Greetings, and welcome to the Penn National Gaming fourth quarter conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. I would now like to turn the conference over to Mr. Joseph N. Jaffoni, Investor Relations. Please go ahead.
Thank you, Frank. Good morning, everyone, and thank you for joining Penn National Gaming's 2021 fourth quarter conference call. We'll get to management's presentation and comments momentarily, as well as your questions and answers. First, as our practice, 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 terminology such as expects, believes, estimates, projects, intends, plans, seeks, may, will, should, or anticipates, or the negative or other variations of these or similar words, or by discussions of future events, strategies, or risks and uncertainties, including future plans, strategies, performance, developments, acquisitions, capital expenditures, and operating results.
Such forward-looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance. 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 all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release as well as on the company's website. With that, it's now my pleasure to turn the call over to your host, the company's CEO, Jay Snowden.
Jay, please go ahead.
Thanks, Joe. Good morning, everyone. Here with me, and while missing as usual, is our CFO, Felicia Hendrix, our Head of Operations, Todd George, as well as other members of my exec team, and we're all happy to jump in and answer questions you might have later on the call. I thought before I get into prepared remarks, I first wanted to address the article about Dave Portnoy that dropped last night from the same paywall subscription-based publisher as the last article, and which also happened to be on the same day of our earnings call exactly three months ago. The allegations are from anonymous sources made about Dave and his personal life, and Dave has responded publicly. Many of you have probably seen that just as he did last time.
Before we get started, I just wanted to respectfully ask three things for the call today. One, if you have read or plan to read the article, I would just recommend that you also read and watch Dave's response that he posted last night. Two, that like last time, we give this time to play out. There undoubtedly will be more to come in the coming days, just as what transpired three months ago. Then lastly, that we keep today's call focused on Penn and our earnings release and our exciting and unique future outlook. With that, let me jump into prepared remarks. Throw my readers on here that my team's never seen me wear before, but I'm getting old.
We provided a link to the slide presentation along with our earnings report this morning that if you haven't already opened or printed it out, I would suggest you do it now if you have access. Our prepared remarks will reference several of those slides today. I'd like to start and spend some time on slide four, as it provides an appropriate backdrop for all of our comments today. There's been so much focus the last few months on online sports betting handle and questions about paths to profitability that I think it is helpful for context to highlight at a strategic level what it is that makes PENN truly different from the competition. We have the nation's largest portfolio of regional gaming assets that generate significant and sustainable free cash flow.
In fact, 2021 was a record year of free cash flow at Penn that resulted in year-end lease-adjusted net leverage of 4.1 times. This balance sheet strength and financial flexibility has afforded us the opportunity to pursue the continued evolution of our differentiated omni-channel strategy, which includes a thriving and profitable media business anchored by theScore and our investment in Barstool Sports and a rapidly growing interactive business with a clear path to near-term profitability and a long-term path to meaningful value creation. A path that is not entirely contingent on TAM or scale or marketing spend, but one that is more in our control and based on a business model and margin profile that has unmatched structural advantages that I'll cover in more detail a little later.
Given this unique competitive positioning and confidence in our future growth prospects, I'm pleased to share that our board of directors has authorized a $750 million three-year share repurchase program. Our strong financial position provides us with the ability to continue to grow our business and invest where appropriate, while also returning capital to shareholders in a rapidly evolving marketplace. If you move on to slides five and six, you can see that we had a strong finish to really what was a tremendous year for us at Penn with our fourth quarter revenues and adjusted EBITDAR exceeding both 2020 and 2019 levels, despite the ongoing pandemic.
I'm incredibly grateful for the hard work and dedication of our team members across the entire enterprise during this challenging time as they continue to deliver best-in-class service to our guests while managing the virus-related impact on their own lives. In the fourth quarter, we successfully advanced several of our long-term strategic objectives. Most significantly, we closed on our acquisition of theScore, a transaction that provides us with another powerful sports media brand, loyal audience, and full control of our product and technology roadmap. Looking ahead a year from now, we also have the opportunity to fully own Barstool Sports, which together with theScore, will mark our transformation into a major media and entertainment company. You will note in our release that we have created a new operating segment for Interactive, which delivered very impressive results, certainly relatively speaking.
I think there is a misperception right now in the market that there is no clear path to near-term or even medium-term profitability in the sports betting sector. I'd like to remind you that we are employing a very unique strategy, and we are already seeing the benefits of our disciplined marketing approach and numerous structural advantages. In fact, our Interactive segment exceeded our EBITDA expectations in the fourth quarter despite launching sports betting in Iowa and iCasino and sports betting in West Virginia, as well as some costs associated with the integration of theScore in an extremely aggressive competitive environment that's been well documented by many of you. We have all seen the incredible level of marketing spend in this space, which we all know is not sustainable in a competitive environment.
We have not, at PENN, and will not jump into that fray as we remain focused on channeling our investments into ownable and differentiated products, experiences, and technology platforms for our end users that will have long-term benefits versus spending irrationally on short-term marketing initiatives with very questionable returns. We are also very fortunate to have two dynamic and growing customer acquisition funnels in Barstool Sports and theScore together with our leading portfolio of retail casinos and sportsbooks that provide us with highly effective organic marketing and monetization opportunities without the need to incur massive losses to compete. We're going to stay committed to our strategy of leveraging these strengths.
Looking ahead, we expect our Interactive business to lose approximately $50 million in 2022, which is an improvement from our prior $80 million EBITDA loss for the year and obviously pales in comparison to the anticipated losses of the competitive set. Importantly, this estimate is inclusive of investments we are making to scale our operations and infrastructure in anticipation of bringing our technology in-house and launching in a minimum of four new jurisdictions. Regarding the cadence of the year, we expect to incur most of that EBITDA loss in the first three quarters as we launch in several new markets and prepare our products and technology stack for football season 2023, sorry, 2022. By 2023, we expect to be generating positive EBITDA in our Interactive division, as I've said before.
As I mentioned earlier, we see a lot of attention in the press about handle market share. While that is a useful metric, particularly when a state first launches, it doesn't mean as much when those incoming dollars generated from that handle are completely offset by marketing and promotions. While we think this point is becoming more widely understood, unfortunately, because of the varied ways the states report sports betting metrics, the investment community is forced to use handle to compare company performance in each state. Fortunately, there are a few states that report net gaming revenue, which we believe is a more relevant measure of performance. You can see that in states like Pennsylvania and Michigan, our NGR market share underscores the benefit of our profit-focused strategy, as shown on slide 16 in our slide deck.
While we, like all operators, have seen volatility from month to month based on hold and always will, with the return of football season, we have gained traction pretty much across the board with our online sports betting revenue, more than doubling in the fourth quarter. We are doing this while spending a fraction, a small fraction of what our competitors spend on marketing. Our performance in New Jersey, which is perhaps the most competitive online sports betting market in the world, is particularly notable as we captured meaningful share despite launching three years or more after our primary competitors. Felicia and I regularly are asked when we can expect to see positive contribution margin following new state launches.
As you will see on Slide 18, our low customer acquisition costs and high retention rates are providing a very short payback period, specifically within two or three quarters of launching in a state. By the time we are in a state for a year, we typically achieve over a 2x return on our initial investment in that state. This return is even faster, of course, and higher in states that also offer online casino. Slide 19 reinforces this point by illustrating the impact of our structural advantages versus the competition. We are confident our organic marketing strategy and market access footprint will lead to outsized profitability over the long term. This doesn't even factor in the impact of our retail sports books, which are highly profitable and provide significant opportunities for cross-sell.
We now operate 24 retail sports books across the country, and we estimate that our total retail market share outside of Nevada is 12%. In Louisiana, we generated over half of the state's retail handle and revenue during the first two months of operation at temporary sports books at our five casinos. We expect even greater upside when we complete the Barstool rebranding at our signature locations in Lake Charles, Baton Rouge, and Bossier City. Speaking of Louisiana, following our recent launch of online sports betting there on January 28th, we now operate online sports betting in 12 states and iCasino in four.
Looking ahead, we have several important milestones on the horizon, including anticipated launches in Ohio and Maryland, the establishment of remote mobile registration in Illinois in early March, which, if you recall, we went live about a year ago and only had one month of remote mobile registration before it reverted back to on-prem. That's a big deal for us in the state of Illinois. The recently announced launch date for sports betting and iGaming on April fourth in Ontario. Speaking of Ontario, just to quickly recap, on December twentieth, theScore Bet became one of the first mobile gaming operators to secure certification from GLI for its sports betting and iGaming platform in the province of Ontario. Just yesterday, the Alcohol and Gaming Commission of Ontario approved theScore Bet's registration as an internet gaming operator.
These are two important milestones before theScore Bet can begin operations in the province on April 4, and theScore continues to work to satisfy all remaining requirements, including execution of an operating agreement with iGaming Ontario. Our team at theScore has been hard at work preparing for this launch in their home province for a long time, a province with a population of 15 million people, which would rank as the fifth largest state in the U.S. on a population basis. We believe theScore Bet brand, supported by the personalities at Barstool Sports, will allow us to be very competitive in that highly lucrative market. As for our iCasino products, we made a number of upgrades during the quarter, including the introduction of our first in-house developed games.
These improvements have led to steady month-over-month growth this past fall in both handle and revenue for the Barstool Casino. I'm particularly pleased with the performance of our in-house games, which have contributed over 20% of our Barstool Casino handle and revenue since their launch. Our ability to leverage Penn Game Studios in developing bespoke games like Barstool Blackjack and Barstool Slots allows us to capitalize on cross-sell from the Barstool audience while also reducing third-party content fees. We see opportunity to expand our iCasino share this year as we refine our omni-channel strategy to better leverage our growing mychoice database, which is now over 25 million members. Turning to the retail side of the business, we saw strong property-level performance across our segments most of the quarter, with some softness in late December due to Omicron and the increase in COVID-related restrictions.
Our properties are still seeing strong visitation from the younger demographics, and we are continuing to reimagine our casinos with offerings such as our market-leading retail, Barstool Sportsbooks, and other food and beverage and entertainment options that will help to drive long-term retention of this demographic. Overall, we continue to benefit from a rational and stable marketing and promotional environment and feel confident that the EBITDAR flow-through achieved in the second half of 2021 is sustainable, barring any unforeseen macro or competitive developments. In December, we celebrated the opening of Hollywood Casino Morgantown, our fourth casino in Pennsylvania and the forty-fourth property in our industry-leading portfolio.
Like its sister property that opened last August in York, Pennsylvania, this state-of-the-art casino, about an hour outside of Philly, is built for the future with our new technologies and customer conveniences, including our 3Cs, cardless, cashless and contactless, PENN Wallet experience. The property also features the latest evolution of our Barstool Sportsbook, Tony Luke's famous cheesesteaks, and several other F&B and entertainment amenities. We're encouraged with the early results at Morgantown as we were able to reach into a new market with approximately 80% of our rated business being driven by new members to our active database. The 3Cs are now live at all of our Pennsylvania properties and our 4 casinos in Ohio, and we are excited about the potential to introduce this technology to additional properties across the portfolio, pending regulatory approvals.
Our 3Cs solution removes friction from transactions and reduces wait times and lines while also bolstering our marketing capabilities. Our mychoice loyalty app now has nearly 750,000 downloads, up 23% during the fourth quarter, and we now have 30,000 users of mywallet, which provides our customers with a seamless mobile wallet solution to connect directly to their favorite games. With that, I'll now turn it over to Felicia Hendrix.
Thanks, Jay. As Jay referenced, we generated record free cash flow in 2021 of approximately $800 million, as well as record net leverage of 4.1x. Given our strong financial positioning as well as our confidence and improved visibility in our overall business, we not only received board authorization for a 750 million share repurchase program, but we're also reinitiating guidance. For 2022, we're providing a net revenue range of 6.07 billion-6.39 billion and an adjusted EBITDAR range of 1.85 billion-1.95 billion, which implies a 37% EBITDAR margin at our core operations. We believe these ranges capture the uncertainty that still exists in most consumer sectors while also appropriately bracketing our financial expectations for the year.
I'd like to provide you with several other metrics to help your modeling. For 2022, our corporate expense is expected to be 100.5 million, inclusive of our cash settled stock-based awards. Maintenance CapEx is expected to be roughly 300 million. We expect total interest expense of 566 million, of which 95 million is cash interest, cash taxes of 159 million, and an annual share count of roughly 187 million. Our new interactive reporting segment that we added this quarter reflects our view that the results of our interactive operations represent a strategic and high-growth component of our overall operations.
The Interactive segment, which was previously reported within the Other segment, includes the operating results of Penn Interactive, including Barstool Sportsbook and Casino, theScore, and our proportionate share of earnings attributable to our investment in Barstool Sports. Corporate expense will continue to be reported in the Other segment, in addition to standalone racing operations, other joint ventures and management contracts, and the Heartland Poker Tour. As a result of this change in reportable segments, we recapped previously reported segment information to conform to the current management view for all prior periods presented, which you can find in this morning's release. These changes have no impact to our company's consolidated financial statements. Before I hand it back to Jay, I'll just leave you with a few housekeeping items. In the fourth quarter, corporate expense, inclusive of cash settled stock-based awards, was 24.3 million.
Our cash rent payments were 228.8 million. Cash interest was 14.8 million. Cash taxes were 32.7 million, and maintenance CapEx was fifty-five point three million, with total CapEx at 102.1 million. Our balance sheet remains a key asset for us. Total liquidity as of December 31, 2021 was 2.5 billion, consisting of 1.9 billion in cash and our 700 million undrawn revolver. Traditional net debt was 886 million, an increase of 841 million during the quarter, principally due to a cash payment of approximately 923 million for the acquisition of theScore. As Jay mentioned earlier, our lease-adjusted net leverage was 4.1 times, a record low for the company.
Our balance sheet gives us the flexibility to be opportunistic in a dynamic marketplace and to return capital to shareholders through share repurchases. While we're not guiding to an optimal net leverage level today, our strong free cash flow generation should enable us to naturally de-lever over time. With that, I'll turn it back to Jay.
Thanks, Felicia. As you saw in our release, we're continuing to expand on our ESG initiatives as well and look forward to sharing our 2021 corporate social responsibility report in April in conjunction with our proxy filing. Highlights from the quarter include the launch of a $4 million STEM scholarship fund and internship program at historically black colleges and universities in states in which we operate. In addition, we started a new pilot program to help mentor and develop our hourly and early career team members who want to pursue leadership positions at our company. We also kicked off our annual $1 million diversity scholarship program for the children of team members and are now reviewing applications for the 2021-2022 school year.
In our inaugural year, we awarded over $1 million in two- and four-year scholarships to 58 individuals, the majority of whom were first-generation college students, which is an awesome story. We expect this year's program to be similarly successful, and I look forward to sharing more details with you next quarter. In other positive PENN news, earlier this week, we were honored to come in second place out of 34 companies as an employer of first choice in the annual Casino Gaming Executive Satisfaction Survey by Bristol Associates and Spectrum Gaming. I believe that now marks six or seven, maybe eight years in a row that we've finished first or second in this anonymized survey. We're also proud to report that in the iGaming and mobile sports betting division, Penn Interactive came in first place out of 28 organizations. Congratulations to everybody at PENN and Penn Interactive.
Our support of our nation's heroes also continues. We are approaching 100,000 customers enrolled in our myheroes loyalty program, which provides special benefits for veterans, active-duty, and first responders. When we hit that milestone, our properties will be contributing $100,000 to local veterans groups in their communities. In conjunction with this year's Army-Navy football game, Barstool Sportsbook ran a special Viva La Stool promotion, matching certain first-time deposits and raising $200,000 to support the Fisher House Foundation and Semper Fi & America's Fund veterans organizations. Yet another example of how our marketing approach can be a win-win for our bottom line and those in need in our communities.
Let me just reiterate how excited I am for the significant milestones ahead of us over the next 12-24 months, including several new state and province launches, the debut of theScore's proprietary risk and trading platform in Ontario, the integration of the Barstool Sportsbook into theScore Media app in the U.S., and the migration of the Barstool Sportsbook to theScore's player account management and trading platforms before football season 2023. With that, Frank, we'll turn it over to you, and we'll open it up for our first question.
Thank you. Ladies and gentlemen, if you would like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. If you're using a speakerphone, please lift your handset before entering your request. One moment please for the first question. First question comes from Joseph Greff with J.P. Morgan. Please proceed.
Good morning, everybody. My first question is a multipart one and relates to your 2022 guidance and related commentary. One, what's your assumption for same-store land-based revenue growth? How much of the $6.2 billion or so in revenues relates to interactive? I know you gave us, you know, sort of an EBITDA metric for interactive for this year.
Yeah, Joe, we're not gonna comment on interactive guidance at this point on the revenue side. We have given you the historical levels, and we've given you the EBITDAR, but we're just not at the place yet where we're gonna start talking about on the revenue side. I'll turn it to Todd for the same store.
Thanks, Felicia. Joe, basically, we're looking at relatively flat, some upside in the South, but we are going to have
Some headwinds related to our Council Bluffs property, which will see new competition coming from Nebraska later in the year, as well as a full year now in East Chicago with the Hard Rock property. Then we'll have just one more in Lake Charles with Horseshoe, the former Isle property being rebranded as a Horseshoe in Q3. All in all, it'll be minimal growth on a same-store basis due to those being offset by some of the other properties.
I would only add to Felicia and Todd's comments, just from a sort of, you know, quarter-to-quarter cadence perspective, Joe, that Q2 is gonna be really hard to match, I think, for everybody in the industry. That was definitely sort of as good as it gets high watermark. As you think about quarterly modeling, I think, you know, Q1, assuming that, you know, Omicron impact really does fade away here as we enter February, and we can get some bad weather events on weekdays versus weekends, which would be nice, which didn't happen in January. I think you should expect Q1 to show upside versus last year Q1. Q2 would likely not meet Q2 of 2021. Q3 and Q4, probably pretty close to in line with what we saw in 2021.
Somewhere thereabout, I think, is a decent way to model quarter by quarter.
Yeah, great add, Jay. Again, Joe, excellent point by Jay on Q1 because we do have a somewhat favorable comparison, as last year, especially in the Midwest, there were a lot of restrictions still in place.
Got it. Then, Felicia, you gave us a breakdown on different 2022 items such as maintenance CapEx. Can you repeat that? Was 300 million the right number?
Yeah. Joe, thanks for that question.
Why is that so high?
Yeah. Historically, it's been about 200 million. There's a few items in there now, revenue-enhancing investments, such as investing in Barstool Sportsbooks, our retail sportsbooks. On the hotel side, we're renovating our hotels with a very new and exciting prototype. Also, our investments in technology and 3Cs are in that number. I would use, even as you're modeling out, you know, past 2022, for the near term, 300 million as your new maintenance CapEx number for a while.
Okay. My last question, I was gonna ask something on Barstool and Dave, and maybe I'll ask that offline after the call. Jay, just thinking about Ontario and the anticipation of the market dynamics there and competition there. When you think about Ontario versus some of the U.S. markets, what's different about Ontario? What's similar to Ontario versus some of the maturing online sports betting markets in the U.S.?
Good question, Joe. I honestly think there's probably more differences than similarities as I look at any of the individual states here in the U.S. for a couple reasons. One, Canada has been a gray market for some time now. But the regulators in Ontario are requiring those gray market operators to go through some KYC and regulatory requirements before they relaunch post-April 4. I think that'll be interesting to see how that plays out versus maybe some of the, you know, U.S. markets, not so much gray operators. It was more of a dynamic where maybe people were betting illegal offshore with bookies, whereas it was really gray. They were there. It wasn't illegal or legal, just kinda gray.
We'll have to see how that competitive dynamic with gray market operators in Canada plays out. One of the other factors that I think is encouraging versus what we've seen in all the U.S. states is that there are advertising restrictions in Ontario as it relates to gaming. You cannot advertise promotions or discounting to your business, which we welcome. It's gonna be a lot more about, I think, just educating. You know, we'll spend some money when we launch there because you're really in education mode about this move from gray market to above the board market legalized, and you wanna make sure that people know who those legal operators are going forward.
I like the fact that you can't just put your business on sale and heavy discount to get people to download and deposit and bet, which is what we've seen here in the U.S. in most states. Lastly, of course, we think we have a. We're in a really strong position because I think it's somewhere close to 20% of people in Ontario have the theScore sports media app on their phone. You think about the ability to convert from sports media to sports betting when you can do both on the same app and see all the live odds. If you're just in there checking scores, you're gonna know very quickly if you're a theScore media app user that we are now offering live sports betting with the theScore Bet app.
I think we're in a really strong position. Obviously, we're gonna be very focused on conversion of sports media to sports betting. We're gonna definitely make sure that everybody in Toronto and greater Ontario that they definitely know that we're now live and that it's a legal market, and that there are legal operators that have offerings there. We'll have to see how it plays out. Certainly, our expectation is to be, you know, kind of, you know, no lower than low double-digit market share from an online sports betting perspective. Maybe, you know, on the online casino side, we'd like to start off in the mid to high single digit range, and then just continue to grow both of those from beginning.
Great. Thank you.
Thanks, Joe.
Our next question comes from Bernie McTernan with Needham & Company. Please proceed.
Great. Thanks for taking the question. Good morning. I was wondering if I could just pry a little bit in terms of the 2023 interactive guidance as to what meaningful means. Are we talking tens of millions of dollars or maybe something bigger than 100 million?
Yeah, I would say stay tuned, Bernie. I mean, I don't wanna get too far ahead of ourselves. It'll be real EBITDA, and you will likely not have to wait until football season to see it. I actually think we have a good chance of football season 2022 showing profit. Really depends on the Ontario launch and momentum and is Ohio live yet and Maryland. I think once we hit that point of being profitable, which hopefully is late 2022, you should expect that to just go forward ramping into 2023.
Understood. Thinking about that $50 million investment, going into profitability in 2023, is it possible to break down maybe the 50 million into some buckets, whether it's U.S., Canada, and the tech stack? Not sure if those are the right three to think about, but if there's a way to kind of bracket it out.
Yeah. At a high level, Bernie, I would say that you should think about our interactive operation in the U.S. as a standalone as being profitable in 2022, which I think is noteworthy, but, you know, we didn't wanna over-highlight that because at the end of the day, it's still, you know, net negative 50 when you put everything together. There's gonna be continued ramping and scaling of our headcount and our infrastructure as we are continuing to hire lots of engineers and product development people working on our tech stack. So there's a lot of staff ramping that's going into the technology investments, which is actually going very well, and we're so pleased to have a big office in Toronto where we can recruit people.
Of course, the Penn Interactive office in Philadelphia, where we do the same thing. There's definitely gonna be an investment into Ontario at launch because of the education investment that I mentioned earlier of just making sure people in Ontario know that you have live and legal sports betting options as opposed to maybe gray market ones that have been offered for a long time in that marketplace. When you throw all that into the pot is where you get to approximately a negative $50 million EBITDA. If you just think about the core interactive operation in the U.S., it will be profitable in 2022.
Understood. Thanks for taking the questions.
Thanks, Bernie.
Our next question comes from Barry Jonas with Truist Securities. Please proceed.
Hey, guys. Can you talk about the health of the consumer in this rising inflationary environment? How much of that weighs into your guidance beyond the new supply risks you talked about?
Hey, Barry, this is Todd. Great question. What we've seen, I mean, obviously last year, there was some stimulus money floating around through many of the quarters. You know, the encouraging, take Omicron out and some calendar noise in December, what we saw in Q4 has continued into January outside of weather, especially the second half. We actually just were coming off the best weekend that we had in January was actually this last weekend, and that was with we actually had property closures at Bangor and Plainridge up in the Northeast, but the rest of the country seemed pretty healthy. I feel that we're seeing increased visitation in many of our properties, but really much of the story as it was last year continues into this year, where a higher value per trip.
People are still coming in and they're spending to the levels that we were seeing in 2021. To date, it hasn't really been much of an issue for us.
Great. Jay, maybe just a high-level follow-up question. As the overall North American interactive market develops, has anything changed in your view relative to the size, scale, or maybe timing of Penn's long-term opportunity?
Well, there's always, you know, the big question that we can never answer with accuracy is what is the TAM going to be? When are more states gonna legalize online gaming? How many states will there be at full scale from an online sports betting perspective? What's gonna happen in California and Texas? There are a lot of questions that we unfortunately can't answer, I think we have a perspective on. No, I think that, you know, with the way we viewed this opportunity from the beginning, and we still do, is that online sports betting is an unbelievable acquisition tool for us. It's not ever going to be as high margin standalone as online casino or brick-and-mortar casino. Because of our structural advantages, we think we can run industry-best margins in online sports betting. We have marketing advantages.
We're gonna have technology advantages. Of course, we have access advantages given our footprint. Things have, I guess, played out mostly how we thought they would. We wanna continue to improve our market share in online casino. We have not performed as well there as we anticipated performing, and we're on top of that. We have, you know, created Penn Game Studios, which has put out some fantastic bespoke product and content that we're already seeing over 20% of our handle in online casino coming from games that we created. That's very encouraging as we'd love to see that get to, you know, 50%+ down the road, and we've only launched a few games up to this point. I think we're very pleased with the things that we have within our control.
We think the launches this year, in particular Ontario and Ohio, are very, very exciting for us. Throw Louisiana in there as well because we have such a strong presence from a retail casino perspective in Ohio, as well as Louisiana. Then, of course, in Ontario, we talked about that already. No, I wouldn't say the outlook is different other than the you know, the big question has been and continues to be what is the ultimate TAM going to be? But as I mentioned in our prepared remarks, from our perspective. You know, we've got a model that is built to make money, and that's what we do at Penn. Whether that TAM is 20 billion, 30 billion, 50 billion, we're gonna be in the business of making really good margins and generating cash flow.
That's great. Thanks so much.
Thanks, Barry.
Our next question comes from Ryan Sigdahl with Craig-Hallum Capital Group. Please proceed.
Good morning, Jay, Felicia, and congrats on the strong business trends and good to see the buyback authorization as well.
Morning, Ryan.
Curious on interactive. I know there's been several questions, but the loss you were previously expecting a couple months ago, 100 million, give or take in 2022, it's half that now. I guess first was New York in that previous assumption, and then secondly, what's changed positively versus a few months ago?
Yeah, happy to. Honestly, when we talked about this on our last earnings call, New York was not in our assumption because we hadn't heard one way or the other. We wouldn't have built that in, because we just didn't know at that time on the call. It really, over the course of the fourth quarter, we just continued to, you know, operate, I think, smart. We didn't know what the heavy promotional environment and paid media spend environment was going to do in terms of pressuring our margins and maybe moving customers. I've been blown away, impressed at the resiliency and the retention that we see in the online sports betting space.
As we shared in a couple of our slides, and as you saw throughout the fourth quarter, we didn't change the way we market in the fourth quarter. It was as irrational as you could ever imagine, the amount of money that's being burned that I'm sure we'll hear about from future earnings calls this quarter. We didn't jump into the fray, yet we grew our market share, and we were operating at better margins than we anticipated. We had built in a little bit of flex there of, well, what if we need to spend a little bit more in marketing to hold on to our base. Instead, what we saw, as we said we probably would, which was football season came back, we saw our market shares in states that we've been live in, like Michigan and Pennsylvania, bump back up again.
Our MGR market share was the best quarter we've had, I believe, in both of those states since launch. We did all that without participating in the really aggressive discounting that we see from most of the others. You know, we're really, really pleased with how we see the interactive business, and that's why we anticipate the loss being less in 2022 than we did just a quarter ago.
Great. Just moving on to the retail side with one. You have the 3Cs at eight properties now, I believe, added one quarter-over-quarter. You have a little bit more duration at a few of these properties now. Any financial metrics you can share kind of before or after of what that looks like from either a play standpoint, a margin standpoint, etc.? Thanks. Good luck.
Yeah. Thank you. A couple things. We're live in Pennsylvania and Ohio. Today, what we're seeing, obviously the whole goal with this was to remove friction. We've been able to improve service times. We're obviously taking people out of the lines at the cage and at the players club. That has helped, and it all drives more time on device, more time playing. That all helps. Then we've seen this adoption that you would normally see from the younger demographic, and really this is what we thought we would see, but it's now working into the older demographics, thirties, forties. We're seeing actually people that are engaging with us with the app and with the wallet.
We're seeing actually a higher level of play, some of that driven by, they're more engaged, and they're making more trips. This is a very encouraging trend for us as we look to roll out into the other states. It's really kind of proof of concept was in Pennsylvania, and now moving into Ohio, we're starting to pull these trends together, and we'll have more to talk about as we have more time and more people adopting the technology.
Todd, do you wanna maybe also highlight the demographic trends we're seeing by age in the fourth quarter and even into January? It's very encouraging when you think about technology launch and how sticky these relationships have become.
Yeah, great point, Jay. You know, really last year, I think we've talked about this in some of the other calls, that younger demographic is what everybody was trying to solve for and how to get the younger demographic into casinos. Q4 was not unlike the other quarters. You know, really that under 35 demographic was up about 40% year-over-year, and then the 35-44 was up high 30%. The part that's been missing, we actually started to be able to see some of that coming back. That 55-64 was up about 6%. The 65+, that will be the one that is really impacted by flare-ups of the Omicron virus. We were seeing encouraging trends October, November, first part of December.
As Jay spoke to in his opening remarks, when we had that bit of a flare-up, that part is still lagging behind. We feel that once we can move some of these things behind us, that will be the last segment that comes back. Especially with these younger demographics that we're seeing, you know what, I would throw the unrated play segment in there as well. That was still up 12% for the quarter. All of these are greatly encouraging, and we feel comfortable that with our technology rollouts, we'll see higher adoption than what we initially modeled.
Yep. I would just add, too, Todd hit it earlier in terms of, you know, some new competition in a couple pockets across the U.S., that when you pull those impacted properties out, our margins obviously look even better. I think we pick up another over 1,000 basis points, or excuse me, 100 basis points when you pull those out. So it is something that I'm not sure was modeled not well enough into people's estimates in terms of how they thought about Q4 and how they think about 2022.
I think the fact that we're gonna, you know, we're anticipating coming in at the property level of roughly 37% margins, which is gonna be, you know, 500 basis points plus better than 2019, is really impressive given that we've got, you know, Chicagoland and Nebraska, Colorado, you've got some pockets of new competition or new supply entering these markets.
Well done. Thanks, guys.
Thanks Ryan .
Our next question comes from Stephen Grambling with Goldman Sachs. Please proceed.
Hi. Thanks. Jay, you noted that there's the opportunity to buy the remainder of Barstool. What are the key considerations that you are evaluating in determining the right ownership level? And would the leadership team and/or content creators at Barstool have to be licensed at certain ownership levels, or would that impact their ability to create certain types of content or even bet on the app? Thanks.
Yeah. I mean, we're we couldn't be more excited about moving our ownership position up from its current 36%. We anticipate at the third anniversary that obviously it naturally contractually goes up to 50% as we've disclosed before, and then there's put call rights after the 50%. We anticipate taking that to 100%. There really isn't sort of a decision process. We look forward to being the owners of Barstool 100%. They've been great partners of ours. It's a hyper-growth sports media business. They've grown their revenues over the last two years somewhere close to 150% in total. It's profitable, which, you know, most smaller sports media businesses don't make money. They're not even that small anymore. They burn quite a bit.
We're really excited for the third anniversary. You know, in terms of what is the structure and how that, how does that impact certain things from a licensing perspective, I would just say TBD on that one. Those are things that we're continuing to work through internally. It won't just be, you know, we acquire Barstool, and then we don't announce anything beyond that. I think there's gonna be some structural implications as well, and we're working through all of that behind the scenes. You should expect to hear something before the end of the year.
Got it. That's helpful. Then on the buyback, maybe this is for Felicia, I know that you have a three-year window there, but is that generally the cadence that we should think through? Or, you know, is this purely opportunistic, or will it be viewed more as a consistent buyback? And if it is opportunistic, is there any kind of upper bound on leverage ranges that you'd be willing to go to take advantage of the stock?
Yeah. Thanks, Stephen. I don't think we're gonna talk about the cadence of our buyback program, but it is a three-year program. Like you said, we are gonna be opportunistic. Obviously, it also gives us the opportunity to offset you know, stock option dilution. So it puts us in a much stronger place than we've been in for the past few years. Then, you know, obviously, over time, we have to balance our choices of you know, buyback or growth. You know, we're in this great situation where you know, it's not an either/or for us, right? We can continue a buyback program and pursue growth opportunities at the same time given our balance sheet.
You know, regarding the leverage on our 4.1x now, we are looking at that level as being kind of where our focus is. You're probably not going to see us do anything that would be meaningfully levering. So as I said before, we're not gonna talk about an optimal level, but we really like where we are now. That's always gonna be a focus for us as well as we think about the different opportunities that we face. I would think about it as a three-year program and us being opportunistic as things come up.
Yeah. I would just add, Stephen, I know you know this, I think it's lost sometimes that we generate significant free cash flow, and we could use, you know, the majority. I'm not saying we're going to. We could use the majority of that authorized share repurchase level in 2022 and have it not be a levering event for us. We'll be opportunistic. I think we obviously feel like we're undervalued. That's why you put these things in place, and there might be some dislocation in the marketplace. We'll see how things play out. We'll see how the cadence works out. It felt like a natural time for us to institute that authorization.
Makes sense. That's all super helpful. I'll jump back in the queue. Best of luck.
Thanks, Stephen.
Our next question comes from Shaun Kelley with Bank of America. Please proceed.
Hey, good morning, everyone. Jay, I just wanted to go back to your comment. I think maybe it was in Felicia's part of the prepared remarks where you talked about the 37% core margin. Just to be kinda clear on what's in that, is that excluding interactive on both sides, so both revenue and obviously both corporate and losses from the online side or investments for the online side? That's kinda the first question on just clarifying that. The second would be, I think that's actually a little bit better than what you did this quarter. What would be driving improvement if I'm doing the math right?
Yep. You are doing the math right, Shaun. It's apples to apples. It excludes interactive. It excludes corporate expense and racing and the other stuff that falls in other. It is slightly better than fourth quarter. You know, fourth quarter is typically one of your, if not the slowest quarter of the year, certainly from a margin perspective, it historically has been for us. There was some Omicron impact during the busiest week of the year, Christmas to New Year's, as we definitely felt a bit of a fall off from what we were seeing earlier in fourth quarter and what you would have anticipated as a normal ramp heading into the holidays. We feel like 37% is a good target. It's gonna be, you know, aggressive, but we think we can achieve that internally.
Todd and our team of regionals and our general managers have and continue to do an amazing job of sharing best practices and, you know, just looking under every rock and, you know, making sure that we're thinking about the business differently as we launch new technologies. You know, it's very difficult in this environment, as you can imagine, Shaun, but we debated this guidance thing over and over and over again because one thing we know is the number we gave will be wrong. I don't know if it's gonna be, you know, directionally, we feel like we gave a number that we hopefully can beat or exceed. If there are new variants and casino restrictions and shutdown in some markets, it's very difficult to anticipate, but 37% at the property level feels achievable for us in 2022.
Yeah, Shaun, the only thing I would add, and Jay Snowden touched on it, that week between Christmas and New Year's is really, you know, it's what saves December or the time from Thanksgiving to New Year's Eve. When that saw the spike in Omicron, it really made it difficult. Also the way the calendar laid out, you typically have a weekend between Christmas and New Year's, and obviously with Christmas holiday following on the weekend and New Year's Eve following on the weekend, you kind of lost the extra days where you outperform and over-index. I think with all that and then the seasonality, again, Q4 is kind of a tough comparison. You know, our 37%, it doesn't mean that we're 37% every single month.
There is some seasonality in there.
It's really encouraging. Thanks for the detail. Just as my follow-up, yeah, Jay, kind of zooming out a little bit, you know, kind of curious on, you know, theScore, it's an interesting acquisition, and obviously there's a lot of directions you can take it. You know, could you talk about just sort of getting maybe some more content and traction for that app here in the United States? What might it take to convert, you know, maybe some of that business into actual revenue? Obviously, its usage and its loyalty is extraordinary. It's kind of trying to figure out how monetizable that might be in the next couple of years.
Yep. Remember, when we announced our acquisition of theScore, it was really for three strategic reasons. One, number one sports media app in Canada, and we knew Ontario was coming soon in terms of legalized online sports betting, online casino. Number two, it's a very healthy and fast-growing media business as a standalone, so we knew there would be a great opportunity of audience conversion. They are as good as they come in the sports media world in terms of retention. They really just don't lose users. When people download the app, they use it a lot, and they stay in the ecosystem. Of course, last, this is a technology company that is, you know, helping us to solve for owning our tech stack and our product roadmap, short term, medium term, long term.
Those are the reasons why we made it happen. You know, last one, culturally, we are very aligned with the Levys, and it gets back to your question in terms of the U.S. where they didn't jump into the fray either. They didn't burn through, you know, $10s of millions or $100s of millions of paid media expense. They wanted to make sure that they launched. They're live in four states, or we're live with them in four states here in the U.S. We don't plan on them going live in more states in the U.S. because we're gonna work on integrating the Barstool Sportsbook into theScore media app across the U.S. So they've really been able to just sort of perfect what they do and try a lot of things with their new PAM and promotional engine here in the U.S.
In preparation for Ontario, I would expect that you should see improvements in the U.S. in terms of our ability to convert theScore media ecosystem to Barstool Sportsbook as we throw more effort at that in the second half of this year around football season. We'll have more information to share with you as the quarters tick on. The focus right now is on building out the tech stack and a very successful launch in Ontario.
Thank you very much.
Our next question comes from Chad Beynon with Macquarie. Please proceed.
Hi, good morning. Thanks for taking my question. Congrats on the results. On slide 15, you laid out the handle and the gross gaming revenue for the sportsbook. It appears that your, the conversion or the hold rate is higher than, you know, what some of your peers have been talking about. I'm assuming that's just because of the, you know, lower reduction from promos, which Jay, you also highlighted as a big strategy. I'm wondering if you can just talk about, you know, how you see hold rates long term, and then any mix of pre-game versus in-game, that you're happy to disclose for the quarter. Thanks.
Yeah. Hold percentage, it's sort of like talking about blackjack hold. It's some quarters work for you, some work against you. There are times where you can have a really good hold in a quarter and then, you know, Mattress Mack beats you for 5 million and there goes your hold for the quarter. We have the balance sheet to be able to fade action like that, which is why Mattress Mack and VIP players like that enjoy betting with us amongst our service and VIP focus. I think that over the long term, we've sort of modeled in somewhere in that 7%, maybe 7.5% hold. If you look at our life to date results across all of our online sports betting launches, that's about where we are.
I think we're at like 7.1%-7.2%, somewhere in there. I don't know, Chad. I would imagine that's probably gonna be about average for industry. We obviously are really placing a significant focus on our in-game offerings, and we launched it in football season this year. It was the first time that we had same game parlay, or what we call Parlay Plus. That was very popular. We saw the parlays as a percentage of total handle went up significantly in football season this year. That probably drove some of the hold percentage premium that you're referencing. Also, you know, we just tend to be more disciplined around what we're giving customers to generate the revenue.
We try to give them enough to be, you know, somewhat competitive and to make sure that we're able to incentivize them to stay loyal with us without giving them so much that it actually exceeds your total revenue brought in, which is what we're seeing with a lot of the competitors on an NGR basis, when you think about their total marketing reinvestment. Anyway, I think from a whole percentage standpoint, you should probably just model in somewhere in that 7%-7.5% range. I would like to see our in-game betting percentages continue to increase. They have been. I think that as you have seen over in the U.K., those percentages will continue to be outsized as opposed to pre-match. Some sports in the U.S., it's just hard for in-game. Basketball moves too fast.
Baseball is a perfect in-game betting sport, and we will be live at the start of baseball season whenever they get through this labor dispute. We will be live with same game parlay for baseball season this year, which I think is gonna be a nice shot in the arm for us, 'cause if you only have pre-match in baseball, it's just a long, slow game. In-game, you know, it keeps the fun going throughout and keeps you engaged as you're consuming that content. I would expect to see some improvements in terms of, you know, how we perform during baseball season this year with better products. We've made other enhancements to our app as well. You know, we'll see what happens to hold percentage in baseball season now that we have that product.
Thanks, Jay. From a land-based portfolio standpoint, there were a few assets that traded in 2021 in Vegas, and it appears that there's a few more for sale in 2022. Just wanna take your temperature on how important the consideration for a destination property is at this point.
Look, it would be nice to have one in the portfolio. I just would really stress that we're not gonna chase something that we can't get a return on. You know, there's been a couple of transactions recently, but actually three transactions recently in Las Vegas. You know, they were at valuations that we weren't comfortable with. One of them, I think, you know, that was worth stretching for because of the condition of the property and how new it is, but you should not expect Penn to be a leading bidder if it's an irrational competitive bid process. With all of that said, you know, we have the balance sheet to do things that not every company can do.
If the price is right and the property is right for us and the location is something we're comfortable with, we would probably take a look at it at a minimum and kick the tires.
Thank you very much.
Thanks, Chad. Frank, we'll take one more question.
Next question comes from Ben Chaiken with Credit Suisse. Please proceed.
Hey, how's it going? Thanks for taking my question. Just a quick clarification from earlier. I believe this might have been in response to Shaun's question. You were mentioning taking some of the attributes of the Barstool Sportsbook and adding it to theScore app in the U.S., if I heard you correctly. Is that in line with the strategy you've been thinking all along, or were you emphasizing theScore in the U.S. a little more than previously maybe? Again, more about clarification there. Thanks.
Yeah, happy to, Ben Chaiken. When we announced that we were acquiring theScore, what I had said at the time, which is, by the way, consistent. Not to say we won't change our mind on things, but on this one, we really haven't changed our minds, which is that we would be leading with theScore Bet brand in Canada and supporting it with Barstool personalities and content, but really pushing that audience to theScore Bet. In the U.S., the exact opposite, where we'll continue to lead with Barstool Sportsbook and do our best to move that theScore audience onto Barstool Sportsbook. I think having two different sports betting brands in the same market gets confusing.
We felt like just keeping it simple and focusing on one brand in the US versus the other brand in Canada was the best course for us. With all that said, we might find a year from now that was wrong, and we wanna have both brands in both markets, and we're launching Barstool Sportsbook in addition to theScore in Canada and vice versa here in the U.S. As of right now, really since we started talking to our partners up at theScore, the Levys, and as we talked about it with Dave and Dan and Erica and our team internally here at Penn, we all agreed that was the right approach, single brand Canada, single brand in the U.S.
Makes sense. I appreciate it. Thanks.
Thanks, Ben. Thank you everybody for joining us this morning, and we look forward to speaking to you again in three months.
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.