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Edited Transcript of PENN earnings conference call or presentation 6-Feb-20 2:00pm GMT

Q4 2019 Penn National Gaming Inc Earnings Call

WYOMISSING Feb 13, 2020 (Thomson StreetEvents) -- Edited Transcript of Penn National Gaming Inc earnings conference call or presentation Thursday, February 6, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jay A. Snowden

Penn National Gaming, Inc. - CEO, President & Director

* William J. Fair

Penn National Gaming, Inc. - Executive VP of Finance & CFO

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Conference Call Participants

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* Carlo Santarelli

Deutsche Bank AG, Research Division - Research Analyst

* David Brian Katz

Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure

* Felicia Rae Kantor Hendrix

Barclays Bank PLC, Research Division - MD & Senior Equity Research Analyst

* Harry Croyle Curtis

Instinet, LLC, Research Division - MD and Senior Analyst of Gaming, Leisure & Lodging

* Jared H. Shojaian

Wolfe Research, LLC - Director & Senior Analyst

* Jeffrey Stantial;SunTrust Robinson Humphrey;Equity Research Associate

* John G. DeCree

Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research

* Joseph Richard Greff

JP Morgan Chase & Co, Research Division - MD

* Shaun Clisby Kelley

BofA Merrill Lynch, Research Division - MD

* Steven Moyer Wieczynski

Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research and Gaming & Leisure Research Analyst

* Thomas Glassbrooke Allen

Morgan Stanley, Research Division - Senior Analyst

* Joseph N. Jaffoni

JCIR - Founder & President

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Presentation

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Operator [1]

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Greetings and welcome to the Penn National Gaming fourth quarter conference call. (Operator Instructions) I would now like to turn the conference over to Mr. Joe Jaffoni, Investor Relations. Please go ahead.

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Joseph N. Jaffoni, JCIR - Founder & President [2]

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Thank you, Frank. Good morning, everyone, and thank you for joining Penn National Gaming's 2019 Fourth Quarter Conference call. We'll get to management's presentation and comments momentarily as well as your questions and answers, but first, I'll review the safe harbor disclosure.

In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements within the meaning of the private securities litigation Reform Act of 1995, which involve risks and uncertainties. These statements can be identified by the use of forward-looking terminologies, such as expects, believes, estimates, projects, intends, plans, seeks, may, will, should or anticipate or the negative or other variations of these or similar words 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, actual results may vary materially from expectations. The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Form 10-K and Form 10-Q. Penn National assumes no obligation to publicly update or revise any forward-looking statements.

Today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures, calculated and presented in accordance with GAAP, can be found in today's press release as well as on the company's website. It's now my pleasure to turn the call over to company's CEO, Jay Snowden. Jay, please go ahead.

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [3]

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Thanks, Joe. Good morning, everyone. Thanks for joining us for Penn's 2019 fourth quarter earnings, and importantly, our 2020 outlook. Our solid fourth quarter results that exceeded guidance punctuated an exciting conclusion to a truly transformational year in 2019 here at Penn National. A year that delivered a number of notable accomplishments for Penn. First, we established a goal at the close of the Pinnacle acquisition in October 2018 to complete most of the heavy integration and synergy lifting by the end of 2019 so that we would be one company with one mission and one culture and eliminate the use of the term legacy from our vocabulary by January 2020, and I'm happy to say we have accomplished that goal.

Second, despite this acceleration of combining companies and the significant change management and, at times, disruption associated with that, we were extremely pleased and honored to be named the gaming industry's employer of first choice by Barstool Associates (sic) [Bristol Associates] and Spectrum Gaming group in their 2019 anonymous executive survey. So my hats off to all of our amazing property and corporate leaders on this extraordinary accomplishment.

From a financial standpoint, we exceeded $5.3 billion in revenue, $1.6 billion in EBITDAR and 30% EBITDAR margins for the first time in our company's history. We also raised our synergy target from $100 million to $120 million in cost synergies and another $15 million to $20 million in revenue synergies over the course of 2019, some of which are starting to materialize now that we have implemented our loyalty program, mychoice, across all of our properties.

Lastly, we now find ourselves with over 40 properties across 19 states, a footprint that is unmatched and strategically critical for Penn as we move forward. And speaking of the future, let's spend a little time on that. As exciting as 2019 was, we have bigger plans and even more to accomplish in 2020. We are currently under construction with our 2 Category 4 facilities in Pennsylvania. We anticipate opening our new ground-up facility in Morgantown in November, and our York property at the very end of this calendar year. We also announced last week, on January 29, our investment in and partnership with Barstool Sports, a unique partnership that we believe will deliver immense value to both parties and our shareholders, team members and loyal customers and fans for decades to come.

When PASPA was overturned in May 2018, we knew the casino industry was going to be changed forever. And Penn was positioned better than any other gaming company to lead this industry revolution. We have the broadest footprint in the U.S., we're regional gaming's best operators. We have the broadest footprint in the United States. We have an extremely entrepreneurial and innovative culture and group of leaders as well as some of the nation's highest quality regional gaming assets and brands. What we were missing, however, was a sports betting name an audience to lead with and to activate. We also didn't want to sell the rights to or give up economics around the sports betting and iCasino opportunities, given we believe, strongly, this convergence with retail casinos is where the future of our industry is headed.

We met with dozens of potential partners over the last 18 months and finally found the one that checked all the boxes for them and for us, that's Barstool Sports. We couldn't be more excited to be partnering with Dave Portnoy, Erika Nardini, and the rest of the Barstool Sports family and their 66 million loyal stoolies. We'll be launching retail-branded Barstool Sports books across the country over the coming quarters. As well as our mobile sports betting app Barstool Sports book later in the third quarter. Our goal is to be top 3 in sports betting market share in every state where we operate and #1 in profitability, both retail and online.

We also aspire to be the industry's first and only pure omnichannel provider of sports and casino experiences and entertainment in the U.S. And because we have the best team and because -- and we control 100% of our future and the economics associated with it, we're confident we can deliver on these ambitious goals.

So with that, I'm going to turn it over to B.J. to walk you through 2020 guidance, and then we will open it up for questions.

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William J. Fair, Penn National Gaming, Inc. - Executive VP of Finance & CFO [4]

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Thanks, Jay, and good morning, everyone. I want to address 2 items this morning, and first, with respect to our guidance, going forward, we'll only be providing a guidance range for EBITDAR for the year. I think you'll all acknowledge that our guidance is still equal to, if not more than what most other gaming companies provide.

We'll still be providing in the press release our cash lease payment forecast for the year as well as other key issues -- other key uses of cash to allow for a calculation of our free cash flow generation. Our EBITDAR guidance range for the year is $1.67 billion to $1.7 billion, and our free cash flow guidance is $405 million to $430 million.

It's important to note that while our guidance does not include any impact related to the Barstool transaction, it does include all of the cost associated with the launch of our sports betting app later this year. Our total lease payments for the year, including the 3 GLPI leases and the 2 VICI leases, are forecast to be $901 million to $905 million. The range is dependent upon achieving escalators, for which we will provide updates as we progress through the year.

The trailing 12-month rent coverages as of 12/31/19, for the GLPI leases are as follows: the Penn Master Lease was 1.93. The amended Pinnacle Master Lease was 1.77 and the Meadows lease was 1.97.

The second item to cover this morning is that you'll notice we have recorded an impairment charge for our balance sheet of over $170 million. The majority of this charge is related to the adoption of the lease standard ASC 842 and is an accounting change on how the financing obligations of the Penn and Pinnacle Master Leases are addressed. The charge also reflects the impact of changes in gaming legislation in Illinois, Indiana and Pennsylvania, primarily on the acquired Pinnacle properties since the legislation became effective post-acquisition of the company.

So with that, I will turn it back to Jay.

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [5]

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Thank you, B.J. Before I open it up and hand it back over to Frank for questions. I did want to thank a couple of people. As all of you know, this is B.J. Fair's last earnings call. B.J. is leaving Penn at the end of March, and I wanted to personally thank B.J. for his countless contributions to Penn over the course of the last 6-plus years, both in his role as Chief Development Officer, and his role as Chief Financial Officer. B.J. is the consummate pro, great colleague. He's going to be sorely missed. And I want to personally thank him for that for being a great guy. And also, for agreeing to stay on through the end of March and work through a seamless transition with Dave Williams, who will be starting as our new CFO in early March. So B.J. thank you.

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William J. Fair, Penn National Gaming, Inc. - Executive VP of Finance & CFO [6]

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Thank you, Jay. It's been an honor, and it is a phenomenal company.

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [7]

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Thank you. I also wanted to -- he's not here with us this morning, but I can assure you, he's on our call. I wanted to thank Tim Wilmott for a few things. He probably will be on every one of our calls, and he'll be critiquing me after our call. So well, I welcome that call, Tim. I wanted to thank Tim for -- I've known Tim for almost 20 years now from our time together at Caesars as well as our time together at Penn. And Tim has been a mentor of mine throughout that time. He's a great partner, he's been an amazing sounding board for me over those 20 years. He's taught me a tremendous amount, and most importantly, Tim, is just a dear friend. And on behalf of the Board, on behalf of the company, Tim, I wanted to thank you for the seamless transition. These CEO transitions don't always go well and it could not have gone better with you being as gracious as you are and taking the time to make it exactly that. This was so well-orchestrated by you, and I just can't thank you enough for being you. So with that, Tim, thank you.

Great having dinner last Monday. I'll see you soon for another dinner. And with that, Frank, we're going to turn it over to you to open it up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Joe Greff with JPMorgan.

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Joseph Richard Greff, JP Morgan Chase & Co, Research Division - MD [2]

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Before I ask my questions, I just want to say it was great working with you, B.J., and really wish you the best of luck in the next endeavor that you embark on.

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William J. Fair, Penn National Gaming, Inc. - Executive VP of Finance & CFO [3]

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Thanks, Joe.

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Joseph Richard Greff, JP Morgan Chase & Co, Research Division - MD [4]

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My first question, guys, relates to your outlook for this coming year. The $30 million of EBITDAR range. Can you explain what's sort of baked in at the low end and what gets you to the top end? How much of it is related to Massachusetts, Colorado impact to OpEx on maybe the sports betting app platform? And then maybe Jay can help quantify what that sort of OpEx is this year in terms of getting that sports betting app up? That's probably something that at least we didn't, at least on our side, we probably didn't incorporate any kind of expense for this year?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [5]

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Yes, Joe, it's a great question. And we're providing guidance in a range and different than we have in the past without revenue guidance, and I'm sure we'll get into that later as well. Look, here's what I would say about guidance is that -- and we mentioned this on -- in the earnings release and also in B.J.'s opening comments that this guidance range includes the cost associated with the launch of our sports betting app. Because you have to remember that we're building out an infrastructure right now, a team of developers and engineers that are working, we have a big large office in Philadelphia, developing what we believe is going to be a best-in-class app. But we don't have the scale yet of the revenues coming in for that app, and so we launch this app in August, and we'll launch in a few states, and then there'll be a cadence of going live in states as we move forward every month or 1.5 months after the initial launch.

So I think you'll see, Joe, that the benefits of our sports betting apps and sports betting overall will, I think, be more visible in 2021 and 2022. We're launching the sports betting app so it's more of a cost to build out that infrastructure and the resources associated with it in 2020. But as we get the scale on the revenue side, I think you'll see that it will be a really good growth story for us, and that's not too far off as fast as states are continuing to legalize sports betting.

And then with regard to your first question on the range, it's a range. I wouldn't say there's any one particular thing that drives the lower end of the range or the top end of the range. The only reason why the range midpoint isn't right at consensus is because of this cost of start-up for our sports betting app, or else we would have been there. We feel really good about our core business right now. Probably, honestly, the best I've felt in years given what we're seeing, how we finished the year, the benefits of mychoice and the impact we're seeing in multi-property markets like St. Louis and Kansas City, both top line, bottom line. January started strong. You saw the Maryland numbers came out last night, and I think you'll find other states are going to look a lot like Maryland. So we feel really good about our core business, and we'll see how this plays out. But there's really nothing in particular driving the lower end of the range or the higher end. We're just giving ourselves some wiggle room because it's hard to anticipate what will happen throughout the year.

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Joseph Richard Greff, JP Morgan Chase & Co, Research Division - MD [6]

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Great, excellent. And then as a follow-up, Jay, I know you talked, I guess, for several months now about maybe accelerating -- or ways to accelerate your balance sheet net debt reduction plan and that would include things like Trop and Prairie State Gaming, potentially. Can you talk about maybe where you guys are in terms of assessing, monetizing those among other things that you might be looking at? How formal is that process? Or is it just sort of a theoretical, more reactive process?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [7]

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It's a little bit of both. I would say on the Prairie State Gaming, a little bit more on the reactive. And on the Tropicana side, there's been so much, as I mentioned on our last call, unsolicited interest that it's very active. We got another call 2 days ago with interest and potentially acquiring some or all of the landholdings there. So it's very active. I would tell you that from a prioritization standpoint, for me and for the company, now that we've gotten the Barstool news out there, it's all around Barstool and activating that Barstool audience and our properties and our -- and launching retail sports books, obviously, working on the build-out of this app, the development of the sports betting app and the successful launch in August that is absolutely critical to us. So that's a top priority, and the other top priority is delevering. We want to get this balance sheet -- we want to continue to improve the balance sheet. We would love to get our net adjusted lease -- lease-adjusted net leverage down to 5.0 by the end of the year. Obviously, if you calculate our free cash flow, we're not getting there just through free cash flow, we probably get down to 5.2, 5.3 through free cash flow. But delevering is a very high priority for all of us here. We're continuing to have active conversations, and we're encouraged because with the draft coming up, the NFL draft in April in Las Vegas, the Raiders stadium is almost completed, the season launches in August, September. There's just a -- it's a great convention year for Vegas as well. There's still a lot of interest. We know the land we have there is extremely valuable, and we're going to continue to explore that. It's a high priority for us.

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Operator [8]

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Our next question comes from Felicia Hendrix with Barclays.

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Felicia Rae Kantor Hendrix, Barclays Bank PLC, Research Division - MD & Senior Equity Research Analyst [9]

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B.J., last quarter, I said goodbye, and it was premature and maybe it was kind of rated below in the year, so I'll say goodbye now.

So just wanted to, in general, clarify that for 2020, because you didn't give revenue guidance, that you will see EBITDA margins, or EBITDAR or margins, rather, higher year-over-year. Just mainly my question is around wondering if the sports betting startup costs, at all, will be an offsetting factor?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [10]

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We anticipate, Felicia, continued improvement in EBITDA margins. Todd George, our regional leaders, our property general managers, laser-focused and always have been, always will be. We know there's still meat on the bone. We think there's meat on the bone, both in terms of revenue opportunities and cost opportunities and are encouraged by the way the year has started and our ability to execute on both. So yes, look, the cost associated with the launch of our app is what it is. You kind of -- I kind of carve that out and say, what -- how do you look at our core business, and we look at our core business and say, it's healthy, consumer sentiment is strong, confidence is there. Folks have jobs, and they're seeing wage growth as well and real estate values are holding up. So we feel really good heading into the year.

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Felicia Rae Kantor Hendrix, Barclays Bank PLC, Research Division - MD & Senior Equity Research Analyst [11]

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Okay. And then so the trajectory of EBITDAR margin growth, perhaps, will kind of stay in the same path?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [12]

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I think that's a good assumption, Felicia. There's no reason to think or assume that our margins are going to plateau anytime in the near future.

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Felicia Rae Kantor Hendrix, Barclays Bank PLC, Research Division - MD & Senior Equity Research Analyst [13]

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Okay, great, helpful. And then just switching gears over to Barstool Sports, and I know you guys are planning to give a lot of detail in June, but as I'm sure you can guess, we're getting a lot of questions on this. So just hoping you can help us nip some of these in the bud. Just wondering if you could help us frame what kind of market share you might garner in each state you're in? And then also, how you're thinking about promotional expense. I think some folks are also using the DraftKings EBITDA as a -- EBITDA margin as a proxy that's in the low 30s. So wondering if that's realistic? And then I just have a quick follow-up after that.

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [14]

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Sure, Felicia. Look, we -- I think we're thinking about this opportunity different than most are. I think the real key benefit here and the combination of Barstool Sports and Penn National Gaming is that this is an omnichannel strategy. And we don't even launch our sports betting app until August, but our teams were together on Monday, brainstorming all day on how we can activate the Barstool Sports audience of stoolies because they're so excited to participate and to see our properties and to be there for March Madness at our retail sports book. So for us, it's so much bigger and broader than just having a sports betting brand and launching an app. This really is, if we do it right, we're creating an ecosystem. And if you like sports betting, you like gambling in casinos or you like online slots, online mobile sports betting, whatever you like, Penn has an offering for you is the way we envision the future. And hopefully, every state where it's legal, our footprint, obviously, helps with that a lot. And as we think about the profitability of sports betting, and of course, down the road, iCasino as that continues to be legalized across the country, that's really where we believe we're going to stand out. We've set our goal, Felicia, to your specific question, to be a top 3 revenue market share leader for sports betting, retail and online. Casino, you could certainly say the same thing, although I would hope were higher than top 3 for iCasino and we think the difference for us is that we can be #1 in profitability. We think we can run the best margins for that sports betting and casino business because of our footprint, because we don't have the friction costs associated in most states with having to go in with a skin partner and pay 5% to 15% of net gaming revenue just for access, that is a huge cost savings. And then #2, because the Barstool audience is so fiercely loyal to that brand that we believe the cost of acquiring customers for Penn, leading with the Barstool Sports book brands is going to be very different than everyone else out there. Others have had to spend hundreds of millions of dollars to create the brand that they have today and to build a database. And we think that we've looked at this differently, and through our investment in Barstool, there's a more efficient path to profitability for us.

And then the last thing I would mention is that, just on a pure stand-alone basis, though, I don't think you can look at this investment in year 1 as a typical accretion dilution analysis, but we believe that Barstool is worth a lot more than $450 million even today. I mean, that's our opinion. You take that for what it's worth. But this is a business that now is doing $100 million in revenue, it's profitable, and it's been growing its top line by over 50% the last 2 years, and there's really no end in sight in terms of where the growth can go.

So we feel great about the investment in Barstool. We believe in Barstool as a stand-alone, as a company, as a brand. And then, of course, all of the synergies when you combine Penn and Barstool together. So I think that's a long-winded answer to a relatively short concise question, but that's the way we're thinking about it.

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Felicia Rae Kantor Hendrix, Barclays Bank PLC, Research Division - MD & Senior Equity Research Analyst [15]

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That's helpful. And then my follow-up was kind of along those lines, on the customer acquisition side. I think everybody understands the loyalty of the Barstool consumer, but if you'll have competitors who are giving away a lot of money, quite frankly, in promotions and that sort of marketing, at the end of the day, I think it's hard for some folks to really kind of understand or fathom how that -- how sticky that loyalty will be?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [16]

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Yes, let's see how this plays out, Felicia. It's hard for me, I'd be completely speculating now on what exactly is our strategy going to be 5 months post-launch of our app. I will tell you this, if there's -- and I know Jason Robins well, he's a friend, but there's any chance of DraftKings getting to 35% margins, they also can't be spending at the promotional levels that they are today. So that's not going to last forever. I think, right now, it's all about acquisition, acquisition. We believe the partnership with Barstool Sports is a very powerful acquisition tool and a very powerful retention tool. Will we have to have some promotions here and there to keep the loyalty? I would say, potentially, we just need to see how this plays out. And it's too early for us to do that today.

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Operator [17]

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Our next question comes from Thomas Allen with Morgan Stanley.

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Thomas Glassbrooke Allen, Morgan Stanley, Research Division - Senior Analyst [18]

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So just on the 2020 guidance I know you're no longer giving quarterly guidance, but qualitatively, can you just talk about -- well, quantitatively, if you're willing, but qualitatively, can you just talk about how we should think about the seasonality of EBITDA and just kind of like the onetime items that may hit in 2020?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [19]

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Sure, Thomas. I would -- here's what I would say, first half of the year, Q1 and Q2. Again, there's always the weather factor. So I don't really know what to do about the weather factor. It's been mild this year, last year, it wasn't. That's obviously beneficial so far this year, knock on wood. But I would say, as you're looking at how you're going to spread quarterly, you would probably say, Q1 and Q2 would be a normal seasonal spread based on what we're saying we would do, and EBITDA and EBITDAR and revenues would probably reflect that with some margin growth. And then Q3 and Q4 would be a little bit different because we're launching our sports betting app and so the second half of the year might look different than the first half of the year from a seasonal standpoint, simply because you've got some onetime and initial start-up costs that are hitting in August through December that wouldn't have been there if we weren't launching our own sports betting app.

So hopefully, that answers your question.

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Thomas Glassbrooke Allen, Morgan Stanley, Research Division - Senior Analyst [20]

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Yes, that's helpful. And then just can you talk about kind of what same-store growth has been? How it's trended through 2019? And kind of how you're thinking about it in 2020?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [21]

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Sure. We actually -- if you look at fourth quarter and you carve out Plainridge, everybody knows the story there with Encore opening, we had a lot of construction disruption at our Meadows property, and we're starting to get both -- well, we're starting to get Meadows back on track, and we'll see how things play out at Plainridge, although, start of the year is better than what we saw in the fourth quarter and third quarter. I would just tell you that we feel very good about same-store sales growth, and we're comfortable saying, excluding those 2 in the fourth quarter, that fourth quarter would have showed probably the best same-store sales growth that we saw all year. You just have the noise of Plainridge and Meadows that are negatively impacting the results. But as you look at 2020, we're assuming low-single-digit same-store sales growth in most all of our markets with very few exceptions, including the 2 that I mentioned, although we believe Meadows will continue to ramp up now that construction is behind us.

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Thomas Glassbrooke Allen, Morgan Stanley, Research Division - Senior Analyst [22]

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Okay. And sorry, so just to confirm on Plainridge and Meadows. Plainridge will still be down and Meadows will be down but get better. Is that the way to understand that?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [23]

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Yes, I think you can assume a ramp to sort of flat revenues here in the next couple of quarters and then we should start to see some growth at Meadows second half of the year. And then the only other one, and we mentioned this, or we highlight this on our earnings release, which is there's Monarch opening in Black Hawk, Q1, Q2, I think the dates are still kind of moving around, but we did build in some assumptions around impact, which, we believe, will be short-term in nature. I mean, we -- I think everyone who's been to Black Hawk would agree that we need more hotel rooms. Our revenue per available room at our Black Hawk hotel is by far the highest in the company. We wish we could build more hotel rooms. We just don't have the land to do it. And I think Monarch opening up several hundred high-quality hotel rooms right across the street is really good for Monarch, and I think it's really good for Penn and Ameristar Black Hawk long term.

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Operator [24]

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Our next question comes from Steve Wieczynski with Stifel.

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Steven Moyer Wieczynski, Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research and Gaming & Leisure Research Analyst [25]

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Jay, so in the past, you talked about, I think, on the last couple of calls, you were seeing weakness in your lower tier customer level, which was always expected, given the change in marketing spend that you guys and some of your competitors have been doing as well. But I guess the question is, have you seen that lower-tier customer start to bottom out? And maybe also help us think about what you're seeing across some of your other tier levels as well?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [26]

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Sure, Steve. Yes, is the answer. I think we are starting to see a bottoming out of our lowest worth segment, the retail segment. We saw, in the fourth quarter, growth in unrated, which is always a good sign of, to me, the health of the unincentivized consumer. We saw tremendous growth at our VIP segment, strongest growth of the year. And our Midwest segment, we saw some growth. Visitation is kind of across the board, as we've talked about before, but consistent with the past. But we are starting to see signs of a bottoming out of that retail segment. We've made a number of marketing reinvestment decisions and adjustments over the course of the last couple of years. And so we're encouraged by what we're seeing at the moment. But I would say, generally speaking, the database trends that I've talked about in previous quarters, Q4 was pretty consistent with those trends.

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Steven Moyer Wieczynski, Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Equity Research and Gaming & Leisure Research Analyst [27]

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Okay, got you. And then I don't know if I missed this or not, but in terms of the Northeast and Plainridge with win up there, have you seen those guys start to pull back on the promotional side of things at all? Or is it still -- are they still throwing all kinds of money at potential customers?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [28]

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We haven't seen any material change at this point. Steve. It's still aggressive. And it's just -- we don't get involved in those things. We're obviously protecting our VIP customers and the mid-worth that are geographically closer to our property. We're not going to get into a marketing war. We wouldn't win anyway against a $2.5 billion asset. So we're being patient. We're being smart. I think the team there is doing a really good job thinking on their feet and making adjustments on the fly. And again, we're encouraged by more recent trends that we're seeing there versus what we were seeing in Q3 and Q4. So there could be something happening behind the scenes that we haven't actually seen yet in our competitive shopping. And I think that we're making the appropriate adjustments as well and hope that the trends for 2020 are better than what we saw in Q3 and Q4 at Plainridge.

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Operator [29]

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Our next question comes from Carlo Santarelli with Deutsche Bank.

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Carlo Santarelli, Deutsche Bank AG, Research Division - Research Analyst [30]

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Jay, it sounded like you talked to a number that was maybe around $15 million of cost with the comment that you made relative to consensus and the midpoint of your guidance. That being so, and we think about kind of Greektown for the full year this year. I guess the remaining piece is kind of the synergies achieved in 2019? And what kind of lingers for 2020 related to the Pinnacle transaction? Would you be able to kind of quantify the 2019 bucket? And obviously, then we could do the math on what's to come in 2020?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [31]

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Yes, really, not a lot has changed from our last call, Carlo, with regards to synergies. We actually, internally, are moving on from the word synergy, and it's now about operational excellence and sharing of best practices. I think Tim said on our last call, roughly half of those $120 million of cost synergies would be realized in '19 and roughly half realized in 2020. Obviously, run rate and realized are 2 different things, but I think it's safe to say that, that's very much the case. And as you build up from our $1.6 billion of EBITDAR in '19 to the call it $1.7 billion without some impact from the launch of our sports betting app in 2020, you can see that roughly half realized in '19 roughly half and '20 plus Greektown, the math works out.

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Carlo Santarelli, Deutsche Bank AG, Research Division - Research Analyst [32]

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Okay, Jay. So sorry, said differently, the $120 million, you'll see about $60 million of that in 2020? Is that what you were -- is that the expectation right now? And then the revenue synergies will probably be more pronounced in '21, or '20 and '21?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [33]

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That's correct, Carlo. From a realization, yes, of synergies, I think that's a safe assumption.

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Operator [34]

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Our next question comes from Barry Jonas with SunTrust Robinson Humphrey.

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Jeffrey Stantial;SunTrust Robinson Humphrey;Equity Research Associate, [35]

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This is Jeff on for Barry. I guess, first off, on the asset monetization strategy, do you think we can see any negative synergies with the potential sale of the Tropicana? And just to go along with that, how much business do you think could potentially just shift over to the M Resort? And would you consider a marketing agreement with another strip operator?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [36]

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So no negative synergies if that were to happen. And yes, I think we can move some business from Trop to M Resort. We really do -- we market both of those properties to our database, some prefer to be on-strip, some prefer to be off-strip. M Resort is on fire, has been for years. And so could we accelerate some of that movement and visitation to M from the strip. Sure, we could, and of course, that would be by design. I do think, to the last part of your question, and we've talked about this internally. We just, obviously, have a lot to work through and really need to focus right now on making sure that we're developing a best-in-class app that is a very high priority for us. But you look down the road and the Barstool Sports book, from a retail standpoint, it's such a compelling brand and the activation of that audience is going to be, I think, really exciting and create a lot of value. And if we're on the strip, then, of course, we would use the Barstool Sports book for a retail sports book. And if we weren't on the strip, I think there could be potentially opportunities to partner with others who might be looking to do something really unique and different with their retail sports book. So time will tell how that plays out, and that's down the road, but I think we have a lot of optionality.

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Jeffrey Stantial;SunTrust Robinson Humphrey;Equity Research Associate, [37]

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Great. And just to go along with that on the general sports betting strategy with access to the national Barstool brand now, do you think we could see more M&A or partnerships just to be able to access more states kind of for that online piece?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [38]

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Well, I think, yes, is the answer. We, obviously, feel great about our sports betting strategy, and we want to be where sports betting is legal. And so the nice thing about what Penn has today is, we not only had enough skin to partner with 4 really good companies to give them access and return for a combination of equity upfront cash, and in every case, revenue share, but we still have enough second and third skins in a number of our markets that we can do some bartering, some trading to get into other states maybe in return to give them access into states that we're in. So we're -- we've got folks that are living this day in and day out. We obviously, want to make sure that we're in most, if not all, states that are legal, certainly the ones that have significant population, maybe not the real small states, but it's a very high priority for us, and we think we have a path to access in most, if not all.

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Operator [39]

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Our next question comes from Harry Curtis with Instinet.

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Harry Croyle Curtis, Instinet, LLC, Research Division - MD and Senior Analyst of Gaming, Leisure & Lodging [40]

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Jay, the rise in the stock, in some degree, is related to the fact that you've become, or you're becoming more of a content provider. And part of that ability is -- going forward is how you retain and attract talent. So can you give us a sense of the -- of your team now and in terms of how you retain them and how you expand that base because it's probably going to become more competitive?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [41]

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And Harry, it's safe to assume that you're referencing specific to Barstool talent?

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Harry Croyle Curtis, Instinet, LLC, Research Division - MD and Senior Analyst of Gaming, Leisure & Lodging [42]

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Yes, I'm sorry.

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [43]

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Okay. Yes, we -- and I mentioned this the morning of the announcement on our investor call that we have -- the way that we structure this investment in Barstool Sports, we put a lot of time and energy into. And so just one more reason why I was so excited to do something with Dave and Erika and the team at Barstool because they wanted exactly what we wanted, which is alignment between the 2 parties. And we were able to structure their consideration as most -- more equity than cash. And I actually think, in hindsight, they probably have taken even more Penn equity than cash, and we're talking about that. But there's tremendous alignment and so, yes, part of retention is employment agreements, Erika Nardini, Dave Portnoy, Dan Katz and others have signed up for long-term employment agreements, which is fantastic. And they also have Penn equity that is going to be vesting over periods of time. And I think they are incentivized, not just because of their employment agreement, but also because of the Penn equity that they own to be around for the long term, and that was very important to us that this wasn't just a quick cash transaction and then where they're holding what's left of a media company that we don't completely understand or know how to run yet. Erika wants to be around for a really long time, and she and Dave and Dan have done amazing things with Barstool. And they just signed up to be around for a long time. So that's our approach.

I think, Harry, you can think about it as employment agreement is a big piece, and Penn equity and alignment is the other big piece. And folks at Barstool are really excited to be a part of this magic that we're creating.

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Harry Croyle Curtis, Instinet, LLC, Research Division - MD and Senior Analyst of Gaming, Leisure & Lodging [44]

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So to that end, and thank you -- to that end, again, focusing on content. That's one mode around the business that you've created, and you're really the first to put these together. How do you build a moat around this from a competitive point of view?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [45]

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Yes, it's a great question, Harry. We're going to have to really see how this develops. I would tell you that we're already moving on to what's next because that's what we have to do. And we have our own view of the answer to your question. I don't want to share it at the moment, publicly, but I would tell you this that having met with all the media companies out there, I don't feel like there is another Barstool. That's my honest opinion. The loyalty of that audience is like something I've never seen before, and I continue to be blown away as the days go by of just how devout and rabid the fans are at Barstool. And how much -- because Erika and Dave and Dan and the team at Barstool, they've been so smart about how they connect with their audience, and it's through audio, it's through video, it's through digital, it's through social, and it's regular, and it's 24/7. And we were just talking before the call here in the room about how you go on to Barstool's website, you just kind of get lost, like, meaning in a good way, just click here, click there, it's like going on to into YouTube. There's so much content, it's entertaining. And that's really unique. That's really special. It's one thing to have a really compelling sports brand, and there's lots of those out there. But I'm not sure that those sports brands have the deep connection between the talent behind that sports brand and the fan, and that's what Barstool has that, we believe, is truly unique.

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Operator [46]

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Our next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch.

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Shaun Clisby Kelley, BofA Merrill Lynch, Research Division - MD [47]

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Jay, I just wanted to go back to the customer acquisition topic for a quick moment just to make sure we're kind of thinking about the cadence correctly. So it seems like, from a guidance perspective, you're definitely banking on some OpEx investments here, which, I think, is probably going to be engineering talent and things to roll out the app. But is there any meaningful investment either needed or contemplated just purely on customer acquisition dollars that are actually in the guidance for, let's call it, the post August period post launch? Or just how are you thinking about kind of that period from August until end of year as you start to get up and running in some of the states?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [48]

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Yes. Great question, Shaun. Thank you. It's worth clarifying on this. We really want to see the value of customer acquisition from the Barstool database. And so we are not planning any aggressive material customer acquisition to go along with that. For the first few months, we're planning to launch, and I think it's 3 states in August, and we'll come out with a cadence on our June Analyst Day as to what the total launch schedule looks like. But we want to see what the -- our ability to attract and retain and convert stoolies over to the Barstool Sports book is without getting into significant customer acquisition commitments beyond that. It doesn't mean that we're not going to spend money elsewhere. It doesn't mean that we won't spend some money even at launch through other channels, it just means that our primary strategy, certainly for 2020 after launch, is going to be focused on the Barstool database.

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Shaun Clisby Kelley, BofA Merrill Lynch, Research Division - MD [49]

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Great. I think that's going to be helpful for folks. And then the second question, similar topic, but probably more of clarification. As you -- I think you mentioned in response to a prior question that there will be some kind of onetime and initial start-up costs as you were talking about the kind of cadence of how we think about the quarters through guidance. Just to be clear on that as well, Jay. Is that -- is the onetime and initial start-up cost, is that the extra, let's call it, pick your number, $15 million or $20 million that we're seeing in some of the corporate overhead or that we're already seeing in the guidance? Or is there onetimers that you're going to exclude for launch cost that we should also be thinking about?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [50]

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No, you're thinking about it the right way, that it's really focused on the lead up and launch -- mostly the launch and post-launch costs related to the engineering and development team around that app. There's a little bit of onetime cost, but it's more the infrastructure starts to run through our income statement August going forward.

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Shaun Clisby Kelley, BofA Merrill Lynch, Research Division - MD [51]

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Great. And last question, and it's a little bit of a lead-in into June, but we are also getting a number of kind of questions on the topic here, which would just be, could you talk a little bit about the Penn side of the interactive team? I believe, you've got a number of people -- I think you guys are going to be on the front lines as it relates to actually the engineering piece of rolling out the front-end app. Could you just tell us a little bit more about the team that you've got in place here? I think there's some ex-media execs that may be helping that effort in Philadelphia? And just a little bit more color on kind of what you're doing on that side of the talent roster? I think we all kind of know the Barstool brand and -- are pretty confident in durability and reach on the media piece, but sort of maybe help us with the tech piece a little bit. And again, appreciate we're going to get a lot more color in June, and that's it for me.

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [52]

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Yes, great, Shaun. I'm happy to. We actually recruited a gentleman named Jon Kaplowitz to run our interactive division. He started with us, I think it was a little over a year ago, 13 months ago, January of 2019. And Jon joined us from Comcast, NBCUniversal, was responsible for the new business development division. He is a sports betting guy at his core, online gaming guys, first job out of college was with the World Poker Tour. So he's been involved in gaming and sports betting for a long time. His media background has been extremely helpful as we thought about our options in the media space, along with Chris Rogers, our Head of Dev and Strategy. We just spent a lot of time together talking about the pros and cons of all of these different options. Well, when Jon joined us, he also brought over a few people that worked on his team. They actually developed the Sports Predictor at NBC Comcast, that's been launched now for about a year, if not a little longer than a year. And so they do -- they had really good experience around sports betting, really good experience around launching an app. And that team has been in Philadelphia continuing to recruit and build out. And obviously, with -- after the Barstool news, our ability to recruit has become even better. But we have a team now of over 50 product developers and engineers in Philadelphia. We're moving into permanent office space there, I believe, in May. Right now, we're in some WeWork space, but we're running out of room. And we feel great about the team we've assembled. We feel great about the products. We've been beta testing that product against our competitors in New Jersey with real online sports betters for many months. We like what we see in terms of how that product is scoring and user experience, ease of use, attractiveness, all of those things. It's a great app. And we, obviously, still have more work to do. But I would just add that Dave Portnoy and Dan Katz and others at Barstool, they love betting on sports and they have been for a long time, and obviously, know all the real money online sports betting apps well from New Jersey and elsewhere. And they're going to be giving us a lot of ideas and working with us to make sure that the app that we launched in August and that we're developing is going to be a best-in-class app. And we feel like we're going to be able to deliver on that.

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Operator [53]

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Our next question comes from John DeCree with Union Gaming Group.

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John G. DeCree, Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research [54]

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Thanks for all the color so far. Jay, I wanted to maybe ask a question about sports a little differently, which kind of compares you guys to kind of digital and media companies so far. But one of your assets or collection of assets as your brick-and-mortar casinos, and your depth and breadth there that's pretty hard to replicate from just a capital investment perspective. Can you talk about how that kind of gives you some competitive advantages? I know market access is the obvious one, but are there seemingly some other advantages there relative to other competitors in the sports betting space right now?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [55]

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John, thank you. It's a great question. And this is where we really believe our strategy is differentiated. And I won't go into what all of our competitors are doing or have done or have announced different partnerships, et cetera. But we do feel like; one, we control our own destiny 100%. We control the economics of that destiny 100%. We've got an amazing partner in Barstool Sports with complete alignment and a path to control, right? So that's really important. And what I would tell you is that, and I shared this on our call last Wednesday, after the announcement, take our Hollywood Lawrenceburg property as an example. The only difference in the fourth quarter of 2019 and the fourth quarter of 2018 for that property was having a retail sports book. And we're seeing -- this is even without Barstool. This is just having a retail sports book, we're seeing table game growth of just under 20%, food and beverage growth of just under 20%, slot growth of 3-plus percent, which we haven't seen there since Ohio legalized casinos. So we're really encouraged by what retail sports can do for a property. I think our property leaders that Lawrenceburg have attributed 10% of their EBITDA in the fourth quarter was due to sports -- the retail sports book. That's really powerful. And you start to think about Barstool-branded retail sports books and live remotes with Dave and Dan Katz and KFC and PFT and others at Barstool at our properties. I mean, this is what we're spending time talking about now for March Madness this year. Even though our sports books aren't yet branded Barstool, that's okay. We can have Barstool personalities at our properties, activating audiences and having fun in the sports bars and betting at the retail sports book and playing table games and staying at the hotel, seeing a concert, what have you. So there's a lot there. We'll talk about it more in June when we get together for our Analyst Day. I think we'll be able to articulate what sort of value potential we see, not just with online sports, but with retail sports and online casino, and you have to make some assumptions around legalization and tax rates and things of that nature. But we've got some pretty, I think, interesting and provocative thoughts around all of this, that we'll share more with everybody in June.

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John G. DeCree, Union Gaming Securities, LLC, Research Division - Director and Head of North America Equity & High Yield Research [56]

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That's helpful, Joe. Looking forward to hearing about that in June. And then if I could, slightly different question, perhaps, on the regulatory landscape. We spent a lot of time on sports betting today and the iGaming piece of this doesn't seem to have as much momentum in sports betting, but it's certainly there. And I think you've mentioned in the press release, seeking out a profit in Pennsylvania in spite of the tax rate there. Can you talk at a high level about how you kind of view the iGaming opportunity today, size and regulatory momentum maybe relative to sports betting?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [57]

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Sure thing. Look, I always point to New Jersey because New Jersey is the state that has been legal and live with iCasino the longest, I think it's 5 years now. And if you look at what happened at launch, I think the initial iGaming business was viewed as a bit of a failure because there were estimates, by some, of -- it's going to be a $1 billion business out of the gate. Well it wasn't. It was $150 million in the first year, but you did see growth for the next 4 years of between 20% and 30% each year. And then you get to 2019, which was the first full year of sports betting, retail and online. And the impact that, that had on iCasino was amazing. So iCasino went from a 25% compounded annual growth rate for the first 4 years to over 60% in 2019. So as you look at how sports betting and casino converge and how the synergy between those 2, because oftentimes, people on their mobile device and they're betting on a game, there's a lot of downtime when you're waiting on the outcome of the game. And so if you're introduced to casino products, you might take the opportunity to go over and try blackjack or roulette or crafts or poker, maybe even a slot machine. And I think that's proving out real-time in New Jersey. And what I would say is that, though I agree with you today as we sit here the prospects for iCasino legalization don't look -- we're not as bullish as we are around iSports because sports is happening so fast. I think states are always looking for new tax dollars. This is a great opportunity to go after incremental tax dollars versus cannibalizing existing casino tax dollars. And New Jersey, in the -- you're looking now at year 5, it's $500 million iCasino business that the casino operators there would tell you and the results of their brick-and-mortar casinos over the last several years would tell you, it's been incremental. And so that's really exciting. Michigan just legalized iSports and iCasino. And so I think there's going to be some very large states that have legalized iCasino that, John, you could see this accelerate because other states are going to be looking at the opportunity and the size of this new business, and it's a new addressable tax base and so it could start to accelerate come 2021, 2022, if New Jersey and Michigan and West Virginia and Pennsylvania and the other states that are legal continue to ramp.

Now Pennsylvania is -- it's challenging, right? Because the tax rate is so high, and we've had to be so mindful. We're literally spending 0 marketing dollars. I mean, I might be exaggerating a little bit, but outside of marketing to our database, we're not spending any money. That's the only reason we were able to eke out a profit. If you spend any money marketing your business in Pennsylvania for iCasino, you're in the red. And so I don't think that's the right approach or strategy. I think other states like New Jersey that have reasonable iCasino tax rates are seeing the benefit of that. And if you compare New Jersey iCasino results to Pennsylvania iCasino results in their first 6 months post launch, whether you're looking at total revenue or per capita revenue, you'll see that New Jersey got some things right in that the tax rate is reasonable, and they're allowing their businesses to market effectively. And I think what you're going to find in Pennsylvania is that us operators are hamstrung because the taxes are so high we can't market effectively.

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Operator [58]

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Our next question comes from Jared Shojaian with Wolfe Research.

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Jared H. Shojaian, Wolfe Research, LLC - Director & Senior Analyst [59]

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So just taking a step back to the fourth quarter results, a few questions. Revenue was below the guide, costs were better than the guide. Can you just talk about the driver there? And then the other revenue was up a little bit sequentially. What's the driving piece there? And is that the right run rate going forward? And then just lastly, share count was lower. Did you repurchase any stock in the quarter?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [60]

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We did not repurchase any stock in the quarter. So I'll start with that one. B.J., any comments on that?

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William J. Fair, Penn National Gaming, Inc. - Executive VP of Finance & CFO [61]

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No, there's no stock repurchases.

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [62]

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Yes. We did not purchase any stock in the fourth quarter. So it really shouldn't be any change there.

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William J. Fair, Penn National Gaming, Inc. - Executive VP of Finance & CFO [63]

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And actually -- yes, go ahead.

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [64]

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Okay. Yes. Look, I would say, with regard to the fourth quarter, if you carve out Plainridge and Meadows. That really is the revenue miss for us. And so you can see the rest of our business. We performed well in the fourth quarter because the beat on the bottom line would have been even better if we hadn't declined on the top line to the magnitude we did at Plainridge and Meadows. So we feel good about that, and we're seeing a continuation of that into the first quarter of 2020, which is great. And again, weather has been mild in the Northeast and Midwest, which is very helpful because last year, it wasn't, but it's good to see the growth in Q1 so far.

With regard to the other category that how we report our financials, look, you're seeing Penn interactive starts to ramp. And we're just getting started. And look, at some point, and I don't know when, maybe we'll mention this in our June Analyst Day, but we'll report Penn Interactive as its own region or division. We're just not there yet. It doesn't have the scale yet. But because we were able to ramp up our Pennsylvania iCasino business and not lose money, that really is the notable difference in the other category from Q3 to Q4. So I think it's probably safe to assume you'll see trends more like Q4 out of other, if not a little bit better, as we continue to ramp throughout 2020.

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William J. Fair, Penn National Gaming, Inc. - Executive VP of Finance & CFO [65]

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And Jared, just to go back, the basic shares, you see a consistency between the quarters. The diluted you just saw was primarily just difference between the stock price of what you'd see at the time. So that was really the only change you're going to see in that side. So it was pretty much the same, no change and no buybacks.

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Jared H. Shojaian, Wolfe Research, LLC - Director & Senior Analyst [66]

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Okay. That's helpful. And Jay, just to confirm that last comment. So in terms of modeling purposes, any of the revenue and EBITDA generated from the Barstool app that's not going to be in one of your geographic segments that will be in like another segment? Is that how you're thinking about it?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [67]

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That's right for the early days. We'll, at the right time, report that out separately, so everyone can see what that business looks like as a stand-alone. But for now, and for 2020, it will show up in the other category.

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Jared H. Shojaian, Wolfe Research, LLC - Director & Senior Analyst [68]

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Great. And then just one last one. Obviously, it's only been a couple of weeks since the Barstool announcement. Is it too soon to notice any positive effects at the property level?

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [69]

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It is because we haven't really done anything yet. Although, interestingly, a couple of the Barstool personalities, Lo Duca and BlackJack, went out to our Penn National Race Course property in Grantville on their own. And they had a heck of a time, and I think it's well documented. They posted their experiences at property. And property, Dan Iman team did a great job, making them feel great and welcoming them and welcoming the stoolie fans that showed up. And I don't know if there's a coincidence, we had a great weekend. I don't -- maybe it did, maybe it didn't. It's too early to say is what is my answer. But I think, even after the March Madness event, I think we're going to get a better feel for how much potential there is here and again, a lot more to come in June on our Analyst Day. And Frank, we have time for one more question if there is one.

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Operator [70]

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We have a question from David Katz with Jefferies.

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David Brian Katz, Jefferies LLC, Research Division - MD and Senior Equity Analyst of Gaming, Lodging & Leisure [71]

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You've covered a lot of detail, and I appreciate all that. Just with respect to the build-out of the technology tributaries in the business, whether it's iGaming or sports, I am curious, the degree to which the traditional technology providers, right? Your typical sort of gaming floor systems providers, et cetera, are playing a role in that versus the degree to which you're bringing in new and incremental technologies along with it. And that's it for me.

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [72]

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Okay, David. Yes. We -- as you think about the app that we are building out right now and the platforms that we're -- and technology we're going to use in that app, they really are sort of the non-endemic gaming company, land-based gaming company partners, not to say that those partners don't have good products and platforms, we just went through a process, and we decided that can be was the best platform for us from a trading services standpoint. We're their largest customer, which I think is really, really important to us. They have a Philadelphia-based office because we have a Philadelphia-based office, which is really, really important to us. So we feel great about Kambi being a partner and us having their attention, and they have our attention, and it's been great so far. I can't say enough about the Kambi relationship. And then with regards to player account management, the Penn -- the user experience. We have a rent-to-own strategy there with a company called White Hat. And so we want to own the user experience. If it touches the customer, it needs to be vertically integrated and owned by Penn. And so that's sort of the difference between the 2. I think your base platform and things that are behind the scenes, we don't feel like we necessarily need to own or even want to own because others do it better, and they're constantly innovating. But the front end, what touches the customer, we do want to own that medium term, certainly long term, and that's the path that we're on.

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Operator [73]

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Mr. Snowden, there are no further questions at this time.

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Jay A. Snowden, Penn National Gaming, Inc. - CEO, President & Director [74]

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All right. Great. Thank you, Frank, and thank you for everyone dialing in. We look forward to talking again in 3 months and talking about the first quarter results. Have a great day.

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Operator [75]

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That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a great day, everyone.