PENN Entertainment, Inc. (NASDAQ:PENN) Q3 2023 Earnings Call Transcript

Who maybe have bet once or twice or intrigued by it and they really trust the ESPN brand. And so there’s our opportunity to cross-sell from the ESPN media ecosystem into ESPN BET, we really like our chances there, particularly with the 12 million in their Fantasy database. There’s a high propensity to bet on sports, as we know with Fantasy players. But I — look, I think one of the things that we’ve talked about internally, in terms of what does success look like, is that we want to see whatever that market share is in the first couple of months. We want to see that continue to grow over time. But we don’t, and that will speak to the product and the retention. What we don’t want to have is a giant splash in the first month or 2, and then you leak market share, like that would not be deemed to success.

So as you’re thinking about retention, and we’ll share more of the KPIs, obviously, after we launch. We don’t have any as we sit here today. But we’ll be able to share a lot more by the time we’re getting together in early February. And then, of course, we talked on our last earnings call about an Investor Day, which we still plan to do. We had initially said before year-end. But as we thought about it more, we’re just not going to have enough information to share, if we try to jam it in before year-end. So we’ll do it sometime in Q1. Most likely sometime between Super Bowl and the start of March Madness, good time of the year to do it, and we’ll have 2 to 3 months of results under our belt. So I would say stay tuned in terms of the KPIs around retention, but at a very high level, we want to continue to build our market share over time and not have it be a giant shot gun day 1 and then you slowly leak market share.

That’s not the goal. And that’s why I think you’ll find that our approach in terms of how we’re marketing and how we’re investing in customers and promotional dollars, paid media, how we’re thinking about integrations, that’s all going to continue to build over time. That’s not going to be that we go out there day 1 or month 2 or month 3 and try to bring everybody into the ecosystem. We want to build this thing over time.

Operator: Our next question comes from Joe Stauff with Susquehanna.

Joseph Stauff: I wanted to ask a couple of questions maybe on your Ontario market, that being sort of the analog. I guess, as I look at the math and you did indicate say double-digit market share. So you’re growing with the market, on a year-over-year basis. It certainly seems just kind of based on the numbers as well. And I’m wondering if you’ve seen any, say, changes in that market, where an operator gets more aggressive, say, with promotional spend or not? Or do you think that market has kind of stabilized in terms of where everyone’s market share is today, say, versus last quarter or the previous quarter? I guess that’s the first question. And then the second question is, again, in the same market, Ontario, do you see anyone in the Ontario market, there’s a large number of them, with an effort to have an integrated product offering like you have media sports book to casino?

Jay Snowden: Good question, Joe. I’ll hit the second one first because I think it’s the easier of the 2. And the answer is no. We don’t see any of the competitors in Ontario or in the U.S., that have really focused on this deep integration between sports media and sports betting. And I think we’ve got it to a point in Ontario, where it’s pretty frictionless. I hesitate to really hang on that word because people may sort of define that differently. But you don’t know when you’re in the Score media app and you’re populating a bet slip. And then when you’re ready to place the bet, you click and it takes you right over the score bet, you place your transaction and you move right back over the score and finish reading your story or whatever you were doing checking scores and stats, et cetera.

And we envision getting there very quickly here in the U.S. with ESPN. And the great news about the integrations that we’ve been able to execute and deliver on in Ontario is that our friends at ESPN have experienced that and we have a shared vision of getting there, here in the U.S. as quickly as possible. So it’s not as though there’s a disagreement or a different vision for how we want to integrate and how we want to cross-sell. And as you mentioned before, the couple of slides that we included on 12 and 13 about Ontario speaks to 73% and of the wagers and handle in our ecosystem coming from those that were media users before we launch. So that’s 3 quarters. It’s very strong. And then our ability to cross-sell within our app, from sports betting into online casino of greater than 50%.

Those are great results. And I would say, we mentioned or showed in this Slide 13, what our growth is year-over-year, and then I also highlighted we actually broke every record in October. It’s preliminary. Obviously, we have to audit through everything. But our preliminary results in October were on a GGR and NGR basis, the best month that we’ve ever delivered in Ontario. So we have tremendous momentum. The market has only gotten more competitive. There’s over 40 operators and over 70 competing brands in Ontario, and we continue to grow our business at or above market growth levels. As you can see in the slides there, especially on the online casino side as we get more and more effective of cross-selling between online sports betting and online casino.

So I don’t — and to the first part of your question, I don’t — we really don’t see anything crazy from a promotional standpoint in Ontario from anybody. There might be waves of — remember, you’ve got sort of a moratorium on being able to advertise what your promotions are. It’s more brand advertising. But you’ll see waves of some companies being more aggressive during certain times of the sports calendar. But generally speaking, it’s pretty stable promotionally, which I think makes the growth story that we’ve been able to deliver on more impressive and what gets us even more confident for our ability to execute here in the U.S.

Operator: Our next question comes from John DeCree with CBRE.