Jay Snowden
Chief Executive Officer and President at PENN Entertainment
Thanks, Joe. Good morning to everyone on the call. As usual, I'm joined here in Wyomissing by our CFO, Felicia Hendrix; and our Head of Operations, Todd George, as well as other members of the executive team. We provided a link to our investor presentation, along with our earnings release this morning. If you haven't already opened or printed it out, I would suggest you do that now as our prepared remarks will reference several of those slides as we go along.
At a high level, 2023 was another transformational year for PENN Entertainment. We are the only company in the industry that has a fully-integrated sports media and sports betting platform, along with an omnichannel base of assets with which to drive cross-play and synergies as the database continues to grow at a rapid pace. The future looks very promising given our unique position and long-term strategic advantages.
On the retail side of the business, we generated more than $2 billion in property level EBITDAR in 2023 from our industry-leading portfolio of regional gaming assets and impressively delivered on our property level margin goals despite an uncertain macroeconomic environment, thanks to our best-in-class operators and leaders across the country. We also broke ground on four exciting new retail growth projects in Illinois, Ohio, and Nevada, which we expect to complete by the first half of 2026. As a reminder, we anticipate these will deliver a 15-plus percent return on the aggregate investment. The continued strength of our retail business provides a solid foundation as we continue to invest in our high-growth digital business, which will create significant long-term shareholder value.
Speaking of the digital business, earlier this month, we announced that the founding family behind theScore, John, Benjie, Aubrey, and Noah Levy, will be transitioning from their leadership of theScore and PENN Interactive. John departed earlier this week, while Benjie, Aubrey, and Noah will be leaving in early April. We have been working closely with the Levys over the last several months on this plan and timing to ensure a smooth operational transition. Their departure comes at a natural inflection point for our Interactive business. We've achieved a lot over the last several years, including the completion of our proprietary tech stack, the successful launch of theScore Bet in Ontario, the migration of our tech stack into the U.S., and now the launch of ESPN BET. Even more importantly, we have developed an incredibly deep bench across PENN Interactive, and we have several talented leaders ready to step up and take on more responsibility in the coming months. I want to extend my sincere thanks to John, Benjie, Aubrey, and Noah for all of their hard work and contributions to PENN Interactive's success. We are near the conclusion of the month-long search process for the new Head of Interactive and look forward to sharing an update on that with you in the near future.
Turning to slide 6 in our investor presentation. On November 14, we successfully and seamlessly launched ESPN BET simultaneously in 17 states across the U.S., a first in the industry and no doubt a testament to the strength of our technology teams. Bolstered by the number one brand in sports media, the launch resulted in much higher-than-expected registrations, generating over 1 million new signups to our industry-leading PENN Play rewards program and expanding our digital database by over 50%. In fact, we acquired as many first-time depositors and betters in the first two months as we had anticipated we would generate in the first full year post launch. Importantly, approximately one-third of these customers are located within 50 miles of one of our more than 43 retail properties, which sets up well for cross-selling and monetization as part of our omnichannel strategy. In addition, we saw our monthly active users grow from nearly 190,000 in the third quarter to more than 770,000 in the fourth quarter. Our early success bodes well for our planned launches in North Carolina and New York this year, which I'll talk about in a moment. Given the early success in customer acquisition and retention, we now expect the digital segment to inflect to roughly breakeven in 2025 and start generating meaningful EBITDA and free cash flow in 2026 and beyond.
Turning to slides 7 and 8, you'll see that strong early retention and consistent user acquisition have led to steady month-over-month increases in cash handle even as our promotional expenses have started to normalize. Our January cash handle was 289% higher than prelaunch cash handle in October of '23, while our promotional expenses as a percentage of handle went down from 32.2% in November to 2.8% this January. According to the latest Sensor Tower data, which is similar to other data sources you may have seen, such as Apptopia, we have consistently held the number three ranking and share of weekly active users amongst our top peers, providing a foundation for even greater handle and GGR share gains as we grow our share of wallet and monetization per user. The ESPN BET numbers on the chart on slide steady acquisition and retention across the board, even as our promotional expense began to taper on. Our initial promo offer at launch was right in line with our competitors, and we lowered that offer by 50% in advance of the Super Bowl given the more recreational play surrounding the game.
Meanwhile, the total time spent on ESPN BET according to the sensor tower data also continued to ramp nicely as we added new features and integrations, which will only accelerate now that we can focus more of our product and engineering team's energy on product improvements, especially in the areas of same-game parlays, player props, and live betting, as opposed to time-consuming migrations and launches, something we are all very excited about. All of this is very promising as it relates to both top-of-funnel demand for ESPN BET and early retention success. The important takeaway here is the ESPN BET app is proving to be sticky in the early days as a result of our strong brand and UI/UX, which will improve from here with product enhancements and deeper integrations with ESPN in the coming quarters.
As you'll see on slides 9 and 10, ESPN BET has helped us reach new demographics of sports fans that are incremental to our digital database, resulting in a 63% greater year-over-year parlay mix and higher volumes for non-NFL games, particularly the NBA. While these parlay results are a clear improvement from where we were prelaunch, we still have a long way to go in this area, and you'll see significant improvements throughout 2024. We also saw a 35% increase in our percentage mix of females in our digital database. These data points demonstrate the potential for ESPN BET to help broaden the appeal of sports betting to the more casual better and grow the overall market, an important goal of ours from day one.
Notably, before the launch of ESPN BET, overall market handle grew by more than 17% year-over-year from January to October 2023 in the states with publicly available data in our market analysis. After ESPN BET overall market handle is up nearly 30% year-over-year from November through December 2023, and it's up over 25% even when you exclude ESPN BET. ESPN BET has and continues to bring new sports fans and betters into the sports betting ecosystem. ESPN BET has also helped boost our Hollywood-branded iCasino business, which has seen a nearly 280% increase in monthly active users, providing a platform for future growth with new proprietary content continuing to roll out from our PENN Game Studios. As we've emphasized in the past, when customers engage with us across multiple channels, their value goes up more than 6 times over those who engage via only one channel, and we continue to see a lot of upside as we improve our iCasino offerings.
As illustrated on slide 13, in connection with the launch, ESPN implemented an initial wave of exclusive Bet Mode integrations across the ESPN ecosystem, which includes our six-pack odds integration. This provides for a seamless click-through from the ESPN Gamecast to a customer's desired bet on the ESPN BET app. This is very powerful as there are over 28 million monthly active users on the ESPN media app. You should expect more Bet Mode integrations throughout 2024. I said at the outset of our partnership with ESPN that we'd be getting significant value for our marketing dollars by allocating our $150 million per year to the single best brand and platform in the U.S. to reach sports fans and potential betters. We're already seeing that with the robust menu of promotion and integration across all of ESPN's platforms, including traditional linear advertising, digital media, in program integration, odds attribution, database marketing opportunities and access to some of the biggest personalities in sports media for special events, promotions and social media engagement.
As I mentioned, we have just scratched the surface on these integrations and there's substantially more to come, all included as part of our deal that we will unveil throughout 2024 and into 2025. Our initial ESPN BET advertising campaign was headlined by SportsCenter anchors, Scott Van Pelt and Elle Duncan. We then added spots with NBA legend Kendrick Perkins, the host of Get Up, Mike Greenberg, followed by our most recent commercial with sports betting analyst Erin Dolan that launched during Super Bowl week. This campaign with Erin is our first product and integration-focused campaign, which we expect will help drive continued awareness of ESPN BET and our direct integration with the ESPN Media app. Meanwhile, Elle Duncan, and Erin Dolan hosted a Super Bowl party at the M Resort at our property in Las Vegas. And I'm happy to announce we'll be rebranding Greektown's market-leading sportsbook to ESPN BET just in time for the NFL draft in Detroit. In addition, ESPN regional radio talent will be hosting events throughout the year in our Retail Sportsbook. We look forward to additional ESPN BET retail launches at key properties as we continue to create meaningful cross-sell opportunities.
Looking ahead to the rest of 2024, we are excited to introduce ESPN BET in North Carolina, which is expected in March and New York expected prior to football season, in each case, of course, subject to regulatory approvals. While the economic model in New York is indeed challenging, we look forward to bringing ESPN BET to the largest regulated online sports wagering market in North America. These two new jurisdictions will be extremely efficient for us.
As highlighted on slide 16, our ESPN annual national marketing spend per capita will be reduced by 20%, with the addition of North Carolina and New York, which will take our addressable online sports betting U.S. population from 37% to 46% and significantly expand our reach and scale. Very important for us as most of our ESPN and off-channel marketing spend is nationally focused. As noted in the release this morning, the Interactive segment EBITDA losses for the fourth quarter were higher than expected. The majority of that miss was driven by the high volume of customers acquired through ESPN BET, which resulted in elevated promo expense that negatively impacted net revenues and to a lesser extent unfavorable hold due to customer-friendly sports results. The first two weeks following the launch of ESPN BET in November happened to be two of the lowest hold percentage weeks of the entire NFL season.
Looking ahead, we expect that first quarter 2024 Interactive EBITDA losses will be roughly half of our fourth quarter '23 Interactive EBITDA results and for Q1 to be the largest EBITDA loss quarter of the year for us in 2024. For the entire year of 2024, on a same-store basis, we anticipate an EBITDA loss commensurate with what we saw in Q4 at around $330 million, demonstrating the top line momentum and efficiencies on the cost side. Due to the two state launches this year in North Carolina and New York, which we announced on Tuesday, we are forecasting a total EBITDA loss in 2024 of approximately $400 million. As mentioned earlier, we now anticipate 2025 being around breakeven and 2026 to deliver meaningful positive EBITDA and free cash flow.
Before turning it over to Felicia, I'd like to thank our property leaders and all of our team members for delivering another quarter of really solid property level performance. Notably, 10 properties spread across our portfolio achieved their highest ever fourth quarter revenue. These outperformers helped offset the impact of supply pressures in a few of our key markets, as well as continued softness in our south region. This further demonstrates the benefits of our geographic diversity and unique omnichannel strategy. The introduction of new technologies and our ongoing reimagination of our properties, while providing a best-in-class customer experience is continuing to drive demand for PENN. As you know, our industry-leading customer loyalty program, PENN Play, is supported by our 3 Cs technology, which is now deployed at 21 properties, collectively representing approximately 70% of our retail EBITDAR. During the quarter, we've also grown our total PENN Wallet customers to 110,000, and we've received $300 million in total PENN deposits. As we've often said, those guests who use the digital wallet demonstrates superior loyalty through increased visitation, time on device, and total theoretical value.
