PENN Entertainment Q4 2025 Earnings Call Transcript

AlphaStreet
Provided by AlphaStreet
February 27, 2025
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Operator

Greetings, and welcome to the Penn Entertainment 4th-Quarter 2024 Earnings Call. I would now like to turn the conference over to Joe, Investor Relations. Please go-ahead.

Joe Jaffoni
Investor Relations at PENN Entertainment

Thank you, Nicky. Good morning, everyone, and thank you for joining Penn Entertainment's 2024 4th-Quarter Conference call. We'll get to management's presentation and comments momentarily as well as your Q&A. And during Q&A, we ask that everyone please limit themselves to one question and one follow-up.

Now I'll review the Safe-Harbor disclosure. Please note that today's discussion contains forward-looking statements. Forward-looking statements involve risks, assumptions and uncertainties that could cause actual results to differ materially. For more information, please see our press release for details on specific risk factors.

With that, it's now my pleasure to turn the call over to the company's CEO, Jay Snowden. Jay, please go-ahead.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Thanks, Joe. Good morning, everyone. Joined here in with our CFO, Felicia Hendrix; our Head of Operations; Todd George; and our CTO and Head of Interactive, Aaron, as well as other members of our senior management team. I'd like to begin my prepared remarks by focusing on where we are today at Penn and more importantly, where we're headed with the exciting opportunities that lie in front of us in 2025 and into 2026. Underscoring our confidence in both our digital and retail outlook, we have announced this morning our intention to repurchase at least $350 million of shares of our common stock this calendar year.

As you can see on Slide 5 of the investor presentation, we have a very healthy core retail business that has been consistently growing market-share in most of our regional markets not impacted by new supplier competition. We unquestionably have the best operations and the best operators in the industry, led by Todd George and our gaming tax-adjusted margins continue to prove that out. Given the capital investments we have been making at our properties over the last several years, including our new ESPN bet retail sports books, combined with continued cross-sell from our digital database of over 4 million gaming customers.

We anticipate that trend continuing as we move forward. Outside of the known weather events across the country quarter-to-date, that certainly remains the case so-far in 2025 as well. We are positioned extremely well this year to start delivering on a multi-year growth phase. We have four retail growth projects currently under-construction, which are highlighted on Slides 7 and 8 that we anticipate will generate attractive returns over the coming years. One of those projects is expected to open in the 4th-quarter in Joliet, Illinois as the anchor attraction of a brand-new mixed-use entertainment destination and the other three are on-track to open throughout the first-half of 2026.

It is also worth noting and feels great to finally be able to say that other than the known new supply in-markets like Council Bluffs, Chicago Land and Louisiana and the recent opening of Cordish Live property in Bosier City, Louisiana, we do not anticipate any new significant competitive supply impacting us in 2025 or 2026. PEN will soon be the new supply hitting a few key markets across the US for the first time in years. On the digital side, we are gaining momentum and are the proud owners of some extremely valuable assets. As you can see on Slide 11, the score and score bet continue to be a very good story for us in Canada.

Ontario is our number-one market in North-America in terms of revenues, gross profit and contribution margin today. And we delivered another strong year of performance in 2024. We believe the strength in Canada will only grow once we launch in Alberta, pending all requisite approvals, given the affinity for and loyalty to the Score brand across the country. Next, as highlighted on Slide 15, we have recently launched standalone Hollywood iCasino products in the states of Pennsylvania and Michigan and intend to launch soon in New Jersey pending final regulatory approvals.

While still early, while still early, the results are promising and the momentum is tangible. In fact, in the recent US iCasino app rankings by, we jumped up seven spots to second place. We were laser-focused on speed and UIUX and it shows. Optimizations like this are only possible because we own our technology stack. We plan additional Hollywood iCasino launches in 2025 pending final regulatory approvals. As you all know, iCasino represents a strong flow-through and margin profile. And given our large Hollywood branded retail property footprint and databases, in addition to online sports-betting from which to cross-sell, we expect these positive trends to continue moving forward in 2025 and beyond.

Lastly, we have our ESPN bet online sports-betting business. We have been live for about 15 months now. We have a strong committed brand partner. We have a fully-owned technology stack. We have an incredible team led by Aaron, who also happens to be a talent magnet as we've seen, running the business from top-to-bottom. We are seeing green shoots as highlighted throughout the deck, but we have more work to do to unlock the full potential and value of our partnership with ESPN.

Working closely with our partners at ESPN, we've identified ways to better optimize our spend together, resources and activities in 2025 to deliver improved results. We and ESPN are focused on doing exactly that and we are confident in our strategy to continue growing our handle market-share throughout the year. We believe we can accelerate that momentum via optimized activities with ESPN, enhanced integrations such as the recently launched in-app live-streaming, deeper personalization and cross-sell with their ESPN fantasy products, top of funnel effectiveness and stronger retention through product and promo engine enhancements throughout 2025.

I would also like to take a few moments to revisit with all of you why we decided to pursue our omnichannel strategy a few years back. When was overturned in 2018, we viewed the digital and mobile gaming introduction to our industry as a potentially transformational growth opportunity in two key ways. Number-one, we believe that digital represented a once in a lifetime strategic database growth opportunity for an industry that was continuing to age up, an issue we had been contending with for decades. Digital was an opportunity to-market to and attract a much younger audience of online sports-betting betters and build a flywheel of omnichannel options for customers of all ages and demographics to experience.

Cross-selling customers from online to retail and vice-versa has worked in other industries around the world and we believe it would also prove effective and value-enhancing in our industry. That belief is absolutely playing out. Slide 12 shows the exponential growth of our digital database since we embarked on this journey. There are 4 million new members in our digital database that we likely would not have Otherwise known. Importantly, approximately 34% of these members live within 50 miles of a Penn property. Furthermore, the average customer age of our Penn Penplay database -- active database has come down approximately 10 years and now sits in the mid-40s since 2020. And the cross-sell opportunities are continuously proving themselves out as we grow our share in key markets across the country as highlighted back on Slide 6. Number two, the second reason we decided to pursue digital was to build a scaled and profitable standalone business at Penn, one we believed would provide a long-term growth opportunity and also command a higher valuation. While that opportunity and strategy are still very much intact, we haven't met this one yet. We believe that's about to change. As we have said previously, we expect to approach breakeven in 2025 as part of our deliberate plan to build a significant digital database and continuously improve financial results. We believe the significant investments in digital, along with our losses are mostly behind us now. We anticipate each quarter of 2025, delivering a lower loss sequentially throughout the year, ultimately ending the year with the 4th-quarter, representing the first profitable quarter since the launch of ESPN Bet. In total, we anticipate 2025 delivering a year-over-year EBITDA improvement in the Digital segment of roughly $350 million at the midpoint. Felicia will get into more specifics around 2025 guidance momentarily. We are completely aligned with our shareholders' focus on achieving profitability in digital and maintain our belief that, that segment will be profitable in 2026. We have great brands, IP and assets that we believe have significant value and will deliver improving financial results as we continue to execute. Further, we have a variety of levers we can pull to enhance value depending on our results as we conclude 2025 and enter 2026. And with that, I'll now turn it over to Felicia.

Felicia Hendrix
Executive Vice President, Chief Financial Officer at PENN Entertainment

Thanks, Jay. For the 4th-quarter of '24, we reported retail revenue of $1.4 billion and adjusted EBITDAR of $461 million, both slightly above the high-end of our previously guided 4th-quarter revenue and EBITDA ranges. Our Retail segment had a strong finish to the year with steady increases in-demand throughout the 4th-quarter. For our Interactive segment, adjusted revenues, excluding our Skin tax gross-up were $142 million and Interactive adjusted EBITDA in the quarter was a loss of $109.8 million.

Customer-friendly sports-betting results negatively impacted Interactive adjusted revenues by $44 million and interactive -- interactive adjusted EBITDA by $32 million. As Jay mentioned earlier, our omnichannel strategy is delivering upon expectations. Slide 18 points to our Super Bowl 2025 highlights. Our local presence in New Orleans and Baton Rouge help to drive new sign-ups, engage with -- engage with VIPs and drive visitation at our properties. In fact, our theoretical growth from guests across our Louisiana properties increased 9% year-over-year and our theoretical growth across all properties increased by 5% year-over-year.

We also hit Super Bowl records with a 34% parlay mix as a percentage of handle, which is up by more than 1,500 basis-points year-over-year and 76% of users placed a same-game parlay bet, which is up more than 1,800 basis-points year-over-year. Now moving on to the numbers. The table on Page 8 of our earnings release summarizes our cash expenditures in the quarter, including cash payments to our REIT landlords, cash taxes, cash interest and total capex. Of our total $221 million of capex in the quarter, $122 million was project CapEx-related to our four development projects.

We ended the 4th-quarter with total liquidity of $1.7 billion, inclusive of $707 million in cash-and-cash equivalents. Further, we delevered by 1.3 turns in the quarter and we will exit covenant relief today as planned. We expect to continue our deleveraging trajectory throughout 2025 and to remain well below our covenant threshold, which enables us to resume returning capital to shareholders as we announced this morning under our previously approved $750 million share repurchase authorization.

As it relates to guidance, we continue to see strength in retail customer demand and as Jay mentioned, other than the known new supply in Council Bluffs, Chicago Land and Louisiana and the recent Cordish Life property opening in Bosier City, Louisiana, we do not anticipate any significant new competitive supply impacting us in 2025 or 2026. We couldn't be more excited about the potential of our four growth projects, beginning with the anticipated opening of Hollywood Joliet in the 4th-quarter of this year and the other three projects that are expected to open throughout the first-half of 2026.

As noted on Slide 7, Hollywood Joliet will be a brand-new land-based property optimally located adjacent to the I-80 and the I-55 interchange. It will be an anchor tenant in the new Rock Run Collection, which will include retail, restaurants, hotels, entertainment and residential living. We expect Hollywood Joliet to benefit from an estimated 240,000 daily vehicles at the new location versus only 10,000 at the current site. With all this in mind, our 2025 retail revenue guidance range is $5.6 billion to $5.75 billion and our EBITDA guidance range is $1.85 billion to $1.95 billion. This guidance does not include any costs related to an anticipated roughly two to three-week closure of Joliet to transition to our new property. We are working closely with our regulators and look-forward to sharing additional details in the upcoming quarters on a final opening date.

For Interactive, our 2025 revenue guidance range is $1.25 billion to $1.75 billion and our EBITDA guidance range is a loss of $200 million to a loss of $100 million, implying a $350 million year-over-year EBITDA improvement at the midpoint. This guidance assumes ESPN Bet handle market-share of 4.7% in our live jurisdictions, excluding New York, which is a 100 basis-point improvement from year-end 2024. OSB hold of 9%, promotional expense as a percent of handle in the mid to-high 2s compared to the low-2s in the 4th-quarter of '24.

And for US iCasino GGR market-share, we are assuming a 3.5% -- we are assuming 3.5% in our live jurisdictions, which is a 140 basis-point increase from year-end 2024. For the year, we are assuming a skin tax gross-up of $520 million. Our 2025 guidance does not include anticipated launches in Missouri or Alberta. We expect each quarter of the year to generate lower losses sequentially, culminating in positive EBITDA in the 4th-quarter. For the first-quarter of '25, our interactive revenue guidance range is $270 million to $350 million and our EBITDA guidance range is a loss of $85 million to a loss of $70 million.

We are assuming Skin tax gross-up of $130 million in the first-quarter of '25. Our first-quarter interactive EBITDA guidance represents a year-over-year improvement of roughly $120 million at the midpoint. Though we are off to a good start this quarter from an OSB and Super Bowl hold percentage standpoint, our first-quarter '25 interactive EBITDA guidance also reflects our investment in the launches of Hollywood standalone iCasino across numerous states. This early spend is helping us deliver good results in terms of incremental users and revenue growth as reflected in our investor presentation. We're anticipating we will be free-cash flow positive in 2025 and beyond as we grow total company EBITDAR and approach slight profitability in our Interactive segment by year-end 2025.

For the year, we expect our other segment EBITDA, which includes corporate expense as well as our racing operations to be $121 million versus $117 million in 2024. Total capex for 2025 is expected to be $730 million, inclusive of $490 million of project capex. By the end of 2025, we will have completed the majority of the capex for our four growth projects and could begin to access GLPI's balance sheet at our discretion as Joliet and the hotels at Columbus and M. Resort open.

We are committed to draw $225 million from GLPI for Aurora, which will open in the first-quarter of '26. And as a reminder, we will also receive $50 million from the City of Aurora for the project this year. For net cash interest expense, we forecast approximately $150 million for full-year 2025. Net cash taxes are expected to be roughly $70 million for the year and our basic share count as of the end-of-the 4th-quarter was 152.2 million shares and we typically have roughly $15 million of diluted shares, inclusive of the 14 million share dilution from the preferred. And now I'll turn it back over to Jay.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Thanks, Felicia. We see great momentum this year and our announcement to repurchase at least $350 million of stock in 2025 highlights our excitement for the opportunities that lie in front of us. We are opening the first of four growth projects. Our retail properties continue to gain market-share. We are seeing green shoots of the ESPN bet and our standalone Hollywood iCasino offering is off to a promising start. It's a great time to be at Penn and we believe it's also a great time to be an investor in Penn.

And with that, Nikki, if we could turn it over to you for the first question.

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Operator

And at this time, if you would like to ask a question, please press the start and one on your telephone key pattern. You may remove your question by pressing star to. Once again, that is star N1 for your questions. We'll take our first question from Carlo Santarelli with Deutsche Bank. Please go-ahead. Your line is open.

Carlo Santarelli
Analyst at Deutsche Bank Aktiengesellschaft

Hey, everyone. Good morning. Felicia, you just provided a lot of color and I wanted to kind of just focus in on the two Illinois projects specifically. Historically, a riverboat to land-based moves have been very return friendly. I would expect your thoughts are similar for these two projects. I did want to ask though, in terms of the financing, two different transactions with GLPI, was kind of wondering about how you're thinking about the timing of the second kind of financing and what kind of goes into when we make those decisions.

Felicia Hendrix
Executive Vice President, Chief Financial Officer at PENN Entertainment

Yeah, thanks, Carlo. What we've been saying and what we continue to work towards is that we will probably take the financing close to opening so that we're not including rent before we are generating EBITDA -- EBITDAR at those properties. So I would -- if for your model, I would assume that financing comes at opening?

Carlo Santarelli
Analyst at Deutsche Bank Aktiengesellschaft

Okay. Okay. Understood. And then, Jay, maybe could you talk a little bit, you guys obviously provided a lot of color on how you're thinking about the OSB side shaping up for '25. Can you talk a little bit about the decision tree and the timeframe around kind of the OSB business specifically as you measure yourself against those targets going through 2025?

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Yeah. Happy to. We -- I think Felicia provided some pretty good detail in terms of what our expectations are in terms of market-share, both on the sports-betting side as well as iCasino. Those would be full-year numbers. So obviously, we would expect to see improvements in-market share as we move throughout the year, culminating with the highest-level of market-share at the end-of-the year. And I sort of think about this in terms of the levers that we have access to and control of as we move through 2025 and we get closer to 2026.

And just taking a step-back, when we announced our partnership with ESPN in the summer of '23, both side -- both sides of this partnership made it very clear that we expected to compete to -- for a seat at the podium. And we're not on pace right now to do that. So I would just say that our expectations as we're moving through 2025 are that we're continuing to show improvements in both the sports-betting business, of course, on the online gaming business as well. And if you're -- if we're not hitting the levels that we expect to as we move through the year and you approach the end of this -- you approach the end-of-the calendar year, then you've got levers operationally.

Obviously, there's a lot of dollars in the marketing category of our digital business. We've got a cost structure that right now is built for us to be a scale player because that's where we expect to be. That's where ESPN expects us to be. But if you're not trending that direction, then obviously, you're not going to be operating a business from a cost structure standpoint at a scaled level. So we have levers at our disposal. And of course, as you get into 2026, you hit the third anniversary of our relationship with ESPN and both sides expect to be in a really good place. I mean, we are heads-down, laser-focused.

We have tremendous plans in-place for 2025 and 2026. But if for whatever reason, we're not hitting the levels that we need to, then obviously, as you're approaching that third anniversary, you have a three-year clause in the contract that both sides will have to do what's in their best interest. And so that's always out there. And so we do have conviction in terms of showing the improvements throughout the year. We're off to a great start on the iCasino side with our launches in Pennsylvania and Michigan. It's early, but we're encouraged by what we're seeing there. And we anticipate that continuing to ramp.

Sports-betting, we ended football season from a handle share perspective better than we began the football season. So that's good. It's not as much progress as we wanted to make or we plan to make as we move forward. But we have great product enhancements that I'm sure Aaron will touch upon on this call. And we have great team. We have a great partner and we feel like we can continue to make really good progress. But if we don't, we've certainly got levers that we can pull if we need to as we conclude '25 and head into 2026.

Carlo Santarelli
Analyst at Deutsche Bank Aktiengesellschaft

Okay. Great. Thank you both very much.

Operator

Thank you. Our next question comes from Barry Jonas with Truist Securities. Please go-ahead. Your line is open.

Barry Jonas
Analyst at Truist Securities

Great. Hey, good morning, guys. What's the right way to be thinking about the ramp of your land-based renovation projects once open? And are there more potentially more opportunities like this afterwards? I did see GLPI announce some potential funding at a council. Thanks.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

I'll hit a bit of the second one and then Todd, you can hit the first one in terms of the ramp. Yeah. We -- it's -- we've been working internally, obviously really hard on the four current growth projects that are under-construction. Feel really good about those projects. We have an amazing design and construction team led by Mike Carroll, who has been able to keep these projects on or ahead of schedule and on-budget. You don't hear that from many companies these days, but we've really nailed that and very proud of the team for that. And we do have other projects internally that we're taking a really hard look at and some similar to the Joliet and Aurora in the sense that you'd be moving from an old water-based vessel on to land with new amenities and we think could generate really high returns.

So Council Bluffs is one of those, I would say more to come in terms of the details on that project. Project and a couple of others that we're not ready to announce, but we're working really hard on internally. And I think given the returns that we've seen from some of our competitors in Louisiana for similar projects and we anticipate seeing really nice returns from our first of the four that opens up later this year at Joliet makes you feel that much stronger about return profile opportunities for these other projects. So the answer is yes. And we also have a couple of hotel expansion opportunities in the portfolio as well. Thanks, Jay.

Todd George
Executive Vice President, Operations at PENN Entertainment

Barry, the only thing I would add to your question on-ramp. And typically when you open a property, you're looking at a 90-day, maybe a six-month ramp to start creating some of those efficiencies. You obviously open up, you always over hire knowing that there'll be turnover. You spend a little bit more in marketing. The amazing thing about these projects, I mean, literally with a move, you can really trim that ramp timeline by half or more because a lot of your staff is already hired, you already have a very active strong database. So you're simply in the case of Aurora and Joliet, you're simply moving to a much better property, a much better offering.

There will be a few differences in there as we are going to be partnering and we'll be announcing shortly some third-party partners for restaurants that I think will just blow people away in the Chicago land area. And then the other projects in Columbus and the M, it's adding hotel towers and in the case of the AM, some much-needed meeting space, so we can make sure we accommodate all the demand that's out there. So I would look at the ramp to be fairly quick, again, just because of all the infrastructure that's there in-place right now and opening up Joliet in the end of this year and then Aurora in the first-half of next year, I think that positions us well for the future.

Barry Jonas
Analyst at Truist Securities

Great. And then just for a follow-up, I would just love to get your thoughts on the risk of gaming tax increases and maybe what you can do in response. Surprisingly, that's not just an online question, but just curious to get your thoughts there.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Yeah, look, I think over the years and been at this for over two decades now, the best approach and it doesn't always happen -- unfortunately this way, the best approach for states that are facing budget deficits and are looking for assistance on how to solve for that is to engage with the industry in our case. And as opposed to waking up and reading a headline of tax increases. So that's a bit of a frustration, I think for the entire industry. There are Several opportunities to help states that are looking to plug some holes in their budgets as it relates to our industry and the list is actually quite long. Tax increases is not the best way to attack this clearly. We are competing in many cases against illegal or gray market games in many of these -- in many of these states that don't pay taxes, they're not regulated. We compete against offshore illegal operators that are offering casino-like games and sports-betting in many of these states that are unregulated and untaxed. And now we're dealing with sweepstakes that are unregulated and untaxed as well as potential future market -- futures markets, competitors in sports-betting, again, unregulated, untaxed. So there's a lot of dollars there to pursue in one-way, shape or form. And of course, in our industry specifically in terms of what we have control over, there are some states where as opposed to a tax increase, you could look at something that maybe benefits the industry as a whole and the state. And in some cases, that could be the introduction of sports-betting if it's not already legal. I think many states have already gotten there. And then in some cases, online casino is another option. Again, not every state is structured the same. There are some states where the introduction of online casino, I think makes a lot of sense for probably most operators if they have an omnichannel strategy and certainly for the state in terms of driving incremental tax dollars. And then there are some states that are structured differently, in some cases, even geographically, I take Colorado as an example where when gaming was legalized in Colorado, the casinos were to be located in old mining towns up in the mountains an hour and a half away from the population center. So in states like that, if you legalize online gaming, it is going to absolutely hurt the brick-and-mortar industry that's invested hundreds of millions of dollars and employs hundreds, in some cases, thousands of residents and has paid hundreds of millions of dollars in taxes. So that doesn't make a lot of sense, but then there's plenty of states where casinos are spread-out throughout the state, Pennsylvania being a good example. And I think that's been largely a win-win for the industry as well as for the state. So there's different paths here. I think the best way to move forward for both the states that are in need of some assistance here of plugging budget gaps and are looking at the industry is to sit-down, engage and talk. And I think that's usually where it ends up. It doesn't always start there, but that usually is where it ends up and we are obviously very active in all of the states where you've read some headline potential increases in taxes to find alternative solutions.

Barry Jonas
Analyst at Truist Securities

Great. Thanks, Jay. Thanks, guys.

Operator

Thank you. Our next question comes from Sean Kelley with Bank of America. Please go-ahead.

Shaun Kelley
Analyst at Bank of America

Hi, good morning, everyone. Thanks for taking my question. Jay or Felicia, wondering if we could just dig in a little bit on some of the assumptions for market-share as you think about the progress at ESPN that and with the Hollywood iGaming standalone app. Could you just give us a little sense on maybe your own thoughts on exit rates or where you've been trending so-far in the first-quarter to kind of put the market-share parameters that you said, like how much is incumbent on things improving from here and how much of that of that improvement or progress are we kind of already seeing in the base business today?

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Yeah. We're -- we're seeing it now on the iGaming side. Again, we just launched in Pennsylvania in December and in Michigan in early-January. So we don't have a ton of time behind us, but we -- it's early, but we picked-up roughly 50 basis-points of market-share in Pennsylvania over the first two months and about 25 in Michigan in the first month. So that's good. I don't want you to take that and extrapolate it with really anything other than say, we feel like we're making progress here in Q1. We should be exiting Q1 seeing real progress in iGaming market-share. Sports-betting that's been more of a grind higher.

The improvements we saw from beginning of football to-end were there, but it wasn't at that level of market-share growth month-to-month that I just mentioned with iGaming. So we expect iGaming growth and market-share to be at a faster clip than sports-betting. You can see that in our assumptions for the year of picking-up 100 basis-points in sports-betting, but more like 140 in casino. Hopefully, those are both conservative. If one is off, maybe the other one can pick-up for some of the one that's off a bit. And so there's different ways that you can see that play-out over the year, but we would anticipate ending the year, obviously at the highest rate of share both in sports-betting, which we anticipate being over 5% by the 4th-quarter. And on the online gaming side, it will be our best quarter of the year as well as we continue to build new products and offerings and continued momentum in terms of cross-selling across the database.

Shaun Kelley
Analyst at Bank of America

Great. Thank you. And then just as a follow-up, sort of same theme, but as you think about the arrangement with ESPN bet, and Jay, in the prepared remarks, you mentioned just some of the opportunity to kind of further unlock the full value there. And you gave some examples. Most of those seem to be probably more tweaks as it relates to just optimization initiatives and integrations. Is there anything that you could do to, I guess, more proactively restructure maybe the cost balance here, especially when it comes to the committed contractual spend? Or is it too hard-to-do that until we kind of get to the necessary three-year deadline or is that not even necessary in your view right now?

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Well, I'll hit part of that. I think Aaron can jump-in terms of a lot of what we're anticipating, really starting to help us grow our share as we move throughout the year. Look, we have -- we have levers. I mentioned that earlier, we have not just the spend with ESPN, but we have a pretty significant marketing spend outside of ESPN. And we have a -- we have a structure in-place today, a cost structure in-place today that is built for this business to be at-scale.And so if we're not trending to be at-scale, then you're making changes to your cost structure. That's just business 101. So we feel like right now, we've got the right plans in-place and we're aligned with our partners to continue to head-down, execute extremely well and see improvements. If you're not seeing those improvements as you go through the year, you're continuing to make adjustments in those other large cost categories.

Aaron LaBerge
CTO and Head of Interactive at PENN Entertainment

Yeah, but we're super-excited. First of all, we launched last November. So we're just past a year into this. And so we -- both sides have learned quite a bit. We are hyper-focused on just executing on the opportunity. I think last earnings call, we talked about we had just launched our account linking initiative where you can link ESPN and ESP embed accounts. And I think I shared maybe that was in the tens of thousands. I mean that is 230,000 people today.

If you look at Slide 15 or Slide 12 of our deck, you can see our MAU growth on the OSB side, that's a large percentage of our monthly active users are linked. That personalization data is flowing. We are starting to build personalized experiences that you will see launching throughout the year. We have a big integration coming with the tournament challenge, which is the biggest NCAA bracket game in the world through ESPN. We are deeply integrated and natively integrated into that product. And so on and so forth. The integrations are just going to continue to get deeper and more meaningful, and we're very excited about that and we think that's going to yield a positive results.

So again, as Jay said, we continue to optimize everything we're doing, all of our marketing spend, all of our integrations. Both sides are getting really smart about how those are working and functioning and it's got our full attention. So we're optimistic that this is going to continue to grow as Jay said.

Shaun Kelley
Analyst at Bank of America

Thank you both.

Operator

Thank you. Our next question comes from Brandon Montour with Barclays. Please go-ahead. Your line is open.

Brandt Montour
Analyst at Barclays

Great. Thanks, everybody. Good morning. So first question is on the brick-and-mortar side. You know, obviously, it seems like delight at the end-of-the tunnel in terms of supply pressure. Could you maybe flesh out the cadence throughout the year? As you -- are you going to start to lap things to the point where you think that you're going to see lessening pressure as you move through the year that we would see flow into the quarterly results?

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

I mean, I would say, yes, because we now are getting closer to lapping the introduction of gaming in Omaha, Nebraska. Obviously, the project that was the South suburbs of Chicago opened later in 2024. The only one that's really quote-unquote new opening in 2025 is the live project in Bosier City, Louisiana, which Todd and I and others visited just last week. And so I would say, as you're thinking about the cadence throughout the year and Todd will jump-in here, you should see less impact as we go through the year as you anniversary these. And then obviously, as you get into 2026, once you get past anniversary in, we really don't see any new supply hitting us in a significant way going-forward.

Todd George
Executive Vice President, Operations at PENN Entertainment

Yeah, JD, and you hit on this in your opening remarks. I mean the next big new properties or new offerings are our own. So I would think you can start looking at from Q4 forward. We've got some really exciting quarters ahead of us with Q4, Q1, Q2 of '26, we will be bringing new supply, new offerings to markets and greatly improving a couple of our properties. So I think, again, we're putting those behind us. And as people come into a new market , in the case of Nebraska, in the case of some of these new offerings in Louisiana, you spend a little bit more upfront to create an impact. You spend a little bit more upfront to drive that database. But once that settles out, then people gravitate to where they're going to demonstrate loyalty moving forward?

Brandt Montour
Analyst at Barclays

Great. Thanks for that. And then just a follow-up on Canada and Alberta. Jay, your comments are obviously exciting because you guys have a great position in Ontario. But could you compare and contrast the launch or the eventual launch for Alberta given -- I mean, I guess that's a gray market now. I'm not sure if you operate there currently, but you operated in Ontario. When that market launched and held a key position in that market. So just any other thoughts on how that could look, your contribution positive in Ontario today, if you think that would be the same sort of ramp-in Alberta?

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Yeah, Brent, our expectations for Alberta would be very similar to where we are currently in Ontario from a market-share standpoint. We were not an operator pre-legalization and in Ontario. So we really did have to fight against some incumbent operators who had been operating when it was more of a gray market at launch and we performed quite well, obviously. We have a brand that's -- it resonates with not just people who love sports, but we also have a great casino product and our iCasino business in Ontario has been ramping quite nicely. You look at the monthly active user growth in iGaming in 2024 over '23, it was great.

So I think now that we have a better product and we know what works and what doesn't from a top of funnel acquisition, CPA. I think Canada is actually a good market for us in the sense also that there is a no-inducement policy there. So you really are competing based on your brand and your product and the experience. We like that. It's performed very well against all of the same operators that have maybe larger share here in the US and we would expect that dynamic to be the case in Alberta as well.

Aaron LaBerge
CTO and Head of Interactive at PENN Entertainment

Yeah, we have the same -- we have the same MAU coverage in Alberta as we do in Ontario through the score. So just in terms of the score integration and the score bet and mind share in that area, it's as strong as it is in Ontario. So we expect very similar results when we do launch.

Brandt Montour
Analyst at Barclays

Excellent. Thanks, everyone.

Operator

Thank you. Thank you. Our next question comes from Joe Stauf with Susquehanna. Please go-ahead. Your line is open.

Joe Stauff
Analyst at Susquehanna Bancshares

Thank you. Good morning, Jay. Felicia. Thank you thank you. I wanted to ask Aaron and Jay or remember, just following-up on digital. I understood in terms of kind of like where you are on it, you know, in terms of the product and the improvement in the product and March Madness coming up and integrations. I'm wondering if they're Aaron, like are there other mile posts maybe that we can think about? Obviously, Disney is launching a huge effort, right, right for ESPN D2C in the fall.

They talked specifically about how betting was an important component of that. Are these also pretty big mile posts that you know you're preparing for in terms of, you know, say, amplifying, say, user growth and things of that nature? That's my first question. And then second question, I just wanted to clarify on the land-based portfolio, you know, no new headwinds, competitive headwinds. I was just wondering where you think -- are there any current, say, competitive headwinds that you're seeing in the portfolio as you assess it today?

Aaron LaBerge
CTO and Head of Interactive at PENN Entertainment

Well, I'll take the first. So obviously, I'm not going to speak on ESPN's plans for their D2C service, but I can certainly share that we are deeply integrated with that product and are incredibly excited about it and can't wait for the world to see what those integrations look like. And when you think about ESPN in the video business, you know, they produce or distribute 35,000 live events a year, which is pretty powerful in terms of our aspirations.

As a matter of fact, we just started launching and rolling out live video streaming with an ESPN bet just this week. I think we're live in PA in Colorado and will be live through the rest of our jurisdictions through the week. So live betting is certainly important. So having a partner that produces so many live events and being able to integrate with those is powerful. Of course, they have a new streaming service. We talked about March Madness only because it's the most imminent, but we have massive plans on the same scale for fantasy football, which is going to coincide with likely the timing of flagship as well. So there's a lot going on towards the -- towards the end-of-the summer that we're excited about.

But look, if you continue to look at our app and use our app, it is getting better each month. It's looking better, it's feeling better, more markets are being added. We're adding streaming, we're getting better in parlay distribution. We're expanding our same-game parlay offerings. We continue to feel that we're going to be competitive from a product perspective from here out as we continue to get better. And then, of course, maximizing what we're doing with ESPN is obviously one of the key pieces that we -- that gives us confidence in our guidance.

Todd George
Executive Vice President, Operations at PENN Entertainment

Yeah. And then on the second one, related to the headwinds, I know Jay mentioned this and I think Felicia as well in the opening remarks, but it -- most of those are really behind us. We just absorbed the last one as Jay touched on, a bunch of us visited the new live property in Bosier City. But we've just been going with new comp in the South, in the Chicago land area and Nebraska, again, putting those behind us. The only other thing I would add-in Q1 this year at similar to last year, we did have some pretty significant weather impact across several of our properties. But this last weekend without new weather, very healthy turnout, great volumes going into what should be another no weather impact weekend. So I think going-forward, we've absorbed everything other than the last one that we both mentioned.

Joe Stauff
Analyst at Susquehanna Bancshares

Thank you.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Thank you. And I think Todd hit it a little bit there, just worth-mentioning that the quarter-to-date, certainly in February year-over-year, the weather has been a lot worse than it was last year. Now when the weather breaks, as Todd mentioned, last weekend, we had a fantastic weekend. We would expect to see the same this upcoming weekend. It's been a good week so-far this week and March should be a good month with pent-up demand, but just you'll see the February results from a lot of these states in the Midwest and the Northeast that weather is definitely an impact on a year-over-year basis.

Operator

Thank you. Our next question comes from Chad with Maguire. Please go-ahead. Your line is open.

Chad Beynon
Analyst at Macquaire

Hi, good morning. Thanks for taking my questions this morning. On the repurchases, you made a lot of effort in '22 and '23 to chip away on those. Great. Great to see the $350 million program. So can you just talk about what's programmatic versus opportunistic? And then secondly on that, why was $350 million the right number? Is that a percentage of a market cap or kind of a leverage goal, how did you arrive at that number? Thanks.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Yeah. Yeah, we picked that number, Chad, just because we felt like if you're going to do something, you want it to be substantive and that's a little north of 10% of the market cap overall. I would say that our approach is to be opportunistic throughout the year and it will be less programmatic and certainly more opportunistic. That's the way we did it mostly previously, and that's the right approach I think as we move through the year this year as well.

Chad Beynon
Analyst at Macquaire

Thank you. And then on the retail business, the commentary you gave in terms of the start of the year was helpful. I know last quarter, you were pretty enthusiastic in terms of what you saw in October. And then obviously, we've heard from a lot of the other peers in the space that post-presidential election, the trends just felt more normalized. So can you just talk about if that was the case that led to the retail beat in Q4? And as you mentioned, just as we think about normal non-weather periods, if the tiers of your database continue to look pretty strong? Thanks.

Todd George
Executive Vice President, Operations at PENN Entertainment

Yeah. Yeah, that was absolutely the case. Post-election, you could see leading up to the election kind of the uncertainty. And again, I think some of our peers said it's not necessarily the result of who won but I just think getting all that noise out-of-the way and having people understand this is the way we're going-forward as a nation. It's -- it led to some pretty great volumes on Q4 that really continued into Q1 in the non-weather-related days. And again, the strength of the consumer and what we're seeing in most of our markets, people are coming out and still taking time to be entertained. So that's been a great story for us.

Chad Beynon
Analyst at Macquaire

Thank you. Thanks, Todd. Thanks,.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Thanks.

Operator

Thank you. Our next question comes from Jordan Bender with. Please go-ahead. Your line is open.

Jordan Bender
Analyst at Citizens Jmp

Everyone. Thanks for taking my question. If I caught it correctly, your interactive guidance range it seems fairly wide at around $500 million. Felicia. You talked about the inputs that go into the full-year guidance. But can you just kind of help us parse out what does the bottom-end of that range versus the top-end of the range kind of look like?

Felicia Hendrix
Executive Vice President, Chief Financial Officer at PENN Entertainment

Thank you. Yeah. So the sensitivity that will help you is if you take the midpoint of the low-end of the range. If you take the midpoint and the market-share, okay, the low-end of the range would be 100 basis-points lower and the high-end of the range would be 100 basis-points lower and that's on the ESPN bet market-share. And then iCasino, that range would be plus or minus 50 basis-points.

Jordan Bender
Analyst at Citizens Jmp

Thank you. And then on my next question, it seems like you're seeing a nice uplift at the properties with the ESP and branded sports books. Are there any quantify -- quantifiable impacts you're seeing in terms of whether it's customer sign-ups or digital acquisition that you're cross-selling from your brick-and-mortar properties online.

Todd George
Executive Vice President, Operations at PENN Entertainment

Yeah, listen, the big game, the Super Bowl in New Orleans was a great opportunity for us. I'm just seeing tremendous account sign-ups, seeing all of our properties around Louisiana. So we have a nice representation. We have one in the New Orleans area, but we also have really amazing resort properties in both Baton Rouge and Lake Charles and a really nice one in Bosier as well. But we saw a tremendous cross play. Mississippi held a golf tournament and sent players over. So the Mississippi properties, all of this benefit -- benefited us tremendously.

And then what we're seeing across the country really is these sports books have truly become part of that entertainment destination. So we've taken a bit of a different approach to the more traditional sports books that you would have found in Vegas over the years where it's great AV, it's great food and beverage, it's great entertainment. You go there with your friends. So all that has helped drive that visitation and is a big part of our omnichannel strategy.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

And that we highlighted the point earlier, the average age of our active database. I can't stress enough. I mean that's moving the Titanic quickly to go from an average age of 53 years-old just five years ago to 44 years-old now. We're very encouraged by that. There's tremendous cross-sell opportunities throughout the ecosystem, both online to retail and retail to online. It's working. Our property leaders are incentivized and totally dialed-in on helping us continue to make that -- create value in doing that. And so I think you'll see continued momentum in those categories as we move through '25 and into '26.

Jordan Bender
Analyst at Citizens Jmp

Yeah. Thank you very much.

Operator

Thank you. Our next question comes from Dan Politzer with Wells Fargo. Please go-ahead.

Dan Politzer
Analyst at Wells Fargo & Company

Hey, good morning, everyone. Thanks for taking my questions. First, I just wanted to touch on the iGaming business. You mentioned 3.5% targeted iGaming share. Is there any additional detail you could provide on that customer, your goals there, whether it relates to payback period, margins, the type of customer you're seeing? And along those lines, as you think about that $100 million to $200 million of interactive losses in 2025, where -- does iGaming -- is iGaming a positive contributor to that or detractor?

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Yeah. Definitely a positive contributor. If we continue to ramp that business. We're actually seeing really nice growth. You probably won't be surprised by this as we've launched the Hollywood standalone app on the slot side and we're seeing significant growth in our overall hold percentage largely driven by that slot mix. So we would expect iCasino to be really a positive contributor throughout the year. And hopefully, we end-up performing even better than what we guided to.

Again, those are just in the states that we're live in. So 140 basis-points for the year feels attainable, certainly as we sit here today. I think with regard to the iCasino demo, definitely when -- when we -- all we had was the Hollywood offering within the ESPN bet app, the demographic skewed young and it skewed mail and it skewed table games, not surprisingly. And what we're seeing now with Hollywood is there's maybe a little bit more of what you would see in a land-based casino in terms of the gender mix, definitely still SKUs younger than our land-based casinos, average age in the 40s as opposed to maybe early 50s in the land-based casinos.

But we're pleased with that because obviously sports-betting brings in more somebody in their 20s, early 30s, mostly male. And so very complementary. You've got one of your business lines targeting younger men, you have another that's targeting sort of you know Gen Xers that are maybe skewing more female and then the land-based side, we grab everything, but SKUs a little bit older.

Aaron LaBerge
CTO and Head of Interactive at PENN Entertainment

Yeah. Well, I would just add to Jay, the 25 basis-point growth per month-in PA in Michigan, that is all coming from database growth with very little marketing or promotion at the beginning. So it's basically being able to take the retail customer and provide a clear message to them that they can go play Hollywood casino when they leave and targeting that audience. And that's been very effective in a very short period of time. So we just think that's going to continue to improve. And obviously, once we start really focused on marketing and promotion in an efficient way, we think we can -- we can actually supercharge that. So we're off to a strong start there.

Dan Politzer
Analyst at Wells Fargo & Company

Yeah. Got it. That makes sense. And then just switching over onto the sports side of things. You've talked about the DTC option for ESPN really being kind of the next goalpost. I guess on the other side though, ESPN, it seems like they're ending their contract with Major Leagu Baseball after this year, which was earlier-than-expected. I mean, I guess is baseball important? Did you have -- do you have a view on this? Was this kind of did catch you off-guard? Any kind of commentary or color there would be helpful.

Aaron LaBerge
CTO and Head of Interactive at PENN Entertainment

So look, I mean, baseball is clearly important, but they're not getting out-of-the baseball business, they're getting out-of-the baseball video business. So they'll continue to have scores and schedules and standings and most people come and get their scores from ESPN, which we're going to continue to be deeply integrated with on their site and then cross back to ESPN bets. So the video package that ESP has will always continue to change, but they're serving all sports fans with a robust stats package that attracts 100 million-plus people a month. And so that traffic will continue and our integration with baseball will continue and it's important for us.

Dan Politzer
Analyst at Wells Fargo & Company

Yeah. Got it. Thank you so much.

Operator

Thank you. Our next question comes from Jeff with Stifel. Please go-ahead. Your line is open.

Jeff Stantial
Analyst at Stifel Nicolaus

Hey, good morning, everyone. Thanks for taking our questions. Jay, you shared some encouraging metrics on the early performance you're seeing for the standalone iCasino app and 61% NGR growth even ahead of that is quite impressive. I'm curious, just as you look at the returns that you've been seeing there on user acquisition and overall spend, does this lead you to rethink at all how you think about strategic allocation of resources between online sports and casino and then whether that's tech and product development personnel and focus or else incremental UA spend? Just any thoughts there would be great. Thanks.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Yeah. No, we're -- those are things that you continue to reevaluate Real-time, I wouldn't say it necessarily takes away from how we're thinking about what's in front of us in 2025 from a sports-betting perspective, but it does -- it does get you into a different mind space in terms of what you can do to continue to generate and maybe supercharges, as Aaron put it, what you're doing in the iGaming side. Again, it's early, but we're also seeing really strong retention.

We're seeing that those -- those user -- the user growth week-over-week is continuing to move-in the right direction. So it's not as though we're inducing people to come over with promos. They're spending time -- spending a few -- a few times on our slot machines and then they're going away again. We're seeing really strong retention. So given the retention is strong, we know the product is great. Third-parties have validated that and we're seeing it in our own numbers. Then our guidance for the year does include some incremental spend than maybe we otherwise would have thought about it maybe a few months ago in terms of supporting that iGaming business because we're seeing good early returns.

Jeff Stantial
Analyst at Stifel Nicolaus

Okay. That's great. Thanks for that color, Jay. And then looking at Slide 6 in the deck, the cross-sell metrics look like the omnichannel thesis is really starting to take hold going into 2025. Jay or Todd, whoever wants to take this. Could you just help us understand a bit more what you're seeing in terms of player behavior for these new mostly younger guests? I guess, how does compare to your typical brick-and-mortar customer and what are you seeing in terms of retention or repeat visitation versus more kind of one-and-done traveling type behavior? And that's all for us. Thanks.

Todd George
Executive Vice President, Operations at PENN Entertainment

Yeah, great question. It's strange. When we first started to model this out, we thought that the obvious cross-sell would be into table games. But really what we are seeing is a lot of them come in and play slot machines. I think part of that is the price of entry where they're coming in used to Playing at lower denominations, higher volumes and that's what that's what we're seeing on-property. And then once they come in, we're actually seeing increased visitation from what you would normally find when you see a new member come in through the retail channel. So from a frequency and visitation standpoint, some of it being event-driven around weekends and special events, but we're seeing solid visitation, solid frequency. And as they kind of grow into your loyalty program, then you're starting to see them move-up into the higher levels of the loyalty program. So it's a similar journey. It's not necessarily the journey we thought it would be. Again, we thought a lot of them would come in through table games and we do still see some of that. But again, a lot of them are coming in through the slot devices. It's been great to see.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

And Nicky, if we could... Well, go-ahead, Jeff, sorry.

Jeff Stantial
Analyst at Stifel Nicolaus

Actually helpful, encouraging. Thank you both.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Thank you. Okay. Great., if we could have one more question, that would be great.

Operator

And our last question comes from Brian Sigdahl with Craig-Hallum. Please go-ahead.

Ryan Sigdahl
Analyst at Craig-Hallum

Great. Thanks for sneaking me in. I'll just kind of follow-up on the app in the Hollywood casino. But curious on the player profile, how that looks mainly from are the new players you're seeing come in? Are they new to the database or the online database or are they existing ESPN bet users that are cross-playing and prefer kind of the standalone app when they're playing iCasino? Thanks.

Jay Snowden
Chief Executive Officer and President at PENN Entertainment

Yeah, good question, Ryan. We're seeing a little bit of all of that. We're actually seeing more sort of new to our iGaming offering as opposed to people just moving from ESPN bet over to Hollywood. We look at that every day actually. And we're seeing really nice incrementality in terms of the users as well as the revenues, which would tell you this Aaron referenced earlier and Todd has referenced that we've been very effective, our marketing teams at the properties along with our digital teams of putting really compelling offers and products in front of our land-based casino used casino frequenters in both Pennsylvania and Michigan. We now have the brand connection, of course, which makes it much easier.

And we haven't had to put heavy inducements there, which is great. So it's all been very rational. It's healthy business flowing through. Retention looks great and we really as Aaron alluded to, we're just getting started on the extra marketing behavior in terms of finding new customers outside of our entire ecosystem, that has started and that will continue because we are seeing that this is a sticky product and really good reviews early-on thank you. Okay. Thank you, everybody for joining us. We look-forward to catching-up with you again at investor conferences in-between, of course, on our next quarterly call. Thank you.

Operator

This does conclude today's program. Thank you for your participation. You may disconnect at any time.

Corporate Executives
  • Joe Jaffoni
    Investor Relations
  • Jay Snowden
    Chief Executive Officer and President
  • Felicia Hendrix
    Executive Vice President, Chief Financial Officer
  • Todd George
    Executive Vice President, Operations
  • Aaron LaBerge
    CTO and Head of Interactive
Analysts

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