Earnings Call
PENN Entertainment, Inc. (PENN)
Earnings Call Transcript - PENN Q4 2023
Joseph Jaffoni, Investor Relations
Thanks, Frank. Good morning, everyone and thank you for joining PENN Entertainment's 2023 fourth quarter conference call. We'll get to management's presentation and comments momentarily as well as your questions and answers. Now, I'll review the Safe Harbor disclosure. Today's discussion contains forward-looking statements. Forward-looking statements involve risks, assumptions and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors. With that, it's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go ahead.
Jay Snowden, CEO
Thanks, Joe. Good morning to everyone on the call. As usual, I'm joined here in Wyomissing by our CFO, Felicia Hendrix; and our Head of Operations, Todd George as well as other members of the executive team. We provide a link to our investor presentation, along with our earnings release this morning. If you haven't already opened or printed it out, I would suggest you do that now as our prepared remarks will reference several of those slides as we go along. At a high level, 2023 was another transformational year for PENN Entertainment. We are the only company in the industry that has a fully integrated sports media and sports betting platform along with an omnichannel base of assets with which to drive cross-play and synergies as the database continues to grow at a rapid pace. The future looks very promising given our unique position and long-term strategic advantages. On the retail side of the business, we generated more than $2 billion in property-level EBITDAR in 2023 from our industry-leading portfolio of regional gaming assets and impressively delivered on our property-level margin goals despite an uncertain macroeconomic environment, thanks to our best-in-class operators and leaders across the country. We also broke ground on 4 exciting new retail growth projects in Illinois, Ohio, and Nevada which we expect to complete by the first half of 2026. As a reminder, we anticipate these will deliver a 15%-plus return on the aggregate investment. The continued strength of our retail business provides a solid foundation as we continue to invest in our high-growth digital business which will create significant long-term shareholder value. Speaking of the digital business, earlier this month, we announced that the founding family behind the score, John, Benge, Abri, and Noah Levy will be transitioning from their leadership of the score and PENN Interactive. John departed earlier this week, while Benge, Abri, and Noah will be leaving in early April. We have been working closely with the Levys over the last several months on this plan and timing to ensure a smooth operational transition. Their departure comes at a natural inflection point for our interactive business. We've achieved a lot over the last several years, including the completion of our proprietary tech stack, the successful launch of Score Bet in Ontario, the migration of our tech stack into the U.S., and now the launch of ESPN BET. Even more importantly, we have developed an incredibly deep bench across PENN Interactive and we have several talented leaders ready to step up and take on more responsibility in the coming months. I want to extend my sincere thanks to John, Benge, Abri, and Noah for all of their hard work and contributions to PENN Interactive's success. We are near the conclusion of the month-long search process for the new Head of Interactive and look forward to sharing an update on that with you in the near future. Turning to Slide 6 in our investor presentation. On November 14, we successfully and seamlessly launched ESPN BET simultaneously in 17 states across the U.S., a first in the industry and no doubt a testament to the strength of our technology teams. Bolstered by the number 1 brand in sports media, the launch resulted in much higher than expected registrations generating over 1 million new sign-ups to our industry-leading PENN Play Rewards program and expanding our digital database by over 50%. In fact, we acquired as many first-time depositors and bettors in the first 2 months as we had anticipated we would generate in the first full year post-launch. Importantly, approximately 1/3 of these customers are located within 50 miles of one of our more than 43 retail properties which sets up well for cross-selling and monetization as part of our omnichannel strategy. In addition, we saw our average monthly active users grow from nearly 190,000 in the third quarter to more than 770,000 in the fourth quarter. Our early success bodes well for our planned launches in North Carolina and New York this year which I'll talk about in a moment. Given the early success in customer acquisition and retention, we now expect the digital segment to inflect to roughly breakeven in 2025 and start generating meaningful EBITDA and free cash flow in 2026 and beyond. Turning to Slide 7 and 8. You'll see that strong early retention and consistent user acquisition have led to steady month-over-month increases in cash handle even as our promotional expenses have started to normalize. Our January cash handle was 289% higher than pre-launch cash handle in October of '23, while our promotional expenses as a percentage of handle went down from 32.2% in November to 2.8% this January. According to the latest sensor tower data, which is similar to other data sources you may have seen, we have consistently held the number 3 ranking in share of weekly active users amongst our top peers, providing a foundation for even greater handle and GGR share gains as we grow our share of wallet and monetization per user. The ESPN BET numbers on the chart on Slide 8 shows steady acquisition and retention across the board, even as our promotional expense began to taper. Our initial promo offer at launch was right in line with our competitors and we lowered that offer by 50% in advance of the Super Bowl given the more recreational play surrounding the game. Meanwhile, the total time spent on ESPN BET according to the sensor tower data also continued to ramp nicely as we added new features and integrations which will only accelerate now that we can focus more of our product and engineering teams' energy on product improvements, especially in the areas of same-game parlays, player props, and live betting as opposed to time-consuming migrations and launches, something we are all very excited about. All of this is very promising as it relates to both top-of-funnel demand for ESPN BET and early retention success. The important takeaway here is the ESPN BET app is proving to be sticky in the early days as a result of our strong brands and UI/UX which will improve from here with product enhancements and deeper integrations with ESPN in the coming quarters. As you'll see on Slides 9 and 10, ESPN BET has helped us reach new demographics of sports fans that are incremental to our digital database, resulting in a 63% greater year-over-year parlay mix and higher volumes for non-NFL games, particularly the NBA. While these parlay results are a clear improvement from where we were pre-launch, we still have a long way to go in this area and you'll see significant improvements throughout 2024. We also saw a 35% increase in our percentage mix of females in our digital database. These data points demonstrate the potential for ESPN BET to help broaden the appeal of sports betting to the more casual bettor and grow the overall market, an important goal of ours from day one. Notably, before the launch of ESPN BET, overall market handle grew by more than 17% year-over-year from January to October 2023 in the states with publicly available data in our market analysis. After ESPN BET, overall market handle is up nearly 30% and year-over-year from November through December 2023 and it's up over 25% even when you exclude ESPN BET. ESPN BET has and continues to bring new sports fans and bettors into the sports betting ecosystem. ESPN BET has also helped boost our Hollywood-branded iCasino business which has seen a nearly 280% increase in monthly active users, providing a platform for future growth with new proprietary content continuing to roll out from our PENN game studios. As we've emphasized in the past, when customers engage with us across multiple channels, their value increases more than 6x over those who engage via only 1 channel, and we continue to see a lot of upside as we improve our iCasino offerings. As illustrated on Slide 13, in connection with the launch, ESPN implemented an initial wave of exclusive BET mode integrations across the ESPN ecosystem which includes our 6-pack odds integration. This provides for a seamless click-through from the ESPN game cast to a customer's desired bet on the ESPN BET app. This is very powerful as there are over 28 million monthly active users on the ESPN media app. You should expect more BET mode integration throughout 2024. I said at the outset of our partnership with ESPN that we'd be getting significant value for our marketing dollars by allocating our $150 million per year to the single best brand and platform in the U.S. to reach sports fans and potential bettors. We're already seeing that with a robust menu of promotion and integration across all of ESPN's platforms, including traditional linear advertising, digital media, in-program integration, odds attribution, database marketing opportunities, and access to some of the biggest personalities in sports media for special events, promotions, and social media engagement. As I mentioned, we have just scratched the surface on these integrations, and there's substantially more to come, all included as part of our deal that we will unveil throughout 2024 and into 2025. Our initial ESPN BET advertising campaign was headlined by Sports Center anchors, Scott Van Pelt and L. Duncan. We then added spots with NBA legend Kendrick Perkins, the host of Get Up, Mike Greenberg, followed by our most recent commercial with sports betting analyst, Aaron Dolan, that launched during the Super Bowl week. This campaign with Aaron is our first product and integration-focused campaign which we expect will help drive continued awareness of ESPN BET and our direct integration with the ESPN Media app. Meanwhile, L. Duncan and Aaron Dolan hosted a Super Bowl party at the M Resort at our property in Las Vegas. And I'm happy to announce we'll be rebranding Greektown's market-leading Sportsbook to ESPN BET just in time for the NFL draft in Detroit. In addition, ESPN regional radio talent will be hosting events throughout the year in our retail sportsbook. We look forward to additional ESPN BET retail launches at key properties as we continue to create meaningful cross-sell opportunities. Looking ahead to the rest of 2024, we are excited to introduce ESPN BET in North Carolina which is expected in March and New York expected prior to football season, in each case, of course, subject to regulatory approvals. While the economic model in New York is indeed challenging, we look forward to bringing ESPN BET to the largest regulated online sports wagering market in North America. These 2 new jurisdictions will be extremely efficient for us. As highlighted on Slide 16, our ESPN annual national marketing spend per capita will be reduced by 20% with the addition of North Carolina and New York which will take our addressable online sports betting U.S. population from 37% to 46% and significantly expand our reach and scale. As noted in the release this morning, the Interactive segment EBITDA losses for the fourth quarter were higher than expected. The majority of that miss was driven by the high volume of customers acquired through ESPN BET which resulted in elevated promotional expenses that negatively impacted net revenues. And to a lesser extent, unfavorable hold due to customer-friendly sports results. The first 2 weeks following the launch of ESPN BET in November happened to be 2 of the lowest hold percentage weeks of the entire NFL season. Looking ahead, we expect that first quarter 2024 interactive EBITDA losses will be roughly half of our fourth quarter '23 interactive EBITDA results and for Q1 to be the largest EBITDA loss quarter of the year for us in 2024. For the entire year of 2024 on a same-store basis, we anticipate an EBITDA loss commensurate with what we saw in Q4 at around $330 million, demonstrating the top-line momentum and efficiencies on the cost side. Due to the 2 state launches this year in North Carolina and New York which we announced on Tuesday, we are forecasting a total EBITDA loss in 2024 of approximately $400 million. As mentioned earlier, we now anticipate 2025 being around breakeven and 2026 to deliver meaningful positive EBITDA and free cash flow. Before turning it over to Felicia, I'd like to thank our property leaders and all of our team members for delivering another quarter of really solid property-level performance. Notably, 10 properties spread across our portfolio achieved their highest ever fourth quarter revenue. These outperformers helped offset the impact of supply pressures in a few of our key markets as well as continued softness in our south region. This further demonstrates the benefits of our geographic diversity and unique omnichannel strategy. The introduction of new technologies and our ongoing reimagination of our properties while providing a best-in-class customer experience is continuing to drive demand for PENN. As you know, our industry-leading customer loyalty program, PENN Play, is supported by our 3 Cs technology which is now deployed at 21 properties collectively representing approximately 70% of our retail EBITDAR. During the quarter, we've also grown our total PENN wallet customers to 110,000 and we've received $300 million in total PENN deposits. As we've often said, those guests who use the digital wallet demonstrate superior loyalty through increased visitation, time on device, and total theoretical end. And with that, I'll turn it over to Felicia.
Felicia Hendrix, CFO
Our property level segments reported another solid year. Fourth quarter '23 EBITDA results of $476 million exceeded the implied guidance we provided on our third quarter call, despite headwinds of roughly $10 million from the Detroit union negotiations and road closures. And as Jay highlighted, our Interactive segment is showing early signs of strong momentum. As usual, you will find on Page 12 of our earnings release a table that summarizes our cash expenditures in the quarter including cash payments to our REIT landlords, cash taxes, cash interest and total CapEx. Of our total $152 million in CapEx in the quarter, $16 million was project CapEx, primarily related to our 4 retail growth projects. We ended 2023 with total liquidity of $2.1 billion, inclusive of $1.1 billion in cash and cash equivalents. We expect our liquidity to remain strong throughout 2024 and we have no debt maturities until 2026 which are our $330 million convertible notes. As we previously guided on our third quarter earnings call, we continue to expect our lease-adjusted net leverage to peak in the third quarter of '24. While third quarter leverage will be higher than initially anticipated given the demand-based strength of our ESPN BET launch in the fourth quarter of '23, this increase is temporary, and we will also delever more quickly. By year-end 2025, we will return to pre-ESPN BET leverage levels. And in 2026, we will generate meaningful EBITDA and free cash flow from the Interactive division. Thinking about this another way, our path to record free cash flow is very clear, following a year of investment in 2024 and delevering in '25, 2026 will be an exciting inflection point for us given the high EBITDA to free cash flow conversion of our interactive business, which when combined with the free cash flow generated by the existing core business, plus the 4 retail growth projects that will be coming online in early 2026, will position us extremely well to drive shareholder value. I will now provide guidance for our Retail and Interactive segments. For the full year 2024, we expect retail revenues to range from $5.6 billion to $5.75 billion and adjusted EBITDA to range from $1.905 billion to $2.025 billion. Our guidance factors in extreme January weather, new supply in Nebraska, Illinois, and Louisiana, road construction in a couple of markets, and moderate upward wage pressure. For the Interactive segment in 2024, we expect to generate revenues of $1.28 billion to $1.415 billion and an adjusted EBITDA loss range of $420 million to $380 million. These ranges include our launches in North Carolina and New York. On a same-store basis, we anticipate an adjusted EBITDA loss of around $330 million. To help you with modeling the interactive segment revenues, you should assume that our 2023 tax gross up of roughly $400 million remains flat year-over-year in 2024 and other revenues inclusive of skins, social gaming, and media is roughly $200 million in 2024. As Jay mentioned earlier, in the first quarter of 2024, we expect the Interactive segment adjusted EBITDA loss to be roughly half of our fourth quarter interactive EBITDA results and for the first quarter '24 to be the largest EBITDA loss quarter of the year. We expect 2024 corporate expense of roughly $105 million, inclusive of our cash-settled stock-based awards. Total CapEx for 2024 is approximately $500 million, inclusive of $275 million of project CapEx for our 4 development projects. For cash interest expense, we forecast $170 million for the full year after roughly $13 million of interest income. For cash taxes, we are projecting to be in a refund position of roughly $15 million. And as you think about our share count for 2024, our basic share count as of the end of 2023 was $152 million and we typically have roughly $15 million of diluted shares inclusive of the 14 million share dilution from the converts. And with that, I'll turn it back to Jay.
Jay Snowden, CEO
All right. Thanks, Felicia. As you saw in our release, we're continuing to expand on our corporate social responsibility efforts. As we look back on the year, I'm very proud of the continued growth of our diversity, equity and inclusion initiatives which are deservedly gaining a lot of attention; Newsweek named PENN one of America's greatest workplaces for diversity, and Forbes named us for the third straight year as one of America's best employers for diversity. Time Magazine went so far as to name us one of the world's best companies for 2023. Meanwhile, on the community front, we provided more than $7 million in support to local charities and veterans-focused organizations and more than $17 million in economic development grants in 2023, in addition to the more than 8,000 volunteer hours from our team members to help those in need. And on the environmental side, we completed our inaugural Scope 3 Greenhouse Gas inventory and established carbon abatement targets for 2024 and beyond. You can read more about all of these initiatives in our 2023 CSR report which is scheduled to be published in April in conjunction with our proxy filing. In closing, we're continuing to see a stable consumer environment and healthy operating trends in our retail businesses. And on the digital side, I want to reiterate that our partnership with ESPN is not your typical media sports book commercial agreement. Ours is an exclusive strategic long-term alliance that, as I mentioned, has the potential to deliver unique products, experiences, and integrations that are unmatched. And of course, with that will come attractive returns for our shareholders. We had 3 primary goals with ESPN BET for the first several months post-launch: Number one, execute on a successful launch, both in terms of top-of-funnel demand and app stability, competitiveness, and performance. Number two, grow the market, given the strong brand equity and reach of ESPN along with the media integrations. And number three, provide a differentiated experience and value proposition to ensure lasting relationships and product retention. So far, we're off to a great start on all 3 and have built a tremendous foundation for our upcoming launches in New York, North Carolina, and beyond. So with that, Frank, we'll open it up for questions.
Operator, Operator
Our first question comes from Joe Greff with JPMorgan.
Joe Greff, Analyst
Jay, I have two questions, not surprisingly, on Interactive. First, maybe an easier one. Can you talk about the search for leading interactive and maybe why one hasn't been announced because I don't think the Levy is leaving and the timing was all that surprising. Maybe what was surprising was that there wasn't someone named to head it upon their news that they were planning to depart. And then a second question, I mean, it looks like right now, your share maybe in January is sort of in the 7% range. I know the goal is to grow beyond 7% and higher. But if we look at 2 years from now and OSB and I casino, it will be 25%, 30% higher in 2 years than what it is currently running. If you're at a 7% market share level 2 years from now, obviously, a bigger market, can your digital business be EBITDA positive? And if you can share with us how you think of profitability, bigger market, 7% share, what that margin range would be? I think that would be hopeful looking at things kind of a couple of years out versus the investment that people are focusing on this morning.
Jay Snowden, CEO
Good questions, Joe. Starting with the search for the new Head of Interactive, we've been collaborating with the Levys throughout the fourth quarter of 2024, considering the strong talent we have at PENN who can take on their responsibilities as they depart. We've made significant progress on this front. Recently, we spent time in Toronto, and we have a robust team in engineering, product, and marketing. It was important for us to ensure we had a transition plan in place before the Levys leave. We initiated a discreet search last quarter to avoid any preemptive announcements that could cause uncertainty. While I can't disclose specifics, I assure you that we are well advanced in this process and excited about the exceptional talent we are considering. We anticipate announcing our decision before the Levys' exit in April, aiming for a smooth transition with the new Head of Interactive potentially starting a little before or after their departure without any leadership gaps. Regarding the 7% market share and its outlook for the coming years, I want to provide some context. We are three months post-launch of ESPN BET, and we've seen many positives during this period. The strength of the ESPN brand is clear, and they've been excellent partners, consistently exceeding our expectations in our $150 million marketing deal. Our app has performed well and achieved high rankings in the iOS App Store. We launched simultaneously in 17 states, an unprecedented feat, and we successfully managed our first Super Bowl without any issues, maintaining 100% uptime. Furthermore, our customer acquisition has been outstanding, leading to higher promotional costs than we anticipated, with over 1 million downloads and deposits in the first two months, which we previously expected would take a year. This reflects very efficient customer acquisition during this timeframe. On the retention side, we're in a solid position, holding a firm number 3 spot in weekly active users for online sports betting, while also seeing significant gains in online casino usage. Importantly, our cash handle as a percentage of total handle has been increasing monthly from November to January, indicating that customers are moving away from initial promotions, making deposits, and continuing to engage with us, contributing to market growth. The opportunity moving forward is to close the gap on the 7% market share while our share of weekly active users is approximately twice that figure. Our weekly active users are holding steady, indicating that many people have downloaded the app, made deposits, and placed bets, enjoying their experience and returning regularly. However, we have not yet captured our fair share of the market regarding the time users spend on the app. I see this positively, as we know that our growth in user monetization and share of wallet will come from product enhancements. We are making progress on that front. Our teams have been focused on launches and migrations, which limited their ability to concentrate on new features and functionality, but now that much is behind us, we can shift our focus. While we have the North Carolina launch coming up, our numerous state launches prior should make this manageable. We aim to improve our same-game parlay offerings, player props, live betting, and in-game betting, along with deeper integrations with ESPN, which are already in progress and will continue with both the ESPN Media app and the fantasy app. Looking ahead, if we reach a 7% handle market share in these early stages, we feel confident about our growth over the next 12 to 24 months. We believe that 7% is not the peak; rather, our market share should increase steadily as we enhance our products and deepen our partnerships with ESPN. In response to your question about profitability at 7% a couple of years from now, we believe it is achievable. However, we are uncertain about the number of additional states that will legalize sports betting and online gaming in the meantime. It should be noted that maintaining a similar market share in our iCasino segment is also important for us. Overall, after the first three months, we are optimistic about our progress, especially regarding user retention.
Operator, Operator
Our next question comes from Joe Stauff with Susquehanna.
Joe Stauff, Analyst
Jay, I wanted to ask about the media-integrated offering, particularly regarding ESPN's media app. I believe the 6-pack link was launched around mid-January. How long do you anticipate it will take before this becomes a significant source of new customers for you? I understand it’s still early, but in Ontario, approximately 72% of your customers engaged in real betting come from the app. How should we consider this conversion in the future?
Jay Snowden, CEO
Yes. The way we think about it, Joe, is that if we can get the level of integrations between media and sports betting in the U.S. between ESPN and the fantasy app, of course, and into ESPN BET that we should be able to get those percentages to be about the same here. So we're on it. There's really there aren't disagreements or a lack of alignment between us and ESPN on what those integrations will be. Obviously, we're looking forward to bet slip integrations. We're looking forward to fantasy integrations. We think we'll have a lot of that complete by the time we get to football season. It's hard to peg today if it's all going to be done by September, some of it's going to be in the fourth quarter. But we feel really good and we have a lot of alignment with ESPN on just how important it is. I continue to be really impressed at how many resources that they are putting against ESPN BET. This is a big part of a growth opportunity for ESPN, and they're as excited about it as we are.
Operator, Operator
Our next question comes from Carlo Santarelli with Deutsche Bank.
Carlo Santarelli, Analyst
Jay, as you consider the guidance parameters for 2024 that you outlined with interactive, if we set aside the two launches in New York and North Carolina, what is the basis for your assumptions regarding promotional reinvestments? Specifically, how do you foresee promotions as a percentage of handle or a percentage of GGR? What is currently reflected in that assumption?
Jay Snowden, CEO
Yes. I would say, Carlo, that we expect promotions as a percentage of handle going forward to align closely with market levels. We're neither aiming to be the highest nor the lowest. It might vary slightly from month to month, especially with events like March Madness and our partnerships with ESPN. This is largely influenced by our success in attracting new users to the platform, which can lead to spikes in certain months. We don't anticipate much volatility in the late spring and summer months due to MLB, but our performance in North Carolina could potentially increase that percentage in March. When we launched in New York, I expect a bump as well, but overall it should remain fairly consistent and in line with the market. Our goal is not to exceed or fall below the averages seen in other states, which typically range around 2.5% to 3.5%.
Carlo Santarelli, Analyst
I have a couple of questions for clarification regarding the brick-and-mortar business. First, Jay, you mentioned the four projects currently in progress for the first half of 2026. Will all of them now be scheduled for the first half of 2026, or will the fourth project be completed during that time?
Jay Snowden, CEO
Yes. And we didn't mean to be confusing there but we'll have all 4 done and open in the first half of '26, could 1 or 2 of them hit late '25? Yes. So we really haven't changed. We just thought to be clear to say you should expect all 4 to be open and operating in the first half of '26 but it will be opening the 4 of them between late '25 and mid-'26.
Operator, Operator
Our next question comes from Shaun Kelley with Bank of America.
Shaun Kelley, Analyst
Jay, could you provide more details on the implied revenue forecast for 2024? If we analyze the digital aspect, it suggests a market share of approximately 6% to 7%. This aligns with our current position, though it's on a national scale, likely including states like New York and North Carolina. Is this correct? Is this the performance level you expect on a same-state basis? Will this be sufficient to meet your revenue goals for digital in 2024, or do you anticipate needing improved monetization or a better product mix as the year progresses?
Jay Snowden, CEO
No, I think your back of the envelope math is right, Shaun and that's a level that gets us to this interactive result on the EBITDA line. We anticipate that it's going to continue to ramp as we get toward the end of the year and football season from, we've got a lot of product enhancements and deeper integrations with ESPN planned over the course of the next 3, 4, 5, 6 months, really targeting September to be ready for football season. So I would expect that fourth quarter should be a quarter that you see that start to really come together. And I think we would be exiting 2024 with real momentum from a handle market share perspective given the enhancements to the overall experience that I mentioned earlier. So that's the math. We're not really super focused on where we are today on market share. It's where we're going to be in September and beyond. I think it will probably fluctuate around where we're at now given the stability that we've seen in daily, weekly, and monthly active users. We make more enhancements to the product. I think it becomes more sticky. You start to get more share of wallet. Some of the newer players you've brought into the ecosystem. I think they spend more time on the product. They go from betting once a week to twice a week. And so we think that's really going to ramp up. And we picked up so many new users. We covered that a couple of times that it takes the pressure off of us to feel like we need to continue at that pace. It's probably not possible. But we have 2 great state launches, 9% of the U.S. population. We can continue to be sort of at market with regard to our new player, new deposit sign-up. We're not looking to lead the market but certainly be at market. And let the ESPN brand and all the integrations take care of the rest. That's a recipe that we think makes a lot of sense and it's tremendously efficient as we go. But you're correct in your back of the envelope, although we expect to be ramping towards the end of the year into '25.
Shaun Kelley, Analyst
Super. And then sort of maybe drilling down a layer, probably the best way for us to gauge some of your success and improvement on the product side is just going to be watching some of your implied that mix and really your theoretical or your hold rate improve as we move through the year. Could you just talk a little bit about where your theoretical sits today? Kind of we hear numbers obviously for the best-of-breed guys now easily approaching double digits, maybe even low teens. Where are you today just given sort of your mix of customers, our casual better? And kind of how do you expect, when do you expect us to kind of start to see some more measurable improvement in that? Again, I'm putting this in the context of some of the data we've been received where some of the state-level hold rates in January have been really, really low relative to the market. So maybe just help us put those pieces together.
Jay Snowden, CEO
Yes. I'll talk about kind of high level where we think we are and where we want to be and then I'll let Todd jump in on sort of what's been happening in the last couple of months because a lot of that's been done with focus and intention as we continue to drive top of funnel demand. I think today, based on the mix, we're seeing a higher Parlay mix today than we've ever seen which is great. But we're still below market and we know that our Parlay mix, though it's continuing to get better. We've got a little ways to go on pre-package, pre-populated Parlay offerings and sort of a Parlay lounge that you can go to and much like the top competitors of ours have today. That's something that we actually feel like it's all upside from here. So we're probably more at that 7% to 8% kind of theoretically today but we'll be continuing to gradually build that up to double digits. I think it's just a matter of time, Shaun, before we get that Parlay mix and especially on the same game side which is where we're not as strong today but we're going to continue to put a lot of focus and energy there from a product enhancement standpoint between now and football season that we should be able to catch the others over time. But it may not be done in 2024 but I don't think it's going to go beyond 2025, given that we can now focus so many of our resources on product enhancements and features in UI/UX as opposed to just deploying state launch, deploying resources around state launches and migrations. Todd, do you want to speak a little bit about what we've seen so far?
Todd George, Head of Operations
Yes, thank you, Jay and Shaun. I want to add that as we continue to expand our database, we have a blend of promotional spending that is standard in the industry, along with odds boosts that serve as an effective tool for customer acquisition, drawing people into our ecosystem. We successfully used odds boosts to attract new users, particularly during the playoffs, and continued that momentum through the Super Bowl. Currently, the trends resemble the early phases of some of our competitors, which gives us confidence in our progress. We anticipate that with the ongoing efforts we are currently undertaking, we will maintain this progress into next year. The increasing number of users embracing the Parlay feature is motivating for us as we advance into the next stage.
Operator, Operator
Our next question comes from Barry Jonas with Truist Securities.
Barry Jonas, Analyst
ESPN just announced plans with Fox and Discovery for a new streaming service JV. Any sense yet if and how ESPN BET could participate?
Jay Snowden, CEO
Yes, Barry, we've received that question quite often. To frame it, this is how Disney described it, and while I'm not speaking on their behalf, I'm reiterating what was mentioned during their call. This initiative is focused on content distribution, aiming to reach more households and devices as viewers shift away from cable. It offers a new streaming package that includes ESPN and its content. Therefore, if you currently watch ESPN, whether through digital streaming or traditional television, the integrations you see in ESPN shows will also be available on this new streaming platform. Sports Center remains Sports Center, and Get Up continues to be Get Up, with the same integrations we have today. The goal is simply to provide broader access to ESPN for more people across the country. Yes. I mean, look, our position is we'll continue to be looking at opportunities, whether those are acquisitional opportunities or Greenfield as those opportunities present themselves. And that hasn't changed. That won't change. If there's a great opportunity and we think we can generate value in an investment and that's something we're going to strongly consider; sometimes that's easier said than done. Las Vegas Strip, there's very limited opportunities and nothing really hot at the moment. If there's a new state, then that's something that we would be taking and have been taking a hard look at; obviously, nothing is imminent at the moment but we're continuing to keep the tires; that won't change.
Operator, Operator
Our next question comes from Brandt Montour with Barclays.
Brandt Montour, Analyst
The first question is about the non-ESPN marketing spend budget that was mentioned three months ago. Has the outlook for that spending changed at all based on recent developments with ESPN and what you've experienced in the first few months? What have you included in that 24% guidance?
Jay Snowden, CEO
So you should assume, Brandt, that what we've said previously is consistent with how we feel today. It's going to be roughly matching the on-channel spend with ESPN. That's a number that obviously we can flex. But we think that's a good target. That's sort of what's built into our modeling for 2024. It gives us plenty of dry powder to utilize for state launches. You should think about that spend as being much more performance-based marketing spends and probably more targeted. Obviously, the ESPN spend is almost entirely national, and some of the off-channel is national as well but a lot of it is performance and more local and regional focused. I believe the deposit information you're referring to ties back to what I mentioned earlier. The weekly and monthly active user numbers indicate strong engagement, which is not a concern for us. We also have excellent ratings on the iOS app, which makes us feel optimistic. Our focus is on enhancing our products and achieving deeper integration with ESPN to create a smoother transition for users from ESPN's ecosystem—whether that's media, fantasy, or other areas—over to ESPN BET when they're ready to start betting. The current deposit levels reflect that we have yet to capture our full share of wallet. While we are receiving deposits, they may not be as large as those of our top competitors. However, I am confident that we are one of three or four apps on users' phones, and they are placing wagers on our platform. I believe they are waiting for further enhancements, which is acceptable. Our capacity to keep users engaged is now being managed effectively. For those who may have become dormant, we expect to quickly reactivate them as we approach next football season due to our partnership with ESPN and continuous product improvements. Overall, we are in a strong position with over 1 million new users in our database, most of whom engage with us regularly. Our goal is to strengthen our relationships and loyalty, increasing our share of wallet over time, which should lead to deposit growth.
Operator, Operator
Our next question comes from Chad Beynon with Macquarie.
Chad Beynon, Analyst
First one on the brick-and-mortar business. The margin guidance of 34% to a little bit over 35% assumes some slippage from what you produced in 2023. Felicia, you called out some competition and obviously, the weather. As we think about kind of same-store margins, is it safe to assume that properties that aren't being hit by competition could drive the same margins? Or is there a major reason why you would expect for margins to decline in '24?
Todd George, Head of Operations
This is Todd. I'll take that. Yes, that's basically everything that's modeled in there from a same-store basis, putting January behind us, looking at very strong, stable margins, I think the variables that Felicia provided are everything that's modeled in there but we don't see that changing.
Chad Beynon, Analyst
Okay. And then for '24, in terms of stock buybacks, can you remind us what's left on the program? And if there could be opportunities given where the stock is right now to buy back shares at these levels?
Felicia Hendrix, CFO
Yes. Thanks, Chad. We do have $750 million remaining on our stock repurchase authorization. But look, as Jay and I talked about in our prepared remarks, this is a year of investment as we focused on growing and building out ESPN BET. So you probably won't see share repurchases in 2024. But as we transition from the growth phase of our Interactive segment towards profitability and a free cash flow base, we'll have plenty of opportunities to consider return of capital to shareholders. But again, this year, we're focused on investment.
Jay Snowden, CEO
Yes. I mean, look, we have a pretty recent history of buying back shares when it makes sense for us and that's the best use of capital allocation. And right now, as we've covered in this call, we're investing in a high-growth business that's going to generate a lot of value for our shareholders long term. So that's the priority. It doesn't mean that you can't do or won't do anything else. It just means that right now, that is the number 1 priority.
Operator, Operator
Our next question comes from Steven Wieczynski with Stifel.
Steven Wieczynski, Analyst
Jay, considering the 1.2 million new members you mentioned joining your database, with 90% of them being ESPN BET customers, can you provide any details on how many of these new members have visited your physical casinos or used your iGaming platform? We are trying to understand the level of cross-traffic as your ecosystem expands.
Jay Snowden, CEO
Sure. We're in the very early stages, having only been at this for three months. We have developed a solid database and understand where our new members are located, with about a third living within 50 miles of one of our retail locations. We're now ready to start leveraging this information, which we haven't had much time to do yet. We're very excited about the cross-selling opportunities that arise from the influx of new members into our database, which is now nearing 30 million people—just a short while ago it was at 25 million. This presents a significant opportunity for us. Todd, do you have anything to add?
Todd George, Head of Operations
Yes, Jay. The only few items I would add and Jay gave the data point around how many people are so close to our property. When you expand that kind of concentric circle around our properties that number grows significantly. And then just based on what we did through some promotions at year-end with some of our properties moving these people to a property we see such a great multiple, especially on that low to mid-customer that's engaging with us online. When they get to a property, we're seeing great play, great engagement as well as additional spend on the other amenities. So that will be in the playbook as we move forward and it will be a key component this year and all the years as we move forward.
Jay Snowden, CEO
Regarding your question about cross-selling to iCasino, the monthly active user statistics from Hollywood Casino indicate that our cross-sell efforts have been successful. Our product is currently good, but we are striving to make it great. Our product team is dedicated to this improvement, and we expect our market share in terms of handle to continue to grow in line with our daily and monthly active user statistics.
Operator, Operator
Okay, got it. And then, this is probably for Todd. Going back to your embedded guidance on the top line for the brick-and-mortar side of the business. I guess, Todd, can you maybe give us a little bit of color of kind of how you guys are thinking about your core customer this year in terms of spend levels and maybe what gets you to the low end of that range versus the high end of that range?
Todd George, Head of Operations
Yes, Steve. Great question. So for us, especially this last quarter, maybe in the last 2 quarters, we did see tremendous engagement return from that 65-plus customer which has traditionally always been strong for us but just took quite some time to come back into our properties. So looking at those positive trends, those continue into this year. And then our core customer, looking at that mid-range high frequent customer, we are still seeing a little bit of elevated spend per trip and slight increase in trips in Q4. So looking at how that continues through this year in almost every region, that remains strong. So I would say that slight fall off maybe in the 21 to 34 which has been running hot for a long time but we make that up in the 65 plus.
Jay Snowden, CEO
Frank, why don't we have one more question, please?
Operator, Operator
We have a question from Bernie McTernan with Needham & Company.
Bernard McTernan, Analyst
I wanted to ask about Slide 8, specifically the weekly active users. I'm aware of the guidance regarding market share this year, but do you see a structural difference between your weekly active users and your handle or GGR share? I'm trying to understand if this relates to more casual users, potentially leading to a difference in spending, especially if your app is currently the second or third one being used, with the intention of eventually making it the primary app. How are you approaching that customer journey?
Jay Snowden, CEO
Yes, Bernie, we believe it's both factors. We have indeed attracted many new users, which indicates that we have expanded the market. It will take some time for these new users to match the engagement levels of those who have been involved in online sports betting for the past three to four years. Nonetheless, a significant aspect is how we capture a share of the user's spending; we are one of the apps they have on their phones, and they are actively using it. Our data shows that while many people are using our app, we are receiving a smaller portion of their spending. This is encouraging for us on a percentage basis. I think Slide 8 illustrates our potential well. This is not a long-term process; we are confident that we can achieve these goals within the next couple of years if we enhance our product. Additionally, strengthening our partnerships with ESPN, particularly integrating with their fantasy app, is expected to significantly boost our performance. We aim to have this in place before the year ends, ideally aligned with football season. It’s a combination of factors, but the key point is that people have and use the app; we just need to cultivate more loyalty among those users over time. Thanks, everybody for joining us and we look forward to sharing more with you next quarter.
Operator, Operator
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.