Earnings Call: Q3 2020

Oct 29, 2020

Greetings, and welcome to the Penn National Gaming Third Quarter Conference Call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. I would now like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead. Thank you, Kamika. Good morning, everyone, and thank you for joining Penn National Gaming's 2023rd quarter conference call. We'll get to management's presentation and comments momentarily as well as your questions and answers. But first, as always, we'll review the Safe Harbor disclosure. In addition to historical facts or statements of current conditions, today's call will contain 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 ks and Form 10 Q. Penn National Gaming assumes no obligation to publicly update or otherwise revise any forward looking statements. Today's call and webcast will include non GAAP financial measures within the meaning of SEC Regulation G. When required, a reconciliation of all non GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release as well as on the company's website. Thank you for your patience with that. And it's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go ahead. Thanks, Joe. Good morning, everyone, and thanks for joining us for our Q3 earnings call. Here to present with me this morning is our Chief Financial Officer, Dave Williams as well as other members of our senior executive team who are here to help answer your questions. I'm truly pleased to report that we were able to generate strong Q3 revenues as well as record adjusted EBITDAR and adjusted EBITDAR margins, even with the ongoing social distancing and capacity constraints at our reopened casino properties, which at this point includes all but Zia Park in New Mexico. Our success this quarter is a clear reflection of the hard work, scrappiness and determination of our property, interactive and corporate management teams and all our team members who continue to work tirelessly to provide a healthy and safe environment for our valued guests and their fellow team members. I continue to be amazed and incredibly proud of the way our company has responded to the daily challenges this ongoing pandemic presents. Of the biggest highlights of the quarter, of course, was the launch of our much anticipated Barstool Sportsbook app in Pennsylvania. While still early, the app has been very well received. I'll say more about our partners at Barstool Sports following Dave's financial update, but first I want to touch upon our company's response to the devastating impact of Hurricane Laura on Lake Charles, which was soon followed unfortunately by Hurricane Delta. Needless to say, all of our team members at L'Auberge Lake Charles have been personally impacted by these storms, some having lost everything. This continues to be a challenging year in so many ways, but we will rally around our Penn family and the community members in Lake Charles because that's what we do. I'm grateful and proud of the way our sister properties came together to support our fellow team members in their time of need. Volunteers from Boomtown Biloxi, Boomtown New Orleans, Hollywood Gulf Coast and L'Auberge, Baton Rouge have been helping with the cleanup and recovery efforts and have provided temporary housing for Display's team members. I'm also thankful for our partners at Barstool Sports who quickly stepped up and created special Lake Charles Strong merchandise that can be purchased on their website. All of the net proceeds from the sales were generously donated to our Hurricane Laura Relief Fund under the Penn National Gaming Foundation. Barstell Sports CEO, Erica Nardini also hosted the Mayor of Lake Charles on her podcast, Token CEO, to help bring more awareness to the needs of the local community community, which includes covering full wages and benefits for our Lake Charles team members during the property closure. While the national media's attention has almost entirely moved on to other stores, we plan to be there to continue to support Lake Charles and its ongoing recovery efforts. With that, I'll turn it over to Dave. Thanks, Jay, and good morning, everyone. As you'll see in our earnings release and the accompanying deck we provided, Penn National had its best quarter in our company's history in terms of adjusted EBITDAR. That result is even more remarkable when you consider the continued capacity constraints, temporary closure of Liberace Lake Charles following the hurricanes, the late quarter reopening of Tropicana Las Vegas and the continued temporary closure of Zia Park in New Mexico. Our Ohio and Indiana properties were the standouts for the Northeast segment this quarter. In the South, all of our properties, excluding Lake Charles, delivered double digit adjusted EBITDAR growth. Meanwhile, our Midwest segment was able to achieve year over year adjusted EBITDAR growth despite significant capacity constraints. This outstanding property performance combined with our successful capital raise of nearly $1,000,000,000 in September allowed us to repay our revolver balance of $670,000,000 and increase our cash balance to $1,900,000,000 In addition, we reduced our traditional net debt to approximately $693,000,000 at September 30, bringing our lease adjusted net leverage to approximately 4.9x based on 2019 adjusted EBITDAR. We are confident that our improved balance sheet provides ample liquidity to support high return projects in our land based business, such as the new and rebranded retail Barstool Sportsbooks and the further rollout of our interactive products. Finally, in terms of our capital expenditures this year, we're continuing to be very disciplined despite all but one of our properties being reopened. We spent $21,500,000 on maintenance CapEx in Q3 and approximately $2,000,000 on project CapEx related to our Cat 4 casinos in Morgantown and York. We're resuming construction on these projects and anticipate both opening in the second half of 2021. Back to you, Jay. Thanks, Dave. As I referenced on September 18, we officially launched the Barstool Sportsbook app in Pennsylvania, it was the number one most downloaded sports betting and sports app in the country during its 1st weekend despite only having launched in one state. This app launch was a significant milestone for our company. And I would like to personally thank our Penn Interactive team and our partners at Barstool Sports for their hard work and collaboration over the last several months. With all the excitement surrounding the app launch, we were able to acquire a significant number of new customers during the 1st 2 weeks of launch. As a result, our September results reflect higher promotional allowances as first time depositors took advantage of our initial $500 risk free bet and other promotions, all of which were in line with other operators during their 1st month of launch. As you will see on Slide 11 of the deck we provided in the earnings release, Promo credits in September represented 7% of handle as we acquired new customers through promotions for first time depositors. As promo credits and hold rates have normalized in October, we have continued to see strong handle while reducing our promo spend of 3% of handle, leading to meaningful net gaming revenue. We expect this trend to continue as we launch in additional states, given the ability of Barstool to quickly and efficiently convert their audience to our sports betting app and our collective ability to retain those customers. I'd like to emphasize that the impressive results the app has achieved to date have been without any meaningful external marketing spend, which reinforces our belief that we should be able to, in the medium and long term, achieve a top 3 market share position in both the sports betting and iCasino space across the country and states where we operate and with best in class profitability. One of the ways in which we can deliver on this goal is through an innovative and unorthodox approach to marketing, advertising and customer acquisition costs. For example, Dave Portnoy from Barstool Sports reached out to me last week with the creative idea to team up to help save the historic Reading Terminal market in downtown Philadelphia, which was hard hit by COVID and has been struggling to keep the lights on. They had a GoFundMe campaign underway to help sustain their operations, but hadn't quite met their goal. Dave and Penn stepped up together and agreed to contribute $100 for every $100 plus new account opened on our Barstool Sportsbook app a 24 hour period. We ended up raising over $150,000 for the Reading Terminal market to help them complete their goal. In addition, and this is largely due to Dave and his profile online, another nonprofit organization that supports small businesses in Pennsylvania was so inspired by our efforts, they reached out to Dave and they offered to put up another $100,000 of matching of Penn's contributions towards the cause. This was a great win win in terms of attracting new customers and simultaneously providing support for our local community. While there's been plenty of focus on the performance of the Barstool Sportsbook app, we're also very pleased with our investment in Barstool Sports, the media company. Despite the temporary loss of live sports and a general slowdown in advertising spend, Barstow is having its strongest year yet and has seen profitable revenue growth through a diversified mix of advertising, brand licensing and merchandise business. Most importantly, Barstow continues to grow its audience across its podcast network and the largest social media platforms. Over the last year, we have seen some very favorable comps in the podcast sector and we feel good about Barstow's competitive positioning in that space as well. With Barstow actively promoting our retail and online sports betting offerings to their large loyal audience, we believe we can retain and cross sell these customers to our land based casinos and iCasino products. Our experience to date has shown that customers who play with us through multiple channels, including land based casinos, retail sportsbooks online casino are over 12 times more valuable than customers who only play with us at one of our casinos, which illustrates the power of our omni channel strategy. To further capitalize on Barstool's incredible momentum, we are working with them to launch standalone Barstool branded entertainment destinations in key markets. These locations will serve as virtual sportsbooks in large metropolitan areas and states with approved online sports betting, which we believe will further expand the reach of the brand help us acquire new customers at attractive economics. On the land based side of our business, our operations and IT teams led by Todd George and Rich Primus have done a terrific job in helping to evolve our company and indeed our industry towards a new generation of cardless, cashless, contactless technology or what we internally refer to as the 3 Cs. In a post COVID-nineteen world, we believe this will not only improve efficiency and customer service, but also result in incremental revenue as we appeal to a younger demographic that has come to expect a cashless experience in their daily life. On the legislative front, we remain actively engaged across the country and advocating for the passage of sports betting in those states where it is not currently legal, such as Louisiana, which will feature a question on the November ballot that would authorize sports betting at our 5 casinos in the state. In addition, Maryland voters will also have an opportunity to decide whether to allow sports betting in their upcoming election. We intend to exercise our option to acquire the operating assets of Hollywood Casino Perryville in Maryland from GLPI before the end of this year, which will provide us with market access to an industry leading 20 states in 2021. Also on the ballot this year in a statewide referendum in Colorado that will allow local voters in the casino towns of Blackhawk, Cripple Creek and Central City to increase bet limits and add new games such as Baccarat. We've been and will continue to be heavily involved in the campaign in Colorado to support its passage on behalf of Ameristar Blackhawk. Looking ahead, we continue to see solid performance across the land based portfolio in October, and we're anticipating an exciting finish to the year as we introduce Barstool branded retail sportsbooks across several of the properties in our portfolio and the launch of our Barstool sportsbook app and new iCasino products in Michigan pending final regulatory approval. And with that, Kamika, I'd like to turn it back over to you to open up the line for questions. Thank Our first question is from the line of Joe Greff with JPMorgan. Please proceed with your question. Good morning, everybody. Thank you for taking my questions. Jay, I know it's super early days in Pennsylvania for the performance of the Barstow Sports Betting app, but I have a few questions on it. I guess one, what have you learned about the promotional credits to handle relationship, more so not just in isolation, but also in the context of the competitive market. And then when we look at performance in October relative to the walking 13 days or so in September, handle per day is down and I realize promos are down as well. Can you just talk about those 2 topics? And then just to follow-up on that, if you guys were to, say, generate 15% to 20% margins, pick a margin, how much in handle do you need to generate in order to get those type of, say, mid cycle type of margins? And that's all for me. Thank you. Sure thing, Joe. All good questions. And you're right, it is the early days. So I don't know that I'll be able to answer all of those with absolute precision, because we're still learning as we go, obviously. Here's how I would sort of think about each of those is that the promotional credit question. We actually took a different view than I think many when they saw the results from September. We were really excited about, not just the handle, but also promo credit as a percentage of handle at 7%. The reason why that was high is because we broke every record for downloads and registrations and first time deposits for any sportsbook launch in any state in the history of the U. S. Sports betting. So it was naturally going to happen because as every one of our competitors do, we offered people for their first time deposit a free bet of up to $500 So that was expected on our end. We knew that percentage would come down as it has in October. I think if you look at where Pennsylvania has been since sports betting really started to ramp, just call it throughout 2020, is that you typically see promo credits as a percentage of handle right around 3%. And we're seeing already in month number 2 that our percentage is right in that range of 3%. So I think it's natural to see that 1st month high. Most of our competitors when they launched, the same thing happened. They just maybe not as much attention was drawn to that as it was for our 1st couple of weeks in September. And we also think about the handle per day as you look at October, it's really important to think about what's happening from a promo credit standpoint because part of what's driving that handle per day number in September being a little bit higher than October is that many of those bets were on us, right? Those were that was pen money that people were betting with on that initial bet. So the fact that it really has it's almost immaterial, the decline from September to October, but yet, we're generating real revenue both on the growth side and the net side as we share in Slide 11 of the presentation that we attached to our earnings release, we couldn't be happier with what we're seeing in October so far and we think this is just we're still in the first inning. We're learning a lot in terms of what works, what's effective. 39% of betters, since day 1 of our launch have These the customers, the Stoolie fans and others maybe that weren't Stoolie these the customers, the stoolie fans and others maybe that weren't stoolie fans, but have downloaded the app, they really like the experience, the 4.8 Apple App rating is as good as anybody, it's best in class. And people are they're watching Dave and team on their live streams and this is sort of starting to play out how we thought it would likely play out. With regard to your margin question, I'm going to need more time on that one. It's really hard for me to answer that. We have there's so much work to do. And we're in one state today. We hope to be in 2 by the end of this year. And I would say hope because we haven't gotten final word from Michigan. We'll be ready when they're ready. And we plan on being live in every state where we operate and where sports betting and online casino is legal by the end of 2021. And so I think when you're thinking about what do margins look like, we'll be much more educated and scale helps, right? So right now, we're building out an infrastructure of product developers and engineers that are going to support this launch across all of these states, whereas right now, it's all based on one state. So we're going to need a little bit more time to answer your third question, if that makes sense. Great. Thank you, Jay. Appreciate it. Thanks, Joe. Thank you. Our next question is from the line of Felicia Hendrix with Barclays. Please proceed with your question. Hi, thank you so much and good morning. I first wanted to I have one question on your traditional business and then one Barstool question. So just on your traditional business, a lot of your competitors already have been talking about the sustainability of revenue growth for now and also the sustainability of the margins. I'm just wondering outside of specific taxes in the regions, are there any regional segments where it's going to be harder to maintain that sustainability of the cost savings? Or is it pretty similar across the board, again, ex the tax rates? And then also Ohio has been on fire. So why do you think that is and cannot keep up? Sure thing. Felicia, good morning. Thanks for asking the question. No, we actually we were just talking about this a couple of days ago of how remarkably consistent the revenue patterns, the visitation patterns, the spend per visit patterns have been since these properties reopened. You got that first couple of days was a mad rush and then after that, it's just been really steady and stable. And that goes really across all of the regions. And so there really isn't a region that stands out, Felicia, as being more challenging other than there's just some capacity constraint and sort of local requirements that are different from market to market and region to region, that's more of the challenge today than anything around tax structure or our ability to generate great margins and flow through on top line revenue from one market to the next. So I think that and that will all smooth out over time. I don't know when that is, but when we have these capacity constraints lifted, then I think you'll see even improved performance in several of these regions. And right now, we're kind of boxing with one hand tied behind our back. And just on Ohio? I'm sorry, yes. And on Ohio, well, Ohio has been a healthy market for us forever, right, since we went live in Ohio. And Toledo benefited tremendously in the 3rd quarter from Detroit going live a couple of months after Toledo did. Toledo is still performing very, very well, and we actually think some of that business that we picked up is going to be around for the long run, which is great. We have a beautiful property there, and I think many people saw it for the first time and realized that it's a great offering. It's well run. Justin Carter and team there are doing an amazing job. So I think you'll see Toledo continue to perform really well relative to past years. And Ohio is just always going to I shouldn't say always, for the foreseeable future is going to be a growth market for us because it's still relatively new. Properties there have been open for 6, 7, 8 years. And I think you're going to see higher performance there, Felicia, than you will probably been versus other markets across the country. Great. Thanks. And then just kind of transitioning to Barstool. Prior to your launch, you put out in at least one deck, I think it was 2, statistics about kind of what you would need for the Barstool conversion and the My Choice conversion to get to a certain rate for Barstool to get to certain market share. So just in the early days of this launch, I was just wondering if you have any what kind of data you can share with us on those players now? Does the makeup of the folks who signed up match what you expected percentage of Stewlees, percentage of My Choice? Can you give us any color there? I'm particularly interested in My Choice conversion more than or adaptation more than the Astellas, but both would be helpful. Yes, sure. Thanks, Felicia. So a few things. We set internal goals obviously when we launched the app in Pennsylvania. And I would tell you that based on where we are today, we've exceeded every one of the goals that we had set. The only one that we're still working to improve right now is the live in game betting is a little bit lower than we would like to see. It's getting better every week, but it's not yet where we want it to be. But as you think about some of the key stats, you've got over 60,000 downloads of the app in Pennsylvania alone. And then those 61,000 downloads have converted into 48,000 registrations. So you've got almost an 80% conversion from downloads to registrations, which means that once people download it, they're continuing to go, right? People are going through the process of providing you their information. And then from registrations to first time depositors, you're seeing that conversion rate at 64%, which is also great. We thought it'd be around 50%, and we think 50% is around industry standards. So once people register, going through the process of actually establishing a deposit, And that's obviously key because people can't bet until they do that. So I think we believe those are some best in class percentages of conversion. And it's continuing to get better and better. The more unique promotions that we do with our partners at Barstool, we're doing things differently. I think really creative promotions, really creative unique sort of unorthodox unique betting opportunities And you bet the over on this game and you bet $100 or more and then you can join the overs club and you win merchandise from Barstool. So these are things that we're doing that others haven't done, but we're seeing that it's very effective. And again, the fan base really connects with that Barstool brand. So winning merchandise that only few 1,000 people in the country have is a big deal. So those are important for us. And things like average handle per better and average wager per better, it's still so early. I want to see how all of that materializes. So we're above where we thought we would be. But even if it came down some, we're still in great shape right now. The question on my choice is a good one. And I'm actually we've been digging into this a lot. And I'm happy to share that 95% of those that have downloaded the app percent of them weren't. So in terms of acquisition of new customers to the brand and to our entire ecosystem, what a success story. I mean, that is big news for us. And that same 95% holds true when you look at downloads across the country, and there's been over 300,000 downloads across country, 95% of those being new to our ecosystem. But within that 5% of My Choice customers that are using the app and betting on the app, they represent about 20% of the wagers or the wager amount, the handle. So I think it tells you everything that you would want to know in terms of how incremental from a customer acquisition standpoint has the online sports betting opportunity been and how amazing I think Barstool and their brand and their team have been on driving new people within the ecosystem at Penn National Gaming. And then of course, what we already know is that our My Choice customers are very loyal and they love to game. And whether it's inside a casino or online casino in PA, or now betting on the sportsbook app, their spend per bet and per time spent on the app itself is higher than the average player. So we're learning a lot, but I think those are all some nuggets that we're certainly keeping a close eye on and factoids that you probably want to continue to look at and ask us about, because they will evolve as time goes and we launch in additional states. That's super helpful. And I understand creative you're doing to drive the in game betting? To drive what? I'm sorry, Felicia. The live in game betting. We're trying some things. Honestly, we're starting to use push notifications and be smarter about when and how to remind people about certain things, if there's a favorite that's down at halftime and betting on halftime. So we're talking to Dave and Big Cat and others at Barstow. Everyone's got ideas. We're just it's still so early. I'm just kind of highlighting that I think that's a number that we can continue to improve upon. It's not that it's bad. It's just it has room for growth and in game betting is great because there's more engagement with the fan base. Thank you so much for all this color. That was great. Helpful. Thanks, Alicia. Thank you. Our next question is from the line of Shaun Kelley with Bank of America. Please proceed with your question. Hi, good morning everyone. Jay, just 1 or 2 more follow ups. There was something both in the prepared remarks and the press release, a comment on standalone, I think, Barstool brand entertainment destinations. And I'm kind of really curious about what that could mean. Could you explain that a little bit more? I think I'm envisioning something like perhaps barstool sports bars or something along that line. But what kind of structure would we evaluate here? Is this a net? How would the economics work of something like this in terms of sharing between the barstool and the media side and kind of Penn's interaction with some idea like that? Sure thing. So yes, we've been we've actually been talking about doing these probably since well, before we even announced the close of the deal. This is something that Dave and Erica and Big Cat are very excited about. And we think there's still as great a job as they've done with their brand. And you think about the evolution and growth of that brand over the last 2, 3, 4, 5 years, it's been spectacular. And there's still so much that we can do. It's a matter of timing and resources and prioritization. But you can envision these, they're not completely defined yet, Sean. We're still working through with the folks at Bar Stool, what exactly these will be when we say it's an entertainment destination. But you can definitely think about it as some sports bar, a certainly like a virtual sports book because we would be launching these in states where sports betting is legal and you'd walk in and it's not going be an actual retail sports book, but with technology and iPads and other things that we can do, it'll feel like a virtual sports book certainly during the daytime. There will likely be a nightlife component as well that, we have and Dave has lots of ideas on. So more to come. I would with your question with regards to how to think about the economics, we'll share more as we start to develop these, but I'm certainly viewing it more as an opportunity for getting the brand out there even more than it is today and as another efficient way to acquire new customers in key markets. Those are the top priorities for us. I think that the economics will be what they are, but that's not the really the sole motivation or really even the top motivation for wanting to deploy some resources behind this idea. Interesting. Look forward to hearing more. And then so the second thing would just be, obviously you've been pretty clear and I appreciate all the detail on the promo side, but there's still the external marketing piece here, which you've been, I think, very disciplined on given the way you wanted to launch this product. So kind of curious on what's your expected cadence around a broader external marketing spend? I think it would be unfair to assume you guys are going to do 0 external marketing spend as kind of the final steady state. But obviously, you probably want to have markets to leverage it leverage that spending across. So kind of where are you at in that phase? When should we expect to see some external marketing spend? And how do you think that could impact your trends that we're ultimately going to see in some of the KPIs? Yes. TBD really, Sean, we're working through our plan. And to date, despite the results, we've spent 0 on TV, we spent 0 on radio, billboards where billboards already in our portfolio that we just swapped out the creative on the billboards. So we've 0 incremental dollars on billboard. We've really been spending on the customer. And so when they come into the app, they have a great experience and we've got some different boost opportunities for them to get good odds on games or on online to bet with the people that they know at Barstool. And of course, there's things that we can do like we did with the Reading Terminal market in Philly, But I think it's just like that's super creative. It's a win win everywhere. It's unorthodox. But we got more buzz out of that than we would have gotten for spending $10,000,000 on TV in Pennsylvania for the month. And so we're just we're going to do things differently. I think you'll find it to be more efficient. I think it's safe to say that when we do start to spend some 3rd party marketing dollars in advertising that it will still be best in class and lowest in class. But it's not to say that we never will, to your point, especially as we move from Pennsylvania to Michigan and on to other states. We'll have a little bit of a different approach in the states that we're sort of moving on from because we want to stay super relevant in those states. And so we're still working through exactly what that plan is, but I think it's safe for you to assume and everyone to assume that we'll continue to do things in a very pen bar stool way. And it's not going to include the same approach as everybody else in the space. Thank you very much. Thank you. Our next question is from the line of Thomas Allen with Morgan Stanley. Please proceed with your question. Hey, good morning and thank you for all the incremental color on Barstool. So just qualitatively, what have you been hearing from the betters in terms of what they like about the app? And then conversely, whether our stoolies who have not been betting on the app, have you heard anything of why they're not betting on the apps? And then a second question on sports betting, do you think you've been more successful since launch attracting more casual or more serious betters versus kind of your expectations before? Thank you. Sure thing, Thomas. I'll answer the second one first. We've been pleasantly surprised. We've got a lot of heavy action on games from people we did not know when we launched the app. They're definitely in that 95% of being new to the Penn ecosystem. We've got, obviously, the masses. We mentioned we've got 30,000 first time depositors in Pennsylvania since we launched the app. So it's really a good it's a good mix of both. When sportsbooks across the country get hit hard, we're in there as well because you have a lot of action on a lot of the same games and sometimes some of the same better. So I'm happy to see that we certainly have attracted some of those more serious sharp betters. But I love seeing the masses. I mean, that to me is how you win in the long term. And we're continuing to grow those registrations and first time depositors in Pennsylvania, which I think is great. Going back to your first question in terms of what feedback have we gotten qualitatively and what do people enjoy about the app and maybe what are we hearing that could be better. Look, I would say that the one thing we're hearing that could always be better is that the more integration you have in the app with Barstool, the better, right? So we're working on video integration and dynamic promotional opportunities within the app, Shareable bet slip to where when Barstool folks tweet out their bets, you could click on it, takes you straight to the app. So those are things that we're working on that will just make everything more seamless than it is today and make the app feel even though it's already heavily branded, even more heavily and integrated with Barstool, the brand. And so those are things we're working on. It's not nobody's screaming. They're just things that we know will make the app better and make it just a better overall UI, UX for the end user. In terms of what's working, the exclusive bets have been an absolute home run. As I mentioned earlier, you've got 3,000 people betting $100 or more on a Monday night football game, so they can win a jacket that is bespoke to Barstool and what we're offering. Big Cat and Dave tweet that out. And it's just awesome to watch when something happens, how the response is for the end user because of how loyal that audience is and they're following what Dave and Dan and others do all day every day. And so that's been great. We have some unique features on ours. One's called Move the Line, where you can kind of move if you don't where the money line is, you can kind of spread it one direction or the other and the odds move with it. But a lot of people like that for point spreads and money lines. And of course, whenever we're boosting odds, that's a big deal. And so those help when you're doing push notifications and people get a chance to especially when it's hometown teams, we've been doing most of those sorts of things around the Eagles and the Steelers while we're in PA. And we'll continue to do those things. We're getting the app rating at 4.8 is there for a reason and that's after thousands of app ratings. We'd love it to be 5.0 and it's actually interesting if you look at the ratings that have brought it from a 4.9 to a 4.8, it's like 90% frustration that we're only in Pennsylvania. That's what you see when people download and it's really not critiquing the app as much as it is hurry up and come get to us because I want to play on this app, which I think is a really good sign. That's funny. And then just on your brick and mortar business, Boyd last week talked about long term getting margins into the mid-30s. Fuses on their last earnings call talked about potentially getting margins into the 40s. Kind of where do you sit in terms of where you think your long term margin can go? Thank you. Yes. Thomas, I would say, we feel really good about our business right now. And Todd and our regional team and our property leaders have done an amazing job since we reopened these properties and continue to. We're not feeling concerned about maintaining or what we know is that things will continue to evolve. And we know that there are some costs that have to come back in the business. We recently just finally were able to bring salaries back where they were for people who took haircuts on their salaries and we go back to matching 401 programs for our team members and we went back and gave folks on the hourly level their raises for the year and retro those back. So because that's who we are, right? You take care of your team members. And so there's naturally going to be some cost that comes back. But I really think the way to answer your question, you have to, I guess, sort of provide context first. So I guess I would need to know what is the environment. If the environment is at or better than it is today, then I think you should expect most of what you've seen from a margin improvement standpoint to stay. If the environment is something less than that, then we're going to be scrapping our butts off like everybody else figuring out how to adjust as we need to. And I just don't I don't know how to answer the question because we're just in uncertain times. And I don't know what the market is going to look like in 2 months or 4 months or 6 months in a vaccine or effective antibody treatments. And I don't know. All I would tell you is that we're very comfortable with how we're running the business today. And I think you've certainly heard from some of our competitors earlier this week that they seem to be comfortable as well. I'm not hearing anybody and these are not in sort of 1 on 1 calls, but I listen to earnings calls of our competitors and I'm not hearing anyone say, can't wait to get back to the way we marketed pre COVID or can't wait to get back to amenity offerings being exactly the same and buffets reopening across the country. I'm not hearing any of that. So I'm certainly comforted at the moment that it's, it is a rational outlook and approach by those in the space. It doesn't mean there's not going to be a one off privately owned or small public company that tries to do things drastically different. And in case by case, we'll respond as we need to in those markets. But I think generally, we feel as good about our margin performance and our ability to continue to deliver improved margins when you look at pre COVID versus where we are today. I just what is the context around the revenue environment? I'd have to understand that better to fully answer the question. Makes sense. Thank you. Thanks, Thomas. Thank you. Our next question is from the line of Steve Wieczynski with Stifel. Please proceed with your question. Hey, good morning, Jay. So Slide 8, I think is really interesting. And you're showing your retail sports book in Mississippi. And I think what you're trying to get at here is there's been an opportunity and moving them over to the sports book. And I think this is a debate that we've heard a lot about over the years, whether the typical sports bettor is different than traditional casino patron. I understand this is one casino that you're showing here. But Jed, I just wonder if you could give your kind of bigger picture opinion on that debate at this point. Happy to, Steve. And you'll recall that on our this was our 4th quarter earnings call, we did something similar to this with regard to our Lawrence Byrd property, where we had a retail sports book in the Q4 of 2019 and we didn't have a retail sports book at that property in the Q4 of 2018. And we sort of looked at some different data, which was around what was the impact to our food and beverage business, which was up 20% year over year in the quarter. Our table game drop was up 20% year over year in the quarter. And our slot business, which had been in decline for years because of Ohio legalizing casinos in Cincinnati and Dayton and around Cincinnati, was growing low single digit. I think it was 2.5%, 3%, something like that. So clearly, there's a positive impact from these retail sportsbooks. And we believe that by launching Barstool branded retail sportsbooks that those trends are only going to get better at existing retail sportsbooks. And when we launch them at properties that don't have sportsbooks we think will come out of the gate even stronger than we did with some of these more sort of brand agnostic sort of generic, but good well run retail sportsbooks. And what we're seeing in the slide that you're referencing in, not just in Mississippi, we're seeing this really generally across all of our retail sportsbooks is that sports betting does attract a younger customer. And I think this slide illustrates that very well. 77% of handle was from betters under the age of 50. And just to throw out another stat that I don't think we included, but I have in front of me is that 80% of those that have been on the Barstool sportsbook app, 80% are between 21 34 years old. So the retail sportsbooks aren't quite as young as those that are betting on the mobile app, but they're still a lot younger than what we see in our casino betting mostly on slot machines and on table games. We also just one more stat of another business line for us, but our online real money casino in Pennsylvania, very similar to what you're seeing on retail sports betting here, where got an average age of the early 40s as compared to the typical brick and mortar casino where your average age is in the mid to high 50s. So whether you're talking about online casino, you're talking about retail sportsbook, you're talking now about mobile sportsbook, These demos are younger. These audiences are new. I mentioned the 95% on the online being new to our ecosystem. And then on this slide, you can see 2 thirds of those, that are rated sports bettors are new to our ecosystem in 2019 or 2020. And 72% of those that are real players, those that are betting over $1,000 on sports, guess what they're doing, they're also betting on table games and other slot machines. So I think this tells you a lot about the opportunity and I think some get so narrowly focused on what is sports betting as a standalone worth. And there's debates about TAM and 5 years from now and 8 years from now. And I look at this as just such a huge shot in the arm for the industry overall and certainly for us given the way we're structured and all the different business lines that we have and the great partnership in Brand and Barstool that sports betting is even bigger than just what that TAM opportunity and the market share opportunity is in mobile. It's also because it helps our brick and mortar businesses from the retail sportsbooks. It's great for customer acquisition. And once we have new customers in our ecosystem, I think we're as good, if not better than anybody else in a space of moving people throughout that ecosystem. And we have amazing regional assets that are super well run and well maintained in each of the markets where we operate and we've got great mobile products as well. So we feel really good. I know it's a long answer to a relatively simple question, but to me it's broad. I mean, I included this slide because we want to make sure people understand that it's not just about the sportsbook app. It's not just about opening some new retail sportsbooks. It's what are these sports betters doing and how incremental are they to our ecosystem. That's great. Thanks, Jay. And then second question, which is it's going to be a little bit more of a negative question. But I guess, how do you guys think about we're starting to see virus cases pick up in certain parts of the country, you've seen Illinois start to restrict access to certain casinos. And I guess the question is, how do you where do you guys stand at this point or conversations you've had with different regulatory bodies about the potential for you guys to either have to shut down again or have capacity be reduced even more? Yes. Great question. And I was hoping that we wouldn't have to talk about this, but we're all looking at the same stats and reading the same articles, Steve. So it's a very fair question. And I would just tell you that it's very fluid. Most of our jurisdictions are at status quo and we're moving along and we're just all being cautious and but there's not really an active dialogue about any of the things that you mentioned. And then there's a couple out there like in Illinois or Colorado where it's a little bit more active conversation around what are those capacity limitations and should they stay here, should they be modified. So I don't have anything really specific to share with you other than we're staying very close to the health experts and health officials, our regulators, local lawmakers. And this is it's about safety. So this is really it's a group discussion and that's what we care about more than anything. And I just feel I feel obviously, Steve, after the couple of capital raises that we were able to complete this year in May and September, very different sitting here today answering that question than I did in March when none of us saw it coming and we were mandated to shut down. And cash is king during times like now, and I think we've shared good information with you that shows you we're in a very comfortable position from a cash and cash access standpoint, from a liquidity standpoint, really in any type of a scenario as we move forward. Okay, great. Thanks, Dave. Appreciate it. Thanks, Steve. Thank you. Our next question is from the line of Barry Jonas with Truist Securities. Please proceed with your question. Hey, guys. Good morning. Jay, I appreciate the comments about Barstool omnichannel and integrating with the land based business. But maybe just to be clear, what's your view on an acceptable time line to profitability for the interactive line item for the interactive segment? And maybe what are the scale of losses you're willing to take on until then? Yes, it's a great question. We talk about that a lot internally, as you can imagine, Barry. And I think that well, a couple of things. 1, our Interactive division today is sort of buried in other, as you know. And I would anticipate that we're breaking that out and sharing with you what that interactive P and L looks like sometime in 2021. I don't know if that's beginning of year, mid year, end of year. Obviously, we want to have some scale where it's meaningful to look at and talk about. But I would also tell you that I hear lots of others in the space talk about profitability potentially in 2023 and with the spending patterns that I'm seeing, I don't know if that's realistic or not. I won't speak for them. I will speak for us in saying that our path to profitability is a lot faster than that. Will it be in 2021? Maybe. Will it be in 2022? I would be very surprised if we weren't profitable and ramping in 2022. That's And then just to clarify, October hold for the in the deck was about 9 a little over 9% for the 1st 24 days. Is there anything structural that should give you a higher hold rate, whether it's your sort of unique barstool bets or anything like that? Or do you expect that to normalize a little lower? I don't know. It's still early. I've thought about this a lot. We've talked about it with our friends at Barstool. And we I think it depends on where live in game betting goes. I think it depends on what percentage of our total are betting on parlays and exotics. There's a lot of factors there. 9% is obviously really good. I would imagine that that's probably towards the high end of the range of where we will normally end up. We cut it off on that Saturday, just so we knew we had good data. Sunday, I think it was well documented. All the sportsbooks across the country got hit pretty hard on Sunday, bounced back Monday. It's a seesaw, as you can imagine. But we're really pleased at this point with the handle, the handle per day. I actually the hold rate is the last thing I looked at because we're still in we've got to build this out, we need to acquire, we want to make sure that the app rating is great and that our customer acquisition efforts are working. So I'm looking more at first time registrations and first time deposits and downloads and handle, the hold will be what it is based on how lucky we are and the bets that people make. But I think 9% is probably going to be towards the high end of that range. I don't anticipate us or anybody else holding 10% plus normally in sports betting. Great. And then just if I could ask one last quick one. Cashless, any updated thoughts how that could work? I know you get some fees now from ATMs, but are you thinking upside to cashless in terms of higher fees, players, spend per player or maybe it's on the staffing side being lower? Just any color there. I know it's early, but anything would be helpful. Well, and Barry, you're going to be hearing us talk a lot about this and Todd talking a lot about this on future calls. In that we're just now planning to get launched in our first state, which is going to be in Pennsylvania. That'll happen in 2021. And look, there's I think there's the natural sort of you asked the question around cost and efficiency. There's a natural efficiency in that we spend a lot of money, 1,000,000 and 1,000,000 and 1,000,000 of dollars handling cash and tracking cash and counting cash and transporting cash and receiving cash. It's banking cash. I mean, we spend a lot as does the industry. So clearly, there's efficiencies there if you're moving toward a cashless world. We really look at it a lot more as especially where we find ourselves today since we've reopened our properties, we've got these younger demos in our buildings. And there's a lot of like you get like the squirrely eyeball look when you tell people that they have to go to an ATM to get cash. Like this is not what somebody who's 27 years old is accustomed to doing. And then paying a fee to get your own cash is really like a it's a kick. So I think the way we're looking at this is, if we're able to advance the technology inside of our brick and mortar facilities along with improve the offerings around sports betting and barstool branded destinations like we've talked about that we also need to make sure that the experience inside the building is what somebody who's 21 to 40 or 45 years old expects. And so I think there's revenue upside more so than maybe others sort of focused on right now in that these younger demos, I think, will probably word will spread and we're going to have the right offerings, if we have the right technology, we have the right access to cash and to their loyalty program and they go to a restaurant, they order on an app as opposed to holding the menu and there's all these things that we know we can do that is that's where the younger generations are and are going to be. So more to come, but I would think of it, you're going to hear more updates from us probably on upside revenue potential. Of course, we'll share the efficiencies and there's plenty of them. But I think that the real return on the investment is probably going to be on incremental business. Awesome. Thanks so much, Jay. Thanks, Barry. Thank you. Our next question is from the line of Stephen Grambling with Goldman Sachs. Please proceed with your question. Hi, thanks. Just a couple of quick follow ups. First on the brick and mortar business and thinking about demographics, can you elaborate on what you're seeing from the younger crowd that seem to be coming in during initial opening and how their engagement in signing up for the rewards program may have evolved over the quarter? Yes, sure, Stephen. We've been pleasantly surprised not only by the influx of younger demo coming into the casinos since we reopened, but that their visitation patterns have really been great. It's been as consistent and stable as any other part of our business. So we've been it's like you're trying to sign somebody up for a loyalty card and they hold a piece of plastic. It's not something that somebody that's 20 6 years old typically does. So we have to evolve. And yes, we're signing people up, but again, you get kind of the squirrely look when you have to stay in the line and sign up for a piece of plastic. So we're really anxious to get going on this. But what we're finding, pleasantly surprised, is that they're not over indexing to table games. We're actually seeing a lot of this younger demo play slot machines almost the same sort of percentage breakdown as what we see in our sort of mid age and older demos. That has surprised me. I think the slot technology has continued to advance and evolve, which is great, but I was still expecting to see that over index to table games. So that's been a pleasant surprise for us. I certainly think that there are expectations from a non gaming amenity standpoint and an overall experience standpoint that we're just going to continue to have to get better. And we have a lot of plans that you'll be hearing from us on how we plan to do that, and it will be part of our capital efforts for 2021 2022 to continue to evolve the experience inside our facilities. That's super helpful. And as an unrelated follow-up, can you talk about whether the barstool downloads outside of Pennsylvania or concentrated any geography and how that might inform you on the rollout strategy? It really follows population. So, we've got a lot of people in California screaming and like it's going to be a long time before you can play on the mobile app in California, given the law hasn't passed and probably isn't going to for a while there. But you're certainly seeing a lot in New York, as you would expect, a lot in Texas, a lot in New Jersey, you can get a lot of New Jersey feedback and some go as far as to cross the bridge and that in PA, but most are just waiting for it to come to New Jersey. But if you follow the sort of population by state, that's where you'd see the hit rates mostly on these downloads from outside of the state of Pennsylvania. And so there's none that necessarily stick out to tell you we should be going to this geography first? Their brand has become so big and it's national, it's not regional. Early days, it was Massachusetts, then it was Mass and New York, and then it was the Northeast, and then it was Chicago. And now it's just national. I mean, I don't know if you recall last year when LSU won the national title and the first thing that Joe Burrow wanted to do is put on his Barstool hat interview with Big Cat for on Barstool before he met interview with anybody from the national media, ESPN or NBC or the rest of them. So it's just this brand is big, it's growing every day. Dave and Erica and Dan and others have just done a phenomenal job. But we're anxious to get to we sort of let me answer this way. We think about the prioritization of states really about, number 1, which states are launching, right? So we can be at the starting gate, level playing field, we're not playing catch up. Those are going to take priority for us. Michigan, that's the case. Virginia, will be the case. We're getting our application for Virginia in this week. Number 2, which states have both sports betting and online casino? That's a big deal, right, because we're going to be able to offer both once we launch in Michigan. And so circling back to a state like New Jersey is really important for us as well. We're already live in PA. Number 3, what is the population of the state because the Barstool brand is so big, it generally follows how large the state is in population. That's where we want to be. And tax rates obviously are important for us as well. And then there's always the one offs that the Barstow brand is so big that Massachusetts, if Massachusetts or Wynn Massachusetts legalizes sports betting, they check all of those boxes other than I don't know what will happen for iGaming, but being at the starting gate is important. That's where Dave started the brand. So we're very much looking forward to launching our product in the state of Massachusetts. But that's sort of the way that we think about it, Steven. That's helpful color. Thanks so much. Best of luck. Our next question is from the line of John DeCree with Union Gaming. Please proceed with your question. Good morning, everyone. Thanks for sneaking me in here. Good news, I just have one question. So we'll try to squeeze a little bit more data or anecdotes out of you, Jay. I think a lot of what we talked about today, given the short timeframe that Barstool has been live is on registrations, first time download. So it's probably a little early, but I'll give it a shot anyway if you have any anecdotes you could share about the frequency of use. Are you seeing customers who've been first time depositors, first time wagers? Are they are they vetting frequently? Are they coming back in the 1st couple of weeks? So any kind of thoughts on frequency would be interesting. Sure, John. Again, it's early, right? So we're tracking it every week in terms of those that downloaded and deposited in week 1, what's their behavior in week 2 and week 3 and week 4 and then what are those in week 2 look like. So we're seeing pretty consistent patterns. I think they're probably largely a bit better than industry standard in terms of what is your overall churn rate, right? So those that maybe bet once and then didn't bet again against how many new people have signed up and deposited, we're seeing really good patterns there, but it's early. We obviously that's something that we'll never stop focusing on, downloads, registrations, first time deposit and you can't just bank on the 1st week, you got to keep at it. And I think that we'll figure out creative ways to continue to do that like we did with the charity event around the Reading Terminal market, which was a huge success for us and the local community there to generate a lot of first time depositors and to write a big check for a local business nonprofit in need. So more to come, I guess, is the way to answer that, but we're pleased so far with the trends. Got it. That's fair. Thanks, Jay. I appreciate it. All right. Thanks, John. Thank you, everybody, for dialing in this morning and look forward to speaking with you in early February. 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.