Earnings Call: Q4 2020

Feb 4, 2021

Greetings, and welcome to the Penn National Gaming 4th 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 Mr. Joe Jaffoni, Investor Relations. Please go ahead. Thank you, Frank. Good morning, everyone, and thank you for joining Penn National Gaming's in the 2020 4th quarter conference call will get to management's presentation and comments momentarily as well as your questions and answers. But as always, I'll first review the Safe Harbor disclosure. In in addition to historical facts or statements of current conditions, today's conference call contains forward looking statements within the meaning of Private Securities Litigation Reform Act of 1995, These statements can be identified by the use of forward looking terminology such as expects, believes, estimates, Or by discussion of future events, strategies or risks and uncertainties, including future plans, strategies, performance, developments, acquisitions, capital expenditures and operating results. Such forward looking statements reflect the company's current expectations and beliefs, but are not guarantees of future performance. As such, 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. International Gaming assumes no obligation to publicly update or revise any forward Today's call and webcast will include non GAAP financial measures within the meaning of SEC Regulation G. 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 the company's website. With that, it's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay? Thanks, Joe. Good morning, everyone. Thanks for joining us for our 4th quarter earnings call. Unfortunately, we don't have our new Chief Financial Officer, Felicia Hendrix are not on board quite yet, though I know she's out there listening and eager to join the team here in a few weeks. We're excited for that. So in her place, I'll be are providing a brief financial update this morning following a high level year end review and some additional color on what was really an exciting quarter for us in Q4 of 2020. Here with me as usual are members of my executive team this morning who can help answer your questions, including our Head of Operations, Todd George, who will answer questions about our core business and Justin Sebastiano, our SVP, Finance and Treasurer, who will tag team with me as needed on the finance side. We're also joined for the first time are joined by Harper Coe, our new GC. Welcome, Harper. With that, let me begin by saying that as we close the final chapter on one of the most have been a very difficult and surreal years for all of us from a personal and professional standpoint. I'm immensely proud of the way our team members at all levels of our organization came together, weathered the storm and helped us emerge as a stronger company than ever before. While we'll continue to adjust to the uncertainties of today's world until COVID-nineteen is behind us, will be able to respond to the 2020 and the 2020 results. We will continue to see the And we supercharge the digital transformation of our company at the same time. Our team at Penn proved a lot in 2020. For me, as I reflect the words agility, perseverance, tenacity, resilience, creativity and change agents all come to mind. Our results in 2020 speak to the relentless focus and nimbleness of our best in class corporate and property management teams, And they reflect the power of our incredible partnership with our great friends at Barstool Sports. While I am equally proud What I am equally proud of, excuse me, in looking back on 2020 is how our company rose the occasion to support our team members and host communities in these times of great need and heighten social justice awareness. Through our Penn National Gaming Foundation, we created a COVID-nineteen emergency relief fund for our team members and raised over $3,700,000 from our Board of Directors, senior management team and our foundation. In addition, we provided $13,000,000 in one time holiday cash bonuses to our non executive team members company wide in the 4th quarter will be available to help with the financial impact to their families from the pandemic. We also created the Hurricane Laura relief funds with an initial contribution of $2,500,000 to help our community and team members impacted by the storm, in addition to providing more than $6,000,000 in full wages and benefits to our team members while L'Auberge Lake Charles was closed. Most importantly, we joined Dave Portnoy's latest mission at Barstool to help save and sustain small businesses across the country that have been impacted by COVID-nineteen, contributing more than $4,600,000 and counting to the Barstool Funds. Finally, on the social justice front, our diversity committee announced a new $1,000,000 Annual scholarship program to support team members from historically disadvantaged and underrepresented groups. And we launched a series of new inclusion related initiatives will be able to provide a brief update on our financial results. Turning now to our Q4 results. Both our revenues and adjusted EBITDAR were trending ahead of forecast before COVID-nineteen related closures in Illinois, Michigan and Pennsylvania and increased restrictions in Ohio and Massachusetts, amongst a few other states, began in mid November. While revenues contracted 23% year over year, adjusted EBITDAR declined by only 9% for the same period, reflecting structural changes that were put in place with the onset of the pandemic. These adjustments to our core business helped to expand adjusted EBITDAR margins by 580 basis points relative to Q4 2019 Results despite the aforementioned headwinds, helped by an improvement of 7 20 basis points in the South segment, which was least affected by the COVID-nineteen restrictions despite the impact of Hurricane Laura in the Q4 in Lake Charles. We remain convinced that these structural changes to our business will result in meaningful EBITDAR growth once volumes return to pre pandemic levels. Trends in January thus far are very encouraging, which Todd can provide more color on during our Q and A session. In fact, this past weekend, we saw our highest Friday, Saturday combined slot volumes across our company portfolio of properties since the Q1 of 2020. Our sales segment has continued to be particularly strong with January revenues the highest we have seen in the month of January in the last 5 years are on a same store basis, leading to exceptional flow through to EBITDA. We are continuing to see encouraging growth in the younger demographic tiers of our database, And we believe the rollout of COVID vaccinations and treatments will encourage more guests in all age segments of our database to return to our land based facilities. When they do, they'll soon be met with the 3 Cs, our new cashless, cardless and contactless technology, which will improve efficiency and provide a guest experience in line with other industries historically frequented by younger demographics, which we expect also to drive further incremental revenue for us. Were planning to launch the 3 Cs at our Pennsylvania casinos in the first half of twenty twenty one subject to regulatory approval and we'll continue that rollout for the remainder of 2021 to other regions. I'm sure Felicia would also want you to know that our cash balance stood at a healthy $1,900,000,000 at quarter end even after paying down $115,000,000 of our term loan B. In turn, our net traditional debt decreased to approximately $578,000,000 at December 31, 2020, bringing our lease adjusted net leverage are at 4.7% based on 2019 adjusted EBITDAR compared to 5.7% at the end of 2019. Some Some of you may have also noticed in our financial statements that we recorded a sizable unrealized gain related to our equity positions in PointsBet and theScore, which were received as part of our market access skin agreements. This is just an example of the significant value we think we will realize over the next several years from our portfolio Other highlights from the Q4 include the continued momentum we're seeing for our Barstool Sportsbook app in Pennsylvania, Strong retention, CRM efforts and creative promotions, including our matching of first time deposits with donations to the Barstool Fund to support small businesses throughout have led to an increased handle and market share and most importantly, highlight our unique and unmatched approach to efficient customer acquisition. More recently on January 22, we introduced our Barstool Sportsbook mobile app in Michigan to very strong demand. Dave Portnoy, as many of you know, went to the University of Michigan and he and Big Cat have a very loyal fan base there. They've been hanging out at our Greektown property in Detroit, generating a lot of excitement and awareness not just for our Barstool Mobile Sportsbook and fully integrated iCasino, which we launched on Monday, But also our retail barstool sports book and the Greektown Casino in general, which really highlights the power of our differentiated omni channel strategy. We think this strategy is sure to only gain steam in a post COVID environment. Importantly, Michigan's launch weekend had 68% are more first time depositors than Pennsylvania's initial weekend and the daily active users were nearly 2 thirds higher than the average daily active users in Pennsylvania during 2020. All the more impressive when you consider the state of Michigan's population is only a little over 70% Also worth noting, the attention and excitement from the Michigan launch has created a halo or spillover effect, And the publicity surrounding our Michigan launch helped our registrations and daily active users climb in Pennsylvania as well. We are just beginning to will be available on the call for the call. We are excited to see the early benefits from being live in our second state. Our next launch state will be in Illinois, where we plan to go live prior to March Madness, are pending regulatory approval, of course. And from there, we'll continue to roll out in new states every 3 to 5 weeks or so until we're operational in 10 or more states by the end of 2021. We achieved another milestone in Michigan with the launch of our Barstool branded iCasino product on February 1. Although it's obviously early, we have been extremely pleased with the initial results as nearly 15% or as of this morning over 15% now of our Michigan sportsbook customers placed a wager on the Barstool iCasino during its first two days of operation and average daily users exceeded our more mature Hollywood branded iCasino product in Pennsylvania by more than 70% over the same 2 day period. Finally, we have now fully implemented our industry leading My Choice Rewards program across all of our properties and our online channels. This program of over 20,000,000 members connects our land based are participating in our sports betting and iCasino products, offering players a wide range of compelling incentives to consolidate play across our various platforms. Are My Choice Player affinity program has become even more compelling as we recently announced a strategic partnership with Choice Hotels that provides are yet even more earning and redemption options for our most valued and loyal guests as well as an additional funnel to fill our nearly 10,000 hotel rooms across the enterprise. Looking forward, we're anticipating an exciting New Year as we continue to introduce Barstool branded retail and mobile sportsbooks across our portfolio, including brand new builds at our 2 properties opening in Pennsylvania during the second half of twenty twenty one. We have already seen very strong results from our retail sportsbooks with our Indiana properties seeing meaningful increases in both gaming and non gaming revenues following their rebranding as Barstool Sportsbooks. We are incredibly optimistic about the opportunities to unlock further upside as we introduce additional Barstool Sportsbook and Sports Bars across the portfolio. In the meantime, on the legislative front, we're focused on the enabling legislation for voter approved sports betting laws in Louisiana and Maryland, And we're aggressively lobbying in 2021 for new opportunities for sports betting in Ohio, New York, Texas, Massachusetts and Missouri among others. We believe our industry best geographic footprint combined with the work we have done over the past year has set the stage for a very exciting 2021. And with that, I'd like to ask Frank for you to please turn it over to the line of questions. Thank Our first question comes from Joe Greff with JPMorgan. Please proceed. Good morning, Jay. Good morning, everybody. Good morning, Joe. First question for you, Jay, and you kind of talked about it In a couple of different places in your prepared comments, but we're all kind of thinking about the return of that 50 years old and older Can you remind us when we think about spend per visit and visitation and margins, How does that segment compare to the other segments in your database? How does that compare to that retail segment? Is that something that could be a positive mix shift Yes. I'm going to let Todd George answer that one, Joe. Thanks, Jay. Hey, Joe. So traditionally, Joe, this segment has performed higher. This is the group with more time, more cash. So we're encouraged that in Q4, the trend has been positive, but we're starting to see greater visitation from this group than we've seen in the prior This is also a group that is more actively engaged with us, starting to get into that Again, as Jay touched on in his opening remarks, this was a group that was out in force this last weekend and through much of January. Great. Thank you. And then Jay, on the U. S. Sports betting side, We're seeing, not necessarily Pennsylvania and Michigan, but just in other markets that the environment have gotten a little bit more promotional and some kind of craziness with customer acquisition costs. When you look at The broad overall trends there, how does that factor into your thinking on how You're going to market and promote and acquire customers. How has your thinking evolved maybe over the last, I don't know, year or so that you've seen more experience. And then how does that translate into what you're doing in Michigan and thus far in Pennsylvania, I know both markets are kind of early days. And then when you think about the initial performance in Michigan outperforming Pennsylvania, Is it really just a function that Michigan is sort of a jump ball market for everybody and so therefore you're a little bit more on an even playing field and so therefore share momentum is a little bit stronger, but love to hear your thoughts on all these things. Sure, Joe. I'll tackle the second one and then the first one. And the answer to the second question around the differences between Michigan and PA, I would point to that as the primary reason. We've been pointing to Michigan for, I I don't know, 6 months now, ever since we knew that Michigan was a state that was going to be ready to go sometime in the late Q4 or early Q1, Because any other state that we could launch in out of the gate like Pennsylvania, you're playing catch up. We launched in Pennsylvania, I think it was 14 or 15 months After sports betting had gone live from a mobile standpoint, the Michigan for us is a great proving ground. We're at the starting gate at the same time, the gun goes off and We're not playing catch up. We can jet out of the starting gate the same way that everybody else can. But of course, we definitely do things different. We have this Amazing partnership in this fully integrated media strategy with what is the most compelling and fastest growing are in the same store. And we're going to be in the same store as the company on the Internet. So you look at the popularity of Barstool, where it was when we announced our investment in Barstool a year ago to where it is today. And it's been so robust. It's beyond anything that any of us could have ever expected. And so we're in this really great position, Joe, where I think it's well documented that this is kind of tying into your first question, Customer acquisition costs, I think most analysts have done a good job researching this and it's anywhere from $300 to $800 per customer For the space, right? What I would tell you is that for Penn so far in the 1st 4 months in PA, despite all of the barstool will fund matching that we've done as well as in Michigan in our 1st month. We are well below the bottom end of that range. We have So much room for we have so much cushion to be opportunistic and figure out what we want to do and how we want to do it. And so we're starting to test Some paid media, paid advertising in PA and Michigan, we're just dabbling. We're happy with the early returns, but we're in this great spot where We think we can generate meaningful market share and profitability just relying on that Barstool Media Partnership and then anything else we do above and beyond there is for us just to continue to grow our share and do it in a way that delivers a nice return on investment. And I think that's a very different strategy than everybody else in the space. Our next question comes from Shaun Kelley with Bank of America. Please proceed. Hi. Good morning, Jay. Good morning, everyone. Jay, maybe to follow-up on that last point. I think as we're looking at the report that came through. We're staring a little bit at the kind of corporate and other line in your reported financials. And that number does seem seem to be coming in materially better than I think what we or probably The Street had modeled. There's a lot going on in that line item. And what I'm kind of trying to get at is, Are we seeing an actual material contribution on the profit side from some combination of Penn Interactive, Barstool Media and some of these other things that are going on, some of the maybe the market access piece. Or can you help us understand that a little bit better? Because it seems like it almost entirely offset Your corporate costs in the quarter, if you could just help us unpack that a little bit. Yes. Well, you are correct in all of your assumptions there around What sort of packed into that other category? And we will at the right time, I would anticipate probably before the end of this year, this calendar year, will start to report PI out separately. We're not ready to do that yet, but you should assume that what drove the other results as everything associated with Penn Interactive and what comes with that. We had an amazing quarter. And That's with doing we've done everything that we intended to do from a marketing standpoint in the Q4. We haven't held back. We're at the point now where it's What else do we want to do because our customer acquisition costs are so much lower than everyone else's, we can really be thoughtful around what we do, How we do it, when we do it. And we've got partners that are just in no shortage of ideas all the time. I don't know how How many of you guys saw, but for example, one of the things that we're doing this weekend around the Super Bowl that I just don't think our competitors can do this because Our media partners and their following is so compelling and so loyal. But Dave set up to where he's got 5 personalities at Bar will be available for the next 2 quarters. And there's a contest throughout the day in the Super Bowl betting on the game throughout the game. And whoever ends up with winning the most money, If you bet $100 on our app on any bet on the Super Bowl, you get randomly assigned to one of these 5 personalities. And if your personality ends up after Super Bowl with the most money, you get $1,000 dropped into your account. It's just those are ideas that no one else are doing something like that. And that's something that we're so excited about because we've got this list of dozens of ideas and we're just prioritizing Which ones make the most sense? Which ones are Dave and Big Cat and the team at Barstow most excited about because You sense when they've got a great idea just how much energy they throw at it. And so yes, we think we're in a really good position. And I think that What you see in that other line, Sean, is that you're seeing really early on profitability. I'm not telling you that you should expect that quarter because we may decide that as we launch, we want to be more aggressive in some of the things that we're learning on the paid media side. But As of right now, we're spending on the things that we know move the needle and we're still able to look at our P and L and be really, really impressed. And Jay, maybe just to kind of push it a little further since I mean, I think you've kind of alluded to it, but maybe just to say it directly. Do we think is reinvestment really the first priority and you start really analyzing the customer acquisition costs and what you can do to maybe further accelerate some of these new markets, because I mean you've done all this, you were, I guess, implied profitable in the quarter and you were Adoptly ready to ramp and ready to roll for getting going in Michigan, which is a huge launch for you. So I mean, it's Impressive and we're trying to think about how to extrapolate these numbers or this trend line going forward. Yes. What I would say to sort of play it safe, Sean, is that and I've said this on a previous call that I think we could definitely be profitable in 2021 If we desire to be, I'm not sure that that's really what our number one priority is. Right now, we're trying to grow the funnel and really focus on as much on new customers, acquisition, first time depositors as possible in all of these markets. And what's interesting is that even as are aggressive as we were in the way that we are aggressive and we matched over $3,000,000 in Michigan in the 1st weekend on first time deposits and wagers. And I sit back and I look at our customer acquisition cost for the Michigan launch, and it's still less than $200 Right. So we have a lot of flexibility here in terms of what we want to do and how we want to do it. I would assume that 2021 maybe is sort of breakeven ish are on the interactive side, but we clearly have a path to ramping up profitability faster than anybody else, and I would expect to start to see that Our next question comes from Steve Wieczynski with Stifel. Please proceed. Hey, Jay. Good morning. So you talked about that typical acquisition cost that's out there today in that range of $300 to $800 I think is the range you referenced. And you guys, You mentioned you're well below the bottom end of that range. And I guess the question is, how far up That range could you guys go before you lose profitability? And what I mean by that is, could you get all the way up to the high end of that range and still be profitable Steve, I think at scale, the answer is absolutely yes. Remember, with everything that we just talked about in terms of the Q4 and profitability and our great Michigan launch, we're in 2 states. So we have all of this overhead costs. We've been ramping our Penn Interactive division around staffing. We now have over 250 people. We've got 100 product Development and engineers, and that's all now being spread. All that cost is being spread across 2 states, right? So you can imagine as you scale this thing The 10 states, 11 states, 12 states, which is where we plan to be by the end of 2021, you have all that much more dry powder to spend on Growing the funnel and widening that funnel of acquisition. So we're testing things now. We spent some money on TV advertising in PA in Michigan around AFC NFC Championship weekend, not a lot, but we dabbled. We're really happy with what we saw on the returns on that. But I think most of what you're going to see us do is just going to be around the fully integrated media strategy or strategies. And you should expect what we do to be new, different, unorthodox, but super effective and super high return. Okay, got you. And then second question, Jay, this would normally be the call where you guys give guidance for the year. And obviously, we understand You're not going to provide guidance given the current backdrop. But is there a way for us to understand how you guys are thinking about the business this year without explicitly And I guess what I mean by that is, I would assume you guys have modeled out multiple scenarios in terms of what the year could look like. I'm just wondering, What are some of the key items that you guys are watching, which I assume most of it's tied to the virus and vaccinations and stuff like that. But what are some of the things that you're watching that push you to either the high end or the low end of how the year could shake out? And I hope that makes sense. It makes absolute sense, Steve. And I we've already talked about Penn Interactive. So I think for modeling purposes, if you assume breakeven, then somewhere in that range, slightly positive, slightly Not, but breakeven for the year, is probably the way to model it. Everything else in our business, it boils down to COVID. And so if we assume from here through the remainder of the year that restrictions and closures get no worse than they are today. And you map that out for the remainder of the year and the restrictions continue to ease every few months. We look at the consensus number and say that number looks fine. But I just to your point to put a number out there right now when we don't have Full control over our destiny the way you do in most years, we felt like wasn't the right approach, and I'd be surprised if many decide to do that. But It really does depend on sort of what decisions are being made at the state level and at the regulatory level in terms of how we can operate Our next question comes from John DeCree with Union Gaming. Please proceed. Jay, I wanted to ask a question about the core casino business. And since The addition of the reopening of COVID, casino marketing and promotional spend has been something that the entire industry has rationalized Quite considerably. And I was wondering, as we navigated the 4th quarter with additional lockdowns and then moving into January, which sounds like things are improving nicely. Have you seen across the industry, given your footprint, any change in behavior? Or would you say the industry is still really focused on keeping Good morning, John. I'm going to let Todd grab that one as well. Thanks, Joe. Hey, John. So similar to what we saw coming out of the pandemic, every quarter has really been a change for the entire industry. And in the beginning, it was more driven by we had capacity restrictions. So there was it was pointless to market rather aggressively. But I think what everybody has seen with that model, The customers continue to come back and as long as you're offering the product that's in demand as well as the service component, everybody has remained are completely rational, including going into this year. And typically, that Q1 number is a pretty robust number anyway, just With a seasonality component as long as weather stays pretty reasonable. But we have not seen anybody in really any market come away from Thanks. That's helpful color. And Jay, maybe one for you on some of the barstool metrics that you provided in your prepared remarks. I think you've mentioned about 7% of Barstell registrations have come from your My Choice database. I was wondering if you had any data or anecdotes yet on maybe how many My Choice customers that have been dormant have maybe found Barstow and become reactivated or maybe standalone independent app customers that have found their way Into a casino and realizing it's early and with restrictions, but kind of curious how the cross sell has gone the other way into the casino? Yes, it's early. So we don't have a whole lot to share there. I'll give you what I know, which is really around our Real Money Gaming Hollywood Casino in PA, because that's now been live for the longest period of time, which is About 50%, five-zero of the users are users that are active in our Pennsylvania casinos, About 25% were brand new to the ecosystem and 25% were reactivated, so they had gone dormant. I think that, that percentage will be less on the sports betting side because you don't have a direct crossover correlation from casino But no question, we are reactivating some guests. I just don't have any specifics for you as it relates to sports betting. Our next question comes from Ryan Seidl with Craig Hallum Capital Group. Please proceed. Great. Thanks for taking our questions, guys. Just curious on Michigan, if you're able to kind of bifurcate out, Maybe even just directionally because absolute numbers aren't out yet, but what your market share is there relative to kind of how you started in Pennsylvania? Yes, that's a tough one, Ryan. I don't want to be on record of predicting what the first 10 days in Michigan came to. I think there There's already some numbers out there that people are tracking related to geo comply and the number of pings and things of that nature. I would just say that I think You have to look at Michigan even with regard to PINGs differently than you have any other state launch because Michigan is the only state to date in the U. S. That went live on the same day with both sports betting and online casino. And so you should expect The number of pings relative to other state launches was going to be higher in Michigan. We just none of us know How many of those were specifically for downloading and betting on sports betting versus downloading and betting on the online casino? What I would I think we did in our slides, if you look through those, we tried to do a good comparison of The first weekend and then the 1st 10 days in Michigan versus Pennsylvania, we all know what our market share has looked like in Pennsylvania From a handle standpoint in that 12% to 13% range and really ending the year in December with our best month to date. And you look across the board in the Michigan metrics, whether you're looking at downloads, registration, first time deposit, daily active users, Number of wagers per day, wagers per day, it was all significantly higher in Michigan than it was in the state of Pennsylvania. And back to one of the other questions, I think it is being at the starting gate at the same time makes a huge difference. We're not trying to Convinced sports betters to leave the app they've been betting on and download our app. That's the challenge that you run into when you're launching later than everybody else. This was a It's fair game. Today is the 1st day and download Barstool, and I think we're seeing really good results out of the gate. Good. Yes, I realize difficult question to answer, so helpful context. And then there's been a lot of conversation, I guess, about your hold percent Recently here, it was significantly better than kind of industry average and everyone else. Any comment on what we're seeing in Pennsylvania there as far as your hold goes? Yes. I mean, look, I would this reminds me of questions we would get on volatility in Blackjack and some months you get lucky and you hold well and Sometimes you don't. I think that for us in PA, we're continuing to build relationships with really good VIPs. We're continuing to see more and more traction with are available on the Barstool exclusive bets and many of those are parlayed bets, which tend to hold better, but are a lot of fun. We had, just to give you a quick During AFC NFC Championship Weekends, when we launched in Michigan, between Michigan and Pennsylvania, we had 11,000 betters bet on the can't lose correlate with Big Cat to get the free hat, right? So it just I think it speaks to sort of what might drive over the long term that whole percentage. I wouldn't overly read into December. I don't think you should expect 20% of us every month. Maybe we end up above average over the long term, but I would also remind everyone we lost money in the 1st month we launched in September. So it does go both ways and VIP play and how people do on parlays can really move that number Our next question comes from Bernie MacTiernan with Rosenblatt Securities. Please proceed. Great. Good morning. Thanks for taking the question. Jay, an earlier point that you made evaluating kind of like what else you want to do given the early success in Pennsylvania And you clearly have proof of concept that Barstool is working. I'm interested in your thoughts on just adding other customer acquisition channels to supercharge what's currently going on. So for example, free to play with Fox's Super6, it's routinely a top app in the iOS apps are under sports. MSG Networks today just announced they were launching some free to play. And then also there was some recent M and A in the Daily Fantasy section. So just wondering if there's any kind of increased tolerance to or wanting are looking to further leverage the Barstool brand on other customer acquisition channels. Yes, Bernie, it's a great question. I'll tell you, We talk about it nonstop around the office here and with our partners at Barstow as you can imagine. And we have a real appetite. We're just trying to make sure that we make the right decisions. And I think we've really benefited from playing the long game and are thinking about what was the right media company to align with and how to fully integrate that media company. We weren't the first to announce a media partnership, but I think when we got to announcing it, were really proud of the one that we put together and how it was structured and how both sides were incentivized. And so we're not going to chase something are saying because of what you read yesterday about what somebody else did. I would tell you that, we're maniacal about improving our strategy for the long term. And yes, we're very interested in figuring out how we can widen the funnel from an acquisition standpoint, whether that's through media partnerships or Social media influencer partnerships, there's all sorts of things that we know we can do. We've just recently announced that we have relationships with Nick Merckx, who's a video gamer in Michigan on an influencer basis. We just announced that we now have a partnership with with an influencer, Logan Paul, which we're really excited about. That's just going to get going. And obviously, the more we scale, the more impactful That will be because it's a national influencer. So we're doing things. We don't necessarily do huge splash Announcements about some of the things that we do, but the things that we're doing, we know are delivering great returns and we're continue to be really aggressive in terms of thinking through what might be next. Our next question comes from Barry Jonas with Truist Securities. Please proceed. Great. Hey, Jay. I guess I wanted to expand on inorganic growth or M and A. Are there sort of jurisdictions you'd like to be in from an omnichannel perspective that maybe M and A would allow you to accomplish? Are there any tack Verticals that you are exploring at the moment? Yes and yes. We've got a lot in the queue that we're looking at right now. New York obviously is a really important state for us to have an The best solution for depending on how legislation works out. There's some differences between what the governor has said and what leading lawmakers want to do, and so we're staying close to that. The nice thing about where we find ourselves today, Barry, is that we've got a Terrific balance sheet sitting on almost $2,000,000,000 in cash. We have we've delivered and we're delivering now in our 2nd state in in terms of being a major player in online sports betting. And we have this great footprint in all of these skins, and we still have lots of excess And so as we think about how to get access to a state or how we want to think about a partnership and M and A, New York is a great example. We can acquire our way into Access, we can partner our way into Access, and we can barter our way into Access because of our Access So we've got a lot of flexibility in that, where we've got a lot of conversations that are warm right now, and we'll be hopefully Announcing soon some of the things that we're currently working on with regard to access. And M and A, We're looking at all sorts of adjacencies because you just don't know how this is all going to come together in the out years. There's going to continue to be, we believe, A lot of industry convergence between gaming, sports betting, media and tech and potentially video gaming, esports. There's a lot out there to consider. And Chris Rogers and others on our team are very busy continuing to look at What all the potential options are for us to consider and it's great having partners like Barstow because they live in Internet every day and they bring have some really good ideas to us that could be really interesting down the road from an M and A standpoint as well. Great. And then I guess as a follow-up, What's your view on vertical integration here as it relates to sports betting or interactive in general? It's in that list of things that we're considering. Barry, I would tell you that now that we've successfully launched in State 2 and we've now launched the fully integrated are still iCasino. I have to say, I could not be happier with our partners at WhiteHat Gaming and Cambie. It doesn't mean that we won't ever think about being more vertical on the tech stack down the road. It just means that I think there's pros and cons to both. And we feel really good about we're the I think it's safe to say the most important client they both have in the U. S. Will be able to move their needle and we have their attention. We've got a lot of great resources. The relationship is in a great place. Are extremely responsive and they've delivered. So we'll see more to come on that one. I don't feel like we've got a gun to our head to figure that out in the next week or month. We've got time. We'll be thoughtful and we'll be judicious if we decide to do something, because we feel like we've got a lot of great options in Our next question comes from Ben Chaikin with Credit Suisse. Please proceed. Hey, how's it going? Thanks for taking my question. In the sports betting segment, it sounds like Illinois is the next State to go live, how did you think about that versus Virginia or another state in the context of the comments you made earlier, Jay, around The benefits of being there when the gun goes off, so to speak. Is it just the size and opportunity of Illinois, but just any more color you could provide there? Yes. Well, a couple of things. One, there isn't another state right now that the gun is about to I mean, Virginia has been kind of leaked. There's been operators kind of going live every 5 days or 7 days, and we're cautious will be in that queue somewhere. They haven't announced all of their licenses up to this point. So for us, It was a pretty easy decision because you have to plan these things out. You can't just wake up one day and say, let's do that state tomorrow. You've got to work with the regulators and every state has different controls and regulations and rules around Betting on college versus not betting on local teams versus not what sports. And so you have to build these things out. Now, Illinois for us is going to be, we think, Right behind Boston, there's no city in the country where Barstow is bigger than in Chicago. And so Big cats from there. We've got a great following on the Barstow side. We have 3 casinos in the state. And For us, Illinois was a no brainer. We want to be live before March Madness. We're cautiously optimistic we'll be able to make that happen. We're just working with the regulators on dates. And after that, it's going to be a mad rush to get as many live as possible before football season that you from a pure But it's all about being prepared for September when college and NFL football kicks back in. So you should expect the Indiana's and the New Jersey's and then when we say New Jersey, both sports betting and online casino, given that we just did both in Michigan successfully. We'll be ready to do both in New Jersey when we go live there. Colorado, Virginia, West Virginia, Iowa, Tennessee, I think that's probably the lineup there. And we're in a spot where We've got an opportunity, depending on what happens and how fast Maryland moves and Louisiana moves, if legislation gets going in Ohio, Massachusetts, we have a lot of flexibility on the second half of the year to continue to swap things in and out. And we think the bigger the state population and The bigger the Barstool brand in the state are really big factors for us. And of course, being at the starting gate is probably going to be factor number 1. So if we can be At the starting dates, then that's probably going to move up from a prioritization standpoint. Got you. That's super helpful. And then just one more on the land based side. I think you mentioned that January had some positive trends. I think you mentioned similar to 1Q 'twenty in the South segment even stronger. Just as we think about the cadence, presumably 1Q had a lot of variation given the development of COVID with March closures, etcetera. So Does that comment equate to the first half of 1Q or the second half or just any more color as you can just try and bracket kind of where you guys stand? Thanks. This is Todd. I'll take that. So I think what we're seeing, if you can extrapolate are actually pretty favorable for us. So even looking at this last weekend where Ohio started to ease restrictions just by moving the We saw a tremendous pickup there. So Illinois now being open and working through the restrictions there. As these states start to ease the restrictions. We're encouraged when we kind of look at the southern region as What we feel every region can look like as we go forward. So, and again, keep in mind that last year Q1 the end of Q1 is where we start to see the COVID impact. So, we're optimistic about the way Q1 kind of shapes up. I would just add that Todd and I were talking yesterday for a while about this pent up demand and it's real. It's real. And what we're seeing in states that, to Todd's point, loosen some of these curfews and restrictions, you see a bump the next calendar day. People want to get out of the house. And I think as the COVID vaccinations continue to roll and treatments prove more and more effective, The weather warms up because you remember most of our portfolio were over indexed concentrated in Midwest and Northeast. You get March, April, May, and if all these things are still moving in the right direction, I think you're going to see some real pent up demand like we're seeing in the South right now. Our next question comes On the media business, you noted solid revenue growth and a bunch of good stats on the following growing as well. Can you provide a little bit of incremental color on How the revenue mix may be shifting between the big buckets of advertising, merchandise, etcetera? Make sure I got that question right, Stephen. You're saying with regard to our sports betting results? Within the JV specifically, I know that you referenced that the media brand keeps growing its presence and that feels like it might be an underappreciated part of the story. So I'm just are curious how the revenue mix on the barstool media side might be evolving. Got it. Sorry about that. Yes, I'm Trying to be thoughtful around what I can say, because remember, we're 36% investors. We don't control or own majority today and I don't want to speak for Erika Nardini about too much about her business, of course. What I would say is that 2020 was best year on record. The growth was unbelievable. There was a little bit of a pocket in that March, April, like every other company in the U. S. And probably the world for that matter was like what's going to happen and you saw some pullback on advertising spend, but really from May through the end of the year, Every category, very strong. And this is something that I actually don't think gets enough attention. I actually appreciate you asking the question, Steven, because we are going to own the majority, if not all of Barstow at the 3rd anniversary, which is only 2 years away. And you look at how there's been some really interesting transactions in the podcast space, We got a call the other day about a tiny little sports media company and the asking price compared to what we're going to end up paying for potentially all of Barstool Makes me feel really good about the value of Barstool. And it's interesting too, we talked about this With Dave and Erica and Dan a few times that Barstool Sports by itself was probably worth X have the potential to get to Y sort of if they stayed on a standalone basis. And Penn maybe was worth A and had potential to get to B. But But then you put the 2 companies to bet together and it became exponential in terms of what the platform that each provided for one another and the exposure and have access to different customer bases and they now have everybody on Wall Street following them and we have everybody not everybody, but So many in that 21 to 40 year old age group following up and wearing pen gear. So it's there's so much synergy. The companies were very complementary for one another. And I think that value, again, without getting into too much detail, and I'm sure Erica will share whatever she comfortable sharing at conferences. That value is only going to continue to grow, given all of the great things that they've done and How they've proven to be just so agile. I mean, who would have thought that Davy Day Trader would be a thing, let alone a huge thing, and unboxing promotions would have millions of viewers every night and live streams of them playing digital blackjack would garner so much attention, but I say it all the time, you're probably sick of hearing me say it. They're marketing geniuses, and we're really thrilled to be partnered with them and thrilled to be the are owners of that brand. Makes sense. That's helpful. They've essentially become a platform for influencers. As an unrelated follow-up I think this is John's earlier question about the customer overlap between channels. Can you touch on what you're seeing and expecting in converting sports betting customers to iCasino? Yes, happy to. Now this is really early. We're talking 2.5 days early. But we had targets internally, I won't We're really close to what our goal was after 2.5 days and those days were Monday, Tuesday, Wednesday, which makes me feel really good heading into the weekend, we're now over 15% conversion. It's so smooth and easy to find in the app. It's got its own place on the bottom as well as in the menu bar. It's very intuitive. It's one wallet. You get in, play some blackjack or some roulette, Maybe at halftime of the game and I think this is where we can do things that are really differentiated around Dave and Big Cat and the other Barstow Nowadays, maybe people are staying tuned in throughout the game as to what they're doing, betting on sports, but then you've got halftime and What are they doing when they go play blackjack or tinkering around with new slot machines? And we definitely one of the things that we will do, I don't have to Share how we're going to do it, but we will do is, we're definitely going to be in the business of creating our own gaming content around Barstool, in our own games Our next question comes from Thomas Allen with Morgan Stanley. Please proceed. Thanks. So starting off on the brick and mortar business, I think you offered up Todd to talk more about the January trend. And I guess Ben asked the question earlier a little bit, but if you think about Q3 'twenty, your EBITDA was up 11% year over year, 4th quarter just now you're down 9%. Like, are the trends kind of in between those? Are we seeing growth? And I remember January, February 20 were really strong. So can you just put all this into context a little bit more? Thank you. Sure. Thanks, Let me start off by saying January just kind of wrapping up here, we're still going through the process. But we're encouraged right now with January being really in line, carried in large part by the South region again, but being very much in line with prior year. February, as Jay spoke to, Friday Saturday were the best volumes we've seen from a slot standpoint Since Q1 of last year and even from a table standpoint, it was the 2nd best Friday Saturday we've seen. So then the storm wiped out much of that in the Northeast. So I think if we look at where February is trending now and we can stay close And then there's potential upside for March. So to be safe, I would say it's somewhere between, but there is upside potential there. Helpful. And then Jay, bigger picture, You stated a number of times you expect to be a top 3 player in sports betting. Are you increasingly confident in that? And how are you balancing kind of spending a lot, which you're not versus just market share? Thanks. Yes. Another one that we talk about a lot, Thomas, are we satisfied with being number 3 everywhere forever? No, We're not and we don't plan to be. Are we satisfied out of the gate that we've spent virtually, we'll just say very little in paid media And we're at number 3 in PA and have been since we launched. That's every month. And we think Michigan, we're off to a great will see where that has us from a market share standpoint. Yes, we're going to figure out as we go what are the best forms of widening and filling that funnel at the top. And we got a lot of ideas that we're will be profitable faster than anyone else. And we're delivering on that and continue to deliver on that pledge, are again faster than anybody else. And as we scale, we just end up with a lot more dry powder to be more aggressive in the areas We have a question from David Katz with Jefferies. Please proceed. Hi, good morning, everyone. Congratulations and thanks for taking my question. Jay, you've covered an awful lot and I wanted to go back to just the market entry. What are the gating factors? What other gating factors are there between the target of 10 markets this year versus turning it into 12 or 8 for that matter. Is it just regulatory getting the app right? I imagine it's more than one thing and I'd love to talk about that list. You've got most of it right, David. And the reason we say at least 10 is because as we sit here today, I don't know what 11 and 12 would be. Like 12, 10 gets you through Even states like West Virginia and Iowa, which are smaller population, it gets you into a state like Tennessee, which is not where we operate, but it's an open market. It assumes that we're live in Virginia, if we get the good news there, which we're again, we're cautiously optimistic that will happen. So Yes. We've sort of pegged the 10 states that we know we can be live in. It's in our control and that we want to be live in. The big question would be what happens and this would be a good problem to have, what happens if Massachusetts, Missouri, Kansas, Name your state, Ohio, Texas. If one of those legalize and can be ready by football season, then we're going to be are figuring that out as we want to be at the starting gate. So being at the starting gate is really important, size of population of state or population size of the state, popularity of Bar in that given state. Those are all factors for us. But you're right in that you can't just snap your fingers and be live in every Tomorrow, because you have to you have a unique bespoke app in every one of these states that have to deliver on what the regulators want and what the rules are and what games you can bet on and all that. And some of that just takes a little bit of time. So I I think what you should expect is that the cadence from here on out throughout the year is going to be much more rapid than what you saw from State 1 to State 2. Perfect. And if I could go back to just one comment from the release that you have talked about a little bit, which is The undervalued nature of the media platform. Obviously, its popularity and proliferation are obvious. But for we casino people, To sit down and try and pencil something, are we looking at comparable Value transactions or is there some more detailed way that we could sit down and pencil some value Yes, I think the best thing you could do for now because their financials You should assume that what we said they were at, at time of investment a year ago, The financials have gotten a lot better. And I think importantly, you just have to look at what sort of transactions have happened Since the time of our announcement, and I would look at podcasting, I would look at media companies, and you can look at a multiple of revenue It's probably the safest way to do it. And in any way that you play around with that math and sort of look at what's available from a comp standpoint, David, I think you would definitely come to the conclusion that it's worth a lot more than what we're going to end up paying. Mr. Snowden, I will now turn the call back to you. Please continue with your presentation or closing remarks. Great. Yes. No nothing else to share. I really appreciate everybody dialing in this morning. Real solid quarter, more importantly, off to a great start this year on our core business. Happy with