M&A Announcement

Jan 29, 2020

Ladies and gentlemen, thank you for standing by and welcome to the conference call to discuss the strategic alliance between Penn National Gaming and Barstool Sports, which was announced this morning. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. As a reminder, today's call is being recorded, Wednesday, January 29, 2020. Now I'd like to turn the call over to Mr. Joe Jaffoni. Please go ahead, sir. Thank you, Kamika, and good morning, everyone. Earlier this morning, we issued a press release and posted a slide presentation, which management will reference on this conference call, both of which can be accessed in the investor portion of Penn National's website at www.pngaming.com. The investor presentation can be found in the Investors section of pngaming.com under both the Events and Presentation pages. Management will make forward looking statements on this call. Actual results may differ materially from those projected in such forward looking statements. Penn National Gaming's forward looking statements and information about factors that could cause actual results to differ can be found on Page 2 of the presentation and in the company's annual report on Form 10 ks for the year ended December 31, 2018, and other reports that have been filed with the U. S. Securities and Exchange Commission. Penn National encourages you to read these materials as they contain important information about the proposed transaction and the risk factors associated with it. With that, it's my pleasure to turn the call over to your host Penn National Gaming Chief Executive Officer, Jay Snowden. Jay? Thanks, Joe. Good morning, everyone, and thank you for joining us on short notice this morning. In what has been really tragic week. We actually planned on making this announcement bright and early on Monday morning. We were all on our way to New York City, And the tragic news about Kobe Bryant hit Sunday afternoon. We decided quickly, let's push this off 48 hours and plan for a Wednesday announcement. And I just wanted to start by saying our thoughts and prayers go out to the family and friends of Kobe Bryant as well as the other families that were involved in this real heartbreaking tragedy. So not easy to transition from there, but did want to mention that at the beginning, Erica and Dave and I were actually talking before the call of how it's just hit you in so many different ways. I've teared up or cried multiple times a day the last couple just watching different interviews with his family, friends, former teammates, colleagues, etcetera. But that said, here we are. We're really excited. I'm joined this morning by Dave Portnoy, the Founder of Barstool Sports and Erica Nardini, the Chief Executive Officer of Barstool Sports. And we're going to walk you through what is we think a really special partnership between Barstool and Penn National Gaming. Before I get into the presentation, I did want to reiterate what Joe Jaffoni mentioned that we have an investor deck on our website. So if you have not downloaded that, feel free to do that now. And also I announced in our press release that we're going to be holding the 1st ever in Penn National Gaming's history Analyst Day in June. And so we're going to answer, I think, probably all of the questions you have for us today and provide a lot of clarity around this strategic partnership. But in June, we really plan to talk more about the 5 year vision, where we see the industry headed, what we believe the size of the opportunity is and the role that Penn National Gaming will play in the future of this convergence of casino and sports betting, digital, brick and mortar. We have a lot of thoughts on that and we look forward to sharing that with all of you in June. So if you can join me now on Slide 3 of our investor deck and I think most of you know the Penn National Gaming story, but I'll assume that there's some folks joining the call that maybe are more focused on Barstool and Media. So I'll provide a little bit of background on who Penn National Gaming is. Penn National Gaming is the largest and best in class operator of regional gaming and racing facilities across the United States. We have a very healthy core business. We have a terrific and growing free cash flow profile, around $400,000,000 a year, mid teen free cash flow yield. We have an unrivaled geographic footprint that includes 41 properties in 19 states. That is critically important as it relates to the sports betting opportunity and we'll talk about that a lot over the next 30 or 45 minutes. And we have one of the top loyalty programs in the industry, My Choice, that has over 20,000,000 customers. So why are we here with Barstool today? It goes back to a date that Dave has quoted many times, as have I, May 14, 2018. That was the day that passed by the Professional and Amateur Sports Protection Act. It was a federal law that prohibited sports betting in the United States other than in 4 states, primarily in Nevada for single wager events. And that was overturned by the U. S. Supreme Court. And from that date to where we are today, it became a state's rights issue and there's been rapid expansion of sports betting legalization across the U. S. It's now legal in 20 states after a short 18 months. Many more states are considering sports betting legalization. And Penn National Gaming, we find ourselves in roughly half the states that have already legalized and 19 total across the U. S, as I mentioned before, by far the most of any other regional gaming company in the United States. That broad footprint is really important for several reasons. 1, it provides us access to this sports betting opportunity without having to pay fees for that access, really important. Number 2, because of the physical presence we have, we can activate new audiences like the Barstow audience and reward them for their loyalty and their spend both at the brick and mortar casinos as well as sports betting, digital and retail. And then lastly, were able to leverage our footprint not just for ourselves to have friction free access to this opportunity, but we were able to also leverage our footprint and strike arrangements and revenue share agreements with a number of sports betting operators, DraftKings, PointsBet, The Stars Group and The Score to provide them access in the states where we have a larger footprint. Many of these states, we operate multiple casinos. We announced those relationships back in August, and I think that's going to be critically important as we move forward. As you look to the next slide at the map, you can see that Penn National Gaming is not only well positioned today in the states in green that have already authorized sports betting through the casinos, but you'll see a number of other states that we are well positioned as we move forward. There's legislation pending in Ohio where we have 4 properties, Missouri where we have 1 in Kansas City and 2 in St. Louis, Louisiana, five properties including markets like Baton Rouge, Louisiana, Southwestern and Southwestern So what's the opportunity? You look out to 2025 and you have estimates anywhere between $7,000,000,000 $10,000,000,000 when you look at retail sports, online sports and online casino, based on leading sports and casino analysts. Some of our competitors have also shared publicly a more aggressive potential market sizing. So this may end up being conservative. Regardless, sports betting and icasino is a massive opportunity for Penn National Gaming and Barstool combined. On the next slide, demographics. This is something that we've talked a lot about in our industry for years. The average age of our casino customers is in the mid-50s. It's been aging up, not aging down. And how do we solve for that? Sports betting obviously is a great nexus for us to start to attract and convert younger sports betters. You see the Penn National Gaming core demo, it's roughly fifty-fifty between males and females. SKU is older, but you look at who bets on sports and they tend to be younger, they tend to be affluent and they tend to be male. So this question we've been asked over and over again around how do you attract younger generation, Gen X, millennials, we have that opportunity with Barstool to do that now. And look, the early results have been very exciting. You look at markets that have already legalized retail sportsbooks like the property here, we provide an example, Hollywood Casino Lawrenceburg in Indiana, it's right across the state line from Cincinnati, Ohio. It's a property that has been hit from competition in Ohio over the last several years. And we did launch a retail sports book beginning of football season in August. And so we thought it'd be great to share with you what the results have been and the impact of sports betting to the casino volumes. You look at last year in Q4, overall gaming revenue was down, table volumes were down, slot volumes were roughly flat year over year. But you look at what's happened in the Q4 of 2019, table volumes are up almost 20%, slot volumes are up 2.5% overall, gaming revenue up 3% and our food and beverage volumes look a lot like table game volumes. So I think this illustrates the power of cross selling from retail sportsbooks to the casino floor. You get increased volumes, energy, foot traffic and excitement. And if you look at the next slide, what's happened in New Jersey has been really fascinating. We've been studying this market closely for the last couple of years. You'll recall New Jersey is a state that has been a leader in online gaming. They legalized online casinos in 2014. You see the red line here in the chart, what the growth looked like after launch in 2014 and healthy but declining growth every year after the launch of online casino. But you see what's happened in 2019. And the reason why you see that bounce from 21% in 2018 to 61% in 2019 is because sports betting was legal for the entire year of 2019. So what this slide shows you is that sports betting has not only been a market building opportunity in itself, it's a $300,000,000 business in 2019. It is also turbocharged online casino business as well as the retail casino business, which was up 7% in 2019. So again, it speaks to this ability to cross sell the younger generation sports bettors and introduce them to casino games at the same time. So how do we compete as Penn National Gaming? If you also let's stay in New Jersey and you look to the right here, you'll see that FanDuel and Sports excuse me, DraftKings and FanDuel have really dominated market share in New Jersey through the 1st year and change. And what do they have? Well, they have well known sports brand. They've got a large database that enjoys sports betting and they have quality user interface. And we knew going into this opportunity and since we started engaging with Barstool back in July, the piece that we've been missing is we needed to find a sports media partner that had a great brand, had a loyal audience that wanted to fully integrate and align with Penn National Gaming and that wanted to skin in the game with us. And Barstool is that partner. I'll talk about the details of the transaction on the next couple of slides. But we also knew that we needed a great sports app. And led by our Head of Interactive, John Kaplowitz, we have a team of 50 plus engineers in Philadelphia that have been working on our app for most of 2019 and we plan to launch that sports betting app in August of 2020. So we'll be about 18 months of work into this app. We've been doing a lot of beta testing against some of our competitors' apps in New Jersey. And we've also been working behind the scenes with the folks here at Barstool, and we'll be doing a lot more of that as we finalize exactly what this sports app launch is going to look like and feel like to the consumer. And we're very excited about that. So let's talk about the transaction itself. Structure for us was very important as we were thinking about potential partners. First, we wanted to ensure that we had full alignment of incentives, as I mentioned earlier, between the parties and the fact that key employees at Barstow, including Dave Portnoy, Erica Nardini and Dan Katz and others are now significant shareholders of Penn and have signed new long term employment agreements was also critical to us. 2nd, we also want to take a prudent approach. We recognize that we're not in the media business, we're in the casino business and we wanted a structure to where Erica and her team maintained control over editorial content and running of the business at Barstool. Our long term commercial deal provides us with a tremendous opportunity and brand for our retail and online sports betting product for years to come. We and Barstool have assembled a cross functional team with the purpose of leveraging Barstool content to drive people to Penn's retail and online properties and integrating Penn's sports betting content, you think about things like odd scrolls into relevant barstool content. Our collective focus is on introducing and driving a significant number of barstool audience into Penn retail casinos and online products. We'll have customary corporate governance rights, including 2 seats on the Barstool Board initially. However, as noted above, Barstool would continue to have editorial control subject to certain guardrails for things such as responsible gaming. We felt it was important that we have a path to control of Barstool given the importance of this opportunity. And as a result, there are put in tallow options after year 3, which could result in Penn acquiring up to 100 percent of Barstool. There is also a possibility that we would find another strategic partner or partners to acquire a portion of Barstool. We'll continue to evaluate those options over the next several years as we have time to figure all this out. The next page on strategic rationale. We think the strategic rationale for the deal is very compelling. 1st, we're getting a tremendous brand. We know that brand is very important in the sports betting space as we have now seen in New Jersey as I mentioned previously with FanDuel and DraftKings. Barstool gives us a brand that is well recognized by sports fans, particularly in the key demographics that we were seeking. 2nd, Barstool has a large and growing loyal audience who loves sports. Barstool has a national scale with the ability to target key regions, which is important given the state by state nature of sports betting in icasino. Barstool can also capture the attention of sports betting demo where they are consuming content. And I can't stress this point enough that this company, their experts at digital and social media very different than traditional media and I think important as you think about the future of who this sports bettor is. We already discussed alignment. That's clearly critical to our success. This deal will significantly reduce our customer acquisition spend by serving as the primary acquisition funnel for Penn's sports betting products. We also think Barstool can be a real catalyst for our brick and mortar businesses, as I mentioned earlier. And they have a tremendous track record of driving visitation at live events, including casinos and we're now working together to build out the marketing schedule and plan that will drive Barstool users into our casinos. So this is a new demographic for us and we're really excited about capturing that visitation. And then finally, we think Barstool will be an important piece in our mission to create a real omnichannel ecosystem touching customers at our physical casinos and through our mobile products. Wherever sports betters or casino betters want to play across the country, retail, online, we're there. We have great products, great offerings, great brands and we'll be welcoming them to our products as we move forward. So with that, I've talked enough here. I'm going to hand it over to Dave Portnoy to talk a little bit about Barstool and Erica Nardini, Chief Executive Officer. So this is Dave. I'll keep this fairly brief. We're super excited about this opportunity. If you're not familiar with Barstool, I started this as a gambling rag. It was a 4 page newspaper, flew out to Vegas before I started it to get involved in this industry. So I think that kind of separates us from a lot of people trying to get in this space right now. This is we've always been in this space. 2 decades, we've been covering it inside out. And this is kind of what I always wanted to do with my life, to be honest. I wanted to be involved in shaping kind of the gambling industry, obviously, and the online. It is the perfect marriage for us. I kind of knew it the second I met Jay. We are just like when I sold the Churn Group 10 years ago, we didn't really have to sell or make a deal. We were doing very well, but this is the perfect opportunity for us. I'm just as confident as I was then that this will work now, and we're super excited about the opportunity. I think it really is the perfect marriage. So Erica will talk a little more about it, but I'm excited. I agree. Our entire company is very excited. We have been approached by every major media company, every major sports betting and casino company, and we felt that unequivocally Penn National was the right fit for Barstool Sports. And I'd even argue that we've helped create the FanDuels and the DraftKings. I've worked with them since they're invested. I turned down equity in DraftKings, so they'd stop having us switch who we'd advertise because our fan base is so loyal that they switch depending on what we tell them. We haven't had a single partner, I don't know, in 5, 6 years where it's constantly go to Penn, go to Penn, one day go to PointsBet, go to DraftKings, go to FanDuel. Now you're going to see the full weight and we're 100 times bigger than we've ever been. So it's exciting. Sorry to cut you off, but I'm excited. So just a bit on Barstool at where we are today. So as Dave Portnoy mentioned, Barstool is a 15 year story. We have a loyal audience that has been with Dave and all of our creators for 15 years. We are today the fastest growing, highest engaging sports, lifestyle and comedy brand on the Internet. As Jay mentioned, if you look at the average age of a casino goer and you look at the average age of a television viewer, it's in the mid to high 50s. The audience that we own is in their 20s, their 30s and their 40s. We create, distribute and monetize over 500,000 pieces of content every single year. And what we understand how to do is to create content that breaks through. We do that in audio. We do that in video. We do that in live events. We do that in social. We do that on our owned and operated properties and we do it on every single property on the Internet. Penn is looking for omnichannel reach and that is exactly what we have. We have over 66,000,000 monthly uniques. We've grown exponentially year over year for the last three and a half years. And when you look at the fastest growing media and technology platforms on the planet, the fastest growing sports and lifestyle brand on those channels is Barstool Sports. And we will continue to grow all of this audience, all of these brands on all of these platforms and platforms yet to come. And that is what our strategy has been for the last three and a years and will continue to be into the future. When you look at our business, we have grown from about 12 people to over 200, from low single digit revenue to over nearly $100,000,000 in revenue profitably. When you look at digital media growth year over year, it's on average 13%. When you look at traditional media revenue growth year over year, it's around 5%. When you look at Barstool Sports, over the last 2 years, you're seeing 53% year over year growth, up to 65% year over year growth. The other difference about Barstool Sports is our revenue is highly diversified. We are not dependent source of revenue. And we see a strong diversification across audio, commerce, licensing, advertising, live events. We will continue to diversify this revenue mix, and we will continue to have the pace of growth that we've enjoyed for the last several years. And then when you talk about our demographics, when you talk about the stoolies, we have grown, as I've mentioned, to over 66,000,000 sands. We reach 48% of men and 44% of women who are millennials and Gen X across the country. We have every key demographic that's relevant to sports betting. They convert, they bet on sports, they bet on sports frequently and their average bet is over $51 So our audience is 1, extremely loyal to Barstool Sports, 2, they're growing rapidly. And 3, they're interested in sports betting. And we will look to continue to grow this audience across all of the channels that I'd mentioned. We will continue to make entertainment content, lifestyle content, sports content, comedy content. And then we will integrate, as Dave mentioned, Penn National wherever and whenever possible to drive conversion to on property, sports betting, etcetera. And then lastly, Dave really hit on this, which is we felt comfortable with Jay and his team from the moment we met them. What we felt that Penn had that we did not have was a physical footprint. We chose the largest casino operator in the United States to be the operator that should bear our brand. The Barstool Sportsbook will be exclusive to Penn National. The second is Jay and his team's omni channel strategy. We are a very disruptive, very innovative, highly competitive digital company, And we believe in being with a partner that understands the connection between physical, real estate, digital strategy and creating a synchronized and consistent approach across all platforms. We felt that their investment in us and their commitment to us was more than an ad deal, as Dave mentioned. We are interested. We are a partner driven company and we felt that Penn was the ultimate partner for us in this category. And then ultimately, it gives us a place to bring our audiences. We tour about 30 weeks a year. We have our personalities, our brands, our people on the ground across this country and now we will do it in places where Penn has a physical presence. Thanks, Erica. And I'll let me hit the right side of this page. I would echo everything that Erica and Dave have said. The first meeting we had, we talked for about an hour about alignment and objectives and what are we all looking to get out of this opportunity and complete alignment. And from that day going forward, we just needed to get through the dotting of I's and crossing of T's, but we really didn't debate over what we wanted to do and how we wanted to do it at all. We were very much aligned. Dave and Erica were excited as a form of consideration to actually receive more in Penn Equity than cash. They want to ride the upside and they know we're going to create something special here. Look, Barstool has a massive audience of loyal fans. That's obviously super attractive and it's growing every day. Every time we update the slide that Erica went through on the different platforms, the numbers are skyrocketing, which is great. Their brand reach is terrific. It's going to lead to greater long term customer value. They're not just going to pop in. I think if we do a great job with our products and our platform and we contextually integrate the talent from Barstool into the app, people are going to have a lot of fun and see that there's differentiation in the experience with us than the experience with others. As Dave mentioned, this company was founded on sports betting. So what better partner than a company that's been focused on sports betting for 17 years and they can convert their audience. That's been proven with different sports betting and casino advertising partners. And I think Erica said it really well. 1st meeting, I walked away with the team from Penn and we used the same words. We feel like Barstool like Penn is scrappy, it's innovative and disruptive in their own space and we view ourselves the same way in gaming. So the last slide before we open it up to questions. We wanted to share with you our assessment of how we stack up versus the competition. I think the revenue driving categories are pretty straightforward. We score well, areas like a strong sports brand, large sports betting demo, in house product development, retail footprints obviously were strong. I also highlight here the leadership in social and digital media. Clearly, that's bar still over really any company out there, not just sports betting companies, but any companies at all. We also broke this down into profitability drivers because we think that the way we've put this relationship together and structured this relationship that we really can focus on driving profit. And I mentioned earlier, lower marketing costs due to a fully aligned media partner. We think that we're going to be best in class from a customer acquisition perspective of being able to do that as efficiently or I should say more efficiently than anyone else. We're in 19 states and we have direct access, so we don't have any fees we have to pay for access in those states. Those fees for access can be very expensive. They range anywhere from 5% to 15% of net gaming revenue. And not only are we not paying fees in 19 states, we're actually collecting revenue shares with our skin partners. I mentioned earlier DraftKings, FOX Bet, theScore and PointsBet, we believe our great companies are all well positioned to be meaningful aggregate drivers of revenue and market share, which due to our rev share agreements with each of them will certainly benefit Penn long term and help to finance our primary strategy with Barstool as we move forward. So we're excited about that. We're excited about the transaction. I'm thrilled to be here today. And with that, Kamika, we will turn it over to you for questions. Thank you. Our first question is from the line of Carlo Santarelli with Deutsche Bank. Please proceed with your question. Hey, good morning everybody. And Jay, Erica, Dave, thanks for the comments. Jay, I'll start with you if you can. When you think about the $66,000,000 uniques and you kind of overlay them with your catchment areas where either iGaming or more specifically sports betting is legal as well as kind of where you have licenses. What do you kind of see as the cross section of customers that you'll be able to take advantage of with low customer acquisition costs early on? Yes, it's a great question, Carlo. And I would tell you from spending a lot of time over the last 7, 8 months with Dave and Erica, if you look at their fans, they're concentrated in the biggest cities, and that's where a lot of our properties are. So I think you're going to see overlay very similar to population in the U. S. And so large cities like Chicago, the home of Dan Katz, we index very, very high with Barstool, and we have multiple casinos, 3 actually in the Chicagoland area, markets like Boston, Massachusetts. Once legal, of course, is a huge market where Dave is from. So we feel very good. I think you can think about them, Carlo, as being a national brand, a national database of consumers based on population size, and so the overlay is pretty quite strong. Great. And then I just have one kind of housekeeping and then one bigger picture follow-up, if you don't mind. In terms of the pre established deals that you guys have for your skins, the partner deals, what does this transaction imply for them? Nothing changes, Carlo. Those relationships, we value. They're great partners. They've been great partners. And we hope that they do fantastic. We're rooting for them, obviously. They are competitors in one sense, but we also are rooting for them from a market share and revenue generation perspective because we're sharing in their success and are rooting for them. So nothing changes on the Skin agreements or the partners. Great. And then last my last question and this one might be a little bit more challenging to answer. But Jay, if you thought about this transaction in totality and looked out 3 to 5 years, whether it's EBITDA or other kind of elements, how do you kind of benchmark success for Penn National? It's a great question, Karl, and I'm going to cover a lot of this at the June Analyst Day. That's a big picture kind of look out into the future question. I would tell you that oftentimes in our industry, you look at transactions on accretion, dilution basis. And really in this case, as you think about the return on the investment, it's going to be obviously over a long term period of time. But we also you have to think about this as if Penn National Gaming were to have launched its own proprietary sports betting product and name, how much in marketing dollars would we have had to have spent to compete with DraftKings and FanDuel who spent 100 of 1,000,000 of dollars over the last 6 years. And instead, we're making an investment so that we don't have to go spend 100 of 1,000,000 of dollars to build out this brand because Barstool already is such a strong brand. So I think you have to think about it in those terms in that I think we can do this more efficiently than anyone else in the space. Many of our competitors have said that they were budgeting to lose $50,000,000 or $60,000,000 per year in 2019 2020. I don't think you're going to hear that from us. So more to come in June certainly, but we feel like we can do this more efficiently than anyone else in the space. Great, Jay. Thanks so much and congratulations everybody. Thanks, Carlo. Thank you. Thank you. Our next question is from the line of Thomas Allen with Morgan Stanley. Please proceed with your question. Hi, good morning. Do you think there is is there a market share target that you're thinking about with this partnership? Thanks. Yes. Thomas, great question, and we'll see how this plays out over time. I think we should be in the top 3 in every state where we operate. That's the goal. I think Eric and Dave would tell you that they aren't happy with that. That's the one argument we have had has been around that. Look, I think there's markets that have been legal for a couple of years. It's going to take us time to penetrate, of course. I think if you're talking about markets that are launching and we're first to launch along with everybody else, our expectations are higher. So anyway, top 3 would be my answer today. Okay. And then just as my follow-up. How are you thinking about the tech stack today? Are there places that need improvement? And then in terms of the integration, how strong will the integration be between the iGaming, the existing bar stool app and then the sports betting? And then how are you thinking about the branding also? That would be helpful. Thank you. All right. Thank you. Appreciate it, Thomas. Look, from a tech stack standpoint, we have Canby as our primary platform, trading services, risk management. That doesn't change. We think Canby is a great partner. We're their largest customer. It's a great relationship and will continue to be a great relationship. We really are focused on the build out of our app, and we want to control the user experience. And so we're using a company called WhiteHat right now for our PAM, player account management, and we're using a rent to own strategy there. So we envision that we're going to be the in control and own the player and user experience on our app as we move forward, and Camby will be a partner for a long time. And from an integration and brands, how are we thinking about that? That's going to play out. We know we're leading with Barstool for our sportsbooks. You're going to see Barstool Sportsbooks in our retail casinos in the coming months. And then you're going to see a Barstool Sportsbook app in August of 2020. So clearly, from a sports betting standpoint, Barstool is the brand. I would imagine that from an online casino perspective, we may have a couple of different casino brands. I think we're going to have a Barstool Casino, and that experience is probably going to be a lot more focused on table games and poker than maybe if we had Hollywood branded casino, which we've already launched in Pennsylvania, that's doing very well, that might be more focused on slots. And I think that if you look at the most successful online gaming companies in Europe, they've got several brands and apps that they work with for sports betting and casino. And I would envision the same to be true for Penn as we look in the out years. Thank you. Our next question is from the line of Joe Greff with JPMorgan. Please proceed with your question. Hey, good morning, everyone. This is actually Dan Politzer on for Joe. Thanks for taking my question. So first, Eric had mentioned that you guys received a lot of or they received a lot of interest. Can you maybe talk a little bit about the competitive bidding process and maybe how long this deal took to come together? Sure, Dan. We started talking, I think it was July for the first time, may have been June. It was in the summertime. And look, like Erica said, they've talked to everybody, and not surprisingly, so have we. We've talked to every media company, publicly traded large, medium sized, small, private. We've talked to regional sports network operators, and we've talked to everyone. And we just wanted to find a partner that had a real brand of loyal sports enthusiasts and that was really interested in aligning incentives and having skin in the game with us to not just build out a sports app but to continue to drive growth for Penn everywhere Penn operates, online, brick and mortar. And that's where we had absolute alignment. And so Barstow actually and I think they would say the same about us, we met each other probably pretty late in the process, and we had talked to a lot of others first. And we've kind of like just stumbled into each other and sat down one day. And then the next week, we all got together again, and you could see the excitement building. So the process was long. We were talking to folks since Pasco was overturned, so more than a year before we met Barstow, and Barstow was doing the same thing. But once we got together, it was clear these are the 2 companies that should be together long term. Got it. So obviously, you've made a fairly compelling case here why Barstow fits in strategically. Why would you not buy, I guess, a controlling stake at this stage of the game? Well, the way that we've structured the deal, we have a path to control, but we wanted to make sure in the 1st 3 years that Erica and Dave can run Barstool because we don't know how to run Barstool. They're a very successful sports media entertainment company, and we need time, right? So that was important. It was also important for the folks at Barstool to understand our business in the gaming industry, and we wanted that relationship to be what it is as an investor in Barstool but not in control of Barstool. And we want Dave and Erica to maintain control of editorial content and to be who they are. This is very important to us that Barstool is going to continue to evolve as it has for the last 17 years, but Barstool is going to be Barstool and we want that. That's why their customers and fans engage and love them so much. And so that's what I would tell you. I think on a go forward basis, you think 3 years out and it's very hard to predict where we're going to be in 3 years, should there be other partners involved in this. We have plenty of time to figure all that out. But for the next 3 years, we're thrilled to be investors in Barstow and have them run their own business. Got it. And then if I could just squeeze in one last quick one. Erica talked about growing revenues profitably. Could you just clarify that? And are you guys run rating profits presently? And how should we think about how Barstow is going to be accounted for on Penn's P and L? Thanks. Yes. It will be accounted for, Dan, as an investment. So obviously, if there's EBITDA, we'll get we'll show 36% of that EBITDA on a quarterly basis. I would tell you that they are profitable, but I would not build anything into your modeling. This is a lot more about the long term value creation and the cost avoidance from a customer acquisition standpoint than it is booking what they're doing in EBITDA, though it is profitable. Got it. Thanks so much and congrats everybody. Thanks Dan. Thank you. Thank you. Our next question is from the line of Shaun Kelley with Bank of America. Please proceed with your question. Mr. Kelly, your line is open. Please proceed with your question. There's no response. I'll go ahead and move to the next question. Our next question will come from the line of Chad Beynon with Macquarie. Please proceed with your question. Hi, good morning. Thanks for taking my question and congrats on the deal to all parties. Thanks, Chad. Jay, on the cash outflow side, the cash and the equity, does anything change with your leverage goals that you've talked about during recent earnings calls? And does this also change how you think about your current portfolio and kind of how this fits into Penn's future? Thanks. Good question, Chad. And look, the short answer is no, it doesn't change our goal for end of year to be at 5x on a net adjusted leverage basis. So we obviously, beyond free cash flow generation, would need to consider what else within our portfolio we could do to accelerate the deleverage story. I've been very public that we've had unsolicited interest in some of our wholly owned assets in the portfolio, and that is an active process. It's a positively developing process, but we just don't have anything to share with you today. And we'll keep everyone posted if anything materializes. But nothing has changed with regard to how we think about the assets in the portfolio, the overall business strategy and our leverage targets. Okay. And then on the Barstool side, are there any big contract renewals? Obviously, the growth is coming from content and distribution, and it sounds like everything is kind of locked up and homegrown, but some of the media companies have different deals that could roll off in the next few years. Is there anything that we just need to be aware of in the next few years that could kind of change the revenue trajectory? No. That's what's different about Barstool Sports is we're not we don't acquire rights. We're not dependent on any single distribution. We actually have grown all of our distribution organically. So when you grow things organically, they're yours. And so we don't have those type of dependencies that you would find in a legacy media company. So we'll continue to grow content, personalities, formats, brands and IP the same way we've done that over the last 15 years and certainly the last 4 years. And certainly, in talking to Erica and Dave and the business folks at Barstool, 2020, despite walking away from these advertising deals at different points in the year that they have today from FanDuel and PointsBet and BetMGM as an example, they're still targeting significant growth overall for the year despite their exclusive relationship with Penn National Gaming and Sports Betting. Thank you all very much. Thank you. And that was our last question for today. I will now turn the conference back over to Mr. Snowden for closing remarks. Thank you. I appreciate it, Kamika, and appreciate everybody joining us this morning. Again, very excited. Look forward to speaking with all of you in future conferences and phone calls, and we're excited about the future. So with that, we'll see you soon. Thank you. That does conclude the conference call for today. We thank you all for your participation, and we ask that you disconnect your lines. Thank you and have a great day.