What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-04 · 217 added, 305 removed, 268 unchanged (66% 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 omni-channel provider 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, and online casinos (“iGaming”).

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 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.

Penn National Gaming, Inc., together with its subsidiaries (“Penn,” the “Company,” “we,” “our,” or “us”), is North America’s leading provider of integrated entertainment, sports content, and casino gaming experiences.

A member of the S&P 500, Penn operates 44 properties in 20 states, online sports betting in 13 jurisdictions and iCasino in five, under a portfolio of well-recognized brands including Hollywood Casino ® , L'Auberge ® , Barstool Sportsbook ® and theScore Bet ® .

Penn’s highly differentiated strategy, which is focused on organic cross-sell opportunities, is reinforced by its investments in owned technology, including a state-of-the-art media and betting platform and an in-house iCasino content studio.

The Company’s portfolio is further bolstered by its industry-leading my choice ® customer loyalty program (the “my choice program”), which offers its over 25 million members a unique set of rewards and experiences across business channels.

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”).

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 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

In February 2020, we closed on our investment in Barstool Sports pursuant to a stock purchase agreement with Barstool Sports and certain stockholders of Barstool Sports, in which we purchased 36% (inclusive of 1% on a delayed basis) of the common stock of Barstool Sports for a purchase price of $161.2 million.

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.

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 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).

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

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

(“Tropicana”) 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 Racetrack and Casino Lease, beginning in May 2020.

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

On January 11, 2022, Penn entered into a definitive purchase agreement to sell its outstanding equity interest in Tropicana, which has the gaming license and operates the Tropicana, to Bally’s Corporation (“Bally’s”).

This transaction is expected to close within the second 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.

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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.

On July 1, 2021, we completed the 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 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.

On August 1, 2021, we completed the 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.

On October 19, 2021, we acquired 100% of Score Media and Gaming, Inc.

(“theScore”) for a purchase price of approximately $2.1 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 “Purchaser”), an indirectly wholly owned subsidiary of Penn, acquired each of the issued and outstanding theScore shares (other than those held by Penn 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 for approximately $1.0 billion.

Each Exchangeable Share will be exchangeable into one 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.

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

We believe that our portfolio of assets provides us with the benefit of geographically-diversified cash flow from operations.

We expect to continue to expand our gaming operations through the implementation and execution of a disciplined capital expenditure program at our existing properties, the pursuit of strategic acquisitions and investments, and the development of new gaming properties.

In addition, the partnership with Barstool Sports, Inc.

(“Barstool Sports”) and the acquisition of theScore reflect our strategy to continue evolving from the nation’s largest regional gaming operator to a best-in-class omni-channel provider of retail and online gaming and sports betting entertainment.

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.

We have also made investments in joint ventures that we believe will allow us to capitalize on additional gaming opportunities in certain states if legislation or referenda are passed that permit and/or expand gaming in these jurisdictions and we are selected as a licensee.

As the COVID-19 pandemic evolves, we continue to adjust operations and cost structures at our properties to reflect the changing economic and health and safety conditions.

We also continue to focus on revenue and cost synergies from recent acquisitions, and offering our customers additional gaming experiences through our omni-channel distribution strategy.

We also continue to focus on revenue and cost synergies from recent acquisitions, technology investments, and offering our customers additional gaming experiences through our omni-channel distribution strategy.

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 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.

to expand our loyalty program, as well as through accretive investments or acquisitions, 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 iCasino 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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video lottery;

“iGaming” (which includes online sports betting and online social casino, bingo, and iCasino products);

online and retail sports betting;

sports media companies;

gaming at taverns;

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and other forms of gaming in the U.S.

See the “Segment comparison of the three months ended March 31, 2022 and 2021” section below for discussions of the impact of competition on our results of operations by reportable segment.

Key Performance Indicators

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However, based on our experience, we can generally offer some insight into the factors that we believe are likely to account for such changes and which factors may have a greater impact than others.

For example, decreases in discretionary consumer spending have historically been brought about by weakened general economic conditions, such as lackluster recoveries from recessions, high unemployment levels, higher income taxes, low levels of consumer confidence, weakness in the housing market, high fuel or other transportation costs, and most recently, the effects of the COVID-19 pandemic.

In addition, visitation and the volume of play have historically been negatively impacted by significant construction surrounding our properties, adverse regional weather conditions and natural disasters.

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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 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.

Our gaming revenue is derived primarily from slot machines (which represented approximately 81% and 85% of our gaming revenue for the three months ended March 31, 2022 and 2021) 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.

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

Reportable Segments

We view each of our gaming and racing properties as an operating segment with the exception of our two properties in Jackpot, Nevada, which we view as one operating segment.

We consider our combined VGT operations, by state, to be separate operating segments.

We aggregate our operating segments into four reportable segments:

We have aggregated our operating segments into five reportable segments.

Retail operating segments are based on the similar characteristics within the regions in which they operate:

Northeast, South, West, and Midwest.

Our Interactive segment includes the operating results of our wholly-owned interactive division, Penn Interactive Ventures, LLC (“Penn Interactive”), theScore, and the Company's proportionate share of earnings attributable to its equity method investment in Barstool Sports.

We view each of our gaming and racing properties as an operating segment with the exception of our two properties in Jackpot, Nevada, which we view as one operating segment.

We consider our combined Video Gaming Terminal (“VGT”) operations, by state, to be separate operating segments.

For a listing of our gaming properties and VGT operations included in each reportable segment, see Note 2, “Significant Accounting Policies,” in the notes to our unaudited Consolidated Financial Statements.

RESULTS OF OPERATIONS

The following table highlights our revenues, net income (loss), and Adjusted EBITDA, on a consolidated basis, as well as our revenues and Adjusted EBITDAR by reportable segment.

The following table highlights our revenues, net income, and Adjusted EBITDA, on a consolidated basis, as well as our revenues and Adjusted EBITDAR by reportable segment.

Such segment reporting is on a basis consistent with how we measure our business and allocate resources internally.

We consider net income (loss) to be the most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) to Adjusted EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures.

We consider net income to be the most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) to Adjusted EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures.

Refer to “Non-GAAP Financial Measures” below for the definitions of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDAR, and Adjusted EBITDAR margin;

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

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

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

For the three months ended March 31,

(dollars in millions) 2022 2021

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Midwest segment 282.9 234.7

96.5 23.7 282.1 71.6

Interactive segment 141.5 86.3

Intersegment eliminations (2)

(6.7) (2.5) (25.6) (5.4)

Total $ 1,564.2 $ 1,274.9

Net income (loss) $ 86.1 $ 141.2 $ 375.7 $ (681.8)

Net income $ 51.6 $ 90.9

Adjusted EBITDAR:

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Midwest segment 125.5 106.0

(58.1) (14.6) (105.1) (42.2)

Interactive segment (10.0) 1.3

(23.7) (22.6)

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Adjusted EBITDA $ 434.6 $ 336.6

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

Net income margin 3.3 % 7.1 %

Adjusted EBITDAR margin

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27.8 % 26.4 %

(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”).

The Other category also includes Penn Interactive, which operates our social gaming, internally-branded retail sportsbooks, iGaming and our Barstool Sports mobile app.

(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 on August 1, 2021), the Company’s joint venture interests in Freehold Raceway, and our management contract for Retama Park Racetrack.

Expenses incurred for corporate and shared services activities that are directly attributable to a property or are otherwise incurred to support a property are allocated to each property.

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

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;

income taxes;

depreciation and amortization;

and stock-based compensation expense).

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.

(2) Primarily represents the elimination of intersegment revenues associated with our internally-branded retail sportsbooks, which are operated by Penn Interactive.

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As noted within “Non-GAAP Financial Measures” below, Adjusted EBITDAR, and the related margin, is presented on a consolidated basis outside the financial statements solely as a valuation metric.

(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.

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

VICI) (“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”.

As a result of the Lease Modification defined in Note 9, “Leases ” to our unaudited Consolidated Financial Statements, only the land and building components associated with the operations of Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course are classified as operating leases which is recorded to rent expense, as compared to prior to the Lease Modification, whereby the land components of substantially all of the Master Lease properties were classified as operating leases and recorded to rent expense.

Subsequent to the Lease Modification, the land components associated with the properties are primarily classified as finance leases.

Consolidated comparison of the three months ended March 31, 2022 and 2021.

The following table presents our consolidated revenues:

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

For the three months ended March 31, Change

(dollars in millions) 2022 2021 $ %

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Total revenues $ 1,564.2 $ 1,274.9 $ 289.3 22.7 %

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.

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.

Gaming revenues for the three months ended March 31, 2022 increased $209.2 million, compared to the prior year period primarily due to easing of restrictions, strong visitation levels among all age groups, increased length of play, increased spend per guest, continued growth in our online, and sports betting revenues and the inclusion of the operating results of three new properties:

Hollywood Casino Perryville, which was acquired on July 1, 2021;

Hollywood Casino York, which opened August 12, 2021;

and Hollywood Casino Morgantown, which opened December 22, 2021.

During the prior year period, gaming revenues were negatively impacted by restrictions on gaming patron capacity in place across all of our properties within the quarter.

Food, beverage, hotel and other revenues for the three months ended March 31, 2022 increased $80.1 million compared to the prior year period, primarily due to easing of restrictions, strong visitation levels among all age groups, and increased offerings and hours of operations, as well as the inclusion of the operating results from our three new properties discussed above.

During the prior year period, food, beverage, hotel and other revenues were negatively impacted as our properties operated within locally-restricted gaming capacity and limited food and beverage, hotel capacity, and other amenity offerings .

See “Segment comparison of the three months ended March 31, 2022 and 2021 ” 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 September 30, Change For the nine months ended September 30, Change

For the three months ended March 31, Change

(dollars in millions) 2022 2021 $ %

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Depreciation and amortization 118.2 81.3 36.9 45.4 %

Impairment losses — — — — % — 616.1 (616.1) (100.0) %

Total operating expenses $ 1,272.2 $ 1,058.4 $ 213.8 20.2 %

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.

Gaming expenses for the three months ended March 31, 2022 increased $158.8 million, compared to the prior year period, 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 and promotional expenses due to increased volumes, while still remaining below pre-pandemic levels.

During the three months ended March 31, 2021 , all of our properties operated under restricted gaming patron capacity with lower gaming activity, resulting in lower gaming expenses.

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 interactive operations.

Fo od, beverage, hotel and other expenses for the three months ended March 31, 2022 increased $48.8 million compared to the prior year period, primarily due to increased offerings and hours of operations which resulted in increases in payroll expenses and cost of sales.

The prior year quarter was impacted by reduced hotel capacity and limited food and beverage options .

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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gains and losses on disposal of assets;

insurance recoveries, net of deductible charges;

changes in the fair value of our contingent purchase price obligations;

expense associated with cash-settled stock-based awards (including changes in fair value thereto);

restructuring costs (primarily severance) associated with a company-wide initiative triggered by the COVID-19 pandemic;

and rent expense associated with our triple net operating leases.

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 nine months ended September 30, 2021.

For the three months ended March 31, 2022, general and administrative expenses decreased by $30.7 million period over period primarily due to a decrease in the rent costs associated with our Master Leases of $50.3 million, representing changes in lease classifications from operating to finance as a result of the Lease Modification as described in Note 9, “ Leases ” to our unaudited Consolidated Financial Statements.

In addition, general and administrative expenses decreased by $24.4 million due to a reduction in the Company’s cash-settled stock-based awards expense which is primarily driven by the Company’s stock price, and an $8.8 million gain representing insurance proceeds received in excess of the receivable due to Hurricane Laura in 2020.

Offsetting these decreases are increased payroll costs of $19.7 million, increased stock compensation costs of $12.8 million, and legal and other professional costs associated with acquisitions of $6.7 million, primarily related to the acquisition of theScore.

Depreciation and amortization for the three months ended March 31, 2022 increased period over period primarily due to increased depreciation costs associated with our Master Leases of $30.2 million, representing changes in lease classifications from operating to finance as a result of the Lease Modification as described in Note 9, “Leases” to our unaudited Consolidated Financial Statements.

Other income (expenses)

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

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

For the three months ended March 31, Change

(dollars in millions) 2022 2021 $ %

2 unchanged sentences

Income from unconsolidated affiliates $ 8.7 $ 9.6 $ (0.9) (9.4) %

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

Income tax benefit (expense) $ (36.4) $ 14.3 $ (50.7) N/M $ (110.1) $ 172.2 $ (282.3) N/M

Other $ (40.7) $ 21.1 $ (61.8) N/M

Income tax expense $ (47.6) $ (20.6) $ (27.0) 131.1 %

N/M - Not meaningful

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.

Interest expense, net increased for the three months ended March 31, 2022 as compared to the prior year period, primarily due to a net $22.8 million increase in Master Lease interest costs due to changes in lease classifications as a result of the Lease Modification as described in Note 9, “Leases” to our unaudited Consolidated Financial Statements.

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

The decrease for the three months ended March 31, 2022, compared to the prior year period, was due to lower income earned from our investments in unconsolidated affiliates.

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 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.

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 iCasino market access across our portfolio.

For the three months ended March 31, 2022, other income primarily consisted of an unrealized holding loss of $38.7 million, compared to an unrealized holding gain of $26.1 million for the three months ended March 31, 2021.

Income tax expense was a $47.6 million and $20.6 million expense for the three months ended March 31, 2022 and 2021, respectively.

Our effective tax rate (income taxes as a percentage of income from operations before income taxes) including discrete items was 48.0% and 18.5% for the three months ended March 31, 2022 and 2021, respectively.

The change in the effective rate for the three months ended March 31, 2022 as compared to the prior year period was primarily due to an increase in the valuation allowance attributed to the Lease Modification during the period ended March 31, 2022.

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 nine months ended September 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 months ended March 31, 2022 and 2021

Northeast Segment

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

For the three months ended March 31, Change

(dollars in millions) 2022 2021 $ %

3 unchanged sentences

Adjusted EBITDAR $ 205.2 $ 193.2 $ 12.0 6.2 %

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

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.

Adjusted EBITDAR margin 31.2 % 33.8 % -260 bps

The Nort heast segment’s revenues for the three months ended March 31, 2022 increased by $87.6 million over the prior year period, primarily due to easing of restrictions, strong visitation levels among all age groups, increased length of play, and increased spend per guest.

In addition, the Northeast segment includes operating results from our three new properties:

Hollywood Casino Perryville, Hollywood Casino York, and Hollywood Casino Morgantown.

During the three months ended March 31, 2021, our Nort heast segment’s operating results were negatively impacted as our properties operated within locally-restricted gaming capacity and limited food and beverage and other amenity offerings .

Additionally, our Pennsylvania properties were temporarily closed for three days in January 2021, due to COVID-19 restrictions.

For the three months ended March 31, 2022, the Northeast segment’s Adjusted EBITDAR increased $12.0 million primarily due to an increase in gaming and non-gaming revenues, as discussed above.

Adjusted EBITDAR margin decreased by 260 basis points to 31.2% due to increased gaming and non-gaming activity as operating restrictions eased, which resulted in increased payroll cost, cost of sales, and marketing expenses.

South Segment

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

For the three months ended March 31, Change

(dollars in millions) 2022 2021 $ %

3 unchanged sentences

Adjusted EBITDAR $ 146.5 $ 133.9 $ 12.6 9.4 %

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

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

Adjusted EBITDAR margin 42.9 % 45.3 % -240 bps

The South segment’s revenues for the three months ended March 31, 2022 increased by $45.5 million over the prior year period, primarily due to strong visitation levels among all age groups, increased length of play, and increased spend per guest.

During the three months ended March 31, 2021, our South segment’s operating results were impacted as our properties operated within locally-restricted gaming capacity and limited food and beverage and other amenity offerings .

For the three months ended March 31, 2022, the South segment’s Adjusted EBITDAR increased $12.6 million primarily due to the increases in gaming and non gaming revenues.

Adjusted EBITDAR margin decreased by 240 basis points to 42.9% due to increased gaming and non-gaming activity, which resulted in increased payroll cost, cost of sales, and marketing expenses.

For the three months ended March 31, Change

(dollars in millions) 2022 2021 $ %

3 unchanged sentences

Adjusted EBITDAR $ 51.2 $ 35.2 $ 16.0 45.5 %

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

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.

Adjusted EBITDAR margin 36.3 % 36.4 % -10 bps

The West segment’s revenues for the three months ended March 31, 2022 increased by $44.3 million over the prior year period, primarily due to easing of restrictions, strong visitation levels among all age groups, increased length of play, and increased spend per guest.

During the three months ended March 31, 2021, our West segment’s operating results were negatively impacted by the temporary closure of our Zia Park property due to the COVID-19 pandemic, which remained closed until March 5, 2021.

Additionally, during the three months ended March 31, 2021 , our other properties in the West segment operated within locally restricted gaming and hotel capac ity and limited food and beverage and other amenities offerings.

For the three months ended March 31, 2022, the West segment’s Adjusted EBITDAR increased $16.0 million primarily due to increases in gaming and non gaming revenues while Adjusted EBITDAR margin remained relatively unchanged.

Midwest Segment

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

For the three months ended March 31, Change

(dollars in millions) 2022 2021 $ %

3 unchanged sentences

Adjusted EBITDAR $ 125.5 $ 106.0 $ 19.5 18.4 %

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

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

Adjusted EBITDAR margin 44.4 % 45.2 % -80 bps

The Midwest segment’s revenues for the three months ended March 31, 2022 increased by $48.2 million over the prior year period, primarily due to easing of restrictions, strong visitation levels among all age groups, increased length of play and increased spend per guest.

During the three months ended March 31, 2021, our Midwest segment’s operating results were negatively impacted as our properties operated within locally-restricted gaming capacity and limited food and beverage and other amenity offerings .

Additionally, our Illinois properties were temporarily closed for periods between fifteen and twenty-two days in January 2021, due to COVID-19 restrictions.

For the three months ended March 31, 2022, the Midwest segment’s Adjusted EBITDAR increased $19.5 million primarily due to increases in gaming and non gaming revenues.

Adjusted EBITDAR margin decreased by 80 basis points to 44.4% primarily due to an increase in gaming and non gaming activity which resulted in increased payroll cost, cost of sales, and marketing expenses.

Interactive Segment

For the three months ended March 31, Change

(dollars in millions) 2022 2021 $ %

Gaming $ 62.9 $ 23.6 $ 39.3 166.5 %

Food, beverage, hotel and other 78.6 62.7 15.9 25.4 %

Total revenues $ 141.5 $ 86.3 $ 55.2 64.0 %

Adjusted EBITDAR $ (10.0) $ 1.3 $ (11.3) N/M

Adjusted EBITDAR margin (7.1) % 1.5 % N/M

N/M - Not meaningful

The Interactive segment, which was previously reported within Other, includes the operating results of Penn Interactive, theScore, and the Company’s proportionate share of earnings attributable to its equity method investment in Barstool Sports.

The Interactive segment’s revenues for the three months ended March 31, 2022 increased by $55.2 million over the prior year period, primarily due to the expansion of Barstool Sportsbook and Casino app as well as the inclusion of revenues from theScore, which was acquired on October 19, 2021.

Additionally, revenues are inclusive of a tax gross-up of $50.3 million and $39.4 million for the three months ended March 31, 2022 and 2021, respectively.

For the three months ended March 31, 2022, the Interactive segment’s Adjusted EBITDAR and Adjusted EBITDAR margin decreased primarily due increased expenses related to ramping and launching the Penn Interactive online sportsbook and casino operations in new states, and the inclusion of theScore financial results, as indicated above.

For the three months ended March 31, Change

(dollars in millions) 2022 2021 $ %

Food, beverage, and other $ 7.3 $ 1.6 $ 5.7 356.3 %

1 unchanged sentence

Adjusted EBITDAR $ (23.7) $ (22.6) $ (1.1) 4.9 %

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.

Other consists of the Company’s stand-alone racing operations, as well as corporate overhead costs, which primarily includes 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.

Revenues for the three months ended March 31, 2022, have increased as compared to the prior ye ar period, primarily due to the acquisition of Sam Houston, the remaining 50% of which was acquired on August 1, 2021.

Adjusted EBITDAR decreased by $1.1 million for the three months ended March 31, 2022, as compared to the prior year period, primarily due to increased corporate overhead costs that are reflective of the current operating environment.

Non-GAAP Financial Measures

11 unchanged sentences

changes in the estimated fair value of our contingent purchase price obligations;

gain or loss on disposal of assets, the difference between budget and actual expense for cash-settled stock-based awards;

gain or loss on disposal of assets;

the difference between budget and actual expense for cash-settled stock-based awards;

pre-opening expenses;

3 unchanged sentences

and stock-based compensation expense) added back for 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 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 Las Vegas Hotel and Casino, Inc.

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).

GLPI) (“GLPI”) and the triple net master lease assumed in connection with our acquisition of Pinnacle Entertainment, Inc., 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 Hollywood Casino at Meadows Racetrack, and our individual triple net leases with VICI Properties Inc.

VICI) (“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 nonoperational 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 non-operational 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 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 of 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.

Adjusted EBITDA information is presented as a supplemental disclosure, as management believes that it is a commonly used measure of performance in the gaming industry and that it is considered by many to be a key indicator of the Company’s operating results.

Adjusted EBITDA information is presented as a supplemental disclosure, as management believes that it is a commonly used

measure of performance in the gaming industry and that it is considered by many to be a key indicator of the Company’s operating results.

We define Adjusted EBITDAR as Adjusted EBITDA (as defined above) plus rent expense associated with triple net operating leases (which is a normal, recurring cash operating expense necessary to operate our business).

6 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.

Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures

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 September 30, For the nine months ended September 30,

The following table includes a reconciliation of net income, 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 March 31,

(dollars in millions) 2022 2021

Net income (loss) $ 86.1 $ 141.2 $ 375.7 $ (681.8)

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

Net income $ 51.6 $ 90.9

Income tax expense 47.6 20.6

Income from unconsolidated affiliates (8.7) (9.6)

Interest expense, net 160.8 135.7

Other income (19.2) (68.0) (43.1) (75.5)

Operating income (loss) 239.1 196.2 833.5 (529.8)

Other (income) expenses 40.7 (21.1)

Operating income 292.0 216.5

Stock-based compensation (1)

8.5 2.8 21.9 11.7

Cash-settled stock-based award variance (1)(2)

5.2 39.5 14.3 46.7

Loss (gain) on disposal of assets (1)

0.3 (6.0) 0.1 (33.9)

Gain on disposal of assets (1)

Contingent purchase price (1)

0.6 — 1.9 (1.4)

Pre-opening expenses (1)(3)

1.6 4.8 2.8 11.5

Depreciation and amortization 118.2 81.3

Impairment losses — — — 616.1

Insurance recoveries, net of deductible charges (1)

1 unchanged sentence

Non-operating items of equity method investments (4)

3.0 1.2 6.0 3.2

Other expenses (1)(3)(5)

13.2 12.4 15.8 12.4

Adjusted EBITDA 434.6 336.6

Rent expense associated with triple net operating leases (1)

116.0 109.0 342.9 310.3

Adjusted EBITDAR $ 494.7 $ 447.0

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

Net income margin 3.3 % 7.1 %

Adjusted EBITDA margin 27.8 % 26.4 %

Adjusted EBITDAR margin 31.6 % 35.1 %

( 1) These items are included in “General and administrative” within the Company’s unaudited Consolidated Statements of Operations and Comprehensive Income (Loss).

( 1) These items are included in “General and administrative” within the Company’s unaudited Consolidated Statements of Operations.

(2) Our cash-settled stock-based awards are adjusted to fair value each reporting period based primarily on the price of the Company’s common stock.

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 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.

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

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

3 unchanged sentences

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

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.

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, and finance transformation costs associated with the implementation of our new Enterprise Resource Management system.

LIQUIDITY AND CAPITAL RESOURCES

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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 nine months ended September 30, Change

For the three months ended March 31, Change

(dollars in millions) 2022 2021 $ %

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Net cash used in investing activities $ (39.6) $ (27.3) $ (12.3) 45.1%

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

Net cash (used in) provided by financing activities $ (239.2) $ 60.1 $ (299.3) N/M

N/M - Not meaningful

Operating Cash Flow

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.

Net cash provided by operating activities increased by $44.4 million for the three months ended March 31, 2022, primarily due to increased gaming and non gaming revenues as operations at our properties benefited from strong visitation levels among all age groups and increased length of play.

Investing Cash Flow

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.

Cash used in investing activities for the three months ended March 31, 2022 of $39.6 million is primarily due to capital expenditures of $65.6 million, offset by insurance proceeds received for losses incurred due to Hurricane Laura in 2020.

For the three months ended March 31, 2021, cash used in investing activities of $27.3 million was primarily due to 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 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.

Cash provided by operating activities as well as cash available under our Revolving Facility was available to fund our capital expenditures for three months ended March 31, 2022 and 2021.

Capital expenditures for the three months ended March 31, 2022 and 2021 were $65.6 million and $25.7 million, respectively.

Capital expenditures related to our York and Morgantown development project were $11.0 million and $10.9 million for the three months ended March 31, 2022 and 2021, respectively.

F or the year ending December 31, 2022, our anticipated capital expenditures are approximately $300 million, which includes capital expenditures required under our Triple Net Leases, which require us to spend a specified percentage of net revenues.

Financing Cash Flow

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 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.

Interest on the Convertible Notes is payable on May 15th and November 15th of each year, commencing November 15, 2020.

In February 2021, the Company entered into a financing arrangement providing the Company with upfront cash proceeds while permitting us to participate in future proceeds on certain claims.

The financing obligation has been classified as a non-current liability, which is expected to be settled in a future period of which the principal is contingent and predicated on other events.

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 $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 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 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.

For the three months ended March 31, 2022, net cash used in financing activities totaled $239.2 million, primarily due to $175.1 million of repurchases of our common stock.

During the three months ended March 31, 2021, cash provided by financing activities of $60.1 million was primarily due to net cash proceeds of $72.5 million from other long-term obligations .

Borrowings and Repayments of Long-term Debt

On May 3, 2022, the Company entered into a Second Amended and Restated Credit Agreement with its various lenders (the “Second Amended and Restated Credit Agreement”).

The Second Amended and Restated Credit Agreement provides for a $1.0 billion revolving credit facility, undrawn at close, (the “Revolving Credit Facility”), a five-year $550.0 million term loan A facility (the “Term Loan A”) and a seven-year $1.0 billion term loan B facility (the “Term Loan B”) facilities (together, the “Credit Facilities”).

The proceeds from the Credit Facilities were used to repay the existing Term Loan A Facility and Term Loan B-1 Facility balances.

The Credit Facilities contain customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and certain of its subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, pay dividends and make other restricted payments and prepay certain indebtedness that is subordinated in right of payment to the obligations under the Credit Facilities.

The Credit Facilities contain two financial covenants:

a maximum total net leverage ratio of 4.50 to 1.00, which is subject to a step up to 5.00 to 1.00 in the case of certain significant acquisitions, and a minimum interest coverage ratio of 2.00 to 1.00.

The Credit Facilities also contain certain customary affirmative covenants and events of default, including the occurrence of a change of control (as defined in the documents governing the Credit Facilities), termination and certain defaults under the Penn Master Lease and the Pinnacle Master Lease (both of which are defined in Note 9, “Leases” ).

At March 31, 2022, we had $2.8 billion in aggregate principal amount of indebtedness, including $1.5 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 $151.9 million outstanding in other long-term obligations.

No amounts were drawn on our Revolving Facility.

After the refinancing of our Senior Secured Credit Facilities discussed above, we have no debt maturing prior to 2026.

As of March 31, 2022 we had conditional obligations under letters of credit issued pursuant to the Senior Secured Credit Facilities with face amounts aggregating to $25.7 million resulting in $674.3 million available borrowing capacity under our Revolving 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.

In addition, our Senior Secured Credit Facilities, 5.625% Notes and 4.125% Notes, restrict, among other things, our ability to incur additional indebtedness, incur guarantee obligations, amend debt instruments, pay dividends, create liens on assets, make investments, engage in mergers or consolidations, and otherwise restrict corporate activities.

Our debt agreements also contain customary events of default, including cross-default provisions that require us to meet certain requirements under the Penn Master Lease and the Pinnacle Master Lease (both of which are defined in Note 9, “Leases” of our u naudited Consolidated Financial Statements ), each with GLPI.

Our debt agreements also contain customary events of default, including cross-default provisions that require us to meet certain requirements under the Penn Master Lease and the Pinnacle Master Lease (both of which are defined in Note 9, “Leases” to our unaudited Consolidated Financial Statemen ts ), each with GLPI.

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

As of March 31, 2022, 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.

See Note 8, “Long-term Debt,” in the notes to our unaudited Consolidated Financial Statements for additional information of the Company’s debt and other long-term obligations.

Common Stock Offering

On May 14, 2020, the Company completed a public offering of 16,666,667 shares of Penn Common Stock and on May 19, 2020, the underwriters exercised their right to purchase an additional 2,500,000 shares of Penn Common Stock, resulting in an aggregate public offering of 19,166,667 shares of Penn Common Stock.

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.

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.

Share Repurchase Authorization

On February 1, 2022, the Board of Directors of Penn approved a $750.0 million share repurchase authorization.

The three-year authorization expires on January 31, 2025.

Repurchases by the Company will be subject to available liquidity, general market and economic conditions, alternate uses for the capital and other factors.

Share repurchases may be made from time to time through a 10b5-1 trading plan, open market transactions, block trades or in private transactions in accordance with applicable securities laws and regulations and other legal requirements.

There is no minimum number of shares that the Company is required to repurchase and the repurchase authorization may be suspended or discontinued at any time without prior notice.

During the three months ended March 31, 2022, the Company repurchased 3,802,408 shares of its common stock in open market transactions for $175.1 million at an average price of $46.04 per share.

The cost of all repurchased shares is recorded as “Treasury stock” within our unaudited Consolidated Balance Sheets.

The remaining availability under our $750.0 million share repurchase authorization was $574.9 million as of May 5, 2022.

Triple Net Leases

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the most significant of which are the Penn Master Lease and the Pinnacle Master Lease.

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

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

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:

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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 September 30, For the nine months ended September 30,

For the three months ended March 31,

(in millions) 2022 2021

Penn Master Lease $ 119.2 $ 117.9

$ 118.4 $ 120.3 $ 357.1 $ 343.4

Pinnacle Master Lease 82.5 81.3

82.4 81.3 245.8 245.6

Perryville Lease 1.9 —

Meadows Lease 6.2 6.2

6.2 6.7 18.6 20.2

Margaritaville Lease 5.9 5.9

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$ 229.3 $ 226.0

(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.

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

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Based on our current level of operations, we believe that cash generated from operations and cash on hand, together with amounts available under our Senior Secured Credit Facilities, will be adequate to meet our anticipated obligations under our Triple Net Leases, debt service requirements, capital expenditures and working capital needs for the foreseeable future.

However, our ability to generate sufficient cash flow from operations will depend on a range of economic, competitive and business factors, many of which are outside our control, including the ongoing impact of the COVID-19 pandemic.

However, our ability to generate sufficient cash flow from operations will depend on a range of economic, competitive and business factors, many of which are outside our control.

We cannot be certain:

(i) of the impact of any continuing operating restrictions to accommodate social distancing and health and safety guidelines on our properties and financial results, including the cash generated from operations;

(ii) of the magnitude and duration of the impact of the COVID-19 pandemic (including reoccurrences) on general economic conditions, capital markets, unemployment and our liquidity, operations, supply chain and personnel, including the potential that some or all of our properties may again be forced to close or cease operations for a certain period of time;

(iii) that the U.S.

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;

(v) that we will achieve the expected synergies from our acquisitions;

and (vi) that future borrowings will be available under our Senior Secured Credit Facilities or otherwise will be available in the credit markets to enable us to service our indebtedness or to make anticipated capital expenditures.

We caution you that the trends seen at our reopened properties, such as strong visitation and increased length of play, may not continue.

(i) of the impact of global supply chain disruptions and price inflation on the U.S.

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

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

(iii) that we will achieve the expected synergies from our acquisitions;

and (iv) that future borrowings will be available under our Senior Secured Credit Facilities or otherwise will be available in the credit markets to enable us to service our indebtedness or to make anticipated capital expenditures.

We caution you that the trends seen at our properties, such as strong visitation and increased length of play, may not continue.

In addition, while we anticipated that a significant amount of our future growth would come through the pursuit of opportunities within other distribution channels, such as retail and online sports betting, social gaming, retail gaming, and iGaming;

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If we consummate significant acquisitions in the future or undertake any significant property expansions, our cash requirements may increase significantly and we may need to make additional borrowings or complete equity or debt financings to meet these requirements.

See “Part II, Item 1A.

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

See Part I, Item 1A.

“Risk Factors” of the Company’s Form 10-K for the year ended December 31, 2021 for a discussion of additional risks related to the Company’s capital structure.

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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, 2021.

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

There have been no significant changes in our critical accounting estimates during the three months ended March 31, 2022.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

This Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements can be identified by the use of forward-looking terminology such as “expects,” “believes,” “estimates,” “projects,” “intends,” “plans,” “goal,” “seeks,” “may,” “will,” “should,” or “anticipates” or the negative or other variations of these or similar words, or by discussions of future events, strategies or risks and uncertainties.

Specifically, forward-looking statements include, but are not limited to, statements regarding:

continued demand for the gaming properties that have reopened and the possibility that the Company’s gaming properties may be required to close again in the future due to COVID-19;

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 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;

the Company's expectations of, and guidance regarding, future results of operations and financial condition, the assumptions provided regarding the guidance, including the scale and timing of the Company’s product and technology investments;

the Company’s anticipated share repurchases;

the Company's expectations with regard to results, and the impact of competition, in online sports betting, iGaming and retail/mobile sportsbooks, including the expected results of theScore Bet in Ontario;

the Company's launch of its Interactive segment's products in new jurisdictions and enhancements to existing Interactive segment products, including the transition to theScore's proprietary risk and trading platform in Ontario, the integration of the Barstool Sportsbook into theScore mobile app in the U.S., and the migration of the Barstool Sportsbook to theScore's player account management trading platforms;

the Company's expectations with regard to its future investments in Barstool Sports and the future success of its products;

the Company's expectations with respect to the integration and synergies related to the Company's integration of theScore and Barstool Sports;

the Company’s expectations with respect to the ongoing introduction and the potential benefits of the cashless, cardless and contactless (“3Cs”) technology;

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

the actions of regulatory, legislative, executive or judicial decisions at the federal, state or local level with regard to our business and the impact of any such actions;

the Company’s ability to maintain regulatory approvals for its existing businesses and to receive regulatory approvals for its new business partners;

the Company’s expectations with regard to the impact of competition in online sports betting, iGaming and retail/mobile sportsbooks as well as the potential impact of this business line on the Company’s existing businesses;

and the performance of the Company’s partners in online sports betting, iGaming and retail/mobile sportsbooks, including the risks associated with any new business, the actions of regulatory, legislative, executive or judicial decisions with regard to online sports betting, iGaming and retail/mobile sportsbooks and the impact of any such actions.

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

Such statements are all subject to risks, uncertainties and changes in circumstances that could significantly affect the Company’s future financial results and business.

Accordingly, the Company cautions that the forward-looking statements contained herein are qualified by important factors that could cause actual results to differ materially from those reflected by such statements.

Such factors include, but are not limited to:

(a) the magnitude and duration of the impact of the COVID-19 pandemic on general economic conditions, capital markets, unemployment, consumer spending and the Company’s liquidity, financial condition, supply chain, operations and personnel;

(b) industry, market, economic, political, regulatory and health conditions;

(c) disruptions in operations from data protection breaches, cyberattacks, extreme weather conditions, medical epidemics or pandemics such as the COVID-19, and other natural or man-made disasters or catastrophic events;

(d) the Company’s ability to access additional capital on favorable terms or at all;

(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;

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

(h) the impact of new or changes in current laws, regulations, rules or other industry standards;

(i) the ability of the Company’s operating teams to drive revenue and margins;

(j) the impact of significant competition from other gaming and entertainment operations;

(k) the Company’s ability to obtain timely regulatory approvals required to own, develop and/or operate its properties, or other delays, approvals or impediments to completing its planned acquisitions or projects, construction factors, including delays, and increased costs;

(l) the passage of state, federal or local legislation that would expand, restrict, further tax, prevent or negatively impact operations in or adjacent to the jurisdictions in which the Company does or seek to do business;

(m) the effects of local and national economic, credit, capital market, housing, and energy conditions on the economy in general and on the gaming and lodging industries in particular;

(n) our ability to identify attractive acquisition and development opportunities (especially in new business lines) and to agree to terms with, and maintain good relationships with partners and municipalities for such transactions;

(o) the costs and risks involved in the pursuit of such opportunities and our ability to complete the acquisition or development of, and achieve the expected returns from, such opportunities;

(p) the risk of failing to maintain the integrity of our information technology infrastructure and safeguard our business, employee and customer data (particularly as our iGaming division grows);

(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 “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.

Such factors include:

the effects of economic conditions and market conditions in the markets in which the Company operates;

competition with other entertainment, sports content, and casino gaming experiences;

the timing, cost and expected impact of product and technology investments;

risks relating to international operations, permits, licenses, financings, approvals and other contingencies in connection with growth in new or existing jurisdictions;

and additional risks and uncertainties described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, 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.

The Company does not intend to update publicly any forward-looking statements except as required by law.

Considering these risks, uncertainties and assumptions, the forward-looking events discussed in this Form 10-Q may not occur.

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