What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-05 · 145 added, 134 removed, 351 unchanged (44% of the section changed)

2 unchanged sentences

EXECUTIVE OVERVIEW

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.

On August 4, 2022, Penn National Gaming, Inc.

was renamed PENN Entertainment, 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 ® .

7 unchanged sentences

(“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”).

9 unchanged sentences

(“theScore”) for a purchase price of approximately $2.1 billion.

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

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

1 unchanged sentence

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.

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.

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

9 unchanged sentences

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.

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, 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.

We continue to adjust operations and cost structures at our properties to reflect 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 seek to grow 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 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.

12 unchanged sentences

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.

See the “Segment comparison of the three and six months ended June 30, 2022 and 2021” section below for discussions of the impact of competition on our results of operations by reportable segment.

Key Performance Indicators

3 unchanged sentences

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 the effects of the COVID-19 pandemic.

For example, decreases in discretionary consumer spending have historically been brought about by weakened general economic conditions, such as lackluster recoveries from recessions, inflation, rising interest rate environments, high unemployment levels, higher income taxes, low levels of consumer confidence, weakness in the housing market, high fuel or other transportation costs, and 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.

1 unchanged sentence

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 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.

Our gaming revenue is derived primarily from slot machines (which represented approximately 83% and 85% of our gaming revenue for the six months ended June 30, 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.

7 unchanged sentences

Table game hold is the amount of drop that is retained and recorded as gaming revenue, with liabilities recognized for funds deposited by customers before gaming play occurs and for unredeemed gaming chips.

As we are primarily focused on regional gaming markets, our table game hold percentages are fairly stable as the majority of these markets do not regularly experience high-end play, which can lead to volatility in hold percentages.

As we are primarily focused on regional gaming markets, our table game hold percentages are fairly stable since the majority of these markets do not regularly experience high-end play, which can lead to volatility in hold percentages.

Therefore, changes in table game hold percentages do not typically have a material impact to our results of operations and cash flows.

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

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

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

3 unchanged sentences

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.

Our Interactive segment includes all of our iCasino and online sports betting operations, management of retail sports betting, media, and our proportionate share of earnings attributable to our 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.

3 unchanged sentences

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.

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

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.

1 unchanged sentence

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

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

2022 2021 2022 2021

Northeast segment $ 684.9 $ 652.5 $ 1,343.4 $ 1,223.4

3 unchanged sentences

Interactive segment 154.9 96.0 296.4 182.3

5.9 1.7 13.2 3.3

Intersegment eliminations (2)

(7.5) (7.8) (15.8) (18.9)

Total $ 1,626.9 $ 1,545.8 $ 3,191.1 $ 2,820.7

7 unchanged sentences

(23.4) (26.9) (47.1) (49.5)

504.5 586.6 999.2 1,033.6

Rent expense associated with triple net operating leases (4)

13 unchanged sentences

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.

(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.

VICI) (“VICI”) for the real estate assets used in the operations of Margaritaville Casino Resort and

Hollywood Casino at Greektown (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, 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.

Consolidated comparison of the three and six months ended June 30, 2022 and 2021.

The following table presents our consolidated revenues:

For the three months ended March 31, Change

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

(dollars in millions) 2022 2021 $ % 2022 2021 $ %

2 unchanged sentences

Total revenues $ 1,626.9 $ 1,545.8 $ 81.1 5.2 % $ 3,191.1 $ 2,820.7 $ 370.4 13.1 %

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;

Gaming revenues for the three months ended June 30, 2022 increased $20.1 million compared to the prior year period primarily due to increases in our Interactive segment and the inclusion of the operating results of three new properties, partially offset by decreases in gaming revenues in our South segment and Northeast segment properties in both current and prior year periods.

Gaming revenues include 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.

Gaming revenues for the six months ended June 30, 2022 increased $229.3 million compared to the prior year corresponding period, primarily due to increases in our Interactive segment resulting from continued growth in our online and sports betting revenues, as well as the inclusion of the operating results of three new properties discussed above.

Food, beverage, hotel and other revenues for the three and six months ended June 30, 2022 increased $61.0 million and $141.1 million, respectively, compared to the prior year corresponding periods, 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 as discussed above, and revenues from theScore, which was acquired on October 19, 2021.

During the prior year periods, 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 and six months ended June 30, 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 March 31, Change

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

(dollars in millions) 2022 2021 $ % 2022 2021 $ %

5 unchanged sentences

Total operating expenses $ 1,324.5 $ 1,167.9 $ 156.6 13.4 % $ 2,596.7 $ 2,226.3 $ 370.4 16.6 %

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

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.

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

Gaming expenses for the three and six months ended June 30, 2022 increased $92.7 million and $251.5 million, respectively, compared to the prior year corresponding periods, p rimarily due to an increase in gaming taxes resulting from the increase in gaming revenues, higher payroll expenses related to volume increases in addition to variable marketing and promotional expenses, which remain below pre-pandemic levels.

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 .

Fo od, beverage, hotel and other expenses for the three and six months ended June 30, 2022 increased $38.2 million and $87.0 million, respectively, compared to the prior year corresponding periods, primarily due to increased volumes as we operated with increased offerings and extended hours of operations, which resulted in increases in payroll expenses and cost of sales.

The prior year periods were 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.

7 unchanged sentences

and rent expense associated with our triple net operating leases.

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.

For the three and six months ended June 30, 2022, general and administrative expenses decreased by $42.7 million and $73.4 million respectively, primarily due to a decrease in rent costs associated with our Master Leases of $88.5 million and $138.8 million respectively, 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.

The decrease was offset by increased payroll costs of $13.3 million and $33.0 million, and increased facility costs due to increased volumes of $10.4 million and $23.8 million, in each respective period.

In addition, general and administrative expenses include a $6.4 million loss on the sale of land for the three and six months ended June 30, 2022.

Depreciation and amortization for the three and six months ended June 30, 2022 increased period over period primarily due to increased amortization costs associated with our Master Leases of $46.7 million and $76.9 million, respectively, 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, for the three and six months ended June 30, 2022, amortization on other intangible assets increased by $12.4 million and $25.2 million respectively, primarily due to the amortization of other intangible assets held by theScore.

Other income (expenses)

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

For the three months ended March 31, Change

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

(dollars in millions) 2022 2021 $ % 2022 2021 $ %

2 unchanged sentences

Income from unconsolidated affiliates $ 1.8 $ 9.1 $ (7.3) (80.2) % $ 10.5 $ 18.7 $ (8.2) (43.9) %

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

Other $ (28.2) $ 2.8 $ (31.0) N/M $ (68.9) $ 23.9 $ (92.8) N/M

Income tax expense $ (56.3) $ (53.1) $ (3.2) 6.0 % $ (103.9) $ (73.7) $ (30.2) 41.0 %

N/M - Not meaningful

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.

Interest expense, net increased for the three and six months ended June 30, 2022 as compared to the prior year corresponding periods, primarily due to a net 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 of $51.9 million and $74.7 million respectively.

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.

The decrease for the three and six months ended June 30, 2022, compared to the prior year corresponding periods, is 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 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.

Other primarily relates to realized and unrealized gains and losses on equity securities (including warrants), held by PENN Interactive, losses on early retirement of debt, unrealized gains and losses related to certain Barstool Sports shares as well as miscellaneous income and expense items.

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 m onths ended June 30, 2022, other income primarily consisted of unrealized holding losses of $16.9 million as well as a $10.4 million loss on the early extinguishment of debt in connection with refinancing our Senior Secured Credit Facilities, as described in “Liquidity and Capital Resources.” For the three m onths ended June 30, 2021 , other income primarily consisted of unrealized holding losses of $7.4 million, offset by a $5.8 million unrealized gain related to certain Barstool Sports shares and other miscellaneous income.

For the six months ended June 30, 2022, other income primarily consisted of unrealized holding losses of $55.6 million on equity shares, as well as the loss on the early extinguishment of debt described above, compared to an unrealized holding gain on equity shares (including warrants) of $18.8 million for the six months ended June 30, 2021 .

Income tax expense was a $56.3 million and $103.9 million expense for the three and six months ended June 30, 2022, respectively, as compared to a $53.1 million and $73.7 million expense for the three and six months ended June 30, 2021.

Our effective tax rate (income taxes as a percentage of income from operations before income taxes) including discrete items was 68.3% and 57.2% for the three and six months ended June 30, 2022 as compared to 21.1% and 20.3% for the three and six months ended June 30, 2021 , respectively.

The change in the effective rate for the six months ended June 30, 2022 as compared to the prior year period was primarily due to the decrease in income before taxes as well as an increase in the valuation allowance attributed to the Lease Modification.

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 months ended March 31, 2022 and 2021

Segment comparison of the three and six months ended June 30, 2022 and 2021

Northeast Segment

For the three months ended March 31, Change

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

(dollars in millions) 2022 2021 $ % 2022 2021 $ %

3 unchanged sentences

Adjusted EBITDAR $ 214.4 $ 231.6 $ (17.2) (7.4) % $ 419.6 $ 424.8 $ (5.2) (1.2) %

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:

Adjusted EBITDAR margin 31.3 % 35.5 % -420 bps 31.2 % 34.7 % -350 bps

The Nort heast segment’s revenues for the three months ended June 30, 2022 increased by $32.4 million over the prior year corresponding period, primarily due to the inclusion of 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 .

The revenue increases resulting from the inclusion of our new properties were partially offset by decreases in gaming revenues in our properties with operations in both current and prior year periods.

Additionally, operating results at our Ameristar East Chicago property were negatively impacted by increased competition as a new property opened in Northern Indiana in May of 2021.

The Nort heast segment’s revenues for the six months ended June 30, 2022 increased by $120.0 million over the prior year corresponding period, primarily due to the inclusion of operating results from our three new properties, as discussed above, and increases in food, beverage, hotel and other revenues as we operated with increased offerings and extended hours of operations, partially offset by decreases in gaming revenues in our properties with operations in both current and prior year periods.

During the prior year periods, 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.

For the three months ended June 30, 2022, the Northeast segment’s Adjusted EBITDAR decreased $17.2 million, and Ad justed EBITDAR margin decreased to 31.3%, primarily due to increased variable marketing and promotional, and payroll expenses associated with hotel and food and beverage offerings not available in the prior year period.

For the six months ended June 30, 2022, the Northeast segment’s Adjusted EBITDAR decreased $5.2 million, primarily due to increased variable marketing and promotional, and payroll expenses associated with hotel and food and beverage offerings not available in the prior year period , resulting in an Adjusted EBITDAR margin of 31.2%.

South Segment

For the three months ended March 31, Change

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

(dollars in millions) 2022 2021 $ % 2022 2021 $ %

3 unchanged sentences

Adjusted EBITDAR $ 143.3 $ 177.1 $ (33.8) (19.1) % $ 289.8 $ 311.0 $ (21.2) (6.8) %

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

Adjusted EBITDAR margin 42.3 % 48.1 % -580 bps 42.6 % 46.8 % -420 bps

The South segment’s revenues for the three months ended June 30, 2022 decreased by $29.6 million from the prior year period, primarily due to strong visitation levels and customer spend in the prior period.

Revenues for the six months ended June 30, 2022 increased by $15.9 million from 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 first quarter of 2022.

For the three months ended June 30, 2022, the South segment’s Adjusted EBITDAR decreased $33.8 million and Adjusted EBITDAR margin decreased to 42.3% primarily due to the decrease in gaming revenues, increased variable marketing and promotional expenses, which remain below pre-pandemic levels, and increased payroll expenses as we reopened outlets and offered additional amenities such as banquets, conferences, and new restaurants.

For the six months ended June 30, 2022, the South segment’s Adjusted EBITDAR decreased $21.2 million and Adjusted EBITDAR margin decreased to 42.6% primarily due to higher variable marketing and promotional expenses, which remain below pre-pandemic levels, in addition to higher payroll expenses associated with hotel and food and beverage offerings not available in the prior year period .

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

(dollars in millions) 2022 2021 $ % 2022 2021 $ %

3 unchanged sentences

Adjusted EBITDAR $ 59.7 $ 61.4 $ (1.7) (2.8) % $ 110.9 $ 96.6 $ 14.3 14.8 %

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.

Adjusted EBITDAR margin 38.8 % 43.7 % -490 bps 37.6 % 40.8 % -320 bps

The West segment’s revenues for the three and six months ended June 30, 2022 increased by $13.4 million and $57.7 million over the prior year corresponding periods, primarily due to increases in food, beverage, hotel and other revenues due to the easing of restrictions and strong visitation levels at our Zia Park, Tropicana, and M Resort properties.

During the three and six months ended June 30, 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 and for an additional thirteen days in April of 2021.

Additionally, during the prior year periods, our 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 June 30, 2022, the West segment’s Adjusted EBITDAR decreased $1.7 million and Adjusted EBITDAR margin decreased to 38.8%, primarily due to higher payroll expenses related to volume increases in addition to variable marketing and promotional expenses, which remain below pre-pandemic levels.

For the six months ended June 30, 2022, the West segment’s Adjusted EBITDAR increased $14.3 million primarily due to increases in gaming and non gaming revenues as described above, offset by higher payroll expenses related to volume increases in addition to higher variable marketing and promotional expenses, which remain below pre-pandemic levels, reflected in Adjusted EBITDAR margin, which decreased by 320 basis points to 37.6%.

Midwest Segment

For the three months ended March 31, Change

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

(dollars in millions) 2022 2021 $ % 2022 2021 $ %

3 unchanged sentences

Adjusted EBITDAR $ 131.3 $ 142.2 $ (10.9) (7.7) % $ 256.8 $ 248.2 $ 8.6 3.5 %

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 .

Adjusted EBITDAR margin 44.3 % 48.2 % -390 bps 44.3 % 46.9 % -260 bps

The Midwest segment’s revenues for the three months ended June 30, 2022 increased slightly compared to the prior year quarter.

The Midwest segment’s revenues for the six months ended June 30, 2022 increased by $49.7 million over the prior year corresponding period, due to strong operating results in the first quarter of 2022, resulting from easing of restrictions, strong visitation levels among all age groups, increased length of play and increased spend per guest.

During the prior year periods, 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.

For the three months ended June 30, 2022, the Midwest segment’s Adjusted EBITDAR decreased $10.9 million and Adjusted EBITDAR margin decreased to 44.3% , primarily due to the decrease in gaming revenues, increased variable marketing and promotional expenses, which remain below pre-pandemic levels in addition to higher payroll expenses associated with hotel and food and beverage offerings not available in the prior year period.

For the six months ended June 30, 2022, the Midwest segment’s Adjusted EBITDAR increased $8.6 million primarily due to increases in gaming and non gaming revenues as discussed above, offset by higher payroll expenses related to volume increases in addition to higher variable marketing and promotional expenses, which remain below pre-pandemic levels , reflected in Adjusted EBITDAR margin, which decreased by 260 basis points to 44.3%.

Interactive Segment

For the three months ended March 31, Change

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

(dollars in millions) 2022 2021 $ % 2022 2021 $ %

2 unchanged sentences

Total revenues $ 154.9 $ 96.0 $ 58.9 61.4 % $ 296.4 $ 182.3 $ 114.1 62.6 %

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

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

Adjusted EBITDAR $ (20.8) $ 1.2 $ (22.0) N/M $ (30.8) $ 2.5 $ (33.3) N/M

Adjusted EBITDAR margin (13.4) % 1.3 % N/M (10.4) % 1.4 % 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

The Interactive segment’s revenues for the three and six months ended June 30, 2022 increased by $58.9 million and $114.1 million over the prior year corresponding periods, primarily due to continued increases in online activity with the launch of theScore Bet in Ontario and the Barstool Sportsbook in additional states, 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 $55.4 million and $105.7 million for the three and six months ended June 30, 2022, respectively, compared to $46.0 and $85.5 million for the three and six months ended June 30, 2021, respectively.

For the three and six months ended June 30, 2022, the Interactive segment’s Adjusted EBITDAR and Adjusted EBITDAR margin decreased primarily due to increased expenses related to ramping and launching theScore Bet in Ontario and the Barstool Sportsbook in additional states, and the inclusion of theScore financial results, as indicated above.

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

(dollars in millions) 2022 2021 $ % 2022 2021 $ %

3 unchanged sentences

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.

Revenues for the three and six months ended June 30, 2022, have increased as compared to the prior ye ar corresponding periods, primarily due to the acquisition of Sam Houston, the remaining 50% of which was acquired on August 1, 2021.

Adjusted EBITDAR increased by $3.5 million and $2.4 million for the three and six months ended June 30, 2022 respectively, as compared to the prior year corresponding periods, primarily due to changes in corporate overhead costs, which are reflective of the current operating environment.

Non-GAAP Financial Measures

7 unchanged sentences

stock-based compensation;

debt extinguishment and financing charges;

debt extinguishment and financing charges (which are included in “other (income) expenses”);

impairment losses;

7 unchanged sentences

depreciation and amortization;

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

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

and our Kansas Entertainment, LLC joint venture.

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

1 unchanged sentence

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).

VICI) (“VICI”) for the real estate assets used in the operations of Margaritaville Casino Resort and Hollywood Casino at Greektown).

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.

1 unchanged sentence

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.

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.

1 unchanged sentence

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).

10 unchanged sentences

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,

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

(dollars in millions) 2022 2021 2022 2021

6 unchanged sentences

Stock-based compensation (1)

14.5 9.2 31.5 13.4

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

Gain on disposal of assets (1)

(9.5) (12.4) (12.4) 9.1

Loss (gain) on disposal of assets (1)

7.3 (0.1) 7.2 (0.2)

Contingent purchase price (1)

(0.9) 1.2 (1.0) 1.3

Pre-opening expenses (1)(3)

2.1 (0.4) 3.6 1.2

Depreciation and amortization 150.3 81.9 268.5 163.2

2 unchanged sentences

Non-operating items of equity method investments (4)

0.3 1.4 2.1 3.0

Other expenses (1)(3)(5)

8.2 2.3 15.5 2.6

Adjusted EBITDA 476.5 470.1 911.1 806.7

Rent expense associated with triple net operating leases (1)

28.0 116.5 88.1 226.9

Adjusted EBITDAR $ 504.5 $ 586.6 $ 999.2 $ 1,033.6

7 unchanged sentences

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

(4) Consists principally of interest expense, net;

income taxes;

depreciation and amortization;

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.

(4) Consists principally of interest expense, net, income taxes, depreciation and amortization, and stock-based compensation expense associated with Barstool Sports and our Kansas Entertainment joint venture.

We record our portion of Barstool Sports’ 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.

2 unchanged sentences

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

For the three months ended March 31, Change

For the six months ended June 30, Change

(dollars in millions) 2022 2021 $ %

4 unchanged sentences

Operating Cash Flow

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.

Trends in our operating cash flows tend to follow trends in operating income, excluding non-cash charges, but can be affected by changes in working capital, the timing of significant interest payments, tax payments or refunds, and distributions from unconsolidated affiliates.

Net cash provided by operating activities decreased by $68.2 million for the six months ended June 30, 2022, primarily due to an increase in cash paid for income taxes and a negative impact in changes in working capital related to gaming taxes and other gaming liabilities and payroll related liabilities.

Investing Cash Flow

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.

Cash used in investing activities for the six months ended June 30, 2022 of $113.7 million is primarily due to capital expenditures of $125.6 million and the acquisition of a $15.0 million cost method investment, offset by insurance proceeds received for losses incurred due to Hurricane Laura in 2020.

For the six months ended June 30, 2021, cash used in investing activities of $99.1 million was primarily due to capital expenditures and consideration paid for gaming licenses and other intangible assets.

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 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.

Cash provided by operating activities, as well as cash available under our Amended Revolving Credit Facility and Revolving Facility, was available to fund our capital expenditures for six months ended June 30, 2022 and 2021, respectively.

Capital expenditures for the six months ended June 30, 2022 and 2021 were $125.6 million and $64.6 million, respectively.

Capital expenditures related to our York and Morgantown development project were $13.3 million and $25.6 million for the six months ended June 30, 2022 and 2021, respectively.

During the six months ended June 30, 2022, capital expenditures also included $17.8 million in construction costs related to hurricane damage sustained at our Lake Charles property of which insurance proceeds were previously received.

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 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 .

For the six months ended June 30, 2022, net cash used in financing activities totaled $477.3 million, primarily related to $342.1 million common stock repurchases, net debt repayments of $18.7 million, $18.2 million in debt issuance costs, and $85.4 million in principal payments on our finance leases and finance obligations.

During the six months ended June 30, 2021, cash provided by financing activities of $18.8 million was primarily due to net cash proceeds of $72.5 million from other long-term obligations, offset by principal payments on long-term debt and principal payments on our finance leases and finance 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.

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

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

At June 30, 2022, we had $2.8 billion in aggregate principal amount of indebtedness, including $1.6 billion outstanding under our Amended 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 2.75% Convertible Notes due 2026, and $150.1 million outstanding in other long-term obligations.

No amounts were drawn on our Amended Revolving Credit 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.

As of June 30, 2022 we had conditional obligations under letters of credit issued pursuant to the Amended Credit Facilities with face amounts aggregating to $25.4 million resulting in $974.6 million available borrowing capacity under our Amended Revolving Credit Facility.

Our Amended 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 Amended 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” 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 March 31, 2022, the Company was in compliance with all required financial covenants.

As of June 30, 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.

6 unchanged sentences

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.

During the three months ended June 30, 2022, the Company repurchased 5,539,177 shares of its common stock in open market transactions for $167.0 million at an average price of $30.16 per share.

During the six months ended June 30, 2022, the Company repurchased 9,341,585 shares of its common stock in open market transactions for $342.1 million at an average price of $36.62 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.

Subsequent to the quarter ended June 30, 2022, the Company repurchased 3,019,790 million shares of its common stock at an average price of $31.46 per share for an aggregate amount of $95.0 million.

The remaining availability under our $750.0 million share repurchase authorization was $313.1 million as of August 3, 2022.

Triple Net Leases

1 unchanged sentence

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

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.

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:

8 unchanged sentences

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

For the three months ended March 31,

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

(in millions) 2022 2021 2022 2021

9 unchanged sentences

Therefore, this lease has been excluded from the table above.

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.

Based on our current level of operations, we believe that cash generated from operations and cash on hand, together with amounts available under our Amended 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.

We cannot be certain:

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

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

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

1 unchanged sentence

(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.

and (iv) that future borrowings will be available under our Amended 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.

12 unchanged sentences

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 three months ended March 31, 2022.

There have been no significant changes in our critical accounting estimates during the six months ended June 30, 2022.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

6 unchanged sentences

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 results, and the impact of competition, in online sports betting, iGaming and retail/mobile sportsbooks;

the Company’s launch of its Interactive segment’s products in new jurisdictions and enhancements to existing Interactive segment products, including 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;

15 unchanged sentences

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