PENN Entertainment, Inc. (NASDAQ: PENN) Third Quarter 2022 Results Conference Call November 3, 2022 9:00 AMm. ET
Participating companies
Joe Jaffoni – Investor Relations
Jay Snowden – Executive Director
Felicia Hendrix – Chief Financial Officer
Todd George – Chief Operating Officer
Conference Call Participants
Omer Sander – JPMorgan
Shaun Kelley – Bank of America
Barry Jonas – Truist Values
Steve Wieczynski – Stifel
Ryan Sigdahl-Craig-Hallum Capital
David Katz – Jefferies
Jason Tilchen – Canaccord Genuity
Bernie McTernan – Needham
Jordan Bender – JMP Values
Joe Stauff-Susquehanna
Operator
Greetings and welcome to PENN Entertainment’s third quarter earnings convention call. During the presentation, all participants will be in listen-only mode. Then we will have a response session. [Operator Instructions]
Now I would like to speak with Mr. Joe Jaffoni, Investor Relations. Continue.
Joe Jaffoni
Thank you, Franck. Hello everyone and thank you for joining PENN Entertainment’s Q2 2022 convention call. We’ll move on to presentations and monitor comments in a moment, as well as your emails and replies. During emails and replies, we ask everyone to limit themselves to one and one follow-up.
Now, I’m moving on to Safe Harbor disclosure. In addition to old facts or statements about existing conditions, today’s convention calls for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve dangers and uncertainties. .
These statements may be made known through the use of forward-looking terminology, such as expects, believes, estimates, projects, attempts, plans, seeks, can, will, will do, should or anticipates or adverse or similar diversifications, or through long-term discussions. events, methods or hazards and uncertainties, additional plans, long-term methods, performance, developments, acquisitions, capital expenditures and operating results.
These forward-looking statements reflect the Company’s existing expectations and beliefs, but are not promises of long-term performance. As a result, the actual effects may differ materially from expectations. The dangers and uncertainties related to forward-looking statements are described in today’s announcement. and in the Company’s filings with the Securities and Exchange Commission, aggregating the Company’s reports on Forms 10-K and 10-Q.
PENN National assumes no legal responsibility to publicly update or revise any forward-looking statements. Today’s call and webcast will include non-GAAP monetary measures within the meaning of SEC Regulation G. If necessary, a reconciliation of all non-GAAP monetary measures. a The maximum comparable monetary measures calculated and presented in accordance with GAAP can be found in today’s report. Press release, as well as on the company’s website.
With that, I now have the excitement of handing the turn to the company’s CEO, Jay Snowden. Jay, please go.
Jay Snowden
Thank you, Jo. Hello everyone. With me are our CFO, Felicia Hendrix; and our Chief Operating Officer, Todd George, and other members of our control team. We have provided a link to our investor presentation in our earnings release, which we will refer to in the ready comments, if you wish to stick to it.
We are pleased to report that, despite persistent economic headwinds, the competitive and promotional environment remained largely stable and once again we had a solid quarter with earnings of $1625 million and adjusted EBITDAR of $472 million. Earnings growth throughout the year, driven through our interactive segment and strong effects on our retail business. Our leaders and team members across the company continue to do extraordinary work.
As you’ll see on slide 6, our interactive effects for the quarter included pricing related to the Kansas launch, our first full season of soccer in Ontario and Louisiana, $12. 5 million in lobbying expenses for California that we recorded above EBITDA, and a payment adjustment processing payment of $7. 9 million.
Given our strong earnings expansion, disciplined marketing technique and the fact that our interactive segment was successful in October, we remain confident in our ability to generate profits in 2023. As we’ve noted in previous quarters, we continue to see expansion. in our MyChoice database with year-over-year rate increases in all segments of the group aged 65 and over.
I draw your attention specifically to slides 8 and 9 that illustrate the recent strong expansion of our 21-44 age segments. In just a few years, we have noticed that this organization grew from just over 10% of our theoretical revenue to about 20%. We continue to reinvent our homes to appeal to this demographic with colorful sportsbooks and sports bars, F-concept
Speaking of generation, we recently brought our industry-leading 3C to Kansas, making it our tenth asset in 4 states where we live. We plan to roll out generation in several more homes through the end of this year to finalize regulatory approvals. Our first delight along with the 3Cs demonstrates that consumers adopting our virtual portfolio prove to be consistent with the frequency of visits and consistent with the spfinnish game consistent with the journey, and we are excited to the long-term customers of this innovation.
Our newly renamed Hollywood Casino in Greektown in Detroit on slide 10 is a clever example of our strategy to reinvent our properties. As you may recall, the hotel was unavailable for almost two years due to water damage. This gave us the opportunity to absolutely transform our popular rooms and hotel lobby to load updated offers and new F concepts.
Let’s move on to slide 13. On September 1, we introduced retail and online sports in Kansas. Starting with the Hollywood 400 unveiled through Barstool Sportsbook and continuing with coordinated joint marketing efforts, our omnichannel technique there has delivered one of our most successful launches. to date when retail and online sports results are mixed.
We recorded our first point of first consistent with capital filings in the state and over 45% of our online processing is done through our existing mychoice database. On October 21, Todd, I and a few other members of our team attended the successful opening of our sportsbook Barstool in L’Auberge Baton Rouge in Louisiana. We were joined by Dave Portnoy and Big Cat, who were also in town for the Barstool College Football Tour in the Ole Miss [ph] LSU game just up the street. Great occasion in general and a lot of excitement generated through Barstool in Sportsbook and the occasions surrounding the game.
Let’s move on to slide 14. In Ontario, we see significant benefits from our built-in media ecosystem, with theScore media users contributing over 80% more GGR than non-media users. following the finishing touches to the initial Barstool Sportsbook integration into theScore media app, which began on October 19.
Our transition in Ontario to our proprietary generation platform exceeded our expectations by operating seamlessly with increased usage, new betting markets and other features. Impulse in any of the categories our first football season. We remain on track to migrate Barstool Sportsbook to our proprietary generation platform in mid-2023, after which we will begin to realize savings on fees and decorate marketing functions in the US. U. S.
On the iCasino front, as highlighted on slide 16, we see continued momentum this quarter with the arrival of 226 new third-party games across all platforms. Meanwhile, PENN Game Studios recently introduced Barstool Roulette and developed our first in-house multi-line. slot game, which will be released next month. We are excited about our first iCasino effects and retention KPIs in Ontario.
The complex promotional features of our player account control formula have helped drive those effects in Ontario, and we look to the future to bring those same features to Barstool Casino in the US. The U. S. will be the next year after migration.
Despite some overall industry weaknesses in virtual advertising, our media business generated strong effects in the third quarter as theScore increased engagement year-over-year and continued our presence in sports media with NFL Insider’s content load. Meanwhile, Barstool Sports also continues to load new content, new influencers and expand its audience, adding the launch of a new NBA-focused podcast featuring Barstool Sports Rone and Pat Beverley of the Los Angeles Lakers.
Before handing over the land to Felicia, I wanted to thank our Executive Director, Maureen Wasloski, and her entire team at Ameristar Vicksburg for their efforts and help in this summer’s water crisis near Jackson, Mississippi. Our team members delivered several pallets of water and much-needed emergency materials and provided transitional housing to those in need.
These are the types of moves that describe our culture at PENN Entertainment, and I’m proud of Maureen and her team for their efforts.
In addition, as you’ll see on slide 21, this quarter we are introducing a scope 1 and scope 2 carbon emissions assessment, which is expected to be completed by the end of the year. On the front of DE
Finally, as a component of our $4 million commitment to fund STEM scholarships at traditionally African American schools and colleges, we are proud to call Prairie View A
With that, I will hand over Felicia.
Felicia Hendrix
Given our strong third-quarter effects and consistent functionality through October, we reiterate our 2022 adjusted earnings and EBITDA guidance of $6150 million to $6550 million and $1875 billion to $2 billion, respectively, and expect to be above the midpoint. for the year’s adjusted EBITDA and profit levels.
Our balance sheet remains very strong. We ended the quarter with a cash balance of $1. 7 billion, liquidity of $2. 7 billion and lease-adjusted net leverage of 4. 3 times. The debt is until 2026.
In addition, as indicated on slide 37 of the appendix to our effects presentation, our leased homes are subject to modest and limited annual indexations that are largely unrelated to the CPI. I will communicate in a moment about our new lease with GLPI. , which is also subject to modest and limited annual indexation.
Given our strong monetary positioning and continued confidence that there is a significant dislocation between our consistent percentage value and our intrinsic valuation, we repurchased another $5. 35 million consistent with percentages in the third quarter for $168 million, or an average value of $31. 40 consistent with constant percentages. with the percentage. Following the end of the quarter, we repurchased another $1 million in percentages for $29. 1 million at an average value of $28. 95 in constant percent. Lately we have $211 million left under our $750 million authority.
Now let’s move on to some more important points about the quarter. In the third quarter, corporate expenses, adding the percentage awards settled in money, were $26. 5 million. Our money rental bills for our REIT owners were $232 million, monetary interest on classic debt $38. 5 million, net taxes on money were $800,000 and total investments were $64 million, of which $1. 9 million were assignment investments related to our Class Four Hollywood York and Morgan Town casinos in Pennsylvania.
Now, regarding some 2022 modeling elements, we expect corporate expenses of approximately $100 million by 2022, adding our cash-settled percentage allocations. return-generating projects, adding the 3Cs, our cashless, cardless and contactless technology, our retail sportsbook Barstool and hotel room renovations.
As we have discussed in the past, we continually compare our allocation portfolio and have plenty of levers to use to maintain a loose cash flow if we start reveling in the effects of economic headwinds, while maintaining high-quality delight in our clients. wait.
For monetary interest expense, we expect $115 million for all of 2022. Cash taxes will be approximately $60 million for the full year, net of refunds received. And for the fourth quarter, you should use about 173 million fully diluted weighted average percentages, which is mostly any additional buyback percentage we would make in the quarter.
Finally, regarding the new expansion projects we announced on October 10, PENN reached an agreement with GLPI to create a new main lease, which would come with the two new ground services in Aurora and Joliet, Illinois, in addition to Hollywood, Columbus and Hollywood, Toledo, Ohio, M Resort in Las Vegas, Meadows in Pennsylvania and Hollywood Perryville in Maryland. the variable hiring structure of 20%.
With that, I pass it on to Jay.
Jay Snowden
Before asking questions, Felicia touched on our exciting plans to relocate our river casino licenses in Aurora and Joliet, Illinois, to higher locations, where we will build new ground services in addition to building a hotel in Hollywood Columbus and adding a moment tower to the M Resort in Las Vegas. We’ve provided many main points about each of those projects on slides 22-29, and we’re happy to provide more color, if you like, in the Q&A.
Suffice it to say that our casino houses remain at the center of our omnichannel entertainment technology and that those projects are in line with our strategy of reinvesting and reinventing our homes. As I noted, we found that our most productive effects come from households offering enhanced services that appeal to both the VIP segment and the younger segments of our database. And we’re excited to introduce new ground service offerings on Chicago land and an expanded footprint to capitalize on strong demand at Columbus and M Complex.
We are also grateful for the opportunity of our long-standing partners investing in LPG of up to $575 million from the planned $850 million budget, and I must also thank the City of Aurora, once again, for committing $50 million. to the relocation assignment there. The four allocations are expected to start structuring by the end of 2023, with most spending in 2024 and early 2025.
We are in a perfect position to undertake these high-growth projects while preserving our monetary position and overall debt profile. And I’d like to conclude by talking a little more about our strategy and interactive perspectives. We have remained very consistent in our technique to this emerging opportunity, focusing on biologics and visitor acquisition rather than competitive external marketing spend. But we have also learned a lot in the last two years and are constantly refining our strategy based on the latest knowledge and, of course, our experiences.
While our third-quarter effects were strong for the reasons we mentioned, we were very encouraged by the recent functionality of our interactive segment, which includes a successful October which, by the way, is an average month of moderation for us at sports. bet online. . I would like to highlight our momentum with theScore Bet in Ontario, as you can see on slide 18, which is one of the most competitive and valuable markets in North America.
As we continue to invest in this market, we are seeing strong returns based on horny visitor acquisition prices and very compelling retention metrics. We attribute this good fortune to several things, but the vital maxim is in fact similar to the enhanced features of our one hundred percent self-generation, generating tangible benefits for our sports betting and iCasino offerings. As our product has improved, especially the complex promotional features and bonus features provided through our player account control system, we are seeing a decrease in CPAs, more unwavering visitors, and higher returns on our marketing spend and investments, all of which we can reflect in other markets here in the U. S. U. S.
Through our experience in Ontario, we have known genuine opportunities to increase market share once we migrate to our own generation stack in the U. S. We will do so profitably in the U. S. in the third quarter and, of course, we will do so profitably. Willing to invest in markets where we see attractive returns while maintaining a disciplined approach. We are also excited about our omnichannel advantages, which have been highlighted through our good fortune in Kansas, thanks to the strong adoption of our mychoice database.
This passod fortune positions us very favorably for Ohio, where we have a solid database of our 4 most sensitive casinos and still plan to go live on January 1st, as well as Massachusetts, where our mychoice database will complement Barstool’s very unwavering audience in the state. , and pending regulatory approval will be online in the first quarter of 2023 in Massachusetts. All this leads us to be very positive about our future.
And with that, we’re going to open it up to questions, Frank.
Q&A session
Operator
Thank you. [Operator Instructions] The first comes from Joe Greff of JPMorgan. Continue.
OMER sander
Hi, Jay and Felicia, Omar Sander for Joe. Thank you for answering our questions. Compared to our estimates on the front floor, the Midwest, West, and South were strong, but the Northeast was perhaps a little weaker. Is there something express for This market that sets it apart from others?Is it more Pennsylvania? Or is it something else?
Jay Snowden
Oui. Je I think Pennsylvania will be the only thing to consider. We have two long standing homes there and we have two new amenities there. So a little noise in Pennsylvania, but Todd, I’m satisfied. to give you the basis to answer that.
Todd Jorge
Thank you, Jay. Yes, I’m sure you’re right. It’s more Pennsylvania, seeing some of the effects of the new festival looming with satellite casinos just setting up somehow. our existing homes in Meadows and PNRC, we lost a percentage there. Therefore, it is quite far from those areas.
OMER sander
Super. Et of his colleagues talked about the upper pressure on labor costs. I wonder what you see in your portfolio, something similar to other markets too that you would call?
Todd Jorge
That’s right, it all comes down to what we’ve seen. The pipeline is open now. More people are looking for work, which helped. So there was a little bump, I would say, at the beginning of the quarter. It is now installed. And then a lot of what we’ve been able to do with the kind of you who has heard Jay communicate about reinventing our properties. Therefore, we become a little more labor-efficient just out of necessity. So we plan to continue that as we move forward. front.
Jay Snowden
And I’d just upload one comment, which we’ve talked about what we think is most likely to be our margins at the asset point. And we said earlier this year that we thought 37% over the year was a smart goal. And Todd and our regional and asset leaders have done a fantastic job. It’s been very consistent this year, which I think shows that we’re dealing with all those dynamics, in many cases headwinds, even if they’re not as significant as they were last year, but we manage them very effectively. First-quarter margins were a little above 37%, I think 37. 1%. Q2 was 37. 2%, T3 37. 3%. You’ll see that herbal based, I would ask everyone to keep in mind, see some herbal seasonality in the fourth quarter, margins will probably drop a little bit from 37%. But when you combine it all for the year, we believe 37% is still a smart goal for us.
Operator
Next is from Shaun Kelley of Bank of America. Continue.
Shaun Kelley
Hello, hello everyone. Jay, I wanted to ask you about online and virtual tracking. You discussed reducing CPAs and saw some opportunities to gain a percentage of market position once you’ve set up the generation platform. My question is, sort of, just as we’re sitting here today, There’s been a lot of discussion about streamlining promotion in the online environment. He has stayed the course so far and has been extremely disciplined. So the question is: is the product in a position it can lean on today?Or do you need to dig a little deeper into the technology stack and perhaps iGaming supply before pushing further market positioning, perhaps on the direct side of market positioning?
Jay Snowden
Big question, Shaun. Es anything we communicate about all the time internally. And the answer is, it’s kind of forked, right? Because in Ontario, lately we are live on our own player account control platform and now on our own trading services, our threat control platform. And we see the benefits. And I also had the opportunity because we’re seeing such high levels of retention in Ontario to continue spending on that.
And the charge consistent with the acquisition has been, I think, higher in form, I would describe it, in Ontario than what we saw at the beginning in the United States. And I think this year, even in the United States, it’s bigger than it was a year ago. And we were very consistent in our message that our strategy was to rely entirely on biological marketing, database acquisition and the funnel feeding our own assets, our own brands and our own databases. In Ontario, we do, we’ve still crowned it with more marketing spend because we’re seeing very smart results, as I just mentioned.
So, I would say what deserves to be expected from us is that we’re moving to making continued investments as long as we see that momentum in Ontario. We are convinced that we can increase our market share in a profitable way. form. We’ve done that. This is already our first market. And we’ll definitely take advantage of that, Shaun, next summer when we go live in the US. The U. S. is in the U. S. with the same tech stack and if CPAs are attractive, and I think we’ll be expecting a higher retention price in the U. S. Once we’re on our own tech platforms we deserve to be expecting to see something similar from us in the current part of next year and through 2024.
We will do all this carefully. We will be aware of how much we spend and where we spend. We shouldn’t increase our market share if we can’t do it profitably, but we’re located in Ontario that we think we can. Once we’re in our own tech stack and have wonderful promotion and bonus engine features that we didn’t have before, we can win customers, retain them, and continue to increase our market share.
Shaun Kelley
Thank you so much.
Operator
The following is from Barry Jonas of Truist Securities.
Barry Jonas
Super. We’re getting closer to the point where you can potentially, or where you can earn one hundred percent from Barstool. Just out of curiosity, we expect to see primary adjustments once it succeeds one hundred percent.
Jay Snowden
We are, we’ve already done it publicly, we committed to this acquisition in February of next year, Barry, and there’s no replacement in this plan. We are very pleased to own all bar stools. They have been amazing partners for us for the last 2. 5 years, almost 3 years now. And what I would say is that, from a media perspective, we’ll have a lot more than a percentage once we close this deal, whether it’s in terms of how we envision opportunities to create synergies with our media assets. We’ve had a lot of exciting Array meetings here lately, about advertising partnerships. And we do it historically, on the casino side, we’ve done it, and that’s an industry statement.
I would certainly say this is true for PENN. No we’ve done a wonderful job of monetizing all the foot traffic and eyeballs that come in and out of our homes and pass through our homes every day. We now have a database of over 25 million other people of my choice. We have never partnered with third parties on monetization opportunities and partnership opportunities. And the people at Barstool and theScore, we have some of the most productive distributors in the sports media industry, and we believe there are wonderful opportunities for us to develop those who advertise and associate. revenue
And more to come, I would say, probably early next year, we’re talking orientations for 2023, there will be something there for media assumptions. And 2023, we’re going to share more and more of our plans, many of which have yet to be made public, but we’re working hard behind the scenes.
Barry Jonas
Sounds good. And then, just as a follow-up, I wanted to ask you about the 3Cs as you continue with the implementation, can you maybe communicate more about the benefits you see or rather expect to see, Jay, it’s more about generating volumes?? Or is it more research for marketing purposes?
Jay Snowden
Oui. I’ll leave Todd – he’s yes. I’ll leave Todd that one.
Todd Jorge
Taxes, Barry, and thank you, Jay. Really, we couldn’t be more excited about what we’re seeing so far with some wonderful states here on the horizon. So, as Jay said, it’s yes to both. The real winner in all this is the guest, the guest, who gets rid of the friction of his experience, does not have to wait in line, can only walk through the assets the way he needs is the overall booster. But then, the analysis we retrieve with behaviors and the ability to interact with them more in real time than waiting to mail them after they leave the assets. It gives us a genuine opportunity to have interaction in the moment, which I think will benefit us as we move forward.
Operator
Our next one comes from Steve Wieczynski with Stifel.
Steve Wieczynski
Hi, guys. Hi, Jay, then I wanted to ask you about those new expansion assignments. And maybe you can just help us or just remind us what throwback measures you’re targeting those?And are those barriers to backwards the same for all four?Or are they others from one new assignment to another?And then, can you help us think about whether there are other allocations of what we would call complementary expansion allocations in your existing portfolio that could be explored in the future?
Jay Snowden
Yes, all the right questions. And the 4 we announced about a month ago, those are projects that we’ve been looking at internally for years, in some cases, and there were a number of reasons, which weren’t worth explaining why it didn’t make sense. Or we haven’t been able to push the cause forward in recent years. And it all combined for 4 of us so we’re really excited about. And some other people look at Illinois and say, wow, there’s been a lot of source besides there. Is this the right place? And what we noticed is that, I already mentioned, even in the existing economic environment, the homes that we have in our portfolio that are quality assets with best-in-class deals and entertainment offerings that we don’t have in many of our smaller, older homes, we perform very well and we don’t really see any weaknesses from a database standpoint.
So for us in Illinois, we think any of those projects will be wonderful in terms of new facilities, but not only are they new, but we’re moving those licenses from their existing locations in either case to a much one that they are: places that are right off the road and have visibility in Joliet’s case. which is part of a mixed-use progression that will come with advertising and residential, we’ll be one of the anchors there. And in the case of Aurora, we just had a wonderful partnership with the city. We have a wonderful location next to Simon Premium Outlet Malls, one of their most successful shopping malls in the country, with massive foot traffic. Strong Asian corporate that also goes to this high-end mall.
And so we think both of them are going to be wonderful projects for us, definitely more offensive than defensive, a little defensive, but definitely more offensive as a way of thinking about it. Columbus has been one of our most successful homes for years. We deserved to have opened this asset with a hotel, but we didn’t. But here we are. And there was a lease dynamic with Columbus and Toledo that Felicia discussed about the profit sharing mechanisms that we’ve now worked out with the new lease with LPG that allows us to think about building those two houses and our database is there and expanding our profit. and our EBITDA as well. So feel smart about it.
And then M Resort, we needed more rooms there for years. This part of the Las Vegas Valley goes crazy when you arrive by plane, you see that all the ceilings continue to rise around the assets there. So the 4 of us, we feel really It’s smart about the profile to individually step back, Steve, to your question. We also think together that those 4 projects will generate a greater pullback in the flow of loose money than where our shares are trading lately. And that’s kind of a way of thinking, if we can deliver a higher return, continue to buy retroactive stocks, invest in expansion projects. In this case, we can do it because our balance sheet and the generation of loose money flow allow us to do so.
So, it was a wonderful opportunity for us to expand, which is at the core of our omnichannel strategy, our retail casinos and upgrade two of our services that are worn out and outdated and expand two of our houses that are high standard. growth markets and high growth assets for us. I would say yes, sorry. And then, the last component he said is more to come. I would say, yes, stay tuned where we have a number of other high-growth homes, where we’ve maxed out on the hotel side. We may use more rooms. And then we will continue to invest in the game room and off-game equipment, 3Cs and hotel renovations. But I think in terms of hotel expansion, there are probably a few more we can look for in the coming quarters or years.
Steve Wieczynski
It is ok. It’s a lovely color, Jay. So you talked a lot about this younger demographic that you see coming into homes and so on. I don’t know if you have the knowledge or not, but is there any way for us to think about that spending point seems for this younger demographic compared to the rest of their classic knowledge base. And I guess what you’re trying to do here is just incorporate that younger demographic into your ecosystem, let it grow from there, let it mature and watch its spending capacity build up and just try to capture that user over time?Is that the right way to think about it?
Jay Snowden
This is precisely the right way. And I’ll let Todd answer your question. Just, as you think, and we try to percentage that with real color and visibility for all of you on a quarterly basis because it’s so exciting. Everything we’re talking about and what’s going on in corporate right now, what encourages us most at PENN is that, this age segment of 21 to 44, just a few years ago, represented just over 10% of our revenue, and now it’s getting to 20%. And that makes the Titanic move quickly.
So, think about LTV related to customers, if they are spending less today than the previous segment, but incorporating them into the ecosystem, functioning on dating, cultivating appointments, generating a loyalty, and proceeding to stay close to them in the dating aspect over the years, that’s where the real price lies. Todd, do you have anything to add?
Todd Jorge
Yes, just in answer to your question, I’m investigating the scenario a bit during the trip. So when you think about our overall database, we see an increase in visits in this 21-44 year organization. But where we are beginning to close the gap. And traditionally, this 21 to 44 and then the forty-five to 54, 55 and more, goes up sequentially. Everyone spends a little more in line with the trip. And there was a pretty decent delta between that younger organization and then the older organizations. We were able to close that delta.
Therefore, they come consistently with the holidays, largely due to their point of engagement with our homes and the offerings we have. Therefore, it is not only the constant experience of the game, but also the way they imagine meals, the way they think about accommodation. So that will be the purpose as we move forward. It’s consistent with decent expansion on a basis, but spending consistent with the holidays is where we’re really making significant progress.
Operator
The next one comes from Ryan Sigdahl of Craig-Hallum Capital.
Ryan Sigdahl
Hi, Jay, I don’Félicia. Je need to start with Interactive, so I think I understood you said positive in October and the fourth quarter, but can you verify that?And then also a kind of confidence in this inflection in the fourth quarter and for 2023 compared to where you were 3 months ago?
Jay Snowden
Yes, satisfied to do so: we discussed in the communiqué in our ready comments that we succeeded in October. And that, and I repeat again, was with an average percentage of tenure that was not higher than tenure. In fact, we were defeated pretty well on the last Sunday of the month. So I wasn’t motivated, which I think is encouraging. We expect to be successful in the fourth quarter. I would say there are some points to stay in the brain for the fourth trimester. The first is that we’re going to have, most likely, we don’t have a date yet, but we’re going to have a launch in the state of Maryland in the fourth quarter. It seems that sometime in November. It hurts a bit the EBITDA aspect when you keep seeing the initial dollars, the dollars in the form of a deposit make their way through the system. There is regularly a period of 1. 5 months to two months that they paint there. Therefore, this will have a somewhat negative impact. But obviously we are going to invest in state freedoms.
Ohio will become active on January 1. There will be spending in December before this approval date of January 1. So, there are two things that will have effects in the fourth quarter a bit in the last two months of the quarter. Then the other thing is, and we haven’t made it public, but I think others have noticed. We’re part of the Mattress Mack World Series bet, so you have a few millions at stake with us that would pay out $10 million. Pass safely. And I think if Mattress Mack doesn’t get it right, we’ll go on to succeed in the fourth quarter if it does, so it’s probably going to be closer to the breakeven point somewhere in that range.
Ryan Sigdahl
Then, just a follow-up, so he saw some excellent positive first steps from players of his CCC initiatives. You’re curious to know what more is on the way in the short term than in the next few years that excites you to integrate more online and Earth Experiences. The one that comes to brain is the online and terrestrial shared wallet, however, communicate about that and then, anything else you are passionate about?Thank you.
Jay Snowden
Yes, listen, percentage wallet, I discussed it before, I think on our last call, it’s a huge morsel for us. We’re focusing right now on generation migration, bringing that back to generation platforms. that we live in Ontario back to the U. S. , up and running next summer, thinking about how we should leverage that in a cost-effective way to increase our market share in the current part of 2023 and early 2024. Behind the scenes, we are already running together between our floor operators and our technicians and engineers, as well as the team we have at Interactive in theScore to plan for the future. Therefore, we are not making any decisions now that harm us in our quest to enter a portfolio for all our offerings.
So he’s probably the one I think is the closest, Ryan, after thinking about generational migration. But when it comes to omnichannel, I think: look, from my point of view, it’s a must, those are table problems. You want to be able to offer your consumers a portfolio and then they can move seamlessly through your ecosystem, whether it’s online, these are retail deals. So, a big priority for us and we have other things that we’re talking about internally that I think we’re going to be in percentage conditions at the beginning of 2023 and from there.
Operator
The next one comes from David Katz with Jefferies.
David Katz
Hello, hello everyone. Thank you for answering our questions. Interested in the demographic dynamics you’re talking about today. Did you hint at what catalyzed this or what triggered it?Because it doesn’t look like it’s coming, is it something we hear a lot from your peers?
Jay Snowden
David, I would say a couple of things about it. And Todd and Felicia, jump to everything I missed or if you need to turn up color. I think we’ve focused on that in recent years. Two things notoriously helped a lot One is COVID. And the way COVID has really helped is that when we reopened, we closed all the casinos, as you know, in March 2020.
We started reopening them in May, June, and July 2020. And when we did, we were one of the few entertainment destinations opening at the time. So, we noticed an influx of young demographics. Of course, our purpose at the time of integrating them into our loyalty program, we want to build relationships. And that’s why we’ve worked very, very hard to get there.
Otherwise, they come in, if they don’t have any, they’re not in their loyalty program, they leave, and they don’t know how to touch them in the background. So, I think our real estate groups have done a wonderful job of getting other people to sign up for our loyalty program. And it’s a wonderful opportunity for us, but we need to make sure we don’t lose them.
And as I mentioned earlier, with all the expansion that we’ve noticed in those younger segments in 2020 and 2021, you see on the slides that we provide, now we’re popping up an expansion, in addition to the expansion here in 2022, which I think is very exciting and shows that we’re not wasting customers. We continue to expand appointments and also expand this segment in quantity.
The other factor, of course, is the legalization of online sports betting in May 2018, and we ended up going live in the fall of 2020 and we were looking for that the other day, which I think is desirable that if you take a look at the number of consumers we’ve been able to develop, we’ve been able to integrate the database of our interactive offerings.
At our online casino, over 80% of our overall winnings come from others between the ages of 21 and 44. And if you look at online sports betting, 90% are between the ages of 21 and 44. attract more young consumers through our interactive offerings, especially online sports betting, however, there is no doubt that the post-COVID ability to attract consumers to our casinos and build relationships with them has been a contributing factor. And, of course, the wonderful opportunity is what that looks at loyalty looks like when you look at 2 years, five years, 10 years on the road that excites us the most.
Todd Jorge
Jay, the only thing that would go up is at your point, when everything else was closed and we were the ones who opened, we saw this inflection that has become more one: the challenge we were solving was how to contain them. And in the past, we would possibly have seen sports and concerts and everything else is kind of a festival for that entertainment budget, that discretionary budget. Then we started to see them more as partners.
Therefore, it has become how to offer more entertainment, how to unlock professional sporting events. And I think all of this has led other people to see the casino experience more as an entertainment experience. And then to Jay’s point this year, our expansion in the number of other people interacting with us across multiple channels. Thus, a casino experience and then an online experience accumulates to more than 25%. So, we’re seeing more people interacting with us across multiple channels, which is helping us create royalty as we go along.
David Katz
Entendu. Et if I can stick to that, Jay, the last time we reached out to the G2E group, we communicated about cultivating PENN’s rebranding and reinventing the loyalty program and that noticeably sticks to what you’re doing technologically. I guess this younger demographic is a component of this reinvention of all that and the repositioning of everything, and they’re convinced it’s sustainable in the long run.
Jay Snowden
That’s precisely, David, and we’re going to have more information about the loyalty program, evolution and rebranding in early 2023. We’re working hard right now on what it is. And, in fact, we are thinking about it. We’re defining what a loyalty program should be in the gaming, interactivity, and entertainment industry, rather than starting with what it has been.
And I think we are: you deserve to expect to hear more from us about this, but you also deserve to expect to hear new things, including in the way we think about the program and what it’s called and the vernacular. around the problems you have and what you can use them for. And we’re looking to deconstruct and then build that as it deserves in the long run, keeping not only kids in mine, but also all the demographics and how we can attract consumers that we don’t have within our ecosystem lately.
Operator
The following is from Jason Tilchen of Canaccord Genuity.
Jason Tilchen
Hello and thank you for answering the questions. In his prepared remarks, Jay talked about the average wait rate for virtual in October. I wonder if you can comment on the third trimester. How much of the virtual expansion has been driven through favorable outcomes. And regarding Ontario, he talked about the very clever functionality there, the partial combination or in-game combination was different in Ontario compared to the US. Why was the technology stack in-house than outsourced?
Jay Snowden
Happy to Jason. Q3, I think the football season was well rated. We had a smart one: I think it was 3 weeks in the month for the NFL and 4 weeks for college football. So stay alert on our behalf. July and August, I don’t forget to be really noisy one way or another. So it’s probably an average outfit. So take it for what it’s worth. I don’t have in front of me what the impact was. It wasn’t really important to us, given that it was actually only three weeks into the quarter.
I think when you take a look at Ontario, and the fact that in October, and again, it’s still early. We are now in our own technology stack since football season for all intents and purposes. But we are witnessing a strong Array gambling game. We are beginning to expand our in-game parlay offerings.
See more of us on the parlay side where we’re launching several in-game parlay features here in November, and we’ll be covering all the major sports before the end of the year. So as clever as the effects are in Ontario, we’re fighting with one arm tied behind our back. We don’t have all the same donations as everyone else, however we continue to grow daily active users, monthly active users, the handful and our GGR as we show on slide 18.
We have a lot of momentum in the business there, and you have to assume that all of this is happening, that the market share continues to grow, and that we are doing it profitably. And we’re seeing a little bit, again, it’s early, a slightly higher percentage of retention in Ontario relative to online sports betting than here in the U. S. In the U. S. , since we’re in our own tech stack, and we can actually think about how we target parlay bettors rather than cash line bettors in Ontario, and we’re notoriously going to do more of that in the U. S. Once we migrate next summer.
Jason Tilchen
Genial. Es really useful. And just a quick follow-up from Kansas. You talked about the very strong acquisition of consumers and depositors there. Is there anything you can call that you’ve done in terms of marketing tactics or something?and apply those from Maryland, Ohio or Massachusetts?
Jay Snowden
Yes, of course. And Todd will communicate about it. I mean, Kansas is a sparsely populated state, so we precede all our comments by saying it’s consistent with capital. But when you look at what we’ve been doing there in terms of registrations and deposits and then cross-selling our mychoice casino database, this has been our most productive launch yet when combining retail and online sports betting. So, of course, there are learnings that Todd can cover that will apply to Ohio, Maryland, Massachusetts, and elsewhere.
Todd Jorge
Thank you, Jay. Yes. We jump a little further and we are going to mobilize our mychoice database. You can see this on one of the slides and in the comments where many other people who have engaged with us through sports betting come directly from our mychoice database. .
So getting that out early, creating that educational process, figuring out how to download the app, how to interact with us, was a big help. Nearly 27% of our new accounts on our Kansas assets have been created since the launch of Sportsbook.
Therefore, the total number of new accounts for assets has increased particularly since the launch of Sportsbook, and then we discovered new tactics for interacting with them, either online or on our assets. We’ve noticed wonderful effects in doing that, which again, as Jay mentioned, the population base and the length of our database for Ohio, we felt very positive going through there, applying the learnings to that state.
Jay Snowden
And the last comment and I know everyone is aware of this, however, the fact that Barstool started in Massachusetts, we think it will give us great credit in the most sensitive of our database of casinos in the state there in the first quarter when they are live. And Ohio is another state that Barstool has over-indexed. Therefore, we anticipate between our 4 assets and the database that Todd referenced, in addition to the sporting strength of the Barstool logo there. These will be very intelligent states for us.
Operator
Our next one comes from Bernie McTernan of Needham
Bernie Mc Ternan
Great. Thank you for answering the question. I just sought to see if the $50 million in interactive losses still made sense for the year. I don’t think so, given the comment above, but I just sought to check. And then, as another competition reports better than Expected Profitability, I don’t know if it’s too early to call those American sports 2. 0, but do you think there are broader implications for the industry or implications for its relative positioning in the industry?
Jay Snowden
Very smart questions. As for the 50, I think they’re based on the $8 million payment processing fee, which wasn’t planned for the quarter, plus some state launches, I think that’s not the right number to use. But as Felicia commented in her ready remarks, if you look at the midpoint of our guidance, we expect to move a little bit off the midpoint for earnings and EBITDA for the fourth quarter and for the rest of the year. year.
So I think if you do the math there, you’ll see that interactivity is probably positive in the fourth quarter, get it up to where we are from the first quarter to the third quarter, and that’s probably where you deserve to be during the year and where it deserves to be for the fourth quarter. I think when it comes to Industry 2. 0, I think that’s a smart way to put it. There’s a lot more focus right now on profitability, which I think is wonderful for the industry. , for all of us.
And we’ve said we’ve focused on a successful style from day one. In fact, we rely on biological marketing and leverage this great ecosystem that we have and move other people through that ecosystem through cross-selling. That’s the magic of what we do at PENN, called omnichannel. It’s a term overused today, but I think we have the ability to execute it well from a generation attitude, from a database attitude and partnerships that have proven to be a success so far.
I think the rest of the industry is still betting more and more on the ability to make a profit, which will probably open the door for us because we’re already starting to see in Ontario that CPAs will probably continue to be more attractive. And we have the ability to take a look at that time and place makes sense.
It’s very likely that we won’t do that in the U. S. We are active in our own tech stack. Therefore, you should not expect us to follow this strategy. We will support the state launches, of course, 3 that will come here in the next few months, and we will continue to move forward and look at what is the hot CPA and retention effects in Ontario and in all likelihood the current part of 2023 in the US as well. The U. S. market share will be wonderful, which will be wonderful for us, proceeding to increase our market share profitably over time.
Bernie Mc Ternan
And then Jay, given the strength of media integration in Canada and its strong monetary position. Are you strategically complete with your media assets with theScore and Barstool?Or could it only grow through mergers and acquisitions or partnerships?And if so, what types of assets may be attractive to you?
Jay Snowden
Oui. Je would say we don’t have, we don’t feel like we’re running out of anything right now. There is no gap in the game, so to speak. It’s on the radar. We still are: we are a very curious organization at PENN. Therefore, we are looking for and contacting media companies, whether they are for sale or not, but thinking about potentially attractive partnerships.
We do the same in other entertainment and live music spaces. And so we go; I don’t know where this will take us in the long run. I know our overall strategy is actually aimed at the entertainment box in general, and it’s not just sports betting, it’s not just retail casinos. We can do a lot with our fan base, audiences and databases at all casinos in our media resources. Looking for opportunities to create price as we look at the long term over the next three to five years.
Operator
The next one comes from Jordan Bender of JMP Securities.
Jordan Bender
Thank you for answering my questions. Type of graft in this last question. It is quite well understood that the casino database is a pretty clever cross-selling for online. I think in Canada, do you see yourself buying Canadian assets on land to create that omnichannel presence there?
Jay Snowden
Who knows? I – we are not – there is nothing imminent. We will not comment – we are not at all at the moment. So I guess I can comment on that. But what I rule out is that we take a look at onshore assets in Canada. There are two major Canadian corporations there.
We would never rule it out. I wouldn’t rule it out much when communicating about the long term and possibly there are those kinds of questions. So, can this also help the overall strategy given the importance and effectiveness of omnichannel for us in the United States?Of course. I think that might make sense to us. But we’re not in talks right now. There is nothing imminent. This can also be attractive if the right opportunity presents itself with the right value at the right time.
Jordan Bender
Super. Et then only my follow-up. It communicated about its internal content and the impressive expansion it has noticed over the past two quarters. Can you simply tell us about the functionality of your internal games or the metrics opposite to some third-party content on your platform?
Jay Snowden
We’ve shared a bit on the slides here that just show the continued expansion in managing our local proprietary games. And we see, and I don’t have the statistics in front of me, however, the last time we looked, we saw in New Jersey that more than 20% of our overall control came from the games we created, namely virtual blackjack games.
Now we have secondary bets. We have the ones that are marked with the other IP collections we have in PENN. So it actually encourages us to do so. It’s attractive because, as an industry we’ve tried in the past, we’ve come up with proprietary gaming themes through execution with third-party brands for land-based casinos and they’ve failed, like one hundred percent of the time.
So it’s encouraging to see that we can create games and in some cases we can do better than some third-party content providers. That encourages us a lot for what we can do next. We just introduced a new roulette product we have: we discussed on our slides, now we are introducing multi-line video slot content. And more to come, however, the first impression we have is that we can succeed in doing so, and we believe we can make more games faster along the way.
Operator
Our next one comes from Joe Stauff with Susquehanna.
Joe Stauff
Hi, Jay, Felicia. I only had two questions. I guess one, and if you answered that, I didn’t hear it, but can you provide us with maybe some sort of quarterly trends and what you’ve actually noticed in some of your markets?Naturally, there was a change in terms of Where did the room come from?
And then, secondly, I’m curious to answer another query about slide nine and visitor segments. I think, based on your comment, it’s fair to conclude that most of the accumulation in those young consumers comes naturally from online sports betting. , which is heavily biased by men. And I wonder where it stands in the strategy of maybe attracting the virtual slot visitor or the classic kind of retail slot visitor within this younger population.
Jay Snowden
Yes. Excellent question. This is the particular time, I will temporarily respond to the first one, which is this quarter to date, which is October. I mean, it’s the 3rd day of November here. The trends are very consistent with what we saw in the 3rd. quarter. Again, I will emphasize that there is a seasonality. Keep in mind that when you look at the history of gaming revenue, EBITDA, and margins, they are regularly a bit below the average of the first 3 quarters in the fourth quarter. Most likely, it will take place here in 2022.
But the trends have been very, very consistent. We are very pleased with our October effects on the interactive side. We’ve covered it before. So, honestly, we feel good, since we’re here today, and we get the question, it turns out to be every day about the component of some groups around what’s going on in the company.
And the answer is that things look good and things seem consistent. This is a solid promotional environment, as a rational and competitive environment is predictable, but everyone has their own narrative about what will happen soon. So I don’t know what you’re doingwith our answer, however, it’s the answer.
As for the young segment, much of that growth, as you point out, is due to more young men entering the formula through online sports betting, however, there are also a lot of them. There are also a giant number of young women who use the online casino.
We’re getting bigger and bigger, whether it’s when it comes to third-party content and starting to expand our own slot content. grow. But as clever as those effects are, they’re particularly more masculine today. So as we become, I think, better at what we’re doing on the slots side, we believe that expansion can actually continue from the male audience and the female audience.
Joe Stauff
Thank for
Jay Snowden
And Frank, we ran out of time. So I’m going to thank you all for joining us this morning. I know many corporations are getting appeals about the effects this morning. Excellent catch-up with everyone. We look forward to speaking with you next quarter.
Operator
That concludes the convening of today’s convention. We thank you for your participation and kindly ask you to disconnect your line. May they have a day for everyone.