users of theScore and Barstool?

Yes. I'm happy, John, to have you talk a little bit more about the demographics of theScore. And I would tell you, from my perspective, we know that there's some overlap, but we also know this is largely incremental, especially when you're talking about their user base in Canada. But go ahead, John.

Absolutely. Jay accurately summarized our efforts. We have been developing our brand in Canada and across North America for many years, with about two-thirds of our users coming from the United States, which has the most engaged audience among digital sports media companies. A key point Jay mentioned is the retention and engagement of our users on our app. We have personalized insights that allow us to monitor user activity almost in real-time. There are days when users are actively engaging with the app, mainly due to sports betting. The experience in Canada mirrors this, as we are one of the leading mobile sports companies there and rank high throughout North America. Our presence on social platforms is significant. There will undoubtedly be some overlap, but the opportunity to collaborate with Penn and Barstool is immense. Our approach to sports is authentic and focused on connecting with sports fans, which is slightly different yet complementary. We can work together in various ways to deepen our relationship. One reason Penn was excited about theScore is the technology we've developed that gives them extensive control for innovative promotions and marketing campaigns. The immediacy of these ideas is crucial, as sports fans expect quick responses. Additionally, nearly half of all wagering now occurs during games, and having the right technology is essential to maintain engagement without interruptions. Overall, as Jay mentioned, Penn's investment ticks all the boxes, reflecting a shared vision and culture between us. Our initial partnership over two years ago laid the foundation, and now we have the resources to accelerate our initiatives across North America, primarily in Canada. This truly is a unique offering.

Our next question comes from the line of Ryan Sigdahl with Craig-Hallum Group.

Congrats on the results and the transaction announced.

Thanks, Ryan.

You've mentioned a lot about the integration of technology. What is your perspective on the development of the in-house managed risk and trading service platform? Additionally, how do you view the situation regarding content? Does this complete all aspects from a technology standpoint, or is there still more to accomplish?

No, this closes it out. It's really exciting, and I would encourage people in New Jersey or any of the states where theScore is live to explore their player account management platform. They will be transitioning over to it. John, could you elaborate on the timing of additional conversions happening in the coming months, particularly regarding managed trading services? Before I hand it over to John, I want to emphasize that we've known the Levies for years. I've always been impressed by their technology-driven approach. They've been digital-first and technology-first. Their headquarters is in Toronto, the tech capital of Canada, presenting a significant opportunity for us as we consider the future. Competing for tech talent in the U.S. is challenging, and it's similar in Canada. However, Toronto and theScore stand out as a leading brand in sports media and soon in sports betting. Our ability to enhance our team in Philadelphia with the team in Toronto and expand in both cities presents a vast opportunity. John, I'll turn it over to you to discuss the timing around managed trading services and the new features you will be rolling out from a market perspective.

Absolutely. It's fascinating how people often can't believe how simple and effective our app is, especially since everyone uses it. Achieving the status of the most popular sports app in Canada and ranking second or third in the U.S. required a tremendous amount of effort. It may appear straightforward, but there's a lot of work behind the scenes, much like a duck gliding across water while paddling vigorously below. When the opportunity for betting arose after PASPA was repealed in the U.S., we made a bold decision to not just lease our engaged user base but to take charge as a digital sports media company. This wasn't an easy choice, especially considering the revenue opportunities we turned down for access to our users. Instead, we decided to prioritize the end user and make their experiences seamless, which meant building our own technology over the past 12 to 24 months—a process that cannot be rushed but is ultimately the right approach. During this time, we took on more responsibility and, as Jay mentioned, in our last quarter, we announced that we’ve essentially taken full control of our operations. The final piece is our risk and trading team, which we are in the process of bringing in-house after originally partnering with another company for our entry into gaming, which functions from the U.S. We expect to have all of that in-house within the next nine to twelve months, possibly even sooner. Currently, about 90% of our capabilities are already internal, allowing for features like a complete player account management system and our new promotion engine. This not only provides maximum flexibility for creativity but also allows for near-instant execution on promotions, avoiding the delays often seen with third-party services. This is one reason, alongside our love for the brand and our users, that there is excitement surrounding what we are building. We are approaching things differently than traditional sports media and gaming companies, and this is a transformative opportunity. We are committed to cultivating a strong relationship with Penn and leveraging their scale to expand significantly in Canada and across North America, with capabilities unmatched by anyone else in the industry.

The one thing I would add to John's comments is that technology is a really interesting thing because what is the latest and greatest today is extremely outdated 2 or 3 years from now. And so as you look at the different tech stack options that are in the market today, there are a lot of really good ones, but we're going to be on one that was built for the North American market and is going to be the most state-of-the-art, the freshest, the newest, the greatest, the most features out there. And we think that's going to allow us to leapfrog the competition as we go live in Canada very soon, and then bring it back to the U.S., which we anticipate happening in 2023.

And Jay, this is Dave. Just to give people an idea of how it could potentially work. We, at Barstool, have not had the chance, as John mentioned, to create specific offerings for ourselves because we've been collaborating with companies that cater to multiple users. However, we discussed the Arizona Bowl, which we will fully control. We have the broadcast rights and everything else is in our hands. This allows us to create unique bets and highlight them on theScore, targeting the audience interested in gambling, as well as our own interests. We will provide offerings and coverage of the game that no one else can, along with the ability to craft bets we know will be central to the game. The Arizona Bowl is just the start. Many people wonder why Barstool is involved with the Arizona Bowl. Since then, we have been approached by other major sports leagues interested in granting us rights. We will control the betting experience and can offer things that others won’t see coming and cannot quickly respond to. This provides us with a complete ecosystem from the start of the game, through the in-game betting, and directing people towards unique betting opportunities related to the game.

Our next question comes from the line of Shaun Kelley with Bank of America.

Congrats to John and Jay and the Levy family. I just wanted to start, Jay, maybe to clarify a point I think you snuck in there. As we get into technology and there's been a lot of questions about the importance of owning the vertical tech stack here, can you just talk about the timing of integrations here? I think you snuck in the 2023 number, but can you clarify that a little bit when you might over off of existing platforms or technologies? And do you think that is disruptive at all and/or how important is it to get that done quickly or in the right way?

Sure. Happy to, Shaun. And again, we're still finalizing the plan. But here's the way we're thinking about it currently, which I think is about as bulletproof as it gets, which is that theScore Bet is going to be going live in Ontario, whenever Ontario is ready to go, call it, December, January, already on their own PAM. John had said on his last earnings call with Benjie that they plan to be live on their own managed trading services platform sometime spring, summer of 2022, so call it in less than a year. And it gives us an amazing opportunity to make sure all of the technology is working as planned in a really, really important market and what we believe will be under high stress, high volume because of how strong theScore brand is in Canada. And at the time that we believe it's ready to bring back to the U.S. and convert our tech stack over, that's when we're going to do it. We think that will probably happen in 2023. Is it the beginning of '23 or middle '23? Not sure yet, but I would say we're highly confident it will be before football season of '23. But we want to make sure that we get this all right first, and we get it right in a market that is really important with high volume and high market share and Canada, Ontario is the perfect opportunity for us to do that. So that's the way we're thinking about it today, Shaun. And we'll obviously continue to update everybody on the call as we have more information. I think we all have a pretty good idea given the DraftKings SBTech conversion, I think, took around 18 months. And so it feels like that's probably about the right time frame for us as well, 18 to 24 months before we bring it back to the U.S. But with all of that said, as Dave just mentioned and John mentioned earlier, there's so much we can do that's complementary between now and then mainly as it relates to promotions and exclusive betting options and things of that nature. We don't have to wait until all of us are on the same tech stack to start executing on that now.

Great. And then as my follow-up, between here and 2023 are 2 relatively important and likely competitive sports seasons. So just wanted to get your thoughts heading into the fall around, just where we sit as it relates to both your technology offering and the national scale side of what you wanted to do on the marketing front. I know you have talked over the last 6 months of getting more aggressive on regional and more pan-regional promotions. But obviously, there's some very large names coming with very, very big wallets into the fall that are also scaling really rapidly. So help us sort of outline both the competitive environment and how your competitive thinking is evolving.

Yes, I'm happy to share. One of my proudest achievements is that we transitioned from not having a sports betting app 2.5 years ago to launching our own in September of last year in Pennsylvania. We've successfully scaled this across four states where we are currently live. Our iOS app boasts a rating of 4.7 out of 5, positioning us among the top competitors in the market, alongside DK, FanDuel, and BetMGM. Our product experience has significantly improved, and we are no longer just catching up. This year, as we approach the football season, the enhancements we have made in sports betting and online casino are remarkable compared to last year. We are confident that we will remain competitive. I want to acknowledge Kambi and White Hat Gaming for their hard work over the past year in providing us with new features and an improved user interface as we head into the football season. This year, we will introduce same-game parlays, a major betting opportunity for the NFL, as well as a shareable bet slip feature that allows users to easily post their bets on social media, streamlining the process. We have many new capabilities this year that were not available last year. Regarding our online casino, we launched quickly to be operational in Michigan alongside others, although we initially lacked a comprehensive range of content. This fall, we will offer a much larger selection of online casino games, including Barstool-themed games for Blackjack and slots developed at our HitPoint Studio. We will also launch custom Barstool-themed live dealer games in New Jersey alongside our iCasino launch in the coming weeks. We have many exciting product developments lined up, which is why we feel confident in being more aggressive in promoting Barstool this year and investing in efforts we didn't have the capacity for last year. We are participating in sponsorships for events with national appeal, and we are enabling our partners at Barstool to engage in marketing initiatives like the Arizona Bowl that were not possible last year. We have more plans in the works that I can’t disclose just yet, but we are focused on expanding our reach beyond what we accomplished in 2020.

Our next question comes from the line of Ben Chaiken with Credit Suisse.

I think we've touched on this, but I'll try to frame it differently. TheScore has a very high-quality news analysis, a robust social media presence, and a strong OSB app. I know Dave and Jay have been using it for years, and I'm in a similar situation. It still feels early, but I see a contrast between the quality of theScore product, which is quite impressive, and the market share achieved so far in the U.S. How do you plan to leverage the existing product in the U.S. to increase OSB iGaming market share? Are you considering combining theScore product with Barstool to enhance the Penn Barstool offerings in the U.S.? Or is the approach more about investing in marketing to build recognition for Score in the U.S.? The technology and vertical integration certainly seem relevant when viewed from a B2C product perspective.

Yes, that makes complete sense, Ben. John, I don't want to speak for you, but I know we're on the same page regarding our launch in the U.S. Both Penn, with Barstool Sportsbook, and theScore have spent very little on paid marketing. This approach was intentional; we wanted to let Barstool operate freely to validate our model, which has yielded great results. Additionally, we needed to ensure we had the right product and capabilities in place. John and the Levy family have been diligent about getting the product right before increasing our marketing efforts to gain market share. We're not worried about our current market share; we're focused on where it will go. I see significant potential in the power of Barstool and the cross-promotion opportunities they provide, especially since Dave and Dan appreciate theScore technology and application. Being part of the same family enhances theScore's visibility in the U.S., presenting a major opportunity. As for our strategy in the U.S., we have time to decide whether to operate under two brands for sports betting or one. I anticipate seeing improved market share results from both theScore Bet and Barstool Sportsbook as we approach football season this year, given our enhanced product and stronger marketing efforts compared to 2020. John, do you have anything to add?

Yes, I believe Jay's perspective is accurate. Our strategies have differed from the typical approach of rapidly acquiring market share and simply hoping it remains viable. From the beginning, we've emphasized product development. For instance, in the U.S., we aim to achieve mid-single-digit to low double-digit market penetrations, and we are making steady progress towards that goal based on our history and current position. In Canada, the situation is quite different due to the strong brand recognition we have. We've been established for a long time, and our audiences have grown; many who watched our network in Canada years ago are now adults engaged in sports betting. When comparing our app's audience to that of other media companies in Canada, we stand out significantly. Even with the entry of major U.S. brands into Canada, it's worth noting that Ontario is comparable to the fifth-largest state in the U.S. While we are also interested in expanding into states like Texas, Florida, and New York, we have a significant opportunity right here with the potential to be the largest sports betting jurisdiction in North America by the end of 2021. This presents a thrilling opportunity for us. The reason Penn and Score collaborate so effectively is due to our sensible approach to market engagement. The innovative methods Barstool is exploring to present sports events illustrate that we are moving away from traditional ways of consuming sports content. We have developed our business based on understanding how consumers interact with sports content today. This shift is crucial as teams and leagues seek new partnerships centered around audience engagement since fan consumption patterns have changed dramatically. Starting from a digital viewpoint, as Dave mentioned regarding the bowl game, is vital. We should focus on understanding how consumers watch or attend games and what engages them before developing the related products. Jay noted that Penn has now met all the necessary criteria for success. Our initial partnership with Jay began over two years ago with the access deal, which established our presence in 11 states in the U.S. Even then, we recognized a shared vision and culture. Now, with the additional resources to expand our efforts across North America, especially in Canada, our offering is truly distinctive.

Our next question comes from the line of Chad Beynon with Macquarie.

Jay, John, congrats on a great strategic deal and a cultural fit. One question, just given your improved customer reach now and improved margin profile, does this position you to make a more compelling pitch in states or provinces like what we're seeing in New York that maybe before didn't make as much sense, but given this different business model that you have, can you get into these markets or make a pitch versus some of the bigger companies that are spending a lot more money?

Yes, that’s a great question, Chad. I believe what we presented as a company yesterday has only strengthened today. In some states, there's open competition, and New York is one of them. They will select a few platforms alongside several operators, and we feel what we offer and our strategy for potential partnerships in New York will be quite unique. We have opportunities to deliver experiences that others cannot, thanks to our media integration, particularly with Barstool Sportsbook and soon, theScore. So yes, I believe we have a fantastic opportunity there. While I don't want to share too much about our strategy in New York, it's important to note that despite the high proposed tax rate, we have the capability to succeed in that type of environment.

Great. And maybe one follow-up. Jay, how are you thinking about the ever-changing lifetime value of customers, particularly now that you have a compelling iGaming product in studio with HitPoint? I know that's changed over the past couple of months. Also with Score's users, should we assume that maybe the lifetime value of their customers, given they're slightly older, slightly wealthier and a little bit more engaged, could be higher than what we have been assuming for a typical customer?

Thank you for the question, Chad. Here's how we view lifetime value (LTV). There are many methods for calculating LTV. Focused on Barstool, that brand stands out as the most relevant sports media and entertainment option for individuals in their late teens to mid-30s. The average age of users on the Barstool Sportsbook is in their late 20s, which is unmatched in our sector. The loyalty to Barstool is incredibly high. I believe LTV calculations can be misleading. If you win a customer through advertising and promotions, it's flawed to assume that you will retain that customer indefinitely. We can calculate LTV more accurately because of our strong retention and the fact that our audience is younger. TheScore enhances this through strong engagement and retention, particularly in live media and betting experiences, along with tailored offerings. With a broader funnel now, we'll be better at keeping customers in our ecosystem once they join. TheScore elevates this further, making LTV a significant metric for us, and we’ll see how it evolves for the industry over time. Rita, that wraps up our call. I appreciate everyone for participating today and am excited to share this news. Thanks to Erika, Dave, and John for joining. We're thrilled about our progress and just getting started, so we look forward to our next earnings call.

Thank you. That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.