Q3 2024 PENN Entertainment Inc Earnings Call

Felicia Hendrix

Thanks Jay. Our third quarter retail revenue and adjusted EBITDA results of $1.4 billion and $472 million were slightly above the midpoint of the third quarter preliminary results we reported on October 7. In markets where we are not facing new supply, demand remains stable.
October volumes improved over September and continued to improve sequentially through the first weekend in November. For our interactive segment, adjusted revenues excluding our skin tax gross up were $141 million and interactive adjusted EBITDA in the quarter was a loss of $91 million.
Better than expected holds driven by a higher parley mix from our approving product, and lower promotional expenses, drove the upside in the quarter relative to the original guidance we provided on August 8.
These results are at the high end of the third quarter preliminary results we reported on October 7, and also reflect a 12% sequential improvement from our second quarter interactive adjusted EBITDA results.
As usual, you will find on page 8 of our earnings release a table that summarizes our cash expenditures in the quarter, including cash payments to our REIT landlords, cash taxes, cash interest, and total CapEx.
Of our total $132 million CapEx in the quarter, $69 million was project CapEx related to our four development projects. We ended the third quarter of 2024 with total liquidity of $1.8 billion inclusive of $834 million in cash and cash equivalents.
As you know, we have no debt maturities until 2026 which are our $330 million convertible notes. Our lease adjusted net leverage peaked in the third quarter of 2024, and we’re excited to begin our delevering trajectory driven by organic EBITDAR growth and our ability to access GLPI’s balance sheet as our growth projects reach completion.
We continue to expect to generate positive free cash flow in 2025 and beyond, bolstered by our interactive segment which should generate meaningful adjusted EBITDA in 2026, and our four retail growth projects which should all be complete by the first half of 2026.
I will now provide guidance for our retail and interactive segments. For the retail segment, we expect fourth quarter ’24 revenues to range from $1.36 billion to $1.38 billion, and adjusted EBITDAR to range from $440 million to $460 million.
Our forecast assumes continued construction disruption in Lake Charles due to the room remodeling project, which will be completed by the end of January 2025. We also continue to absorb new competition in a few markets such as Louisiana, Nebraska and Chicagoland as properties open and make efforts to drive trial.
As I mentioned earlier, we are seeing stable consumer demand, and we are performing well in the markets not impacted by new competition. For interactive, given that fourth quarter industry wide holds has been negatively impacted by customer friendly outcomes quarter to date, we think it’s prudent for now to reiterate the midpoint of our 2024 interactive EBITDA guidance which is unchanged from our last call.
We expect 2024 corporate expense of roughly $105 million, inclusive of our cash settled stock based awards. Total CapEx for 2024 will be approximately $500 million, inclusive of $275 million of project CapEx.
For cash interest expense, we forecast approximately $175 million for the full year 2024, before roughly $20 million of interest income. For cash taxes, we are projecting a small tax refund in ’24 and our base share count as of the end of the third quarter was 152.2 million shares, and we typically have roughly 15 million of diluted shares, inclusive of the 14 million share dilution from the converts.
And with that, I’ll turn it back over to Jay.

Jay Snowden

All right. Thanks Felicia. In closing, excuse me, I’m proud to report that our efforts to ensure diversity of backgrounds and perspectives within our corporate boardroom have been recognized for the fourth straight year by the form of executive women who named us as one of their champions of Board diversity.
In addition, we’re proud to have been recently named one of the best of the best 2024 top diverse employers by Diversity Com magazine. Finally, our LEAP internship program, which stands for leadership excellence at PENN has been recognized as one of the top 100 internship programs of 2024 by the nation’s largest DEI recruitment platform.
And with that Cindy, can we open up the line for our first question?

Operator

(Operator Instructions) Barry Jonas, Truist Securities.

Barry Jonas

Great. Thank you. Hey guys, good morning. Maybe starting with ESPN that you’re achieving mid-teen share in weekly active users, but more closer to mid-single digits, let’s say in GGR. Giving your mass market focus, what degree do you think you could bridge that delta over time and drive higher spend per user?

Jay Snowden

Yeah. Barry, it’s one of those topics we’ve hit, I think on a quarterly basis for the last several quarters. I think what’s encouraging for us is that if you look at our average handle per user, we’re seeing really nice growth from call it week two of NFL to where we are through week nine, every week we’re seeing sequential growth and handle per user.
So I think part of this is exactly what you said that ESPN Bet certainly draws in a more casual mass market base. We think that’s great for the long term, a higher propensity to bet on parlays and player props is terrific, maybe a lower average wager, but we are seeing that average wager continue to grow from where we were even just a few weeks ago.
So we would expect to see that continue to grow throughout football season as we head out into March madness as well. It’s a big focus for us right now and we think retention we’re in a really good place, but continuing to improve monetization is going to be key for us.

Barry Jonas

Great, and then just follow-up on land based gaming. Maybe at a high level as we think about ’25, I know there’s a few puts and takes. But do you think regional land based gaming can grow next year?

Jay Snowden

We’re not going to go fully into 2025, Barry. I appreciate the question. I would say that what we’re seeing right now, the core business across the country, if you exclude the markets where there’s new supply, things are really stable, and we’ve actually seen a really nice uptick here in the fourth quarter that I’d be guessing if I said I knew exactly what’s driving that, whether that’s election, pre-election, post-election, not really sure, but Q4 we’ve seen a nice bump up from where we were in the third quarter.
October, really nice sequential growth from September. So we’re feeling good about that. I think as you’re looking out into 2025, we’ve highlighted these, but the things that you want to keep in mind in terms of new supply would be Nebraska, Chicagoland, and then in Louisiana, there’s three projects there. Caesars New Orleans just opened their expansion. Could be a little bit of an impact there.
We don’t have a ton of competition with Caesars New Orleans, but there is some. And then of course, we’ve already highlighted Treasure Chest, the Boyd project, and then Bossier City, the Cordish project is going to be open, I believe sometime in Q1, maybe Q2, somewhere in that time frame. So those are the big ones to keep in mind.
The nice thing about Chicagoland as you sort of circle that one is that’s really sort of a first 9, 10, 11 months of 2025 dynamic for us, because we’ll be opening our Harrah’s Joliet relocated land based project sometime before the end of the year.
And then of course, our new Hollywood Aurora relocation project, which is going to be a fantastic asset for us that’s going to be in early ’26. So Chicagoland then we’ll be able to mitigate I think pretty well in ’25. But I think in ’26 it’s time for us to really start play offense there as well as in Las Vegas with the M Resort tower completion, and in Columbus, Ohio, with the Hollywood project, hotel expansion as well.

Barry Jonas

Great. Thank you, Jay.

Jay Snowden

Thanks Barry.

Operator

Carlo Santarelli, Deutsche Bank.

Carlo Santarelli

Hey guys, good morning, and thanks for taking my question. Jay, I’m respecting the fact that you don’t want to give a lot as it pertains to 2025. I know that the message so far on the interactive side has been getting closer to break even next year.
And if you just kind of look at the guidance range, you’re talking somewhere in the ballpark of $400 million-plus of an EBITDA swing. And just big picture, I wanted to understand like the way you guys think about that, obviously, net revenue growth, substantial, promos coming out, et cetera, some launch costs coming out.
But then thinking further in terms of expenses and the path to where you see kind of larger chunkier costs coming out of the business, is there any color you’d be able to provide on kind of that sequencing and transition over 2025?

Jay Snowden

Yeah, I will definitely provide a lot more color on this in February when we put out guidance for 2025, both for the retail business as well as interactive. I would say one of the things before we get into cost that you didn’t mention, you mentioned a lot of things on the online sport betting side that will be vast improvements on a year-over-year basis.
But you also have to keep in mind that we’re going to be launching our standalone Hollywood iCasino offering in Pennsylvania, again pending final regulatory approval sometime in early Q1. And we should be able to follow pretty quickly in states like Michigan, again pending regulatory approval in New Jersey, West Virginia, and in Ontario.
We think Hollywood iCasino will perform very well. So we think that’s going to be a really nice shot in the arm for us in terms of continuing to grow our online casino business. Obviously, that’s a really good margin profile.
OSB with parlay mix is getting better, but the margin profile for online gaming obviously a lot stronger. And I think as you think about the cost structure, we continue to have as we grow in scale, you get efficiencies, and that’s with regard to your third party providers, and being able to negotiate, you get better economics. Of course, the more scale that you have, which will have stronger scale.
And we also have the marketing spend outside of ESPN, I think we’ve really figured out or continuing to figure out what’s effective, what’s working. We’re seeing attractive CPAs in our paid digital performance, digital spend.
And so we’re getting smarter and smarter about what we want and need to spend on the marketing side of things, that will continue through the rest of this year and into 2025. So I would say, with a level of specificity, we will provide more in February, but that’s the way to be thinking about it at a high level.

Carlo Santarelli

Great, and then if I could just one follow-up on the brick and mortar business, as it relates to the fourth quarter, it looks like more or less at the midpoint of the net revenue guidance, you’re flattish, effectively year-over-year. Whereas kind of the midpoint of EBITDA looks to be $25 million lower year-over-year.
Is that essentially just the reflection of — is that a good baseline for kind of what the cost increase looks like from a year-over-year perspective? And could you shed any light on kind of how to think about the outlook for next year as it pertains to kind of cost free, cost mitigation, obviously, some of the benefits you’ll have from anniversarying some of the competition, and some of the disruptions more notably.

Todd George

Hey Carlo, this is Todd. So yeah, typically there’s the seasonality with margins, and Q4 is traditionally always the lowest margin percentage. So I wouldn’t look at that as kind of a guide for next year, unless you’re thinking about Q4 of next year.
Also keep in mind, we had some one-time good guys last year in Q4. So that kind of is the reconciling item for the difference year-over-year and EBITDA flow through. Outside of that, like Jay talked about for ’25, we’ll get into much more detail in February.

Carlo Santarelli

Understood. Thank you guys. Thanks everyone.

Todd George

Thanks.

Operator

Brandt Montour, Barclays.

Brandt Montour

Good morning, everybody. Thanks for taking my question. So the first question is on the fourth quarter interactive guidance. You guys beat the third quarter or your own third quarter guidance by $30 million on EBITDA and then you reiterated the full year end.
So the question is, is that sort of not flowing through that third quarter? Is that how we should think about the direct impact from October hold or is there any other adjustments you made to your core or otherwise KPIs in the fourth quarter we should think about?

Jay Snowden

Yeah, you should think about it as entirely hold related. That’s — it’s been a rough start to the fourth quarter, that’s well documented by many of you. You can see it in the New York weekly results even before the October monthlies come out. You can see it in West Virginia weekly results.
Having a higher parlay mix is great, other than when all the favorites are hitting, and parlays are also hitting. So that’s really been the last five weeks, and the first week of November was very consistent with what we saw in October. Unfortunately, now that it’s just a luck thing, it does change, it switches, it reverses its course.
And so we just felt as opposed to pulling through the difference between the hold impact in Q4, and what the beat was in Q3, and then now you’re sort of banking on hold being an exact number for the rest of Q4.
We thought it just made sense. Let’s not touch the number. If things improve on the whole percentage side, that will be likely a conservative approach. But why bring some of that through if we’re not sure exactly what hold is going to end up for the remainder of Q4.

Brandt Montour

That’s super helpful. And then a follow up on the congratulations on the announcement on the linkages of the account between ESPN and ESPN Bet. Curious what are the initial sort of success rates on getting people to upgrade to that and to actually link the accounts.
If you’ve seen any sort of increased activity related to those accounts that have a linkage, a link linked. And then the last follow-up to that would just be maybe a refresh on the road map specifically regarding that linkage, sort of product development on top of it.

Jay Snowden

Yeah, let me ask Aaron to speak to that one.

Aaron LaBerge

Yeah, great, happy to. Yeah, we’re pretty excited about account linking. We’ve had tens of thousands of people link already. As you’d expect, they’re all placing significantly more bets, higher handle, higher GDR, and also impressive, they’re consuming significantly more ESPN content as well. So these are super fans that are linking.
We’re incredibly happy with the progress so far. I don’t know if you’ve had an opportunity to link, but it’s an incredibly seamless and quick process. And what it really does to get to your second question is it’s really a foundational development that allows us to now personalize every element of your betting experience, not only on ESPN bet, so that we can start serving you personalized promos and offers and content related to your favorite teams and your interest, but also in how that manifests itself across ESPN’s digital platforms.
And so in terms of bet tracking and things like that, you’ll start to see sort of this seamless integration of highlighting of players and teams and results on ESPN without you doing any work. And we think fans are really going to love this.
And of course, the placement of account linking, once your my bets module is activated, is right there on the home page of ESPN and the ESPN app. It’s an incredible experience and it’s only going to get better from here.

Jay Snowden

Yeah, the last thing I would add is, and I mentioned it in my prepared remarks, this is a big technical feat from the team here at PENN, as well as at ESPN. And it’s great having partners where there’s alignment and vision and where we want to take this thing.
And exactly how ESPN Bet integrations will play into the total ESPN sports fandom, and the consumption of sports content. So really happy with the execution, and now it’s time to start marketing the linked betting opportunity, and people are grabbing on to it very quickly. As Aaron mentioned, it’s been tens of thousands, and it’s really picked up even in the last 24 hours.

Brandt Montour

Oh, okay. Thanks everyone.

Jay Snowden

Thanks, Brandt.

Operator

Joe Greff, JPMorgan.

Joe Greff

Good morning, everybody. Jay, I just wanted to ask you about New York, and as we think about the inclusion of your efforts in New York going forward, how so far and how you’re thinking about promos in relation to handle with the inclusion of New York. How you think that trends in the near term and how you think about it more medium and longer term.

Jay Snowden

Yeah, we talked about it before Joe, and I’d say my answer really no different. What we’re seeing in New York so far, not surprisingly is a higher quality customer. The ones that we have gotten through top of funnel, we’re seeing a higher average deposit. and not surprisingly higher average handle per user.
We’ve been very, very disciplined on the promo side, the tax rate is extremely high at over 50%, and you don’t have any promo deduction opportunity before you pay taxes. And so we’re related to the game, but it has been a big opportunity for us to grow our user base. Obviously, New York is a really important market for us and ESPN.
And there’s a lot of people that work in New York but live in other states, like New Jersey and Pennsylvania. And so there’s pretty neat cross sell opportunities depending on whether somebody’s — it’s a weekday versus a weekend, whether they’re commuting, or they’re at home.
And so New York was a critical market for us to launch, but we’re going to remain very disciplined in New York. We’re not as worried about handle market share in New York the way that we are focused on that, and all the other states, especially those that are a combination OSB and iCasino.
I think what’s interesting is that the results that we shared with regard to October, we’re feeling pretty good about the momentum sequentially. So September, we actually from this is all I’m pivoting a little bit, but I think it’s an important part of your question.
If you exclude New York because New York we launched and I believe it was late September, so there’s a little bit of noise in September, and a lot more in October. But if you look at our handle year-over-year growth for ESPN bet in the month of September, again, excluding New York to keep it apples to apples, it was 32% year-over-year.
And in October, excluding New York, it was 45% year-over-year. And that was with our promos as a percentage of handle down a bit from September to October. So we’re growing handle organically, we’re doing it through our retention efforts.
We have profit boost tools that we didn’t have a year ago. These things are all working, and we’re seeing improvement sequentially from September and October, other than obviously, hold percentage has been an impact at just over 5% versus what it was in September.

Joe Greff

Excellent. Thank you for the color. And then good to hear the first five weeks, the start of this quarter from a slot volume perspective strong if — if we were to exclude Michigan, Ohio, and the states that you reference is leading the way, would you say that still broad based growth in slot volume?
Obviously, if you exclude those, you’re also sort of including those markets with competition. My question is like how broad based or how concentrated is that 3.6% volume growth year-over-year to those select markets?

Jay Snowden

Yeah, it’s been surprisingly to the good news side. It’s been broad based, but Todd, maybe you can speak to that a little more specificity.

Todd George

Yeah, Joe, this is Todd. I really, this last weekend, Jay and I and others were talking after the weekend results, it was one of the best weekends we’ve seen in quite some time. And that’s really kind of continued through this week. So you would reference the competitive markets where there’s new competition coming in.
Obviously, those are not performing as well. But I would say across the board, we’re pleased with results and volumes everywhere. And there’s some other key markets that we’re seeing that kind of halo effect from the sports betting.
And as that comes in, we’re seeing growth not only in the states that we referenced, but also Plainridge in Massachusetts has been a strong market for us. So we’re pleased with where we’re headed, and I think continued through this week and getting through Tuesday, and letting kind of people settle into how they feel about the economy in the future.

Joe Greff

Thank you very much.

Operator

Joe Stauff, Susquehanna.

Joe Stauff

Thank you. Good morning, Jay, Todd, Felicia. I had a question realizing it’s very difficult in your previous answer Jay to the 2025 revenue outlook. I’m wondering how you guys think about OpEx in ’25. Is there an opportunity to say assume that it could be flat to down or is that more dynamic? What’s the right way to think about that?
And then maybe just a follow up on the digital side for Aaron. With respect to account linking, I appreciate the commentary, and certainly it’s early in that launch of that product. But are you able to deliver, say a personalized promos that I guess essentially get fed from fantasy lineups into real sports betting? Is that something that you are able to deliver now or that’s something that maybe is what would occur a little bit later?

Jay Snowden

Okay, Joe, we’ll take both of those, Todd and I tag team. The first one I would say, look at a high level again, excluding the markets with new supply, because you’re always going to feel impacts a bit different market to market there.
And we’ll know more obviously when we’re sitting on the call in February, and have a couple more — a few more months under our belt of what we’re seeing with some of the new competition.
I would say, other than that, we’re certainly feeling a lot better on a year-over-year basis going into ’25 from an OpEx perspective than we were in ’24. ’24, there were major insurance headwinds. There were several markets of labor headwinds. and renegotiated union agreements and labor payments. So at a high level, I would say we’re feeling better.
Todd, feel free to jump in there.

Todd George

Yeah, Jay, I agree with all that. The only thing I would add is as we continue to kind of pursue technology, it’s changing the way that we communicate with people from a marketing standpoint. So yesterday, we were in a meeting looking at our overall marketing cost, and we’re moving away from things like postage and mailing costs and printing costs, and moving more to that digital communication.
Those are big dollars for us, also with the way that our properties are laid out now. We have set up kind of these clusters of properties where we can create synergies, we can share marketing expenses, we can share labor expenses, and we do a really good job of that. But we are turning over every stone, so more to come.
But if you were to kind of again, the way you phrased your question up down flat, we’re always looking for that flat to downward trajectory without negatively impacting the guest experience.

Aaron LaBerge

And this is Aaron, I’ll take the second question. So yeah, absolutely. So account linking does unlock the ability for us to know your fantasy rosters, and then to create and target content based on that. If you look at this year for fantasy football, we actually had a really slick integration with ESPN Bet around that. That was pseudo personalized.
Remember this was pre-account linking. So of course, we know who’s on everyone’s roster, and we have markets around all those players. So we could target you based on who was on your roster. And even that implementation that wasn’t super personalized, had a 20% engagement.
So we integrated that through a modal pop-up, and it was highly engaged. And of course now that we have account linking, and we know your roster, you’re going to see that integration natively integrated into ESPN’s actual game.
So it won’t be a pop-up, it will be part of the actual experience. So we’re super excited. Based on that early engagement, we know that fantasy players love sports betting, and they love this content, and they’re hyper engaged. And so this just allows us to take this now to the next level, so we’re super excited about it.

Joe Stauff

Thanks a lot.

Aaron LaBerge

Yeah.

Operator

Shaun Kelley, Bank of America.

Shaun Kelley

Hi, good morning, everyone. I just wanted to touch on the online casino launch or relaunch as we get into 2025. I don’t think we’ve talked about this too much here, but could you just give us a little sense or a little preview on some of the plans there?
We have seen when people have refocused on efforts there, they’ve wanted to have some incremental marketing support for that. So is that something we should expect to be baking into the plans?
And then maybe the bigger strategy question is it going to be sort of what’s your kind of cross sell plan? Are you going to lean more to the casino channel and the brick and mortar side, or a little bit more to the OSB cross sell just given the success so far with ESPN. Thanks.

Jay Snowden

Thanks, thanks Shaun. I’ll hit the cross sell part of it first, and I’m sure Aaron and Todd will have some thoughts in terms of the launch itself, and what’s going to be unique and different about the launch. What’s so — so take a step back for a minute.
We haven’t had the opportunity other than when we launched years ago, our iCasino offering in the state of Pennsylvania, we had it branded Hollywood Casino, but it was with a third party platform, IGT, and that was discontinued about a year ago. And so we really haven’t had the opportunity.
And again, just going back in time, when we launched the Hollywood Casino app in Pennsylvania on that third party platform, we saw pretty strong market share. We were high single digit for most of that time. And obviously, the biggest reason is the cross sell opportunity with your land based casinos, remember that we have four land based casinos in the state of Pennsylvania.
They’re all flagged Hollywood. We have one in Michigan, one of the three land based commercial casinos, again flagged Hollywood at Great Town. And so the cross sell opportunities for us are going to be very significant when we launch that standalone Hollywood casino app.
What we’re doing right now is messy because you’re marketing to your land based casino database at Hollywood properties, and telling them that they should download the ESPN Bet app to play their favorite slot machine. So it’s messy, and we know that this is a big opportunity.
We’ve watched our competition launch standalone iCasino apps with great success, and many times it was the same brand. It was just — it led iCasino, and so for us, it’s not only leading with iCasino in that app, but it’s also the brand connection, which is going to be I think probably very well, we believe pretty powerful for us.
With regard to the marketing plans for that launch, it will be built into our guidance for sure. It doesn’t change what we’ve said about how we’ve thought at a high level about 2025. But we’re definitely going to make sure that we’ve got some dollars put aside so market those new standalone iCasino apps because again, great business, great margins and great cross sell opportunities both with regard to OSB and our land based businesses.

Aaron LaBerge

Yeah. And I think just to build on what Jay was saying, we’re seeing a lot of success in cross sell from OSB to iCasino. What the standalone app lets us do is there is a whole cohort of i-gamers who as Jay said, don’t get the fact that they have to access our casino through our sportsbook. And so this completely unlocks that.
And then of course, building on that further is we have the entire omni channel opportunity where people are in our casinos, and we can now clearly market to them, the same branded product, the same product they’re playing on site as they go interactive. And so we think that’s also going to just be incremental to all the things we’re doing here.

Todd George

Yeah, well said. The only thing I would add, we’ve actually had great conversations starting at G2E with some of the slot manufacturers. So working with them to get some unique products that no one else is offering.
We also have a rather sizable database all across Pennsylvania that we’ll tap into, and kind of look at slots first. But we’ll also be able to do some unique items that we’re working on where we’ll actually put live dealer studios inside of our properties. So we’re just kind of looking at everything and how differentiated our approach can be.

Jay Snowden

Todd triggered another idea or thought that I wanted to share as well with regards to the actual launch, but not surprisingly, we lean a lot more table games today, because the only way to get to Hollywood Casino is through ESPN Bet. And so most online sports betters play table games as compared to slots.
Whereas people that would be coming into Hollywood Casino as a standalone app who are land based retail customers and avid casino and slot players — casino visitors and slot players. I think you’ll see that the product launch and the product offering for Hollywood iCasino will definitely be targeting slots first, and table game second versus ESPN bet. Hollywood Casino is more of a table games first, slot second. So that’s a difference that you’ll see with this launch as well.

Shaun Kelley

Thank you for all the color.

Operator

Dan Politzer, Wells Fargo.

Dan Politzer

Hey, good morning, everyone, and thanks for taking my question. I just wanted to follow-up on just kind of that fourth quarter interactive guide that you gave. If we think about kind of the hold impact, which I think it equates about $35 million or that’s the change.
I guess how much of that $35 million is hold versus kind of other moving pieces in the quarter, account linking, the New York launch, and then does that $35 million swing, assuming that is the correct number, or does that reflect maybe a change in promotional behavior given your customers have been winning?

Jay Snowden

It’s entirely hold percentage, Dan. It’s not, and I mentioned earlier, we’re not down $35 million right now, but we’ve had a rough start from a hold percentage perspective. So we thought it was just prudent to just keep it flat to last quarter, because we’re in a hold right now. That’s not a PENN thing. You’ll hear this, I’m sure from others reporting later week and next week.
So we thought, let’s just take the conservative approach. If hold percentage bounces back and we make up for the really low hold in October and early November, then this is going to turn out to be a very conservative approach.
But it’s hold percentage related. It’s not any of the other stuff where our promos is a percentage of handle. We’ve got a very good handle on account linking was built into our marketing plan for the quarter. So there’s nothing new or different other than hold percentage.

Dan Politzer

Got it. That’s helpful. And then just to follow up on the i-gaming. Is there any research that you’ve done or any kind of insights you can share on where that your current brick and mortar database is playing? Is it other omni channel providers or is it kind of the digital first competitors, and as you think about taking share from those, what are kind of the different buckets as you look at it.

Jay Snowden

Yeah, I’m not sure that we know that answer. I would my best guess would be probably a little bit of everything. They’re probably playing a little bit with us in some of them, and others haven’t connected the whole ESPN Bet. If you’re not a sports better, there’s a iCasino there waiting for you that’s branded Hollywood.
So I would say, think about this as obviously we have the loyalty program connection, that we’re going to be able to introduce more aggressively with people make sure it’s very clear that you can use your — there’s total linkage between what you play and earn on the land based side and what you play and earn within the digital ecosystem.
And so if you’re looking to redeem promo credits that you’ve earned in the land based side within the iCasino app, you can actually do that now, but we haven’t been able to market it as aggressively just because again, the brand disconnect. So I think the loyalty program connection and linkage is going to be pretty powerful for us.

Dan Politzer

Got it. Thanks so much.

Operator

Chad Beynon, Macquarie.

Chad Beynon

Hi, good morning. Thanks for taking my question. Wanted to ask about initial thoughts on the Missouri sports betting vote, plans for that state. And if you think the outcome of this could have any potential impact on some other states, either in that part of the country. or in other regions. And then also related to the tax rate that was announced in that market. Thank you.

Jay Snowden

Yeah, happy to share that. This we’re talking 48 hours ago, but we did have a good feel for whether it was going to pass or not. We know what the structure is. I think Missouri is an interesting state. It’s probably one of the last states in the country, obviously excluding the Californias and Texases and Floridas.
But the one of the last states outside of those three that we know that there’s real sports fandom. You’ve got two major cities really into sports between St. Louis and Kansas City. And of course, we have three land based casinos in the state of Missouri, two in the St. Louis MSA, one in the Kansas City MSA.
We have another property on the Kansas side of Kansas City. So we’re — we think we’re pretty well positioned, tax rate is attractive. I think the structure was attractive, and there’s been some commentary out there about the land based casino, companies only getting one skin for the whole state.
And we’re reading again publicly what I think others can read that maybe that’s not the read of the regulators there, that it’s going to be each of the casino operators that have multiple properties within have multiple skins in the state. So we’re still clarifying that with the regulators.
But that’s our understanding as we sit here today. So we think overall this was good news for PENN, obviously, good news for us launching ESPN Bet, and we feel like we’ve got a nice database that we can tap into across the state.

Chad Beynon

Thanks Jay. I appreciate it. And then just thinking about seasonality on hold, and maybe what a lot of us saw out there with the World Series, and the really strong national numbers, and viewership. Do you think the hold rates for non-NFL sports have a lot of way to go in terms of (technical difficulty)

Jay Snowden

Thanks, Chad, that’s not on our end. I’m not sure what Cindy is that.

Chad Beynon

Okay Jay, did you get all that, thanks.

Jay Snowden

I think I did Chad, if not just jump in at the end. With regard to seasonality and World Series, obviously there was more attention on the World Series and more wagers this year, given the match up was two powerhouse cities versus what it was last year.
As a Yankee fan, it was a brutal World Series, but it also wasn’t super helpful on the betting side. I think people were definitely feeling as though the Dodgers were going to win that series, especially the way that it started.
So I would say World Series every year, it’s hard to say that there’s going to be any seasonality related to World Series. It really depends on the match up and the favorite and where the money is landing. Generally speaking, we would expect the fourth quarter to be a solid sort of in market hold quarter for us.
The good news about the fourth quarter even where we sit today is that October is the lightest betting month of the quarter. If you look at handle by month, historically, typically it’s around 30%, 31% in October, and then the rest in November and December.
So if hold comes around, we’ve got heavier volume months ahead of us, where it could really help make up some of what’s been lost so far quarter to date.

Chad Beynon

Thanks, appreciate it.

Operator

Bernie McTernan, Needham.

Bernie McTernan

Great, good morning. Thanks for your questions. Want to focus on account linking. Aaron talked about personalization. I know there’s bet tracking within the account linking right now. But is there actual personalization that’s happening with bets and promotions right now?
And if it is driving an uplift, embedding the account linking, is there anything you could do to get customers to more aggressively adopt account linking? Would that be something you could look at or is organically the way to go?

Aaron LaBerge

No, we’re actually really focused on driving people towards account linking. We as Jay mentioned previously, we just started promoting it in the last few days. The results have been really great. So we’ll continue both on the ESPN and ESPN Bet side to promote the benefits of account linking.
You’ll see it all throughout your experiences, whether signing up for new products, signing up for games. Just targeted approaches to getting you to link, and sharing the benefits. Back to your first question, in order to personalize your bets and your bet tracking and everything that’s going to go with this, we had to link accounts first.
So we are literally a few days into that. So obviously, as we move forward, you will start to see personalized content bet offers all throughout ESPN and ESPN Bet, and it will just start happening organically.
It’s not going to be a launch. It’s just your experience is going to start getting smarter for you, and you’ll see it in a bunch of different places, including in that module on the ESPN home feed as well.

Bernie McTernan

Got it. Thanks Aaron.

Aaron LaBerge

Yes.

Operator

Jordan Bender, Citizens JMP.

Jordan Bender

Good morning, everyone. Thanks for taking my question. When we look at the 3.9 million digital database you have in your slides, and then the 1.8 million you’ve added since the launch of ESPN. But are you may be able to help us break down how many of those people have come directly through just an ESPN channel versus we want to call it other channel?

Jay Snowden

We haven’t provided that level of detail, Jordan. I would say that since the launch of ESPN Bet, you should assume that most of those that have come through were from the ESPN ecosystem. But we haven’t provided any more detail than that, but it is definitely most.

Jordan Bender

Okay, thanks. And then are you seeing just any in terms of turn rates, are you seeing any difference between people coming in through the ESPN channel versus again that kind of other bucket?

Jay Snowden

Yeah, retention tends to be stronger with those that come in through ESPN. And obviously when you add the integrations and account linking, that just continues to get stronger. We’re quite pleased with what retention looks like.
We’ve got this really large base of mass market casual betters. And I mentioned earlier, we’re continuing to see higher engagement, better handle per user, modernization is improving. So we’re very focused on that, and we have to simultaneously of course continue to attract new and reactivate those that have not reactivated, who maybe came in that November, December, January, February time frame, used promotions, maybe placed cash wager or better too and then disappeared.
And so continuing to focus on reactivating is of highest priority for us. And then of course, we’re seeing outside of ESPN, as I mentioned earlier on our digital performance, we’re like we’re really getting a good feel for what’s working, what’s not from a CPA perspective.
And those CPAs continue to look pretty good, both within ESPN, they’re the best. But they’re looking pretty good outside of ESPN as well.

Jordan Bender

Great. Thanks Jay.

Operator

Ryan Sigdahl, Craig-Hallum.

Ryan Sigdahl

Hey, good morning guys. Just one on the player linking to follow-up on that. Is there the potential to offer say ESPN+ memberships for free, or if you have for linking it, or if you have some status on ESPN Bet you get that membership for free, where you can really try and drive cross synergies from ESPN, or is that I guess too difficult given Disney and PENN are two different companies?

Aaron LaBerge

Well, I think we’re going to let Todd take that one.

Todd George

Hey, thanks Aaron. Great question, and thanks for teeing it up for us. It’s a great timing. We actually are working with ESPN Disney on an opportunity for our database to get ESPN+ and that will be coming out shortly.
It’ll be a one month trial membership. And again, it just shows the teamwork that we have between these companies and everything that we can do together to communicate and interact and engage with our fans.

Ryan Sigdahl

Excellent. Switching over to land base side, you’re shutting down the Freehold Raceway in New Jersey, I guess, is there opportunity to further optimize non-core assets in the portfolio, either sale, further closures, et cetera or is that kind of a one-off?

Jay Snowden

I wouldn’t consider that one, Ryan, a one-off. That was standalone horse racing. And so really if you look at our portfolio, we feel like we’re in really good shape, all of our land based, and barge riverboat casinos, all of them are profitable, both before and after rent, not even close to being unprofitable, any of them.
So there really wouldn’t be any thoughts around any necessary closures or anything of that nature. And I think as you look at the rest of our horse racing portfolio, one, they’re either at close or above break even on a standalone basis.
And they’re also, we believe some of those are great development options for us down the road for potential land based casino legalization or expansion in some of those markets. Certainly Texas is top of mind there.

Ryan Sigdahl

Thanks Jay. And no hard feelings on your disrespect towards Minnesota loyal sports fans, and not having OSB yet. Good luck guys.

Jay Snowden

Thanks Ryan.

Operator

Stephen Grambling, Morgan Stanley.

Stephen Grambling

Hey, this is Stephen. Wanted to touch on digital but with a focus on Toronto and Canada specifically, I guess how does the customer spend in other aspects in that market compared to the US as we think about ESPN Bet customers? And is that segment EBITDA positive on its own or even if you separate out kind of media and betting?

Jay Snowden

Yes, it’s certainly contribution margin positive. It depends obviously on how you would allocate some of those shared expenses beyond that. Ontario has been continues to be a really good story for us, which is part of why we’re pretty bold up on Alberta opportunity whenever that does present itself, it certainly has moved into 2025.
We’ll wait on the government and the regulators there to tell us exactly when the go live launch would be. We’ve got a significant number of users. It’s interesting because the makeup of our database in Ontario is quite similar to what we’re seeing here in the US with ESPN Bet, large mass market casual, certainly have some VIP play, but the bulk of the users are more in that casual segment.
Our parlay mix in Ontario because we’ve been at it a bit longer there is comfortably in the low 30s as a percentage of handle, and that’s up year-over-year from the mid to high 20s. So we’re already ahead in Ontario of what we’re seeing here in the US.
We’re moving in the right direction here in the US, but we’re still in that mid to high 20s, parlays as a percentage of handle. So we look at Ontario sort of being maybe a year or 18 months ahead of kind of where things are here in the US from an ESPN Bet perspective, and everything that we saw in Ontario trend wise, we’re seeing as we go in the US as well.

Stephen Grambling

And then maybe a quick follow-up on that is the cross sell and i-gaming in Ontario also similar to or would you think that that’s generally going to be a little bit of a different (inaudible) just given differences in the retail business there.

Jay Snowden

It’s really just — it’s grown over time again. We’ve been at it longer in Ontario than some of the markets here in the US. Our cross sell percentages are a little bit higher in Ontario. So that tells us we’ve got opportunity, not just on the land based cross sell that Todd and I talked about earlier, but also on the OSB cross sell in the States where you have both.
So it’s a good template for us to look at as we think about what the opportunities in front of us here in the US with ESPN Bet given our experiences, and what we’ve seen in the results in Ontario.
Cindy, if we can have one more question, realizing that we had an investor event just a month ago, and we’re getting close to the end of the hour, but we’ll do one more question.

Operator

David Katz, Jefferies.

David Katz

I’m sitting here looking at your — thank you for taking my question. I’m looking at your slide 4, and I see your map with all the properties, et cetera, and the focus on building out the digital and doing it in a disciplined way with a land based business that’s stable but not growing, any thought toward whether you might consider looking at some properties that aren’t growing, and maybe redeploying some of those resources by selling them toward digital.
And the second part of my question, which I’ll put out up front is I see you do have a presence in Texas. There’s obviously events of the week that may refocus or change people’s view about whether Texas might legalize some things. If (inaudible) might move on, are you positioned and interested in participating in Texas should it move in a legalization direction. Thanks.

Jay Snowden

Thanks David. I’ll hit the second one first. The answer is definitely, yes, we think we’re positioned actually very, very well in Texas. We’ve got ownership of several standalone horse tracks in Texas. And Retama in San Antonio, and Sam Houston in Greater Houston MSA, and those are two of the three Class 1 horse tracks in the state of Texas.
So we are, have been, and will continue to be engaged in conversations with the appropriate people in Texas, and feel like horse racing is very likely to be involved in whatever happened down the road. I’m not going to make predictions on when, and how that will happen. There’s some new Senate positions that just got filled.
And so we need to see how the dust settles in Texas, and the new presidency, and how that may or may not affect others in Texas in terms of potentially joining that administration. So I think more to come in Texas, but definitely well possession, extremely interested and engaged, and will continue to be.
With regard to your first question, look, we have liquidity is not an issue. We have $1.8 billion of liquidity, and so we’re going to spend where we feel like we should be spending and need to be spending across the portfolio, both on the retail side, as well as the digital side. We don’t have a plan to sell any of our assets, none of those are on the market.
Every once in a while, there’s something in that you read in the paper, and I don’t even know where those rumors come from, but that’s not the case. And we feel like we’re strongly positioned. We’ve got some momentum in the business right now.
We’ve got four growth projects that are going to be very exciting additions to our land based portfolio. Again, one at the end of ’25, which is not far away, and the other three in early ’26. So we’ll continue to invest where we feel like we’re going to get the best returns, and that becomes clearer and clearer for us every day, on both the retail side as well as on the digital side.

David Katz

Thank you very much.

Jay Snowden

Yeah, thank you, David. Thank you everyone for joining, especially if you also joined us in Las Vegas. Some of this was redundant, but hopefully you got some new information and takeaways, and we look forward to catching up with all of you again in a few months in February.

Operator

Ladies and gentlemen, this completes your conference call for today. We thank you for participating and ask that you please disconnect your lines.