PENN Entertainment, Inc. Q1 FY2022 Earnings Call

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. It is now my pleasure to turn the conference over to Joe Jaffoni, Investor Relations. Please, go ahead.

Thank you, Tina, and good morning, everyone, and thank you for joining Penn National Gaming's 2022 First Quarter Conference Call. We'll get to management's presentations 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 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 announcement 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 the 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 the company's CEO, Jay Snowden. Jay, please go ahead.

Thanks, Joe. Good morning, everyone. Here with me in Wyomissing this morning is our CFO, Felicia Hendrix; and our Head of Operations, Todd George, as well as several other members of our executive team, should you have any questions for them. We did provide a link to the investor presentation in our earnings release. So I'd encourage you to either print that out or pull it up and maybe refer to it while we're talking, because we'll speak to a few of the slides in the investor deck. We did talk on our last earnings call about what sets Penn apart from the competition and what our strategic objectives and expectations are for the first quarter, in terms of our core business, our interactive segment, investing in new technology and the launch of theScore Bet in Ontario. And I'm proud to say our corporate property and interactive teams have delivered on all fronts in the first quarter. And I want to begin this morning by thanking our team members at all levels of the organization for their continued hard work and dedication to delivering best-in-class products and services to our guests. And we don't always do this, but I'm going to take a few minutes to call out a few of our top performers and some highlights across the company. I'll start in Louisiana, where our properties led by Harold Rowland, Barry Regula, Kim Ginn, and Dan Kennedy, continue to post robust results in what are some of the most competitive markets in the U.S. Their team's focus on profitable revenue drivers, guest service enhancements, and a more efficient cost structure has resulted in market share gains across the board and margins that are the best in all the property's history. I couldn't be more proud of all of our team members in the state of Louisiana. Two of our properties under competitive pressure due to new build-outs and expansions in Black Hawk, Colorado and East Chicago, Indiana led by Sean Demeule and Ryan Coppola have quickly reimagined the way in which we run the business and compete. These properties are both pacing to deliver EBITDAR in the same range, if not higher, than what they generated in 2019 despite the new competition, which is not an easy feat. So hats off to them as well. And in Las Vegas, Hussain Mahrous and our creative team at The M Resort are now generating more EBITDA per quarter than what the property did annually just a few years ago. And with the growing population in that part of the Las Vegas Valley, we expect to see those results only get stronger in the coming years. In St. Louis, Mike Jerlecki and Steve Peate and their teams are finally again able to compete on a level playing field after the elimination of COVID mandates that were much more restrictive for our properties operating in a different county versus the nearby competition and are back to profitably growing market share and breaking EBITDA records along the way. Our teams in Central Pennsylvania, led by Dan Ihm, Ruben Warren, and Marc Guastella have successfully opened two new properties in the last year and have done a terrific job growing the overall database for the company and ensuring we are looking at all three businesses and our results there on an incremental basis. Cannibalization in Central Pennsylvania has been minimal and early combined results have been very encouraging. And then lastly, our Interactive business is led by John Kaplowitz and the Levy family in Toronto continues to demonstrate that there is a different way to approach the online vertical in North America. Disciplined organic marketing, omnichannel cross-sell, great products and owning our media strategy with our friends at Barstool Sportsbook and theScore has led to growth in our net gaming revenue market share results in the first quarter. We believe our differentiated approach will benefit us going forward as the relationships we have and continue to build with our customers are based on delivering great products and customer service, media integration, branded and experiential events and promotions, and a direct connection to our users via live streams and social media engagement with our content creators, led by Dave Portnoy and Big Cat. We don't lead with discounts. These structural advantages are already proving themselves out in real-time and will deliver what we believe will be best-in-class margins over the long term. I'm super fortunate to be working alongside so many talented people every day, and we collectively couldn't be more excited about our future prospects. Now, transitioning to our first quarter results. You'll see on slide 5, we achieved record first quarter revenues of $1.56 billion and adjusted EBITDAR of just under $495 million, which grew 23% and 11% respectively over 2021 levels, driven primarily by strong property level performance across all segments, including the older core demographic who are reengaging through both increased visitation levels and spend per visit. We're also encouraged by the ongoing visitation of our younger demographic. We remain focused on reimagining our properties and offerings to enhance the entertainment appeal to the steadily growing segment of customers. Now turning to slide 8. During the quarter, our industry-leading mychoice customer database grew across all worth segments, and we also added 355,000 new members to our ecosystem. Life to date, we have increased our database by over 1 million from digital registrations alone for the mychoice app, providing valuable cross-sell opportunities. More specifically, we've seen 28% year-over-year growth in our VIP segment and 11% in our core segments, driven by our new online and retail Sportsbook offerings in our recently opened Hollywood casino properties in New York and Morgantown, Pennsylvania. On slide 9, you'll see we're starting to realize early benefits from our 3Cs, which, as a reminder, is cashless, cardless, and contactless technology that powers our mywallet experience. We have exceeded 53,000 mywallet downloads and more than $25 million in deposits. 3Cs technology is now live at nine properties in three states and has increased the value of our guests in terms of visitation frequency and time on the device. We plan to introduce the 3Cs in an additional 14 properties in eight states over the next two quarters, of course, pending regulatory approvals. As noted on slide 10, our Interactive segment grew revenues year-over-year by 94%, exclusive of tax reimbursements from our third-party skin partners, led by strong growth in online sports betting, iCasino, and media. We remain focused on profitable growth with our integrated media retail operations, helping to deliver the lowest customer acquisition costs in the industry. In addition, during the quarter, we introduced our market-leading retail Barstool Sportsbook at Penn National Race Course in Pennsylvania and at L'Auberge Lake Charles in Louisiana, and we plan to roll out additional Barstool Sportsbook at six more properties throughout the remainder of the year. Slide 12 shows the benefits of our integrated retail Barstool Sportsbook and gaming areas, which are helping to maximize cross-sell opportunities on table game play, particularly in the younger segments. Comparing the first quarter of this year to the first quarter of 2019, we've seen a 53% increase in Table Theo for ages 21 to 44 at our properties with retail sportsbooks. On slide 13, you'll see theScore Bet in Louisiana has been a great story for us. And our market-leading properties and partners at Barstool Sports are a huge reason why. Dave and Big Cat hosted a Super Bowl Watch Party at L'Auberge Lake Charles, and Louisiana led by Ben Mintz and Megan Making Money embarked on a show around the state to help promote our Barstool Sportsbook app. This powerful combination of Barstool talent and our best-in-class retail Sportsbook offerings underscores the benefits of our differentiated strategy. Notably, we secured more than 6,000 pre-registrations from our casino database and generated almost 11% NGR with limited external marketing spend. Our Interactive segment had an adjusted EBITDA loss of $10 million this quarter. Later this month, we expect to make a second $12.5 million installment towards the California sports betting initiative, while not originally contemplated in our Interactive segment guidance for 2022. We remain on track, however, to generate an EBITDA loss of approximately $50 million from this segment in 2022 as we continue to scale operations and infrastructure. Following our first quarter results, we anticipate the most significant losses will occur in the second and third quarters as we continue to ramp in our new markets and prepare our products and tech stack for football season. The fourth quarter will likely be closer to breakeven. By 2023, we expect to be generating positive adjusted EBITDA as we start to realize the benefits of our wholly owned tech stack. In addition to the successful launch of our Barstool Sportsbook app in Louisiana on January 28, which became our 12th state, one of the top highlights of the quarter is undoubtedly the launch of theScore mobile app in Ontario on April 4. As highlighted on slide 18, while still early, theScore Bet's performance thus far in Ontario has exceeded our expectations, due in large part to theScore's incredible brand recognition and media footprint as well as the support from Barstool Sports in the popular team from Spittin Chiclets, the number one Hockey Podcast in Canada. As a reminder, with a population of 15 million people, Ontario would rank as the fifth largest state in the U.S. on a population basis. Since launch, theScore Bet ranked as Canada's number one most downloaded sports betting app and the number one rated betting app in the iOS. Early results reflect strong cross-sell opportunities, currently 79% of all bettors in Ontario are theScore Media app users, and 50% of theScore's Sportsbook users have wagered on the iCasino products. Just after launch, theScore announced an exclusive 10-year gaming partnership with the Toronto Blue Jays. This deal grants theScore Bet national marketing rights that extend across all gaming categories, including sports betting, casino, online casino, and fantasy sports. The Blue Jays and theScore Bet also plan to create a branded premium 365 days a year flagship sports bar and restaurant at the Rogers Center that will serve as an entertainment hub and destination for fans. TheScore Bet app is built on theScore's state-of-the-art player account management system and bonus engine, which provides highly customized features and seamless integration into theScore media app. In the third quarter, we expect to transition as planned, theScore Bet in Ontario to theScore's proprietary risk and trading platform as well, which will allow us to significantly bolster the product's features and capabilities, including expanded betting markets and parlay options. Meanwhile, we remain on track to transition the Barstool Sportsbook to theScore's PAM and trading platform in the third quarter of 2023, as previously communicated, which will provide meaningful cost and revenue synergy opportunities. We are excited to have two very strong sports brands in our portfolio in theScore and Barstool Sports. As we mentioned on previous calls, we plan to lead with theScore Bet in Canada given its strong brand equity there, while focusing on the Barstool Sportsbook brand in the U.S. We feel the best way to maximize the value of both brands in the U.S. is to fully integrate the Barstool Sportsbook app into theScore media app, which will occur during the second half of this year. As noted on slide 14, the Barstool Sportsbook app has gained market share in the three states that report net gaming revenue by operator despite our spending a fraction of what our competitors do on promotional and paid media. We continue to believe NGR is a more relevant measure of performance as opposed to handle market share, which doesn't mean as much when revenues are largely diluted by marketing and promotional expenses. And while our popular Barstool Sportsbook app is tied for first on the Apple iOS store among sports betting apps with an average customer rating of 4.8 on a scale of five, we are continuing to add new features to drive further adoption. You'll see on slide 15, we introduced MLB Same Game Parlay, Parlay Plus option and will launch new withdrawal methods, including Mastercard and Apple Pay in the second quarter of this year. Notably, approximately 90% of our withdrawals are now instant, which we're very proud of. Finally, we expect to add a search function and the ability to use mycash as currency later this summer. Meanwhile, our Barstool-branded iCasino business continues to grow as we improve our products, add new games and leverage our casino database and creative marketing by Barstool Sports. For example, Barstool recently launched an iCasino-focused Twitch channel called the Coin Boys, which already ranks in the top 1% of all Twitch programming with an average of 5,000 viewers per stream and a staggering average view time of just under two hours. Flipping ahead to slide 17, we're also excited about the initial slate of games from our Penn Game Studios, which are drawing rave reviews and have contributed nearly 30% of Barstool Casino's online handle across Michigan, New Jersey, and West Virginia. We have high expectations for our first batch of games in Pennsylvania, which launched last week. On the media front, we continue to build momentum as theScore grew revenue 42% year-over-year in the first quarter and continues to garner high levels of engagement. Barstool has also continued to expand its audience and reach while pursuing new outside-the-box growth opportunities. On March 18, the second stand-alone Barstool Sports bar opened in Philly to very strong demand, and two additional locations are under development in major metropolitan locations. In addition, in April, Franking and Trent from the Barstool Golf podcast attended the PGA Zurich Classic, providing video commentary, which garnered four million views and over 100,000 engagements. On May 7, Barstool will broadcast alternative commentary to the Canelo Fight on DAZN, representing a further extension of the Barstool brand into live sporting events. Looking forward, we believe there is significant upside for the media business, and we'll talk a lot more about that in upcoming quarters as we begin to realize the benefits of cross-promotion with Barstool Sports and additional monetization opportunities with both Barstool and theScore. And with that, I'll turn it over to Felicia.

Thanks, Jay. As Jay mentioned earlier, we reported record first quarter revenues of $1.56 billion and adjusted EBITDAR of $494.7 million, which grew 23% and 11% year-over-year, respectively. I'm happy to report the robust demand that Jay described in the first quarter has continued quarter to date. Overall, the competitive environment has largely remained stable. And further, we continue to work on mitigating inflationary pressures by adjusting our offerings and pricing strategies to keep costs in line. As we look toward the remainder of the year and take note of our growing mychoice database, the tangible benefits of our technology investments at our retail properties and our momentum in our Interactive segment, we are increasing our prior 2022 revenue guidance range to $6.15 billion to $6.55 billion and our EBITDAR to a range of $1.875 billion to $2 billion. We continue to believe that our property level EBITDA margins are sustainable at 37%. Now looking at our first quarter 2022 cash expenses. In the first quarter, corporate expense, inclusive of cash settled stock-based awards was $24.7 million. Our cash rent payments to our REIT landlords were $229.3 million. Cash interest on traditional debt was $30.8 million. Cash taxes were $1 million and total CapEx was $65.6 million, of which $54.6 million was a combination of maintenance and return-generating projects, including the three Cs and our Barstool retail sportsbook. The balance was project CapEx associated with our new Hollywood York and Morgantown projects in Pennsylvania. As of March 31, 2022, we had 183.4 million fully diluted shares outstanding. Regarding certain 2022 modeling metrics for your free cash flow forecast, we expect 2022 corporate expense of $98.8 million, inclusive of our cash settled stock-based awards. Total CapEx remains roughly $300 million, of which $100 million is return-generating discretionary projects. We forecast 2022 cash interest expense of $98.3 million. Cash taxes will be $110 million net of refunds received, and for the full year, fully diluted shares are expected to be 183.4 million shares, which is before any incremental share repurchases. Now talking about share repurchases, we were quite active in the quarter under our share repurchase authorization given our view that the market was undervaluing our shares. We repurchased 3.8 million shares of our common stock in open market transactions for $175.1 million at an average price of $46.04 per share. There is $574.9 million remaining under our $750 million authorization. As I mentioned on our fourth-quarter earnings call, our balance sheet gives us the flexibility to be opportunistic in a dynamic marketplace and to return capital to shareholders. We continue to see a dislocation between where we value our shares and where they are currently trading, and we expect to allocate capital accordingly if this dislocation persists. Now I'd like to call your attention back to slide 7 of our earnings deck. We remain very proud of our balance sheet, which provides us with a great deal of flexibility. The statistics on the page speak for themselves. And on May 3, we entered into a second amended and restated credit agreement with our various lenders, which provides for a $1 billion revolving credit facility undrawn at close and upsized from our prior $700 million revolver and a five-year $550 million term loan A facility and a seven-year $1 billion term loan B facility. The proceeds from the credit facilities were used to repay the existing term loan A facility and term loan B1 facility balances. The transaction was leverage neutral and strengthens our balance sheet even further as pro forma for the refinancing, our liquidity is $2.78 billion, and our earliest maturity is now 2026. And with that, I will turn it back to Jay.

Thanks, Felicia. On April 26th, in conjunction with the filing of our proxy, we published our 2021 corporate social responsibility report, which highlights the many ways Penn is continuing to live up to its commitment to being a good corporate citizen. I'm really proud of the report, which shines a spotlight on the tireless efforts of our team members at all levels of our organization to support those in need in our communities to further our diversity, equity, and inclusion efforts and to help preserve our finite natural resources. Some notable examples include the launch of a $4 million STEM scholarship fund and internship program at historically black colleges and universities in states where we operate. We also contributed more than $7 million to help fund COVID-19 and hurricane relief efforts, as well as supporting worthwhile charities and civic organizations around the country with thousands of hours of volunteer work by our team members in addition to our financial donations. Most recently, on March 23rd, members of my executive team and I hosted Louisiana Governor, John Bel Edwards and other local and state dignitaries at the Annual Metanoia Gala at our L'Auberge Casino & Hotel in Baton Rouge to help raise funds to support adolescent victims of human trafficking. It was a very emotional evening, having visited this group's one-of-a-kind shelter for girls aged 11 to 18 years who are provided care for their mental, physical, and spiritual well-being as well as instruction in academic, life skills, and job training. We’re super proud to support this organization’s critically important mission today and going forward. At Penn, we also spent the month of March celebrating women’s history, which included a women-behind-the-Score Bet virtual panel to recognize the critical role our female team members played in the development of theScore Bet app. I look forward to continuing to update you on our ongoing ESG efforts throughout the year. And with that, Tina will open it up to questions.

Thank you. The first question comes from Joe Greff of JPMorgan. Please go ahead.

Good morning, everybody. I have a two-part question on Interactive, and one on the land-based casino side. On Barstool iCasino, can you talk about from here the plan to launch new games and titles for the rest of the year? And then how that rate of growth in new games and titles translates into rate of growth in iCasino GGR, should that be moving in similar trajectories? And then you've given the slide deck, thank you for doing it, what the GGR for iCasino has been. Can you talk about how that translates into NGR, and then I'm assuming that's EBITDA positive right now that segment, can you talk about the margins and maybe the scale benefits and the impact to margins as you introduce new titles and game introductions from here?

Do you want to throw out the land-based question also? And then we'll discuss all those?

Sure. I guess we repeat them. I won't remember them. But obviously one casino operator this week talked about seeing slight softness in that lower-end consumer on the land-based side. Can you talk about what you're seeing at the lower end of your database and for that matter, any degradation and any other segments that might be worth calling out? I know you have a slide deck, with a lot of data on the VIP and that core customer, which looks like it's pretty stable and not being impacted by whatever macro factor that's out there. Thank you.

Yeah. Thanks, Joe. Todd, do you want to tackle the last question first, and then I'll hit the first couple?

Sure. Thanks, Jay, and thanks, Joe. We've really dug into this, understanding everything that's going on with the economy and the world right now. But I'm very happy to say that we've seen very little fall off in that lower-end segment. And frankly, when we really started to dig into the numbers, it's a combination of a couple of things. Some of those consumers are actually moving up into the mid-core level customers, maybe with a little bit reduced frequency, but higher value when they come in. And then some of those, the way we structure our marketing and program incentives, some of those are frankly moving into an unrated place segment. So, when we look at this and again as you know, not really a high profitability segment to begin with. So we're very strategic in the way we reinvest in this group. And what we've seen is that they've either moved up and to the right or frankly, into unrated, where they're actually more profitable for us.

Great. Thanks, Todd. The first couple questions on interactive, Joe, I'll provide some detail. We haven't provided all the detail publicly that you've asked for. We will in time. Obviously, we're still in the very early days in this nascent business, but on the Barstool iCasino side, we do have a slide, as you mentioned, that our Penn Game Studios, we continue to put out really good content. And we're now up to 30% of the handle in iCasino in the states where we've launched those games, which is West Virginia, Michigan, and New Jersey. And so, when we first launched, obviously, we were in the single digits. I think last call we mentioned it was up to 20%. Now it's up to 30%. We did just launch that entire batch of games that's been live in the three states. We just launched those in Pennsylvania on the Barstool iCasino offering as well, a couple of days ago. So we would expect the percentage of play on our games to continue to grow in Pennsylvania. Now that those games are in market, we also have a slide that shows you what the momentum on a sequential basis looks like from a GGR perspective in iCasino will continue to move up and to the right. We're not satisfied, obviously, with where we are in online casino. Most of our energy and focus and resources for the first year and change that we've been live has been toward making sure that we had online sports betting products that were going to be competitive. I think we've definitely delivered on that, both here in the U.S. as well as in Canada. And you should expect to see our online casino products continue to improve. The number of games in the library will continue to grow both from well-known third-party providers as well as our own games. And I think you're going to see that happen in all the states that we're live in. We’ve really prioritized online sports betting first because it's just you have so much more scale, legally so many more states, and really serve as such a great acquisition tool for online casino as well as for our retail casinos. And Todd highlighted in our earnings release, as well as in the slide just how rapidly we've been growing our database and then there are all these great omnichannel cross-sell opportunities. So online sports betting for us is so valuable, not just because of the standalone P&L, which we feel good about is going to get better in time as we have more scale and get better and also owning our own technology, but you think about the cross-sell to online casino and the cross-sell to our brick-and-mortar casinos and elsewhere, is very exciting. Last part of your question was around GGR to NGR, and what I would tell you is that the correlation between GGR and NGR is very tight in online casino. There's very little promotion and discounting that goes on there. It's not like the delta you see in the states that report GGR and NGR on the sports betting side, where there’s more of a delta, and it's very volatile. You don't see that on the online casino side. We typically don't have to discount much to convert GGR to NGR and online casino.

Great. Thank you. And then one final question regarding the Ontario launch. You have a bunch of metrics down there regarding downloads and registrations and average daily active users. Can you actually talk a little bit maybe in relation to Pennsylvania and Michigan, handle and GGR performance? And do you think Ontario's development or growth as a market is impacted by the transition from a gray market to a legitimate developed market?

Yes, there's a lot to discuss regarding Ontario, and we feel very positive about it. It's still early, but we shared some statistics, and you should consider that the results look very promising compared to other states where we've launched, similar to the daily active users we shared. One key difference in Ontario compared to the U.S. is that we had a couple of weeks for pre-registration. Our partnerships with Barstool Sports and The Score helped us achieve significant downloads and registrations before launching on April 4. This strategy worked well for us, unlike our approach in the U.S. When we launched on April 4, we were thrilled with the volume of downloads, registrations, and first-time deposits. What's interesting in Canada is that our strategy differs from the U.S. In the U.S., we heavily relied on our Barstool partners who create a large influx of users when they announce a launch, resulting in a quick surge initially, with a slight decline thereafter. However, in Ontario, since our launch day on April 4, we've observed a consistent and substantial number of first-time deposits and downloads every day, well beyond what we saw on the first day. We are continuously attracting new users who download the app, make deposits, and place bets daily, with low churn rates. We're very satisfied with the products we have. We're already live with our player account management and bonus engine, and we'll complete the rest of the Managed Trading Services platform this summer, ahead of football season. Everything is progressing well, and we'll provide more details about Ontario in the future. I prefer not to discuss specific numbers since we're unsure of our competitors' performances at this time. Regarding the transition from a gray market, we weren't quite sure what to expect, given that people have been engaging with gray market operators and apps in Canada for many years. Nevertheless, we've been pleased with our ability to quickly convert users from the media app to our betting app, supported by various relationships across Ontario. I can't make direct comparisons to competitors as we don't know their performance, but we've received positive public reports regarding downloads and other metrics, which align with our findings.

Thanks, Jay.

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

Good morning, everyone. Jay, we’ve covered a lot of topics already, but I would like to revisit some comments regarding the core consumer. To summarize feedback from other operators, some have pointed out potential softness at the very low end of the database, while others believe there isn't much concern. Could you provide a summary on that? Additionally, could you discuss any regional differences, especially in the South and perhaps out West, where local market trends seem positive? Any highlights you could share would be very helpful.

Yes, I'll let Todd answer that one as well.

Thanks, Sean. So, I'd put us in the camp with really nothing to see here. Even going into April and now into May, just based on where our properties are, and I guess to give a little more color to what Joe asked as well, that lower-end, so look at it kind of that 0 to 49, that's really down less than 0.5%, 0.3%. But really, we're making that up on the 50 to 99, which is up 3.7%, the unrated, which is up 5.4%. We're seeing really positive visitation. When we slice and dice our database and look at not only the work segments but also kind of the geolocation. Most of our customer base is within 50 miles based on where our properties are located. Everything in there is actually trending very well. We also are seeing a little bit more growth at some of our more destination-type properties. So I think you start looking at the Midwest, the South, and we're seeing really decent growth across all segments. And now that we're getting into those summer months where we're increasing the entertainment options, we're located next to some bigger entertainment and sports options and everybody going back out to these events. So again, we're seeing different growth patterns than what some of the industry has seen. But really, we couldn't be happier with what we've seen right up into May.

Super, very clear. And then maybe as my follow-up. Felicia, one of the highlights you called out was around the stock repurchase. Obviously, we knew the authorization was out there, but you put some of it to work. Can you just help us think about parameters around that? I think a lot of this should be self-funding out of free cash flow, but maybe just help us think about the balance and sort of programmatic versus opportunistic, the sort of operative words for us on Wall Street.

Yes. Thanks, Shaun. Yes, I think that we're going to continue to be opportunistic. So, as you know, we've already repurchased 175.1 million shares. And if you go back to the K, I think we reported that we did about $107 million. So, we were obviously active in March for as long as we could be, which got us to that average price of roughly $46 with our stock where it is now. I think it's fair to say that if we thought our stock was undervalued at $46, we think it's undervalued in the high $30s. And so, we'll be in the market again, but it's going to be opportunistic. And I talked about our strong balance sheet and our liquidity. So we're just in a really fortunate place to be able to be nimble and take advantage of the dislocation that we see.

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

Great. Thank you. Jay, can you maybe give some more color about how you plan to reimagine your properties for that younger demographic? And I'm kind of interested in how you think about balancing that with retaining interest from the older demographic?

Todd, do you want to tackle that one as well?

Thanks, Jay, and thank you for the question, Barry. We covered a lot of this in the slide presentation. Much of our progress is driven by technology, our food and beverage options, and the design of our hotel rooms. As we move forward this year, with developments at Greektown, Laberge, and Lake Charles, along with our new hotel offerings, we believe they will be top-notch and market-leading. We have been fortunate to move away from the outdated buffet concept, which is particularly advantageous now with rising prices. Instead, we are utilizing that space more effectively by creating interactive venues that can easily adapt with the seasons, unlike a buffet that has been in place for decades. The main focus for us is enhancing the guest experience and eliminating obstacles. Much of this improvement is being driven by technology, as Jay mentioned, so consider how the casino experience has evolved in the last five years regarding lines and queuing. We aim to eliminate those issues, making the experience more enjoyable for all guests, not just younger demographics. Our goal is to simplify entry and enhance the overall visit for everyone.

I was just going to add one thing. I agree with everything Todd said. When I'm highly encouraged, we were just looking at our age trends and age segment trends in the database for April, for example. Last year, at this time, there was a lot of stimulus money rolling through the economy. There were still very few things for people to do for fun to go out. There were no concerts, restaurants had restrictions, you couldn't go to bars or if you did, they were closed early, you couldn't go to the movies. You can do all of that now. I was actually reading an article this morning that talks about how customer behavior has quickly returned back to 2019 in the last couple of months. And you consider that all of those options are now available to people who love all of those options and have been a part of those options for many years. Yet what we're seeing is that, that younger demo that we were able to bring into our ecosystem over the course of the last couple of years when there was less to do, but our buildings were open, our offerings were up, and we're still seeing sizable growth, as you saw in the Q1 results. April looks just as good on a year-over-year basis off of a very, very large base of growth over 2019 last year. So – it's not as though we brought these younger demos in and they didn't like the experience, but it was the only thing to do. And then it was mass exodus as soon as they could go back to concerts and sporting events. We're growing on top of significant growth from last year. As you look at Q1 of this year versus Q1 of 2019, the growth in those younger segments is super robust.

Yeah. To Jay's point, that 21 to 34, Barry, is up 83% compared to 2019. So, the big problem that everybody was trying to solve pre-pandemic was how do we attract the younger demos, how will they engage with us, what games will they play. And again, this created that unique opportunity at this moment in time where they came in, looked around, and found something that they liked, and we're continuing to evolve as they are, but we're holding on to that and a lot of that is incorporating the entertainment that they're looking for.

That's really helpful. And then just a question on the guidance raise. Can you maybe talk a little bit about what underscores the raise? Is it kind of less concern about the macro economy and inflation, or maybe less concern about new supply cannibalizing you in the back half of the year? And I would just add, I think the implied margin actually went down at the midpoint. So any color there would be helpful.

If it did, that was not our intention. We have committed to our land-based operations at 37%, as we stated last quarter, and we have delivered on that this quarter. This is a delicate situation. We took a risk by providing guidance at the start of the year when many competitors chose not to, and I wasn't certain if that was the right move, but we felt confident given the visibility we had and the performance from the second half of last year. I mentioned earlier in the call about some of our properties and markets facing new competition, particularly in Black Hawk, Colorado, with our Ameristar property there, and in Chicago with the new Hard Rock opening. However, our properties have made quick adjustments thanks to our leadership teams and general managers. We are now able to raise our guidance because we believe we have a clear understanding of our business and the competitive impacts from the new supply in key markets. The only other market with new supply anticipated is Nebraska, which may affect Council Bluffs, but that seems to be a ways off, as temporary casinos will be in place before any permanent ones. In light of our guidance increase, we are incorporating all of the consensus beat for the first quarter and sticking to our earlier projections for the rest of the year. If current trends persist, which seems to be a conservative stance, we will continue to adjust accordingly.

Yeah. I would only add, Jay, and Jay, you talked about this, that 55-plus to 65-plus definitely. They have been lagging behind. You heard others in the industry talk a little bit about the coronavirus impact in January. So that has kept them a little behind, and we feel there's upside definitely there. And then with some of the capital projects that Felicia has mentioned, as those come online, we feel that there's really good momentum at a lot of our properties.

Okay. Thanks, guys, and congrats on a great quarter.

Thank you. The next question comes from Thomas Allen of Morgan Stanley. Please go ahead.

Thanks. Just a follow-up on the guidance. Super encouraging that you guys increased it. I did think it was interesting that we're now one quarter into the year, and you widened the range. Is that being the macro uncertainty or something else? Thanks.

We're not attributing this to any specific factor. We simply aimed to provide a guidance range that reflects our recent performance. I wouldn’t interpret the widening as significant. We feel confident about the midpoint of the new range, which is higher than what we initially projected at the start of the year. The only uncertainty we have relates to macroeconomic factors. There's a lot happening globally right now. However, we have not experienced any adverse effects from rising gas prices, although we have been in similar situations before. When looking at our regional businesses, the catchment areas typically involve a 20-minute drive. This won’t significantly affect spending; people aren’t likely to spend much on gas for a weekly or bi-weekly trip to the casino. Overall, we feel positive about our visibility and the current trends, including results from yesterday. We're monitoring this closely and are satisfied with both our existing and raised guidance, but I wouldn’t assign any particular meaning to the range.

Perfect. And then just on the interactive side, could you give us how much revenue you expect to generate this year? And if you're not comfortable with that, just qualitative commentary, are you more optimistic than you were last quarter around the amount you can generate this year?

Yes. We haven't given that number, but I would say our optimism continues to grow. Ontario is off to a great start. I had high expectations. We're doing better than I thought we would do in Ontario, which feels great to say. And we're continuing to grow our online casino business, I think football season, it's going to be our second real full season of football at scale. We learn every month, every quarter what works, what doesn't. I think our partnership with Barstool just gets stronger in terms of how we communicate and what we do promotionally and through events and live streams and all that. So yes, momentum is good, and our confidence continues to grow in terms of the future prospects.

Thank you. The next question comes from Ryan Sigdahl of Craig-Hallum Capital. Please go ahead.

Good morning. Thanks for taking my questions.

Hey, Ryan.

I'm interested in whether you could provide the monthly breakdown of property level EBITDAR margin for the quarter, specifically comparing January to March. Additionally, could you share any insights on how April has performed?

You should just assume for Q1 that it got sequentially better. Omicron impacted January to some extent. February was really good. March was better and April was very good. Remember, and I just try to be transparent about these things. There were five full weekends in April. So you should expect April's margins to be really good. But any time historically that your April margins or anything like March, that's very rare, even when you have calendar benefits. March is typically the best month of the year and momentum in the business right now is very good. Todd, I don't know if you want to add anything to that?

Well said, Jay. The only thing I would add. Jay and I were talking about this. March is always one of the best months traditionally. April is always one of the tougher months based on holidays and taxes and everything else. But the actual growth from 2019 to 2022, April to date has been one of our strongest months from a margin standpoint. So really, really happy with where we're trending.

Great. And then if you add up where you've launched CCC and then the coming properties over the next few quarters, you have 23. How many total properties do you anticipate today will be allowed by regulations? And then, secondly, on that, you gave some good qualitative metrics, but anything you can share about the financial impact, thinking revenue uplift, margin impact, et cetera?

The regulatory meetings we've held have been very successful. Rich Primus, who leads our tech team, along with his staff, has done an excellent job collaborating with the properties and the regulators. Each time the regulators review our offerings, they seem to understand and appreciate them. Our aim is to have around 30 properties, depending on the regulatory timelines, though not all of that may happen this year due to the need to engage with regulators and ensure a smooth rollout. The impact we're observing is still quite early as we expand into different states, but we are seeing positive results. As more people join the ecosystem, we expect to share some strong data points, although we might be a few quarters away from that.

Great. One last one for me. Just MGM went through a rebrand, expanded their loyalty rewards program earlier this year. How do you feel about the breadth, depth and really brand of your mychoice program?

I would say, stay tuned.

Great. Thanks, guys. Good luck.

Thanks, Ryan.

Thank you. The next question comes from Bernie McTernan of Needham & Co. Please, go ahead.

Great. Good morning. Thanks for taking the questions. Jay, I was hoping you can just zoom in on the tech stack launch in Ontario with your PAM and bonus engine. How is that experience? And maybe if you can compare it to the launch in some of the U.S. states where you're using someone else's technology, anything that you could call out that you were able to do that you had in other state launches? And then just, you talked about a little bit, but just the road map from here in terms of the 3Q rollout of your tech and trading platforms and then it's just kind of a test period in Canada until the launch in the U.S. next year. I just want to make sure we have it right and anything else to think about the tech stack. Thanks.

Yes. The second point is straightforward, Bernie. Our plans remain unchanged, and the road map is still intact. We actually have a slide that reinforces what we communicated when we announced our acquisition of theScore, detailing key quarterly milestones and our plans through the end of 2023. So everything is on track, which is fantastic. Our engineering teams from Penn Interactive and theScore are collaborating effectively, and our product design teams are enthusiastic about it. These are exciting times. Regarding the launch of our own PAM and bonus engine in Ontario, it’s early days, but I’m pleased to report there were no issues; it went incredibly smoothly, even under significant volume and pressure on the launch day, which coincided with the NCAA National Championship game. The team at theScore Bet, the Levy Family, and everyone involved did an outstanding job. We're very pleased with the outcome thus far. One of the noteworthy aspects we've highlighted is the ability to integrate our sports betting offerings directly into our sports media platform. This is particularly potent given the popularity of theScore media app across Canada. It's worth visiting and experiencing firsthand. The app allows users to create their bet slip and perform all actions seamlessly within the media app before transitioning to the betting app for deposits and bets. Owning our own PAM makes this process possible and allows us to design the user experience exactly as we envision it, which can be challenging with third-party providers who cater to a wider range of B2B clients. On the bonus engine side, while it’s still very early, we can now offer personalized and customized promotions based on individual behavior, a significant improvement over the more generic marketing strategies currently prevalent in the industry. We have developed a more sophisticated approach in our land-based operations, and transferring this knowledge to our online business will be very impactful. We're feeling very positive about this. As for managed trading services, as indicated in the slide deck, we're still on track for a launch before the football season this year in Ontario. With this, we can offer a wider variety of betting markets, including same-game parlays and a range of parlay options. We'll also have greater flexibility with pricing and exclusive bets, whether in Canada or in conjunction with our partners at Barstool in the U.S. There will be substantial cost savings because previously, theScore engaged third-party providers for their PAM and managed trading services, similar to our approach in the U.S. Transitioning to our own technology will yield considerable cost synergies alongside the revenue synergies I've mentioned.

Understood. Jay, I'd like to follow up since I haven't been to Canada yet. How does the competition look when you focus solely on products? You're competing against many new operators and gray market operators in the U.S. How does the competitive landscape compare from a product perspective in relation to the U.S.? Do you think U.S. operators are ahead of the gray market operators? There's also about 365 there, which is generally regarded as one of the better operators globally.

Yes, it's a great question, and I think it really evolves down to the individual end user and what are they looking for? What are they accustomed to? There are going to be some people in Ontario that have been betting with that 365 in the gray market for a long time, and that's what they're just going to continue to do, because that's what they've been doing. And so I'm confident that people who have been betting with gray market operators, they take the opportunity to download our app and to register and deposit. We're very confident that they're going to continue to come back to us at least as one of their options as we move forward because the player experience and how seamless everything is integrated between media and sports betting makes what we're doing there and obviously, here very, very unique. Our plan – and again, I mentioned in the slide that 80% or 79% gets rounding up of our users on the score bet in Ontario were known on the Score media app. And so there's obviously a lot of value in being able to convert and to make this seamless on the media applications, and we're going to be doing the same thing here in the U.S. and bringing the Barstool Sportsbook offering and fully integrating that into the Score Media app throughout the United States, in the second half of this year. Not sure if that will be beginning or middle of football season, but sometime during football season. And given what we're seeing in Ontario, we think that will be another nice shot in the arm for our business here in the U.S.

Okay. Thanks, Jay.

Thank you. The next question comes from Chad Beynon of Macquarie. Please go ahead.

Hi. Good morning. Thanks for taking my question. Jay, I wanted to ask about California. I think there's been some confusion from investors this week because there are two separate measures on the ballot in November. Do you have a sense of where California support is on the build that you're supporting, understanding that there will be a lot of communication on the airwaves and in person between now and the election? And then secondarily, on California, is your database proportional in California to the U.S. population, or do you have a higher percentage of stoolies in California? Thanks.

I'll tackle the second one first, Chad, and then I'm going to ask Eric Schippers, who heads Govt. Relations and Public Relations for us, so he's super close to what's going on in California and can tackle some of the more detailed parts of the question that you had. In terms of database and popularity, across the country, the Northeast, obviously, Barstool is strongest because that's where it started. But it's now such a national brand, very strong in the Midwest. We can't wait to get launched in Ohio. It's one of the most popular states in the country for Barstool Sports, and we obviously have four great casinos in Ohio as well. Down South, very, very strong and less strong, and Dave actually spent quite a bit of time out in California for a variety of business things. So yeah, you should assume that what we've been able to do in some of the larger population states would be our expectation for what we can deliver in California as well.

And then in terms of polling, there have been some competing polls out there, but we're pretty confident in the strength of our polling, which shows that 59% of respondents support our ballot initiative, which would open up the market to mobile gaming. The other initiative, which is on the ballot, would be for retail only. And so they're not really competing; they're actually complementary. If both were to be approved, we can go down the road and be very successful there. If only ours is approved, the tribes still have an opportunity through partnerships with us to participate. And I think the key thing here and what is driving the popularity of our initiative is the fact that 85% of the revenues are going to go to support mental health issues, and that is wildly popular in California.

That's great. Thanks for that detail. And then I just wanted to ask the question you get from time to time on the strip. It appears that there are still a few assets for sale out there. What's your appetite for looking at properties on the Strip at this time?

We're not currently interested in pursuing any opportunities. In the past, we might have considered unique assets in great locations, but right now, we're not looking at anything.

Thank you very much. Congrats on the results.

Thanks, Chad. We'll take one more question, Tina.

Thank you. The final question comes from David Katz of Jefferies. Please go ahead.

Hi. Good morning. Thanks for working into the wire. If you could just share some thoughts on how we look at the score in conjunction with Barstool? And the degree to which those customer populations overlap, or don’t overlap, fit together, where the opportunities are? If there are any sort of crossover between those two?

Yes, I'm happy to share. The demographics of Barstool and the Score differ somewhat. Barstool primarily attracts individuals in their 20s and 30s, whereas the Score has a broader audience, mainly in their 30s and 40s. While there is some overlap in the U.S. and Ontario, we notice distinct responses when we activate initiatives for Barstool compared to the Score, indicating that there is incremental engagement between the two groups. From a media perspective, we are beginning to explore new opportunities and discover potential in advertising partnerships. Barstool has connections with many Fortune 100 companies that may not have previously interacted with the Score, and vice versa. Therefore, we are optimistic about enhancing our approach to sales, revenue management, and advertising partnerships.

Got it. That's great. In light of all the information we have and considering everything that has transpired since we began this discussion, how should we think about market share or market share targets for your current offerings?

Yeah. We talk about this a lot internally. And we've talked about our feelings on handle market share versus NGR market share. I wish every state shared NGR market share because the ones that do, we not surprisingly score a lot higher in terms of market share overall. So, NGR is where you start to pay the bills. Handle doesn't pay bills, GGR does not pay bills. NGR, you can start to pay the bills. And so that's all we care about is NGR market share. And you should expect that when the market becomes more rational and you don't have as much discounting and buying of the business, which we do not participate in, to the extent that most of the rest of the competition does today, if you look at what we invest in promos as a percentage of handle, promos as a percentage of revenue, paid media, those spend levels from the competition have to come down or else, no one will ever make money. And I think everyone's been very clear about that. As those spend levels from the competition come down, I think that whoever has the best product, the best brand, and the best relationship with the end users is going to continue to grow their market share, and we feel very good about our positioning in all those areas.

Got it. Thanks very much. Appreciate it.

Thanks, David. And thank you, everybody, for dialing in and joining us this morning. We went a little bit over, but hopefully, that was of value. We look forward to speaking with all of you again next quarter.

Thank you. This 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.