What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-05 · 213 added, 199 removed, 360 unchanged (53% of the section changed)

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EXECUTIVE OVERVIEW

Penn National Gaming, Inc., together with its subsidiaries (“Penn National,” the “Company,” “we,” “our,” or “us”), is a leading, diversified, multi-jurisdictional owner and manager of gaming and racing properties, online gaming, retail and online sports betting operations, and video gaming terminal (“VGT”) operations.

Our wholly-owned interactive division, Penn Interactive Ventures, LLC (“Penn Interactive”), operates retail sports betting across the Company’s portfolio, as well as online sports betting, online social casino, bingo and online casinos (“iGaming”).

Penn National Gaming, Inc., together with its subsidiaries (“Penn National,” the “Company,” “we,” “our,” or “us”), is a leading, diversified, multi-jurisdictional owner and omni-channel provider of gaming and racing properties, online gaming, retail and online sports betting operations, and video gaming terminal (“VGT”) operations.

The Company holds a 36% (inclusive of 1% on a delayed basis) equity interest in Barstool Sports, Inc.

(“Barstool Sports”), a leading digital sports, entertainment, lifestyle and media company, and entered into a strategic relationship with Barstool Sports, whereby Barstool Sports will exclusively promote the Company's land-based retail sportsbooks, iGaming products and online sports betting products, including the Barstool Sportsbook mobile app, to its national audience.

We launched an app called Barstool Sportsbook and Casino in Pennsylvania, Michigan, Illinois and Indiana, and anticipate extending this footprint to other states by the end of the year.

Our my choice ® customer loyalty program (the "my choice program") currently has over 20 million members and provides such members with various benefits, including complimentary goods and/or services.

The Company’s strategy continues to evolve from an owner and manager of gaming and racing properties into an omni-channel provider of retail and online gaming, and sports betting entertainment.

As of June 30, 2021, we owned, managed, or had ownership interests in 41 gaming and racing properties in 19 states and were licensed to offer live sports betting at our properties in Colorado, Illinois, Indiana, Iowa, Michigan, Mississippi, Nevada, Pennsylvania and West Virginia.

(“Barstool Sports”), a leading digital sports, entertainment, lifestyle and media company, and entered into a strategic relationship with Barstool Sports, whereby Barstool Sports is exclusively promoting the Company's land-based and online casinos and sports betting products, including the Barstool Sportsbook and Casino mobile app, to its national audience.

We launched the Barstool Sportsbook and Casino app in six additional states, bringing our total to ten live states, three of which offer online casino play.

Our my choice ® customer loyalty program (the "my choice program") currently has over 24 million members, and rewards and recognizes such members for their loyalty to both retail and online gaming and sports betting products with dynamic offers, experiences, and service levels.

The Company’s strategy continues to evolve from an owner and manager of gaming and racing properties into an omni-channel provider of retail and online gaming, sports betting entertainment, and sports content.

I n October 2021, Penn National acquired Score Media and Gaming, Inc.

(“theScore ” ), which provides us with the technology, resources and audience reach to accelerate our media and sports betting strategy across North America.

Combined with the power of Barstool Sports, Penn National is now well positioned to be North America’s leading digital, entertainment, sports content, gaming and technology company.

Barstool’s wide top of funnel audience reach is highly complementary to the news, scores and stats available on theScore’s best in class media app, which will create a one-stop destination for the sports fan that does not exist today.

As of September 30, 2021, we owned, managed, or had ownership interests in 43 gaming and racing properties in 20 states.

This includes the addition of Hollywood Casino York, located in York, Pennsylvania, which opened on August 12, 2021 and Hollywood Casino Perryville, located in Perryville, Maryland, acquired as of July 1, 2021.

In addition, we are licensed to offer live sports betting at our properties in ten states.

The majority of the real estate assets (i.e., land and buildings) used in our operations are subject to triple net master leases;

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GLPI) (“GLPI”), a real estate investment trust (“REIT”).

In addition, we will soon commence operations of two Category 4 satellite gaming casinos in Pennsylvania:

Hollywood Casino York, which is scheduled to open August 12, 2021, and Hollywood Casino Morgantown is expected to commence operations by the end of 2021.

We expect to commence operations at Hollywood Casino Morgantown by the end of 2021.

Update on the Impact of the COVID-19 Pandemic:

As of June 30, 2021, all of our properties have reopened, and majority of our properties are operating at full capacity while adhering to state mandated health and safety protocols.

As of September 30, 2021, all of our properties have reopened, and the majority of our properties are operating at full capacity while adhering to state mandated health and safety protocols.

Recent Acquisitions, Development Projects and Other

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Within three years after the closing of the transaction or earlier at our election, we will increase our ownership in Barstool Sports to approximately 50% by purchasing approximately $62.0 million worth of additional shares of Barstool Sports common stock, consistent with the implied valuation at the time of the initial investment, which was $450.0 million.

With respect to the remaining Barstool Sports shares, we have immediately exercisable call rights, and the existing Barstool Sports stockholders have put rights exercisable beginning three years after closing, all based on a fair market value calculation at the time of exercise (subject to a cap of $650.0 million and, subject to such cap, a floor of 2.25 times the annualized revenue of Barstool Sports, all subject to various adjustments).

Upon closing, we became Barstool Sports’ exclusive gaming partner for up to 40 years and have the sole right to utilize the Barstool Sports brand for all of our online and retail sports betting and iGaming products.

As noted above, Penn Interactive operates the Barstool Sports mobile app in Pennsylvania, Michigan, Illinois and Indiana.

In addition, Penn Interactive has entered into multi-year agreements with leading sports betting operators for online sports betting and iGaming market access across our portfolio of properties.

On May 11, 2021, we acquired 100% of the outstanding equity of HitPoint Inc.

and Lucky Point Inc.

(collectively, “Hitpoint”).

The purchase price totaled $12.7 million, consisting of $6.2 million in cash, $3.5 million of the Company's common equity, and a $3.0 million contingent liability.

The contingent liability is payable in annual installments over three

years, through a combination of cash and the Company's common equity, and is based on achievement of certain performance factors.

The preliminary purchase price allocation resulted in recognition of $8.5 million of goodwill, $4.3 million in developed technology which is included in "Other intangible assets, net" within the unaudited Consolidated Balance Sheets, along with other miscellaneous operating assets and liabilities.

On October 1, 2021, the terms of the February 2020 stock purchase agreement were amended to (i) set a definitive purchase price of $325.0 million on the second 50% of Barstool Sports common stock, which eliminates the floor of 2.25 times the annual revenue of Barstool Sports and (ii) fix a number of Penn common shares to be delivered to existing February 2020 employee holders of Barstool Sports common stock, to the extent Penn’s stock price exceeds a specified value defined in the amended stock purchase agreement and Penn elects to settle using a combination of cash and equity.

Consistent with the February 2020 stock purchase agreement:

(i) the Barstool Sports

common stock remains subject to our immediately exercisable call rights and the existing Barstool Sports stockholders put rights beginning in February 2023, (ii) the requirement to increase our ownership in Barstool Sports to approximately 50% by purchasing approximately $62.0 million worth of additional shares in Barstool Sports common stock remains consistent with the implied valuation at the time of the initial investment, which was $450.0 million, and (iii), we may settle the call and put options, at our sole election, using either cash or a combination of cash and equity.

We are Barstool Sports’ exclusive gaming partner for up to 40 years and have the sole right to utilize the Barstool Sports brand for all of our online and retail sports betting and iGaming products.

Further, Penn Interactive has entered into multi-year agreements with leading sports betting operators for online sports betting and iGaming market access across our portfolio of properties.

On April 16, 2020, we sold the real estate assets associated with our Tropicana Las Vegas Hotel and Casino, Inc.

("Tropicana") property to GLPI in exchange for rent credits of $307.5 million and utilized them to pay rent under our existing Master Leases and the Meadows Racetrack and Casino Lease (as defined in Note 9 , "Leases" of our unaudited Consolidated Financial Statements,) beginning in May 2020.

(“Tropicana”) property to GLPI in exchange for rent credits of $307.5 million, and utilized the rent credits to pay rent under our existing Master Leases and the Meadows Lease, (as defined in Note 9, “Leases” of our unaudited Consolidated Financial Statements), beginning in May 2020.

Contemporaneous with the sale, the Company entered into the Tropicana Lease, (as defined and discussed in Note 9, “Leases” of our unaudited Consolidated Financial Statements).

Pursuant to the purchase agreement, GLPI would conduct a sale process with respect to both the real estate assets and the operations of Tropicana for up to 24 months (the “Sale Period”), with the Company receiving (i) 75% of the proceeds above $307.5 million plus certain taxes, expenses and costs if an agreement for such sale is signed in the first 12 months of the Sale Period or (ii) 50% of the proceeds above $307.5 million plus certain taxes, expenses and costs if an agreement for such sale is signed in the remainder of the Sale Period.

On April 13, 2021, GLPI announced that it entered into a binding term sheet with Bally’s Corporation (“Bally’s”) whereby Bally’s plans to acquire both GLPI’s non-land real estate assets and Penn’s outstanding equity interests in Tropicana, which has the gaming license and operates the Tropicana, for an aggregate cash acquisition price of $150.0 million.

GLPI will retain ownership of the land and will concurrently enter into a 50-year ground lease with initial annual rent of $10.5 million.

This transaction is expected to close in late 2021 or early 2022, subject to Penn, GLPI and Bally's entering into definitive agreements and obtaining regulatory approval.

On December 15, 2020, we entered into a definitive agreement with GLPI to purchase the operations of Hollywood Casino Perryville for $31.1 million.

The transaction closed on July 1, 2021.

This transaction is expected to close within the first half of 2022, subject to Penn, GLPI, and Bally’s entering into definitive agreements and obtaining regulatory approval.

On May 11, 2021, we acquired 100% of the outstanding equity of HitPoint Inc.

and Lucky Point Inc.

(collectively, “Hitpoint”).

The purchase price totaled $12.7 million, consisting of $6.2 million in cash, $3.5 million of the Company’s common equity, and a $3.0 million contingent liability.

On July 1, 2021, we completed the previously announced acquisition of the operations of Hollywood Casino Perryville (“Perryville”), from GLPI for a purchase price of $39.4 million, including working capital adjustments.

Simultaneous with the closing, we entered into a lease with GLPI for the real estate assets associated with Hollywood Casino Perryville for initial annual rent of $7.8 million per year subject to escalation.

On March 15, 2021, we entered into a purchase agreement with PM Texas Holdings, LLC for the purchase of the remaining 50% ownership interest in the Sam Houston Race Park in Houston, Texas, the Valley Race Park in Harlingen, Texas, and a license to operate a racetrack in Austin, Texas.

The purchase price consists of $56.0 million,, comprised of $42.0 million in cash and $14.0 million of the Company's common equity, as well as a contingent consideration.

The contingent consideration will be triggered in the event the State of Texas establishes a statutory framework authorizing land-based gaming or online gaming operations in the state prior to the ten-year anniversary of the closing date.

The transaction closed August 1, 2021.

On August 4, 2021, we entered into an agreement with Score Media and Gaming Inc., a British Columbia corporation (“theScore”), under which we will acquire theScore in a cash and stock transaction valued at approximately $2.0 billion at the agreement date.

Under the terms of the agreement, theScore shareholders will receive (a) US$17.00 in cash consideration, and (b) 0.2398 of a share of common stock, par value $0.01 per share, of the Company’s common equity for each theScore share.

The agreement is conditioned upon obtaining theScore shareholders’ approval and is subject to regulatory approval.

On August 1, 2021, we completed the previously announced acquisition of the remaining 50% ownership interest in the Sam Houston Race Park in Houston, Texas, the Valley Race Park in Harlingen, Texas, and a license to operate a racetrack in Austin, Texas (collectively, “Sam Houston”), from PM Texas Holdings, LLC for a purchase price of $57.8 million, comprised of $42.0 million in cash and $15.8 million of the Company's common equity, which was preliminarily allocated to property and equipment.

On October 19, 2021, we completed the previously announced 100% acquisition of the Score Media and Gaming Inc., a British Columbia corporation (“theScore”) for a purchase price of approximately $1.9 billion.

Under the terms of the agreement, 1317774 B.C.

(the “Purchaser”), an indirectly wholly owned subsidiary of Penn National, acquired each of the issued and outstanding theScore shares (other than those held by Penn National and its subsidiaries) for US$17.00 per share in cash consideration, totaling $0.9 billion, and either 0.2398 of a share of common stock, par value $0.01 of Penn Common Stock or, if validly elected, 0.2398 of an exchangeable share in the capital of the Purchaser (each whole share, an “Exchangeable Share”), totaling 12,319,340 shares of Penn Common Stock and 697,539 Exchangeable Shares, or approximately $1.0 billion.

Each Exchangeable Share will be exchangeable into 1 share of Penn Common Stock at the option of the holder, subject to certain adjustments.

In addition, Purchaser may redeem all outstanding Exchangeable Shares in exchange for shares of Penn Common Stock at any time following the fifth anniversary of the closing, or earlier under certain circumstances.

Due to the timing of the acquisition and its proximity to the date of this report, the preliminary purchase price allocation has not been completed as the Company is currently in the process of determining the purchase price allocation to tangible and identifiable intangible assets acquired and liabilities assumed.

The acquisition provides us with the technology, resources and audience reach to accelerate our media and sports betting strategy across North America.

Operating and Competitive Environment

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expansions of gaming in existing jurisdictions;

and, to a lesser extent, improvements/expansions of our existing properties and strategic acquisitions of gaming properties.

and, to a lesser extent, improvements/expansions of our existing

properties and strategic acquisitions of gaming properties.

Our portfolio is comprised largely of well-maintained regional gaming facilities, which has allowed us to develop what we believe to be a solid base for future growth opportunities.

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We seek to continue to expand our customer database by partnering with third-party operators such as Choice Hotels International, Inc.

to expand our loyalty program, as well as through accretive acquisitions or investments, such as Barstool Sports, capitalize on organic growth opportunities from the development of new properties or the expansion of recently-developed business lines, and develop partnerships that allow us to enter new jurisdictions for iGaming and sports betting.

to expand our loyalty program, as well as through accretive acquisitions or investments, such as Barstool Sports and theScore, capitalize on organic growth opportunities from the development of new properties or the expansion of recently-developed business lines, and develop partnerships that allow us to enter new jurisdictions for iGaming and sports betting.

The gaming industry is characterized by an increasingly high degree of competition among a large number of participants, including riverboat casinos;

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sweepstakes and poker machines not located in casinos;

the potential for increased fantasy sports, significant growth of Native American gaming tribes, historic racing or state-sponsored i-lottery products in or adjacent to states we operate in;

the potential for increased fantasy sports;

significant growth of Native American gaming tribes, historic racing or state-sponsored i-lottery products in or adjacent to states we operate in;

and other forms of gaming in the U.S.

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The vast majority of our revenues is gaming revenue, which is highly dependent upon the volume and spending levels of customers at our properties.

Our gaming revenue is derived primarily from slot machines (which represented approximately 85% and 89% of our gaming revenue for the six months ended June 30, 2021 and 2020) and, to a lesser extent, table games and sports betting.

Our gaming revenue is derived primarily from slot machines (which represented approximately 85% and 88% of our gaming revenue for the nine months ended September 30, 2021 and 2020) and, to a lesser extent, table games and sports betting.

Aside from gaming revenue, our revenues are primarily derived from our hotel, dining, retail, commissions, program sales, admissions, concessions and certain other ancillary activities, and our racing operations.

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Under normal operating conditions, our properties generate significant operating cash flow since most of our revenue is cash-based from slot machines, table games, and pari-mutuel wagering.

Our business is capital intensive, and we rely on cash flow from our properties to generate sufficient cash to satisfy our obligations under the Triple Net Leases (as defined in "Liquidity and Capital Resources” ), repay debt, fund maintenance capital expenditures, fund new capital projects at existing properties and provide excess cash for future development and acquisitions.

Our business is capital intensive, and we rely on cash flow from our properties to generate sufficient cash to satisfy our obligations under the Triple Net Leases (as defined in “Liquidity and Capital Resources” ), repay debt, fund maintenance capital expenditures, fund new capital projects at existing

properties and provide excess cash for future development and acquisitions.

Additional information regarding our capital projects is discussed in “Liquidity and Capital Resources” below.

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as well as a reconciliation of net income (loss) to Adjusted EBITDA and Adjusted EBITDAR and related margins.

For the three months ended June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

(dollars in millions) 2021 2020 2021 2020

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Adjusted EBITDA $ 364.3 $ 343.6 $ 1,171.0 $ 419.1

$ 470.1 $ (79.3) $ 806.7 $ 75.5

Net income (loss) margin 5.7 % 12.5 % 8.7 % (26.7) %

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24.1 % 30.4 % 27.0 % 16.4 %

(1) The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club and the Company’s joint venture interests in Sam Houston Race Park, Valley Race Park, and Freehold Raceway;

(1) The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club, and Sam Houston and Valley Race Parks (the remaining 50% was acquired by Penn National on August 1, 2021), and the Company’s JV interests in Freehold Raceway;

our management contract for Retama Park Racetrack and our live and televised poker tournament series that operates under the trade name, Heartland Poker Tour (“HPT”).

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The Other category also includes corporate overhead costs, which consist of certain expenses, such as:

payroll, professional fees, travel expenses and other general and administrative expenses that do not directly relate to or have not otherwise been allocated to a property.

payroll expenses, professional fees, travel expenses and other general and administrative expenses that do not directly relate to or have not otherwise been allocated to a property.

In addition, Adjusted EBITDAR of the Other category includes our proportionate share of the net income or loss of Barstool Sports after adding back our share of non-operating items (such as interest expense, net;

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(4) Solely comprised of rent expense associated with the operating lease components contained within our triple net master lease dated November 1, 2013 with GLPI and the triple net master lease assumed in connection with our acquisition of Pinnacle Entertainment, Inc.

(primarily land), our individual triple net leases with GLPI for the real estate assets used in the operation of Tropicana and Meadows Racetrack and Casino, and our

individual triple net leases with VICI Properties Inc.

for the real estate assets used in the operations of Margaritaville Casino Resort and Greektown Casino-Hotel (of which the Tropicana Lease, Meadows Lease, Margaritaville Lease and the Greektown Lease are defined in “Liquidity and Capital Resources” ) and are referred to collectively as our “triple net operating leases”.

The finance lease components contained within the Master Leases (primarily buildings) and the financing obligation associated with the Morgantown Lease (as defined in “Liquidity and Capital Resources” ) result in interest expense, as opposed to rent expense.

Consolidated comparison of the three and six months ended June 30, 2021 and 2020.

(primarily land), our

individual triple net leases with GLPI for the real estate assets used in the operation of Tropicana Las Vegas Hotel and Casino and Hollywood Casino at Meadows Racetrack, and our individual triple net leases with VICI for the real estate assets used in the operations of Margaritaville Casino Resort and Greektown Casino-Hotel (of which the Tropicana Lease, Meadows Lease, Margaritaville Lease and the Greektown Lease are defined in “Liquidity and Capital Resources” ) and are referred to collectively as our “triple net operating leases”.

The finance lease components contained within the Master Leases (primarily buildings), the Perryville Lease determined to be a finance lease (as defined in “Liquidity and Capital Resources” ), and the financing obligation associated with the Morgantown Lease (as defined in “Liquidity and Capital Resources” ) result in interest expense or interest expense and depreciation expense, as opposed to rent expense.

Consolidated comparison of the three and nine months ended September 30, 2021 and 2020.

The following table presents our consolidated revenues:

For the three months ended June 30, Change For the six months ended June 30, Change

For the three months ended September 30, Change For the nine months ended September 30, Change

(dollars in millions) 2021 2020 $ % 2021 2020 $ %

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Total revenues $ 1,511.8 $ 1,129.7 $ 382.1 33.8 % $ 4,332.5 $ 2,551.3 $ 1,781.2 69.8 %

Gaming revenues for the three and six months ended June 30, 2021 increased $1,046.3 million and $1,225.4 million, respectively, compared to the prior year corresponding periods, primarily due to a full quarter of operating results in the current periods, strong visitation levels, and increased length of play.

The prior year periods were negatively impacted by the COVID-19 pandemic, which caused temporary closures of all of our properties during the three and six months ended June 30, 2020.

Food, beverage, hotel and other revenues for the three and six months ended June 30, 2021 increased $194.0 million and $173.7 million, respectively, compared to the prior year corresponding periods, primarily due to strong visitation levels, increased length of play, and lifting of capacity and operational restrictions previously in place in response to the COVID-19 pandemic.

Additionally, other revenues include a gross-up of gaming tax reimbursement amounts derived from arrangements which allow for our third party partners to operate online casinos and online sportsbooks under our gaming licenses of $46.0 million and $85.5 million for the three and six months ended June 30, 2021, respectively.

T he prior year periods were negatively impacted by the COVID-19 pandemic, which caused temporary closures of all of our properties during the three and six months ended June 30, 2020.

Additionally during 2020, upon reopening o ur properties operated within locally restricted capacity and limited food and beverage and other amenity offerings.

For the six month period ended June 30, 2021 , our properties experienced strong visitation levels and increased length of play across all age segments of our player database, attributable to the increased willingness of the 55+ age group to engage in social gatherings as vaccines continue to roll out across the country and the younger demographic’s continued engagement even as other entertainment options become available.

Gaming revenues for the three and nine months ended September 30, 2021 increased $262.6 million and $1.5 billion, respectively, compared to the prior year corresponding periods .

During the three and nine months ended September 30, 2021 increases in gaming revenues primarily related to strong visitation levels, increased length of play, continued growth in our online and sports betting revenues and the inclusion of the operating results from our two new properties, Hollywood Casino Perryville, which was acquired on July 1, 2021, and Hollywood Casino York County, which opened on August 12, 2021.

During the prior year periods, gaming revenues were negatively impacted by temporary closures for a portion of the year at all of our properties due to the COVID-19 pandemic.

Additionally, upon reopening occurring mainly in 2020, restrictions on gaming patron capacity were in place across all of our properties.

For the three months ended September 30, 2021 , we experienced continuous engagement from our younger customers, which contributed to new growth, and offset decreases from our older demographic due to the Delta variant of the COVID-19 pandemic.

Overall, during the nine months ended September 30, 2021 , our properties experienced strong visitation levels and increased length of play across all age demographics of our player database.

In addition, our unrated play continues to perform well as we work to introduce these customers into our my choice loyalty program.

See “Segment comparison of the three and six months ended June 30, 2021 and 2020” below for more detailed explanations of the fluctuations in revenues.

Food, beverage, hotel and other revenues for the three and nine months ended September 30, 2021 increased $119.5 million and $293.2 million, respectively, compared to the prior year corresponding periods, primarily due to strong visitation levels, increased length of play, lifting of capacity and operational restrictions previously in place in response to the COVID-19 pandemic, as well as the inclusion of the operating results from our two new properties discussed above.

Additionally, other revenues include a gross-up of gaming tax reimbursement amounts derived from arrangements which allow our third party partners to operate online casinos and online sportsbooks under our gaming licenses of $44.0 million and $129.5 million for the three and nine months ended September 30, 2021, respectively.

During the prior year periods, food, beverage, hotel and other revenues were negatively impacted by temporary closures for a portion of the year at all of our properties due to the COVID-19 pandemic.

Additionally, upon reopening occurring mainly in 2020, our properties were subject to the implementation of social distancing and health and safety protocols, reduced hotel capacity and limitations on the number of food and beverage offerings.

See “Segment comparison of the three and nine months ended September 30, 2021 and 2020” below for more detailed explanations of the fluctuations in revenues.

Operating expenses

The following table presents our consolidated operating expenses:

For the three months ended June 30, Change For the six months ended June 30, Change

For the three months ended September 30, Change For the nine months ended September 30, Change

(dollars in millions) 2021 2020 $ % 2021 2020 $ %

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Total operating expenses $ 1,272.7 $ 933.5 $ 339.2 36.3 % $ 3,499.0 $ 3,081.1 $ 417.9 13.6 %

Gaming expenses consist primarily of salaries and wages associated with our gaming operations and gaming taxes.

Gaming expenses for the three and six months ended June 30, 2021 increased $478.9 million and $505.8 million, respectively, compared to the prior year corresponding periods, primarily due to an increase in gaming taxes resulting from the increase in gaming revenues, as discussed above.

Additionally, during the three and six months ended June 30, 2020 , our properties were temporarily closed as a result of the COVID-19 pandemic, which reduced our gaming taxes, marketing expenses, and salaries and wages.

Food, beverage, hotel and other expenses consist primarily of salaries and wages and costs of goods sold associated with our food, beverage, hotel, retail, racing, and other operations.

Also included in other expenses are gaming taxes of $46.0 million and $85.5 million f or the three and six months ended June 30, 2021, respectively, on revenues derived from arrangements which allow for third party partners to operate online casinos and online sportsbooks under our gaming licenses for which we collect and remit applicable gaming taxes.

Fo od, beverage, hotel and other expenses for the three and six months ended June 30, 2021 increased $115.7 million and $81.8 million, respectively, compared to the prior year corresponding periods, primarily due to the inclusion of the gaming taxes in the current year periods, discussed above, and due to continued revenue recovery in food, beverage, hotel and other activity as various health and safety restrictions are relaxed or lifted.

In response to the COVID-19 pandemic, we implemented cost saving measures such as:

operating with a reduced workforce, focusing on higher margin gaming offerings, reducing marketing costs, and limiting certain lower margin food and beverage offerings which reduced our salaries and wages, costs of goods sold, and other expenses which helped mitigate our food, beverage, hotel and other expenses during the first six months of 2021 as compared to the previous year corresponding periods.

Gaming expenses consist primarily of payroll expenses associated with our gaming operations and gaming taxes.

Gaming expenses for the three and nine months ended September 30, 2021 increased $194.3 million and $700.1 million, respectively, compared to the prior year corresponding periods, primarily due to an increase in gaming taxes resulting from the increase in gaming revenues, as discussed above, as well as increases in payroll and marketing expenses due to increased volumes.

Additionally, during the three and nine months ended September 30, 2020 , all of our properties were subject to temporary closures for a portion of the year due to the COVID-19 pandemic , and upon reopening, operated under restricted gaming patron capacity.

Food, beverage, hotel and other expenses consist primarily of payroll expenses and costs of goods sold associated with our food, beverage, hotel, retail, racing, and other operations.

Also included in other expenses are gaming taxes of $44.0 million and $129.5 million f or the three and nine months ended September 30, 2021, respectively, on revenues derived from arrangements which allow for third party partners to operate online casinos and online sportsbooks under our gaming licenses for which we collect and remit applicable gaming taxes.

Fo od, beverage, hotel and other expenses for the three and nine months ended September 30, 2021 increased $90.0 million and $171.8 million, respectively, compared to the prior year corresponding periods, primarily due to the inclusion of the gaming taxes in the current year periods, discussed above, and increases in cost of sales and payroll expenses due to increased volumes experienced subsequent to reopening.

The prior year periods were impacted by temporary closures for a portion of the year at all of our properties due to the COVID-19 pandemic and upon reopening occurring mainly in 2020 our properties operated within locally restricted capac ity and limited food and beverage and other amenities offerings.

General and administrative expenses include items such as compliance, facility maintenance, utilities, property and liability insurance, surveillance and security, lobbying expenses, and certain housekeeping services, as well as all expenses for administrative departments such as accounting, purchasing, human resources, legal and internal audit.

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and rent expense associated with our triple net operating leases.

For the three months ended June 30, 2021, general and administrative expenses increased period over period primarily due to a $70.6 million increase in payroll expenses as minimal payroll costs were incurred as a result of property closures during the three months ended June 30, 2020, and a $12.7 million increase in rent expenses associated with our triple net operating leases, offset by a $28.5 million decrease associated with the Company’s cash-settled stock-based awards.

Additionally, the prior year quarter included a $28.5 million gain on disposal of capital assets related to sale of our Tropicana property in April 2020.

For the six months ended June 30, 2021, general and administrative expenses increased period over period primarily due to an increase of $49.2 million in payroll expenses as minimal payroll costs were incurred as a result of property closures during the six months ended June 30, 2020, a $25.6 million increase in rent expenses associated with our triple net operating leases, principally related to the Tropicana Lease, and the inclusion of the gain on the sale of our Tropicana property discussed above.

Depreciation and amortization for the three and six months ended June 30, 2021 decreased period over period primarily due to fixed assets and intangible assets becoming fully depreciated and amortized , and the sale of the real estate assets of Tropicana in April 2020.

Impairment losses for the six months ended June 30, 2020 primarily relates to impairments taken on our goodwill and other intangible assets of $113.0 million and $498.5 million, respectively, as a result of an interim impairment assessment during the first quarter of 2020.

For the three months ended September 30, 2021, general and administrative expenses increased period over period primarily due to increased payroll costs of $29.9 million and increased facility costs of $21.9 million, both related to increased property volumes.

In addition, general and administrative expenses include legal and other professional costs associated with acquisitions, primarily related to the acquisition of theScore, and a $12.5 million political contribution related to the California sports betting initiative, offset by a decrease in the Company’s cash-settled stock-based awards expense of $34.3 million, which is primarily driven by the Company’s stock price.

For the nine months ended September 30, 2021, general and administrative expenses increased period over period primarily due to an increase of $79.7 million in payroll expenses with lower payroll costs incurred as a result of property closures and limited capacity upon reopening during the nine months ended September 30, 2020, a $46.1 million increase in general facility costs related to increased property volumes, and a $32.6 million increase in rent expenses associated with our triple net operating leases, principally related to the Tropicana Lease.

Furthermore, we incurred legal and other professional costs of $14.7 million associated with acquisitions, primarily related to theScore, and we contributed $12.5 million to the California sports betting initiative as discussed above.

The increases were offset by a decrease in the Company’s cash-settled

stock-based awards expense of $32.4 million, which is primarily driven by the Company’s stock price.

Additionally, the general and administrative balance for nine months ended September 30, 2020, reflects a $28.5 million gain from the sale of our Tropicana property in April 2020.

Depreciation and amortization for the three and nine months ended September 30, 2021 decreased period over period primarily due to fixed assets and intangible assets becoming fully depreciated and amortized , and the sale of the real estate assets of Tropicana in April 2020.

Impairment losses for the nine months ended September 30, 2020 primarily relates to impairments taken on our goodwill and other intangible assets of $113.0 million and $498.5 million, respectively, as a result of an interim impairment assessment during the first quarter of 2020.

During the first quarter of 2020, we identified an indicator of impairment triggered by the COVID-19 pandemic, which caused all of our gaming properties to temporarily close.

There were no impairment losses during the three and six months ended June 30, 2021.

There were no impairment losses during the three and nine months ended September 30, 2021.

Other income (expenses)

The following table presents our consolidated other income (expenses):

For the three months ended June 30, Change For the six months ended June 30, Change

For the three months ended September 30, Change For the nine months ended September 30, Change

(dollars in millions) 2021 2020 $ % 2021 2020 $ %

1 unchanged sentence

Interest expense, net $ (144.9) $ (142.3) $ (2.6) 1.8 % $ (418.6) $ (407.1) $ (11.5) 2.8 %

Income from unconsolidated affiliates $ 9.1 $ (1.7) $ 10.8 N/M $ 18.7 $ 2.4 $ 16.3 679.2 %

Income from unconsolidated affiliates $ 9.1 $ 5.0 $ 4.1 82.0 % $ 27.8 $ 7.4 $ 20.4 275.7 %

Other $ 19.2 $ 68.0 $ (48.8) (71.8) % $ 43.1 $ 75.5 $ (32.4) (42.9) %

1 unchanged sentence

N/M - Not meaningful

Interest expense, net increased for the three and six months ended June 30, 2021, as compared to the prior year corresponding periods, due to an increase in interest expense related to the issuance of our 2.75% Convertible Notes in May, 2020 and interest expense related to our Other long-term obligations.

Income from unconsolidated affiliates relates principally to Barstool Sports and our Kansas Entertainment joint venture.

The increase for the three and six months ended June 30, 2021, as compared to the prior year corresponding periods, was due to ongoing positive results in the operations at Hollywood Casino at Kansas Speedway, which was closed for a period during the three and six months ended June 30, 2020, and income earned from our Barstool Sports investment, which we completed in February, 2020.

Interest expense, net increased for the nine months ended September 30, 2021 as compared to the prior year period, due to interest expenses related to our Other long-term obligations.

Income from unconsolidated affiliates relates principally to Barstool Sports, and our Kansas Entertainment and Freehold Raceway joint ventures.

The increase for the three and nine months ended September 30, 2021, compared to the prior year corresponding periods, was due to ongoing positive results in the operations at Hollywood Casino at Kansas Speedway, which was closed for a period in the prior year, and upon reopening in 2020, operated under capacity restrictions, and income earned from our Barstool Sports investment, which we completed in February, 2020.

We record our proportionate share of Barstool Sports’ net income or loss one quarter in arrears.

Other includes miscellaneous income and expense items and primarily relates to unrealized gains and losses on equity securities (including warrants), held by Penn Interactive and unrealized gains and losses related to certain Barstool Sports shares.

The securities are multi-year agreements with sports betting operators for online sports betting and related iGaming market access across our portfolio.

During the three and six months ended June 30, 2021 we recorded an unrealized holding loss of $7.4 million and an unrealized holding gain of $18.8 million, respectively, compared to unrealized holding gains of $29.5 million and $7.7 million for the three and six months ended June 30, 2020, respectively.

During the three months ended June 30, 2021 the $7.4 million unrealized holding loss was offset by a $5.8 million unrealized gain related to certain Barstool Sports shares and other miscellaneous income.

Income tax benefit (expense) was a $53.1 million and $73.7 million expense for the three and six months ended June 30, 2021, respectively, as compared to a $58.4 million and $157.9 million benefit for the three and six months ended June 30, 2020, respectively.

Our effective tax rate (income taxes as a percentage of income or loss from operations before income taxes) including discrete items was 21.1% and 20.3% for the three and six months ended June 30, 2021 respectively, as compared to 21.4% and 16.1% for the three and six months ended June 30, 2020, respectively.

The change in the effective rate for the six months ended June 30, 2021 as compared to the prior year period was primarily due to an increase of pre-tax income.

Other includes miscellaneous income and expense items and primarily relates to realized and unrealized gains and losses on equity securities (including warrants), held by Penn Interactive and unrealized gains and losses related to certain Barstool Sports shares.

Equity securities were provided to the Company in conjunction with entering into multi-year agreements with sports betting operators for online sports betting and related iGaming market access across our portfolio.

For the three months ended September 30, 2021, other income primarily consisted of a loss of $20.1 million offset by an unrealized holding gain of $10.1 million, and a $29.9 million gain related to the valuation of our joint venture investment in Sam Houston and Valley Race Parks prior to the acquisition of the remaining 50% on August 1, 2021.

For the nine months ended September 30, 2021, other income primarily consisted of a loss of $20.1 million offset by an unrealized holding gain of $28.9 million, and a $29.9 million gain related to our investment in Sam Houston and Valley Race Parks as previously described.

For the three and nine months ended September 30, 2020, other income was comprised primarily of holding gains of $67.9 million and $75.6 million, respectively.

Income tax benefit (expense) was a $36.4 million and $110.1 million expense for the three and nine months ended September 30, 2021, respectively, as compared to a $14.3 million and $172.2 million benefit for the three and nine months ended September 30, 2020, respectively.

Our effective tax rate (income taxes as a percentage of income or loss from operations before income taxes) including discrete items was 29.7% and 22.7% for the three and nine months ended September 30, 2021 respectively, as compared to (11.3)% and 20.2% for the three and nine months ended September 30, 2020, respectively.

The change in the effective rate for the nine months ended September 30, 2021 as compared to the prior year period was primarily due to an increase of pre-tax income.

Our effective income tax rate can vary each reporting period depending on, among other factors, the geographic and business mix of our earnings, changes to our valuation allowance, and the level of our tax credits.

Certain of these and other factors, including our history and projections of pre-tax earnings, are considered in assessing our ability to realize our net deferred tax assets.

Segment comparison of the three and six months ended June 30, 2021 and 2020

Certain of these and other

factors, including our history and projections of pre-tax earnings, are considered in assessing our ability to realize our net deferred tax assets.

Segment comparison of the three and nine months ended September 30, 2021 and 2020

Northeast Segment

For the three months ended June 30, Change For the six months ended June 30, Change

For the three months ended September 30, Change For the nine months ended September 30, Change

(dollars in millions) 2021 2020 $ % 2021 2020 $ %

2 unchanged sentences

Total revenues $ 672.4 $ 545.1 $ 127.3 23.4 % $ 1,895.8 $ 1,168.5 $ 727.3 62.2 %

Adjusted EBITDAR $ 231.6 $ (3.6) $ 235.2 N/M $ 424.8 $ 120.9 $ 303.9 251.4 %

Adjusted EBITDAR $ 221.1 $ 204.8 $ 16.3 8.0 % $ 645.9 $ 325.7 $ 320.2 98.3 %

Adjusted EBITDAR margin 32.9 % 37.6 % -470 bps 34.1 % 27.9 % 620 bps

N/M - Not meaningful

The Northeast segment’s revenues for the three and six months ended June 30, 2021 increased by $549.8 million and $600.0 million, respectively, over the prior year corresponding periods, primarily due to a full quarter of operating results in the current year periods, strong visitation levels, and increased length of play.

During the three and six months ended June 30, 2020, the COVID-19 pandemic caused temporary closures of all of our properties which negatively impacted our operations.

Our properties located at Greektown, Bangor and Plainridge Park were temporarily closed during the entire quarter ended June 30, 2020.

For the three months ended June 30, 2021, the Northeast segment’s Adjusted EBITDAR increased $235.2 million, and Adjusted EBITDAR margin increased to 35.5% due to high proportionate share of gaming activity yielding a higher overall Adjusted EBITDAR margin and due to the negative impact of temporary closures during the three months ended June 30, 2020.

For the six months ended June 30, 2021 , the Northeast segment's Adjusted EBITDAR increased by $303.9 million and Adjusted EBITDAR margin increased to 34.7% primarily due to a higher proportionate share of gaming activity yielding a higher overall Adjusted EBITDAR margin, and cost saving initiatives implemented throughout the prior year, designed to mitigate revenue degradation in 2020, such as:

operating with a reduced workforce, focusing on higher margin gaming offerings, reducing marketing costs, and limiting certain lower margin food and beverage offerings.

The Nort heast segment’s revenues for the three and nine months ended September 30, 2021 increased by $127.3 million and $727.3 million, respectively, over the prior year corresponding periods, primarily due to easing of capacity restrictions, strong visitation levels, and increased length of play.

In addition, the Northeast segment includes operating results from our two new properties, Hollywood Casino Perryville, which was acquired on July 1, 2021, and Hollywood Casino York, which opened on August 12, 2021.

During the three and nine months ended September 30, 2020, our Nort heast segment's operating results were negatively impacted by temporary closures for a portion of the year at all of our properties due to the COVID-19 pandemic.

Additionally, upon reopening, in 2020 (and in the case of our Pennsylvania properties upon a second reopening in January 2021 stemming from a mandated second temporary closure commencing in the fourth quarter of 2020), our properties operated within locally restricted gaming capac ity and limited food and beverage and other amenities offerings.

For the three months ended September 30, 2021, the Northeast segment’s Adjusted EBITDAR increased $16.3 million primarily due to increases in gaming and non gaming revenues.

As operating restrictions eased, our proportionate share of non gaming activity increased as compared to the prior year quarter and resulted in increased payroll, cost of sales and marketing expenses, which decreased Adjusted EBITDAR margin by 470 basis points to 32.9%.

For the nine months ended September 30, 2021 , the Northeast segment ’ s Adjusted EBITDAR increased by $320.2 million primarily due the temporary property closures for a portion of the prior year period while the current year period benefited from an increase in gaming revenues, as discussed above.

Adjusted EBITDAR margin increased 620 basis points to 34.1% primarily due to a higher proportionate share of gaming activity in the current year period, yielding a higher overall Adjusted EBITDAR margin.

South Segment

For the three months ended June 30, Change For the six months ended June 30, Change

For the three months ended September 30, Change For the nine months ended September 30, Change

(dollars in millions) 2021 2020 $ % 2021 2020 $ %

4 unchanged sentences

Adjusted EBITDAR margin 43.1 % 47.1 % -400 bps 45.6 % 36.2 % 940 bps

The South segment’s revenues for the three and six months ended June 30, 2021 increased by $246.7 million and $319.3 million, respectively, primarily due to a full quarter and year-to-date operating results in the current year periods, strong visitation levels, and increased length of play.

During the three and six months ended June 30, 2020, the COVID-19 pandemic caused temporary closures of all of our properties which negatively impacted our operations.

For the three months ended June 30, 2021, the South segment’s Adjusted EBITDAR increased $132.7 million, and Adjusted EBITDAR margin increased to 48.1%, due to high proportionate share of gaming activity yielding a higher overall Adjusted EBITDAR margin and due to the negative impact of temporary closures during the three months ended June 30, 2020.

For the six months ended June 30, 2021 , the South segment’s Adjusted EBITDAR increased $214.0 million and Adjusted EBITDAR margin increased to 46.8% primarily due to a higher proportionate share of gaming activity yielding a higher overall

Adjusted EBITDAR margin, and cost saving initiatives implemented throughout the prior year designed to mitigate revenue degradation in 2020, such as:

operating with a reduced workforce, focusing on higher margin gaming offerings, reducing marketing costs, and limiting certain lower margin food and beverage offerings.

For the three months ended June 30, Change For the six months ended June 30, Change

The South segment’s revenues for the three and nine months ended September 30, 2021 increased by $62.6 million and $381.9 million, respectively, over the prior year corresponding periods, primarily due to easing of capacity restrictions, strong visitation levels, and increased length of play.

The South segment revenues were impacted by temporary closures during the hurricane season in both the three months ended September 30, 2021 and 2020.

During the nine months ended September 30, 2020, our South segment's operating results were negatively impacted by temporary closures for a portion of the year at all of

our properties due to the COVID-19 pandemic.

Additionally, upon reopening our properties operated within locally restricted gaming capac ity and limited food and beverage and other amenities offerings.

For the three months ended September 30, 2021, the South segment’s Adjusted EBITDAR increased $16.7 million due to the increases in gaming and non gaming revenues.

For the nine months ended September 30, 2021 , the South segment’s Adjusted EBITDAR increased by $230.7 million primarily due the temporary property closures for a portion of the prior year period while the current year period benefited from an increase in gaming revenues, as discussed above.

Adjusted EBITDAR margin increased 940 basis points to 45.6% primarily due to a higher proportionate share of gaming activity in the current year period yielding a higher overall Adjusted EBITDAR margin.

For the three months ended September 30, Change For the nine months ended September 30, Change

(dollars in millions) 2021 2020 $ % 2021 2020 $ %

2 unchanged sentences

Total revenues $ 145.7 $ 78.7 $ 67.0 85.1 % $ 382.7 $ 223.0 $ 159.7 71.6 %

Adjusted EBITDAR $ 61.4 $ (3.0) $ 64.4 N/M $ 96.6 $ 21.6 $ 75.0 347.2 %

Adjusted EBITDAR $ 54.5 $ 33.6 $ 20.9 62.2 % $ 151.1 $ 55.2 $ 95.9 173.7 %

Adjusted EBITDAR margin 37.4 % 42.7 % -530 bps 39.5 % 24.8 % 1,470 bps

N/M - Not meaningful

The West segment’s revenues for the three and six months ended June 30, 2021 increased by $122.7 million and $92.7 million, respectively, primarily due to a full quarter of operating results in the current year periods, strong visitation levels, and increased length of play.

During the three and six months ended June 30, 2020, the COVID-19 pandemic caused temporary closures of all of our properties which negatively impacted our operations.

Our Tropicana and Zia Park properties were temporarily closed during the entire quarter ended June 30, 2020.

For the three months ended June 30, 2021, the West segment’s Adjusted EBITDAR increased $64.4 million and Adjusted EBITDAR margin increased to 43.7% due to high proportionate share of gaming activity yielding a higher overall Adjusted EBITDAR margin and due to the negative impact of temporary closures during the three months ended June 30, 2020.

For the six months ended June 30, 2021 , the West segment’s Adjusted EBITDAR increased $75.0 million and Adjusted EBITDAR margin increased to 40.8% primarily due to a higher proportionate share of gaming activity yielding a higher overall Adjusted EBITDAR margin, and cost saving initiatives implemented throughout the prior year designed to mitigate revenue degradation in 2020, such as:

operating with a reduced workforce, focusing on higher margin gaming offerings, reducing marketing costs, and limiting certain lower margin food and beverage offerings.

The West segment’s revenues for the three and nine months ended September 30, 2021 increased by $67.0 million and $159.7 million, respectively, over the prior year corresponding periods, primarily due to easing of capacity restrictions, strong visitation levels, and increased length of play.

During the three and nine months ended September 30, 2020, our West segment’s operating results were negatively impacted by temporary closures for a portion of the year at all of our properties due to the COVID-19 pandemic, with our Zia Park property remaining temporarily closed during the entire quarter ended September 30, 2020, and our Tropicana Las Vegas Hotel and Casino property reopening on September 17, 2020.

Additionally, upon reopening our properties operated within locally restricted gaming and hotel (if applicable) capac ity and limited food and beverage and other amenities offerings.

For the three months ended September 30, 2021, the West segment’s Adjusted EBITDAR increased $20.9 million primarily due to increases in gaming and non gaming revenues.

Adjusted EBITDAR margin decreased by 530 basis points to 37.4% primarily due to an increase in gaming taxes and an increase in payroll and cost of sales expenses driven by an increase in our proportionate share of non gaming activity as compared to the prior year quarter.

For the nine months ended September 30, 2021 , the West segment’s Adjusted EBITDAR increased by $95.9 million primarily due the temporary property closures for a portion of the prior year period while the current year period benefited from an increase in gaming revenues, as discussed above.

Adjusted EBITDAR margin increased 1,470 basis points to 39.5%, primarily due to a higher proportionate share of gaming activity in the current year period, yielding a higher overall Adjusted EBITDAR margin.

Midwest Segment

For the three months ended June 30, Change For the six months ended June 30, Change

For the three months ended September 30, Change For the nine months ended September 30, Change

(dollars in millions) 2021 2020 $ % 2021 2020 $ %

2 unchanged sentences

Total revenues $ 285.7 $ 229.1 $ 56.6 24.7 % $ 815.2 $ 493.2 $ 322.0 65.3 %

Adjusted EBITDAR $ 142.2 $ (4.6) $ 146.8 N/M $ 248.2 $ 64.9 $ 183.3 282.4 %

Adjusted EBITDAR $ 125.8 $ 108.5 $ 17.3 15.9 % $ 374.0 $ 173.4 $ 200.6 115.7 %

Adjusted EBITDAR margin 44.0 % 47.4 % -340 bps 45.9 % 35.2 % 1,070 bps

N/M - Not meaningful

The Midwest segment’s revenues for the three and six months ended June 30, 2021 increased by $258.8 million and $265.4 million, respectively, primarily due to a full quarter of operating results in the current year periods, strong visitation levels, and increased length of play.

During the three and six months ended June 30, 2020, the COVID-19 pandemic caused temporary closures of all of our properties which negatively impacted our operations.

Our Alton, Aurora and Joliet properties were temporarily closed during the entire quarter ended June 30, 2020.

For the three months ended June 30, 2021, the Midwest segment’s Adjusted EBITDAR increased $146.8 million, and Adjusted EBITDAR margin increased to 48.2%, due to high proportionate share of gaming activity yielding a higher overall Adjusted EBITDAR margin and due to the negative impact of temporary closures during the three months ended June 30, 2020.

For the six months ended June 30, 2021 , the Midwest segment’s Adjusted EBITDAR increased $183.3 million and Adjusted EBITDAR margin increased to 46.9% primarily due to a higher proportionate share of gaming activity yielding a higher overall Adjusted EBITDAR margin, and cost saving initiatives implemented throughout the prior year designed to mitigate revenue degradation in 2020, such as:

operating with a reduced workforce, focusing on higher margin gaming offerings, reducing marketing costs, and limiting certain lower margin food and beverage offerings.

For the three months ended June 30, Change For the six months ended June 30, Change

The Midwest segment’s revenues for the three and nine months ended September 30, 2021 increased by $56.6 million and $322.0 million, respectively, primarily due to strong visitation levels, and increased length of play.

During the nine months ended September 30, 2020, our Midwest segment's operating results were negatively impacted by temporary closures for a portion of the year at all of our properties due t o the COVID-19 pandemic.

Additionally, upon reopening in 2020 (and in the case of our Illinois properties upon a second reopening in January 2021 stemming from a mandated second temporary closure commencing in the fourth quarter of 2020) our properties operated within locally restricted gaming capacity and limited food and beverage and other amenities offerings.

For the three months ended September 30, 2021, the Midwest segment’s Adjusted EBITDAR increased $17.3 million primarily due to increases in gaming and non gaming revenues.

Adjusted EBITDAR margin decreased by 340 basis points to 44.0% primarily due to an increase in gaming taxes and an increase in payroll , marketing, and cost of sales expenses driven by an increase in our proportionate share of non gaming activity as compared to the prior year quarter.

For the nine months ended September 30, 2021 , the Midwest segment’s Adjusted EBITDAR increased by $200.6 million primarily due the temporary property closures for a portion of the prior year period while the current year period benefited from an increase in gaming revenues, as discussed above.

Adjusted EBITDAR margin increased 1,070 basis points to 45.9% primarily due to a higher proportionate share of gaming activity in the current year period, yielding a higher overall Adjusted EBITDAR margin.

For the three months ended September 30, Change For the nine months ended September 30, Change

(dollars in millions) 2021 2020 $ % 2021 2020 $ %

3 unchanged sentences

Adjusted EBITDAR $ (58.1) $ (14.6) $ (43.5) 297.9 % $ (105.1) $ (42.2) $ (62.9) 149.1 %

Total revenues for the Other category increased for the three and six months ended June 30, 2021, as compared to the prior ye ar corresponding periods, primarily as a result of the activities at Penn Interactive.

T he three and six months ended June 30, 2021 include a gross-up of gaming tax reimbursement amounts derived from arrangements which allow for our third party partners to operate online casinos and online sportsbooks under our gaming licenses of $46.0 million and $85.5 million, respectively.

Penn Interactive's operations continue to build with the launch of the online Barstool Sportsbook in Pennsylvania during the third quarter of 2020 and the launch of Michigan, Illinois and Indiana in 2021, and with ongoing increases in online social and real-money gaming revenue.

Adjusted EBITDAR decreased by $17.0 million and $19.4 million for the three and six months ended June 30, 2021, respectively, as compared to the prior year corresponding periods, primarily due to increased expenses related to the ramp up of the Penn Interactive online sportsbook operations and increases in corporate overhead costs as operations returned to pre-pandemic levels.

For the three and six months ended June 30, 2021 , corporate overhead costs were $26.1 million and $50.1 million, as compared to $16.7 million and $40.9 million for the three and six months ended June 30, 2020 .

Total revenues for the Other category increased for the three and nine months ended September 30, 2021, as compared to the prior ye ar corresponding periods, primarily as a result of the activities at Penn Interactive.

T he three and nine months ended September 30, 2021 include a gross-up of gaming tax reimbursement amounts derived from arrangements which allow for our third party partners to operate online casinos and online sportsbooks under our gaming licenses of $44.0 million and $129.5 million, respectively.

Penn Interactive's operations continue to build with the launch of the online Barstool Sportsbook in eight new states in 2021, and with ongoing increases in online social and real-money gaming revenue.

Adjusted EBITDAR decreased by $43.5 million and $62.9 million for the three and nine months ended September 30, 2021, respectively, as compared to the prior year corresponding periods, primarily due to increased expenses related to the ramp up of the Penn Interactive online sportsbook and casino operations and increases in corporate overhead costs as operations returned to pre-pandemic levels.

Additionally, included in the three and nine months ended September 30, 2021 was a $12.5 million political contribution related to the California sports betting initiative.

For the three and nine months ended

September 30, 2021, corporate overhead costs were $27.8 million and $77.9 million, as compared to $20.1 million and $61.0 million for the three and nine months ended September 30, 2020.

Non-GAAP Financial Measures

16 unchanged sentences

depreciation and amortization;

and stock-based compensation expense) added back for Barstool Sports, Inc.

("Barstool Sports") and our Kansas Entertainment, LLC joint venture.

Adjusted EBITDA is inclusive of rent expense associated with our triple net operating leases (the operating lease components contained within our triple net master lease dated November 1, 2013 with Gaming and Leisure Properties, Inc.

("GLPI") and the triple net master lease assumed in connection with our acquisition of Pinnacle Entertainment, Inc.

and stock-based compensation expense) added back for Barstool Sports and our Kansas Entertainment, LLC joint venture.

(primarily land), our individual triple net leases with GLPI for the real estate assets used in the operation of Tropicana Las Vegas Hotel and Casino, Inc.

and Meadows Racetrack and Casino, and our individual triple net leases with VICI Properties Inc.

for the real estate assets used in the operations of Margaritaville Casino Resort and Greektown Casino-Hotel).

and Hollywood Casino at Meadows Racetrack, and our individual triple net leases with VICI for the real estate assets used in the operations of Margaritaville Casino Resort and Greektown Casino-Hotel).

Although Adjusted EBITDA includes rent expense associated with our triple net operating leases, we believe Adjusted EBITDA is useful as a supplemental measure in evaluating the performance of our consolidated results of operations.

We define Adjusted EBITDA margin as Adjusted EBITDA divided by consolidated revenues.

Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business, and is especially relevant in evaluating large, long-lived casino-hotel projects because it provides a perspective on the current effects of operating decisions separated from the substantial non-operational depreciation charges and financing costs of such projects.

Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business, and is especially relevant in evaluating large, long-lived casino-hotel projects because it provides a perspective on the current effects of operating decisions separated from the substantial nonoperational depreciation charges and financing costs of such projects.

We present Adjusted EBITDA because it is used by some investors and creditors as an indicator of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations.

These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare operating performance and value companies within our industry.

In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including us, have historically excluded from their Adjusted EBITDA calculations of certain corporate expenses that do not relate to the management of specific casino properties.

In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including us, have historically excluded from their Adjusted EBITDA calculations certain corporate expenses that do not relate to the management of specific casino properties.

However, Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with GAAP.

8 unchanged sentences

Adjusted EBITDAR margin is defined as Adjusted EBITDAR on a consolidated basis divided by revenues on a consolidated basis.

Adjusted EBITDAR margin is presented on a consolidated basis outside the financial statements solely as a valuation metric.

Adjusted EBITDAR margin is presented on a consolidated basis outside the financial statements solely as a

valuation metric.

We further define Adjusted EBITDAR margin by reportable segment as Adjusted EBITDAR for each segment divided by segment revenues.

1 unchanged sentence

The following table includes a reconciliation of net income (loss), which is determined in accordance with GAAP, to Adjusted EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures, as well as related margins:

For the three months ended June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

(dollars in millions) 2021 2020 2021 2020

1 unchanged sentence

Income tax expense (benefit) 36.4 (14.3) 110.1 (172.2)

Loss (income) from unconsolidated affiliates (9.1) 1.7 (18.7) (2.4)

Income from unconsolidated affiliates (9.1) (5.0) (27.8) (7.4)

Interest expense, net 144.9 142.3 418.6 407.1

5 unchanged sentences

5.2 39.5 14.3 46.7

Gain on disposal of assets (1)

Loss (gain) on disposal of assets (1)

0.3 (6.0) 0.1 (33.9)

6 unchanged sentences

Insurance recoveries, net of deductible charges (1)

Income (loss) from unconsolidated affiliates 9.1 (1.7) 18.7 2.4

Income from unconsolidated affiliates 9.1 5.0 27.8 7.4

Non-operating items of equity method investments (4)

1 unchanged sentence

Other expenses (1)(3)(5)

13.2 12.4 15.8 12.4

Adjusted EBITDA 364.3 343.6 1,171.0 419.1

8 unchanged sentences

As such, significant fluctuations in the price of the Company’s common stock during any reporting period could cause significant variances to budget on cash-settled stock-based awards.

During the three and six months ended June 30, 2021, the fluctuations in the price of the Company’s common stock resulted in respective gains and losses.

During the three and nine months ended September 30, 2021, the fluctuations in the price of the Company’s common stock resulted in losses.

(3) During 2020 and during the first quarter of 2021, acquisition costs were included within pre-opening and acquisition costs.

As of and for the quarter ended June 30, 2021, acquisition costs are presented as part of other expenses.

Beginning with the quarter ended June 30, 2021, acquisition costs are presented as part of other expenses.

(4) Consists principally of interest expense, net;

2 unchanged sentences

and stock-based compensation expense associated with Barstool Sports and our Kansas Entertainment joint venture.

(5) Consists of finance transformation costs associated with the implementation of our new Enterprise Resource Management system, other non-recurring transaction costs, and non-recurring restructuring charges (primarily severance) associated with a company-wide initiative, triggered by the COVID-19 pandemic, designed to (i) improve the operational effectiveness across our property portfolio;

We record our portion of Barstool Sports, Inc.'s net income or loss, including adjustments to arrive at Adjusted EBITDAR, one quarter in arrears.

(5) Consists of non-recurring acquisition and transaction costs, finance transformation costs associated with the implementation of our new Enterprise Resource Management system and non-recurring restructuring charges (primarily severance) associated with a company-wide initiative, triggered by the COVID-19 pandemic, designed to (i) im prove the operational effectiveness across our property portfolio;

(ii) improve the effectiveness and efficiency of our Corporate functional support area.

2 unchanged sentences

Our ongoing liquidity will depend on a number of factors, including available cash resources, cash flow from operations, acquisitions or investments, funding of construction for development projects, and our compliance with covenants contained under our debt agreements.

For the six months ended June 30, Change

For the nine months ended September 30, Change

(dollars in millions) 2021 2020 $ %

Net cash provided by (used in) operating activities $ 504.6 $ (130.9) $ 635.5 N/M

Net cash provided by operating activities $ 779.0 $ 220.8 $ 558.2 252.8%

Net cash used in investing activities $ (269.5) $ (235.9) $ (33.6) 14.2%

Net cash provided by financing activities $ 375.2 $ 1,445.5 $ (1,070.3) (74.0)%

N/M - Not meaningful

Operating Cash Flow

Net cash provided by operating activities of $504.6 million for the six months ended June 30, 2021, compared to net cash used of $130.9 million in the prior year period, is principally due to increased gaming revenues as operations at our properties benefited from strong visitation levels, increased length of play, and higher overall Adjusted EBITDAR margins, resulting from cost saving initiatives implemented throughout 2020, such as:

operating with a reduced workforce, focusing on higher margin gaming offerings, reducing marketing costs, and limiting certain lower margin food and beverage offerings.

Net cash provided by operating activities increased by $558.2 million for the nine months ended September 30, 2021, primarily due to increased gaming revenues as operations at our properties benefited from strong visitation levels, increased length of play, and higher overall Adjusted EBITDAR margins.

Operating cash flows in the prior year were negatively impacted by the temporary closures of all of our properties due to the COVID-19 pandemic, which significantly decreased cash receipts from customers, offset by the utilization of rent credits resulting from the sale of our Tropicana property.

Investing Cash Flow

The decrease of $119.4 million in net cash used in investing activities for the six months ended June 30, 2021 compared to the same period in the prior year was due to the completion of our investment in Barstool Sports in February of 2020, as well as decrease in capital expenditures, partially offset by $6.2 million in cash consideration related to the Hitpoint acquisition and purchases of gaming licenses and developed technology.

Cash used in investing activities for the nine months ended September 30, 2021 of $269.5 million is primarily due to the acquisitions of HitPoint, Perryville, and the remaining 50% interest of Sam Houston, purchases of gaming licenses, and capital expenditures.

For the nine months ended September 30, 2020, cash used in investing activities was primarily the completion of our investment in Barstool Sports in February of 2020 and capital expenditures.

Capital Expenditures

Capital expenditures are accounted for as either project capital (new facilities or expansions) or maintenance (replacement) capital expenditures.

Cash provided by operating activities as well as cash available under our Revolving Credit Facility is used to fund our capital expenditures for six months ended June 30, 2021 and 2020.

Capital expenditures for the six months ended June 30, 2021 and 2020 were $64.6 million and $73.7 million, respectively.

Capital expenditures related to our York and Morgantown development project were $25.6 million for the six months ended June 30, 2021.

Capital expenditures have decreased for the six months ended June 30, 2021, as compared to the prior year period, due to continued cautionary spending and uncertainty surrounding the COVID-19 pandemic, which has carried forward to the current year.

Cash provided by operating activities as well as cash available under our Revolving Credit Facility was available to fund our capital expenditures for nine months ended September 30, 2021 and 2020.

Capital expenditures for the nine months ended September 30, 2021 and 2020 were $137.8 million and $97.6 million, respectively.

Capital expenditures related to our York and Morgantown development project were $46.6 million for the nine months ended September 30, 2021 .

Capital expenditures have increased for the nine months ended September 30, 2021, as compared to the prior year period, due to the spending on our development projects as the properties prepared or continue to prepare for opening.

We expect that as operations continue to recover, capital expenditures will increase.

Financing Cash Flow

For the six months ended June 30, 2021, net cash provided by financing activities totaled $18.8 million compared to $1,155.1 million in net cash provided in the prior year period.

During the six months ended June 30, 2020, we had net borrowings under our Senior Secured Credit Facilities of $540.0 million, net cash proceeds of $322.2 million related to the issuance of our 2.75% Convertible Notes, and net cash proceeds of $331.2 million related to the issuance of the Company's common equity in May 2020, which primarily resulted in a decrease of $1,136.3 million as compared to the current year period.

For the nine months ended September 30, 2021, net cash provided by financing activities totaled $375.2 million compared to $1.4 billion in net cash provided in the prior year period.

During the nine months ended September 30, 2021, we had net cash proceeds of $400.0 million related to the issuance of our 4.125% Notes due 2029.

During the nine months ended September 30, 2020, we had net cash proceeds of $331.2 million and $957.6 million related to the issuance of the Company's common equity in May 2020 and September 2020, respectively, and $322.2 million of net proceeds related to the issuance of our Convertible Notes due 2026, with net repayments under our Senior Secured Credit Facilities of $175.0 million, which primarily resulted in a decrease of $1.1 billion as compared to the current year period.

Debt Issuances, Redemptions and Other Long-term Obligations

On March 13, 2020, we borrowed the remaining available amount of $430.0 million under our Revolving Credit Facility.

The Company elected to draw down the remaining available funds from its Revolving Credit Facility in order to maintain maximum financial flexibility in light of the COVID-19 pandemic.

On April 14, 2020, the Company entered into a second amendment to its Credit Agreement with its various lenders (the “Second Amendment”) to provide for certain modifications to financial covenants and interest rates during, and subsequent to a Covenant Relief Period, which concluded on May 7, 2021.

In May 2020, the Company completed an offering of $330.5 million aggregate principal amount of 2.75% unsecured convertible notes that mature, unless earlier converted, redeemed or repurchased, on May 15, 2026 (the “Convertible Notes”) at

a price of par.

After lender fees and discounts, net proceeds received by the Company were $322.2 million.

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Consistent with an obligor’s accounting under a debt instrument, period interest will be accreted using an effective interest rate of 27.0% and until such time that the claims and related obligation is settled.

The amount included in interest expense related to this obligation was $3.7 million and $5.2 million for the three and six months ended June 30, 2021, respectively.

On July 1, 2021.

the Company completed an offering of $400.0 million aggregate principal amount of 4.125% Senior Unsecured Notes that mature on July 1, 2029 (the “4.125% Notes”).

The amount included in interest expense related to this obligation was $6.9 million and $12.1 million for the three and nine months ended September 30, 2021, respectively.

On July 1, 2021, the Company completed an offering of $400.0 million aggregate principal amount of 4.125% Senior Unsecured Notes that mature on July 1, 2029 (the “4.125% Notes”).

The 4.125% Notes were issued at par and interest is payable semi-annually on January 1st and July 1st of each year.

The Company intends to use the proceeds from the 4.125% Notes for general corporate purposes.

At June 30, 2021, we had $2,468.3 million in aggregate principal amount of indebtedness, including $1,595.9 million outstanding under our Senior Secured Credit Facilities, $330.5 million outstanding under our Convertible Notes, $400.0 million outstanding under our 5.625% senior unsecured notes, and $141.9 million outstanding in other long-term obligations.

At September 30, 2021, we had $2.9 billion in aggregate principal amount of indebtedness, including $1.6 billion outstanding under our Senior Secured Credit Facilities, $400.0 million outstanding under our 5.625% senior unsecured notes, $400.0 million outstanding under our 4.125% senior unsecured notes, $330.5 million outstanding under our Convertible Notes, and $148.8 million outstanding in other long-term obligations.

No amounts were drawn on our Revolving Credit Facility.

We have no debt maturing prior to 2023.

As of June 30, 2021 we had conditional obligations under letters of credit issued pursuant to the Senior Secured Credit Facilities with face amounts aggregating to $27.8 million resulting in $672.2 million available borrowing capacity under our Revolving Credit Facility.

As of September 30, 2021 we had conditional obligations under letters of credit issued pursuant to the Senior Secured Credit Facilities with face amounts aggregating to $26.4 million resulting in $673.6 million available borrowing capacity under our Revolving Credit Facility.

Our Senior Secured Credit Facilities, 5.625% Notes and 4.125% Notes require us, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests.

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If we are unable to meet our financial covenants or in the event of a cross-default, it could trigger an acceleration of payment terms.

As of June 30, 2021, the Company was in compliance with all required financial covenants.

As of September 30, 2021, the Company was in compliance with all required financial covenants.

The Company believes that it will remain in compliance with all of its required financial covenants for at least the next twelve months following the date of filing this Quarterly Report on Form 10-Q with the SEC.

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All of the shares were issued at a public offering price of $18.00 per share, resulting in gross proceeds of $345.0 million, and net proceeds of $331.2 million after underwriter fees and discounts of $13.8 million.

On September 24, 2020, the Company completed a public offering of 14,000,000 shares of Penn Common Stock and on September 25, 2020, the underwriters exercised their right to purchase an additional 2,100,000 shares of Penn Common Stock, resulting in an aggregate public offering of 16,100,000 shares of Penn Common Stock.

All of the shares were issued at a public offering price of $61.00 per share, resulting in gross proceeds of $982.1 million, and net proceeds of $957.6 million after underwriter fees and discounts of $24.5 million.

Score Media and Gaming Inc.

The agreement is conditioned upon obtaining theScore shareholders’ approval and is subject to regulatory approval.

Under the terms of the agreement, 1317774 B.C.

Each Exchangeable Share will be exchangeable into 1 share of Penn Common Stock at the option of the holder, subject to certain adjustments.

The acquisition provides us with the technology, resources and audience reach to accelerate our media and sports betting strategy across North America.

Triple Net Leases

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The Company’s Master Leases are accounted for as either operating leases, finance leases, or financing obligations.

In addition, five of the gaming facilities used in our operations are subject to individual triple net leases.

As previously mentioned, we refer to the Penn Master Lease, the Pinnacle Master Lease, the Meadows Lease, the Margaritaville Lease, the Greektown Lease, the Tropicana Lease and the Morgantown Lease, collectively, as our Triple Net Leases.

In addition, six of the gaming facilities used in our operations are subject to individual triple net leases.

We refer to the Penn Master Lease, the Pinnacle Master Lease, the Perryville Lease, the Meadows Lease, the Margaritaville Lease, the Greektown Lease, the Tropicana Lease and the Morgantown Lease, collectively, as our Triple Net Leases.

Under our Triple Net Leases, in addition to lease payments for the real estate assets, we are required to pay the following, among other things:

(1) all facility maintenance;

(2) all insurance required in connection with the leased properties and the business conducted on the leased properties;

(3) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor);

(4) all tenant capital improvements;

and (5) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

(i) all facility maintenance;

(ii) all insurance required in connection with the leased properties and the business conducted on the leased properties;

(iii) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor);

(iv) all tenant capital improvements;

and (v) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

Additionally, our Triple Net Leases are subject to annual escalators and periodic percentage rent resets, as applicable.

See Note 9, “Leases,” in the notes to our unaudited Consolidated Financial Statements for further discussion and disclosure related to the Company's leases .

As a result of the annual escalator effective November 1, 2021, for the lease year ended October 31, 2021, the fixed component of rent under the Penn Master Lease increased by $5.6 million.

Payments to our REIT Landlords under Triple Net Leases

Total payments made to our REIT Landlords, GLPI and VICI, were as follows:

For the three months ended June 30, For the six months ended June 30,

For the three months ended September 30, For the nine months ended September 30,

(in millions) 2021 2020 2021 2020

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82.4 81.3 245.8 245.6

Perryville Lease 1.9 — 1.9 —

Meadows Lease (1)

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$ 228.5 $ 228.1 $ 683.6 $ 668.5

(1) During the three and six months ended June 30, 2020, we utilized rent credits to pay $72.1 million, $54.2 million and $4.5 million of rent under the Penn Master Lease, Pinnacle Master Lease and Meadows Lease, respectively.

(1) During the three and nine months ended September 30, 2020, we utilized rent credits to pay $83.0 million, $54.2 million and $4.5 million and $155.1 million, $108.4 million and $9.0 million of rent under the Penn Master Lease, Pinnacle Master Lease and Meadows Lease, respectively.

(2) Rent payable under the Tropicana Lease is nominal.

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(iii) that the U.S.

economy and our business will recover to levels that existed prior to the COVID-19 pandemic and on what time frame;

economy and our business will maintain its recovery from the impacts of the COVID-19 pandemic;

(iv) that our anticipated earnings projections will be realized;

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Risk Factors” of this Form 10-Q and Part I, Item 1A.

“Risk Factors” of the

Company’s Form 10-K for the year ended December 31, 2020 for a discussion of additional risks related to the Company’s capital structure.

“Risk Factors” of the Company’s Form 10-K for the year ended December 31, 2020 for a discussion of additional risks related to the Company’s capital structure.

We have historically maintained a capital structure comprised of a mix of equity and debt financing.

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A complete discussion of our critical accounting estimates is included in our Form 10-K for the year ended December 31, 2020.

There have been no significant changes in our critical accounting estimates during the six months ended June 30, 2021.

There have been no significant changes in our critical accounting estimates during the nine months ended September 30, 2021.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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the impact of COVID-19 on general economic conditions, capital markets, unemployment, and the Company’s liquidity, operations, supply chain and personnel;

the potential benefits of the Perryville transaction with Gaming and Leisure Properties, Inc.;

the potential benefits of the Hitpoint transaction;

the Company’s estimated cash burn and future liquidity, future revenue and Adjusted EBITDAR, including from the Company’s iGaming business in Pennsylvania and Michigan;

the expected benefits and potential challenges of the investment in Barstool Sports;

the expected launch of the Barstool-branded mobile sports betting product in future states and its future revenue and profit contributions;

the potential benefits of the Company’s recently completed acquisition of theScore;

the Company’s estimated cash burn and future liquidity, future revenue and Adjusted EBITDAR, including from the Company’s investment in Barstool sports and its ongoing launch of its iGaming products and online sports betting products, including the Barstool Sportsbook mobile app;

the Company’s expectations of future results of operations and financial condition, including margins;

the Company’s expectations for its properties and the potential benefits of the cashless, cardless and contactless (“3Cs”) technology;

the Company’s development projects or its iGaming initiatives;

the Company’s expectations for its properties;

the Company’s development projects;

the timing, cost and expected impact of planned capital expenditures on the Company’s results of operations;

the anticipated opening dates of the Company’s retail sportsbooks in future states;

the Company’s expectations with regard to acquisitions, potential divestitures and development opportunities, as well as the integration of and synergies related to any companies the Company have acquired or may acquire;

the Company’s expectations with regard to acquisitions, potential divestitures and development opportunities, as

well as the integration of and synergies related to any companies the Company have acquired or may acquire;

the outcome and financial impact of the litigation in which the Company is or will be periodically involved;

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(e) the Company’s ability to remain in compliance with the financial covenants of its debt obligations;

(f) actions to reduce costs and improve efficiencies to mitigate losses as a result of the COVID-19 pandemic that could negatively impact

guest loyalty and the Company’s ability to attract and retain employees;

(f) actions to reduce costs and improve efficiencies to mitigate losses as a result of the COVID-19 pandemic that could negatively impact guest loyalty and the Company’s ability to attract and retain employees;

(g) the outcome of any legal proceedings that may be instituted against the Company or its directors, officers or employees;

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(q) with respect to new casinos, risks relating to construction, and its ability to achieve its expected budgets, timelines and investment returns;

(r) the Company may not be able to achieve the anticipated financial returns from the acquisition of Score Media & Gaming, Inc.

(“theScore”), including due to fees, costs and taxes in connection with the integration of theScore and expansion of its betting and content platform;

(s) the closing of the acquisition of theScore may be delayed or may not occur at all, for reasons beyond the Company’s control;

(t) the requirement to satisfy the closing conditions in the agreement with theScore, including receipt of regulatory approvals and the approval of shareholders of theScore;

(u) there is significant competition in the interactive gaming market;

(v) potential adverse reactions or changes to business or regulatory relationships resulting from the announcement or completion of the acquisition of theScore;

(w) the ability of the Company or theScore to retain and hire key personnel;

(x) the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the Company and theScore to terminate the agreement between the companies;

(y) the outcome of any legal proceedings that may be instituted against the Company, theScore or their respective directors, officers or employees;

and (z) other factors as discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each as filed with the U.S.

(r) the Company may not be able to achieve the anticipated financial returns from the acquisition of “theScore”, including due to fees, costs and taxes in connection with the integration of theScore and expansion of its betting and content platform;

(s) there is significant competition in the interactive gaming market;

(t) potential adverse reactions or changes to business or regulatory relationships resulting from the acquisition of theScore;

(u) the ability of the Company to retain and hire key personnel;

and (v) other factors as discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 , subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each as filed with the U.S.

Securities and Exchange Commission.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis