What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-04 · 184 added, 130 removed, 395 unchanged (44% of the section changed)

3 unchanged sentences

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.

As of March 31, 2023, PENN operated 43 properties in 20 states, online sports betting in 17 jurisdictions and iCasino in five jurisdictions, under a portfolio of well-recognized brands including Hollywood Casino®, L’Auberge®, Barstool Sportsbook®, and theScore Bet Sportsbook and Casino®.

In 2023, PENN completed its acquisition of Barstool Sports, Inc.

(“Barstool”).

Barstool’s vast audience, combined with the reach and highly engaged user base of Score Media and Gaming Inc.

(“theScore”), provide us with a significant digital footprint and growing customer ecosystem.

PENN’s highly differentiated strategy, which is focused on organic cross-sell opportunities, is reinforced by its investments in market-leading retail casinos, sports media assets, technology, including a state-of-the-art, fully integrated digital sports and iCasino betting platform, and an in-house iCasino content studio.

The Company’s portfolio is further bolstered by its industry-leading PENN Play TM customer loyalty program (the “PENN Play program”), which offers our approximately 27 million members a unique set of rewards and experiences across business channels.

As of June 30, 2023, PENN operated 43 properties in 20 states, online sports betting in 17 jurisdictions and iCasino in five jurisdictions, under a portfolio of well-recognized brands including Hollywood Casino®, L’Auberge®, Barstool Sportsbook® and theScore Bet Sportsbook and Casino®.

In August 2023, PENN entered into a transformative, exclusive long-term strategic alliance with ESPN, Inc.

and ESPN Enterprises, Inc.

(together, “ESPN”) relating to online sports betting within the United States.

In the fall of 2023, the existing Barstool Sportsbook will be rebranded across all online platforms in the United States as ESPN Bet, and our online product will include a Hollywood-branded integrated iCasino where permitted.

PENN’s ability to leverage the leading sports media brands in the United States (ESPN) and Canada (theScore) will position us to significantly expand our digital footprint and efficiently grow our customer ecosystem.

This highly differentiated strategy, which is focused on organic cross-sell opportunities, is reinforced by our investment in market-leading retail casinos, sports media assets and technology, including a proprietary state-of-the-art, fully integrated digital sports and iCasino betting platform and an in-house iCasino content studio.

PENN’s portfolio is further bolstered by our industry-leading PENN Play TM customer loyalty program, which offers our approximately 27 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;

the most significant of which are the AR PENN Master Lease, 2023 Master Lease, PENN Master Lease (prior to January 1, 2023), and Pinnacle Master Lease (as such terms are defined in “Liquidity and Capital Resources” , and collectively referred to as the “Master Leases”), with Gaming and Leisure Properties, Inc.

the most significant of which are the AR PENN Master Lease, 2023 Master Lease, PENN Master Lease (prior to January 1, 2023), and Pinnacle Master Lease (as such terms are defined in “ Li quidity and Capital Resources ” and collectively referred to as the “Master Leases”), with Gaming and Leisure Properties, Inc.

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

Recent Acquisitions, Development Projects and Other

On February 17, 2023, we acquired the remaining 64% of the outstanding shares of Barstool common stock not already owned by us for a consideration of approximately $405.5 million, which is inclusive of cash and common stock issuance, repayment of Barstool indebtedness of $23.8 million, transaction expenses and other purchase price adjustments in accordance with GAAP (the “Barstool Acquisition”).

Recent Acquisitions, Dispositions, Development Projects, and Other

On February 17, 2023, we acquired the remaining 64% of the outstanding shares of Barstool Sports, Inc.

(“Barstool”) common stock not already owned by us for a consideration of approximately $405.5 million, which is inclusive of cash and common stock issuance, repayment of Barstool indebtedness of $23.8 million, transaction expenses and other purchase price adjustments in accordance with GAAP (the “Barstool Acquisition”).

Prior to the acquisition, we held a 36% ownership interest, which was accounted for under the equity method.

At the closing of the Barstool Acquisition, we obtained 100% of the Barstool common stock of which the fair value of Barstool was determined to be $660.0 million based on market participant assumptions.

Upon the completion of the Barstool Acquisition, Barstool became an indirect wholly owned subsidiary of PENN.

The acquisition provides us with a greater ability to execute our organic cross-sell strategy through Barstool’s resources, audience, and strong brand recognition.

We issued 2,442,809 shares of our common stock to certain former stockholders of Barstool for the Barstool Acquisition (see Note 13, “Stockholders’ Equity and Stock-Based Compensation” in the notes to our unaudited Consolidated Financial Statements for further information) and utilized $315.3 million of cash to complete the Barstool Acquisition, inclusive of transaction expenses and repayment of Barstool indebtedness.

See Note 6, “Acquisition s ” in the notes to our unaudited Consolidated Financial Statements for further discussion.

Upon the completion of the Barstool Acquisition, we obtained 100% of the Barstool common stock of which the fair value of Barstool was determined to be $660.0 million based on market participant assumptions and Barstool became an indirect wholly owned subsidiary of PENN.

See Note 6, “Acquisitions and Dispositions” and Note 13, “Stockholders’ Equity and Stock-Based Compensation” in the notes to our unaudited Consolidated Financial Statements for further discussion.

On August 8, 2023, PENN entered into a Sportsbook Agreement (the “Sportsbook Agreement”) with ESPN, which provides for a long-term strategic relationship between PENN and ESPN relating to online sports betting in the United States.

Pursuant to the Sportsbook Agreement, PENN will rebrand its existing Barstool Sportsbook across all online platforms in the United States as ESPN Bet (the “Sportsbook”) and will oversee daily operations of the Sportsbook.

The Sportsbook will be deeply integrated within the broader ESPN editorial, content, digital product and sports programming ecosystem, with access to ESPN’s industry leading audience and database.

In addition to the Sportsbook Agreement, on August 8, 2023, PENN and ESPN, Inc.

entered into an Investment Agreement (the “Investment Agreement”) providing for the issuance to ESPN, Inc.

of certain warrants to purchase shares of PENN common stock, par value $0.01 per share, and setting forth certain other governance rights of ESPN, Inc., as discussed in Note 17, “Subsequent Events” in the notes to our unaudited Consolidated Financial Statements.

In connection with PENN’s decision to rebrand our online sports betting business from Barstool Sportsbook to ESPN Bet pursuant to the Sportsbook Agreement as discussed above, PENN concurrently entered into a stock purchase agreement with David Portnoy (the “Barstool SPA”) pursuant to which PENN sold 100% of the outstanding shares of Barstool to David

Portnoy in exchange for a nominal cash consideration ($1.00 dollar) and certain non-compete and other restrictive covenants.

Pursuant to the Barstool SPA, PENN has the right to receive 50% of the gross proceeds received by David Portnoy in any subsequent sale or other monetization event of Barstool, as discussed in Note 6, “Acquisitions and Dispositions” in the notes to our unaudited Consolidated Financial Statements.

We are currently quantifying the impact of the Barstool SPA to our unaudited Consolidated Financial Statements, however we expect the carrying value of the net assets held-for-sale, to be greater than their fair value, less costs to sell, which is expected to result in a material non-cash loss and the corresponding reversal of the net deferred tax liability of approximately $115.9 million that will have a significant impact to income taxes.

The pre-tax non-cash loss is estimated to be between $800.0 million and $850.0 million (inclusive of $705.0 million to $720.0 million in goodwill and intangible assets write offs) to be incurred in the third quarter of 2023.

These material adjustments will be reflected in our September 30, 2023 unaudited Consolidated Statements of Operations and unaudited Consolidated Balance Sheets.

See Note 6, “Acquisitions and Dispositions ” and Note 11, “Income Taxes” in the notes to our unaudited Consolidated Financial Statements.

On February 21, 2023, as described in “Liquidity and Capital Resources,” the Company and GLPI entered into an agreement to amend and restate the PENN Master Lease (the “AR PENN Master Lease”), effective January 1, 2023, to (i) remove the land and buildings for Hollywood Casino Aurora (“Aurora”), Hollywood Casino Joliet (“Joliet”), Hollywood Casino Columbus (“Columbus”), Hollywood Casino Toledo (“Toledo”), and the M Resort Spa Casino (“M Resort”), and (ii) make associated adjustments to the rent after which the initial rent in the AR PENN Master Lease will be $284.1 million, consisting of $208.2 million of building base rent, $43.0 million of land base rent and $32.9 million of percentage rent (as such terms are defined in the AR PENN Master Lease).

6 unchanged sentences

The 2023 Master Lease includes a base rent (the “2023 Master Lease Base Rent”) equal to $232.2 million and the Master Development Agreement contains additional rent (together with the 2023 Master Lease Base Rent, the “2023 Master Lease Rent”) equal to (i) 7.75% of any project funding received by PENN from GLPI for an anticipated relocation of PENN’s riverboat casino and related developments with respect to Aurora (the “Aurora Project”) and (ii) a percentage, based on the then-current GLPI stock price, of any project funding received by PENN from GLPI for certain anticipated development projects with respect to Joliet, Columbus, and M Resort (the “Other Development Projects”).

The Master Development Agreement provides that GLPI will fund, upon PENN’s request, up to $225 million for the Aurora Project and up to $350 million in the aggregate for the Other Development Projects, in accordance with certain terms and conditions set forth in the Master Development Agreement.

The Master Development Agreement provides that GLPI will fund up to $225 million for the Aurora Project and, upon PENN’s request, up to $350 million in the aggregate for the Other Development Projects, in accordance with certain terms and conditions set forth in the Master Development Agreement.

These funding obligations of GLPI expire on January 1, 2026.

5 unchanged sentences

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 acquisitions of Barstool and 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.

In addition, the acquisition of theScore and our Sportsbook Agreement with ESPN reflects 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

Most of our properties operate in mature, competitive markets.

We expect the majority of our future growth to come from cross-sell opportunities between our retail casino, online sports betting and online gaming businesses, and new distribution channels within the advertising and commerce spaces;

We expect the majority of our future growth to come from cross-sell opportunities between our retail casino, online sports betting and online gaming businesses;

improvements, expansions or relocations of our existing properties;

5 unchanged sentences

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

We seek to grow our customer database and loyalty program through the development of new properties and/or the expansion of recently-developed business lines as well as through partnerships with third-party operators, such as Live Nation Entertainment and Choice Hotels International, Inc.

Acquisitions such as Barstool and theScore enable us to further our omnichannel strategy by adding additional revenue streams and customer acquisition.

We seek to grow our customer database and loyalty program through the development of new properties, the expansion of properties and other business lines as well as through partnerships with third-party operators, such as Live Nation Entertainment and Choice Hotels International, Inc.

Acquisitions such as theScore and our Sportsbook Agreement with ESPN enables us to further our omnichannel strategy by adding additional revenue streams and customer acquisition.

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

2 unchanged sentences

video lottery;

iCasino and social casino;

iCasinos and social casinos;

online and retail sports betting;

6 unchanged sentences

and other forms of gaming in the U.S.

See the “Segment comparison of the three months ended March 31 , 2023 and 202 2 ” 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, 2023 and 2022” section below for discussions of the impact of competition on our results of operations by reportable segment.

Key Performance Indicators

7 unchanged sentences

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 84% and 81% of our gaming revenue for the three months ended March 31, 2023 and 2022, respectively) and, to a lesser extent, table games and online gaming consisting of online slots, online table games, and online sports betting.

Our gaming revenue is derived primarily from slot machines (which represented approximately 85% and 83% of our gaming revenue for the six months ended June 30, 2023 and 2022, respectively) and, to a lesser extent, table games and online gaming consisting of online slots, online table games, and online sports betting.

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

17 unchanged sentences

The Interactive segment includes all of our online sports betting, iCasino and social gaming operations, management of retail sports betting, media, and the operating results of Barstool (the remaining 64% of Barstool common stock, not already owned by PENN, was acquired on February 17, 2023).

See Note 6, “Acquisitions and Dispositions” in the notes to our unaudited Consolidated Financial Statements for further information.

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.

7 unchanged sentences

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

For the three months ended March 31,

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

2023 2022 2023 2022

Northeast segment $ 688.0 $ 684.9 $ 1,388.5 $ 1,343.4

3 unchanged sentences

Interactive segment 257.5 154.9 491.0 296.4

6.2 5.9 12.0 13.2

Intersegment eliminations (2)

(8.5) (7.5) (14.8) (15.8)

Total $ 1,674.8 $ 1,626.9 $ 3,348.1 $ 3,191.1

7 unchanged sentences

(25.3) (23.4) (52.6) (47.1)

476.8 504.5 955.0 999.2

Rent expense associated with triple net operating leases (4)

6 unchanged sentences

19.7 % 29.3 % 19.8 % 28.6 %

(1) The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club, Sam Houston and Valley Race Parks, the Company’s joint venture interests in Freehold Raceway, and our management contract for Retama Park Racetrack.

(1) The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club, Sam Houston and Valley Race Park, 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.

1 unchanged sentence

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

Corporate overhead costs were $24.8 million and $51.1 million for the three and six months ended June 30, 2023, respectively, as compared to $23.6 million and $48.4 million for the three and six months ended June 30, 2022, respectively.

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

1 unchanged sentence

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) For the three months ended March 31, 2023, pertains to the following operating leases:

(4) For the three and six months ended June 30, 2023, pertains to the following operating leases:

(i) AR PENN Master Lease;

2 unchanged sentences

and (iv) Greektown Lease.

For the three months ended March 31, 2022, pertains to the operating lease components contained within the (i) PENN Master Lease (specific to the land and building components associated with the operations of Hollywood Gaming at Dayton Raceway and Hollywood Casino at Mahoning Valley Race Course);

For the three and six months ended June 30, 2022, pertains to the operating lease components contained within the (i) PENN Master Lease (specific to the land and building components associated with the operations of Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning

Valley Race Course);

(ii) Meadows Lease;

2 unchanged sentences

and (v) Tropicana Lease (which terminated on September 26, 2022).

Consolidated comparison of the three months ended March 31, 2023 and 2022

Consolidated comparison of the three and six months ended June 30, 2023 and 2022

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) 2023 2022 $ % 2023 2022 $ %

2 unchanged sentences

Total revenues $ 1,674.8 $ 1,626.9 $ 47.9 2.9 % $ 3,348.1 $ 3,191.1 $ 157.0 4.9 %

Gaming revenues for the three months ended March 31, 2023 increased $33.4 million compared to the prior year period, primarily due to increases in our Interactive segment resulting from continued growth in our online revenues.

Food, beverage, hotel, and other revenues for the three months ended March 31, 2023 increased $75.7 million compared to the prior year period, primarily due to increases in gaming tax reimbursement amounts charged to third-party online sports betting and/or iCasino partners for online sports betting and iCasino market access, as well as the inclusion of 100% of the operating results of Barstool subsequent to the Barstool Acquisition on February 17, 2023 .

See “Segment comparison of the three months ended Ma r ch 31, 2023 and 202 2 ” below for more detailed explanations of the fluctuations in revenues.

Gaming revenues for the three months ended June 30, 2023 decreased $32.8 million compared to the corresponding prior year period, primarily due to a decrease in visitation among all segments, offset by increases in our Interactive segment resulting from continued growth in our online revenues.

Gaming revenues for the six months ended June 30, 2023 increased by $0.6 million compared to the corresponding prior year period, primarily due to increased visitation at our properties in the Northeast segment during the first quarter of 2023 and increases in our Interactive segment resulting from continued growth in our online revenues, offset by decreases in the second quarter, as described above.

Food, beverage, hotel, and other revenues for the three and six months ended June 30, 2023 increased $80.7 million and $156.4 million, respectively, compared to the corresponding prior year periods, primarily due to the inclusion of 100% of the operating results of Barstool subsequent to the Barstool Acquisition on February 17, 2023, as well as increases in gaming tax reimbursement amounts charged to third-party online sports betting and/or iCasino partners for online sports betting and iCasino market access .

See “Segment comparison of the three and six months ended June 30, 2023 and 2022” 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) 2023 2022 $ % 2023 2022 $ %

6 unchanged sentences

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

Gaming expenses for the three months ended March 31, 2023 increased $42.9 million compared to the prior year period, primarily due to higher third-party service provider fees from higher online gaming activity, higher payroll expenses, and an increase in gaming taxes resulting from the increase in gaming revenue s.

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

Fo od, beverage, hotel, and other expenses for the three months ended March 31, 2023 increased $72.4 million compared to the prior year period, primarily due to increased volumes of visitors, which resulted in increases in payroll expenses and cost of sales, and increases in gaming tax reimbursement amounts charged to third-party online sports betting and/or iCasino partners for online sports betting and iCasino market access, as well as the inclusion of operating expenses related to Barstool subsequent to the Barstool Acquisition on February 17, 2023.

Gaming expenses for the three months ended June 30, 2023 decreased $3.0 million compared to the corresponding prior year period, due to lower gaming taxes resulting from the decrease in gaming revenues, offset by higher payroll expenses.

Gaming expenses for the six months ended June 30, 2023 increased $39.9 million compared to the corresponding prior year period, primarily due to increases in payroll expenses and higher third-party service provider fees from higher online gaming activity.

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

Fo od, beverage, hotel, and other expenses for the three and six months ended June 30, 2023 increased $81.0 million and $153.4 million, respectively, compared to the corresponding prior year periods, primarily due to the inclusion of operating expenses related to Barstool subsequent to the Barstool Acquisition, which was completed on February 17, 2023, as well as increases in gaming tax reimbursement amounts related to third-party online sports betting and/or iCasino partners for online sports betting and iCasino market access.

General and administrative expenses include items such as compliance, facility maintenance, utilities, property and liability insurance, surveillance and security, and lobbying expenses, 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, 2023, general and administrative expenses increased by $97.4 million compared to the prior year period, primarily due to an increase in rent expense associated with triple net operating leases of $85.9 million stemming from the execution on February 21, 2023 of both the AR PENN Master Lease and 2023 Master Lease.

For the three and six months ended June 30, 2023, general and administrative expenses increased by $106.5 million and $203.9 million, respectively, compared to the corresponding prior year periods, primarily due to an increase in rent expense associated with triple net operating leases of $118.4 million and $204.3 million respectively, stemming from the execution on February 21, 2023 of both the AR PENN Master Lease and 2023 Master Lease.

The impact of these aforementioned lease transactions resulted in the classification of all land components and building components to be operating leases of which the associated rent expense is recorded to “General and Administrative” as described in Note 9, “Leases” to our unaudited Consolidated Financial Statements.

Depreciation and amortization for the three months ended March 31, 2023 decreased $10.7 million compared to the prior year period, primarily due to a $10.4 million decrease in amortization costs stemming from the execution on February 21, 2023 of both the AR PENN Master Lease and 2023 Master Lease.

Prior to the execution of the aforementioned lease transactions, primarily all of the land components contained within the PENN Master Lease and the land and building components contained within the Perryville Lease (as defined in “Liquidity and Capital Resources” ) were classified as finance leases of which amortization of the lease right-of-use assets (“ROU”) were recorded to “Depreciation and Amortization” expense.

Depreciation and amortization for the three and six months ended June 30, 2023 decreased $39.7 million and $50.4 million, respectively, compared to the corresponding prior year periods, primarily due to a decrease in depreciation and amortization costs stemming from the execution on February 21, 2023 of both the AR PENN Master Lease and 2023 Master Lease.

Prior to the execution of the aforementioned lease transactions, primarily all of the building components of the PENN Master Lease were classified as financing obligations of which depreciation of the associated property and equipment assets were previously recorded to “Depreciation and amortization” expense.

Additionally, primarily all of the land components contained within the PENN Master Lease and the land and building components contained within the Perryville Lease (as defined in “Liquidity and Capital Resources” ) were classified as finance leases of which amortization of the lease right-of-use assets (“ROU”) were recorded to “Depreciation and Amortization” expense.

The impact of these aforementioned lease transactions resulted in the classification of all land components and building components associated with the AR PENN Master Lease to be operating leases with the associated rent expense recorded to “General and Administrative” as described in Note 9, “Leases” to our unaudited Consolidated Financial Statements.

1 unchanged sentence

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) 2023 2022 $ % 2023 2022 $ %

5 unchanged sentences

Gain on REIT transactions, net $ — $ — $ — — % $ 500.8 $ — $ 500.8 N/M

Other $ (1.0) $ (40.7) $ 39.7 (97.5) %

Loss on early extinguishment of debt $ — $ (10.4) $ 10.4 N/M $ — $ (10.4) $ 10.4 N/M

Other $ 5.8 $ (17.8) $ 23.6 N/M $ 4.8 $ (58.5) $ 63.3 N/M

Income tax expense $ (34.7) $ (56.3) $ 21.6 (38.4) % $ (202.6) $ (103.9) $ (98.7) 95.0 %

N/M - Not meaningful

Interest expense, net decreased by $48.3 million for the three months ended March 31, 2023 as compared to the prior year period, primarily due to a net decrease in Master Lease interest costs due to changes in lease classifications as a result of the amendment of the PENN Master Lease, as described in “Liquidity and Capital Resources” , of $65.1 million, partially offset by an increase in interest expense on our Senior Secured Credit Facilities of $16.2 million, related to an overall increase in interest rates.

Interest income increased by $9.9 million for the three months ended March 31, 2023 as compared to the prior year period, primarily due to executing on our short term investing strategy utilizing money market funds which commenced during the year ended December 31, 2022.

Income from unconsolidated affiliates relates principally to our investment in Barstool (prior to the Barstool Acquisition on February 17, 2023) and our Kansas Entertainment and Freehold Raceway joint ventures.

The $6.1 million decrease for the three months ended March 31, 2023, compared to the prior year period, is due to a lower income earned from our investments in unconsolidated affiliates and only including income from Barstool from January 1, 2023 through February 16, 2023.

Gain on Barstool Acquisition, net relates to the gain on our acquisition of all the outstanding shares of Barstool common stock not already owned by us on February 17, 2023 as described in Note 6, “Acquisition s ” in the notes to our unaudited Consolidated Financial Statements.

Interest expense, net decreased by $79.4 million and $127.6 million for the three and six months ended June 30, 2023, respectively, compared to the corresponding prior year periods, primarily due to a net decrease in Master Lease interest costs due to changes in lease classifications as a result of the amendment of the PENN Master Lease, as described in “Liquidity and Capital Resources,” of $96.4 million and $161.5 million, respectively, partially offset by an increase in interest expense on our Senior Secured Credit Facilities related to an overall increase in interest rates.

Interest income increased by $8.5 million and $18.5 million for the three and six months ended June 30, 2023, respectively, compared to the corresponding prior year periods, primarily due to executing on our short term investing strategy utilizing money market funds which commenced during the year ended December 31, 2022.

Income from unconsolidated affiliates relates principally to our investment in Kansas Entertainment and Freehold Raceway joint ventures, as well as Barstool (prior to the Barstool Acquisition on February 17, 2023).

The increase of $5.4 million for the three months ended June 30, 2023, compared to the corresponding prior year period, is due to higher income earned from our investments in unconsolidated affiliates.

The decrease of $0.7 million for the six months ended June 30, 2023, compared to the corresponding prior year period, is due to lower income earned from our investments in unconsolidated affiliates.

Gain on Barstool Acquisition, net relates to the gain on our acquisition of all the outstanding shares of Barstool common stock not already owned by us on February 17, 2023 as described in Note 6, “Acquisitions and Dispositions” in the notes to our unaudited Consolidated Financial Statements.

The gain consists of $66.5 million related to the remeasurement of our equity investment immediately prior to the acquisition date and $16.9 million related to the acquisition of the remaining 64% of Barstool common stock.

Gain on REIT transactions, net relates to the amendment and restatement of the PENN Master Lease which resulted in the (i) derecognition of $1.6 billion of financing obligations and (ii) derecognition of $1.1 billion of Property and Equipment, net.

In conjunction with entering into the 2023 Master Lease, the individual triple net leases associated with the Meadows Lease (as such terms are defined in “Liquidity and Capital Resources” ) and the Perryville Lease (as such terms are defined in “Liquidity and Capital Resources” ) were terminated which resulted in a $6.5 million loss from the derecognition of ROU assets and lease

See Note 9, “Leases” to our unaudited Consolidated Financial Statements for additional details on both of these transactions.

Loss on extinguishment of debt relates to the refinancing of the previous Senior Secured Credit Facilities in the prior year.

See Note 8, “Long-term Debt” in the notes to our unaudited Consolidated Financial Statements for further discussion.

Other primarily relates to realized and unrealized gains and losses on equity securities, held by PENN Interactive, unrealized gains and losses related to certain Barstool shares (prior to the Barstool Acquisition on February 17, 2023) 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 iCasino market access across our portfolio.

For the three m onths ended March 31, 2023, other income primarily consisted of an unrealized holding loss of $3.2 million compared to an unrealized holding loss of $38.7 million for the three m onths ended March 31, 2022.

Income tax expense was $167.9 million for the three months ended March 31, 2023, compared to $47.6 million for the three months ended March 31, 2022.

Our effective tax rate (income taxes as a percentage of income from operations before income taxes) including discrete items was 23.8% for the three months ended March 31, 2023 as compared to 48.0% for the three months ended March 31, 2022 .

The change in the effective rate for the three months ended March 31, 2023 as compared to the prior year period was primarily due to the increase in pre-tax income.

the three and six m onths ended June 30, 2023, other income primarily consisted of an unrealized holding gain of $6.3 million and $3.1 million, respectively, compared to an unrealized holding loss of $16.9 million and $55.6 million for the three and six m onths ended June 30, 2022, respectively.

Income tax expense was $34.7 million and $202.6 million for the three and six months ended June 30, 2023, respectively, compared to $56.3 million and $103.9 million for the three and six months ended June 30, 2022, respectively.

Our effective tax rate (income taxes as a percentage of income from operations before income taxes) including discrete items was 30.7% and 25.5% for the three and six months ended June 30, 2023, respectively, as compared to 68.3% and 57.2% for the three and six months ended June 30, 2022, respectively .

The change in the effective rate for the three and six months ended June 30, 2023 compared to the corresponding prior year periods was primarily due to the increase in pre-tax income.

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

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

Segment comparison of the three months ended March 31, 2023 and 2022

Additionally, as a result of the Barstool SPA entered into in August 2023, the deferred tax liability associated with the Barstool tradename and other intangibles will be written off to income tax expense, which will have a material impact on our unaudited Consolidated Statements of Operations and unaudited Consolidated Balance Sheets, as discussed in Note 11, “Income Taxes” to our unaudited Consolidated Financial Statements.

Segment comparison of the three and six months ended June 30, 2023 and 2022

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) 2023 2022 $ % 2023 2022 $ %

3 unchanged sentences

Adjusted EBITDAR $ 217.3 $ 214.4 $ 2.9 1.4 % $ 430.2 $ 419.6 $ 10.6 2.5 %

Adjusted EBITDAR margin 30.4 % 31.2 % -80 bps

The Nort heast segment’s revenues for the three months ended March 31, 2023 increased by $42.0 million over the prior year period, primarily due to an increase in visitation at the Northeast segment’s properties’ casinos, hotels and food and beverage outlets, partially offset by a decrease in total revenues at our Hollywood Casino Lawrenceburg property due to increased competition in the tri-state region.

For the three months ended March 31, 2023, the Northeast segment’s Adjusted EBITDAR increased $7.7 million, and Ad justed EBITDAR margin decreased to 30.4%, primarily due to increased gaming and non-gaming revenues which resulted in increased labor costs and cost of sales.

Adjusted EBITDAR margin 31.6 % 31.3 % 30 bps 31.0 % 31.2 % -20 bps

The Nort heast segment’s revenues for the three months ended June 30, 2023 increased by $3.1 million due to increase in hotel and food and beverage revenues, primarily due to the completion of room renovations at our Hollywood Casino at our Greektown property, as well as increased visitation to our food and beverage outlets, offset by a reduction in gaming revenues, primarily at our Hollywood Casino Lawrenceburg and Ameristar East Chicago properties due to increased competition.

The Northeast segment’s revenues for the six months ended June 30, 2023 increased $45.1 million, primarily due to strong visitation at the Northeast segment’s properties during the first quarter, as well as increases in hotel and food and beverage revenues as described above.

The increases were partially offset by decreases in gaming revenues at our Hollywood Casino Lawrenceburg and Ameristar East Chicago properties due to increased competition.

For the three months ended June 30, 2023, the Northeast segment’s Adjusted EBITD AR increased $2.9 million and Ad justed EBITDAR margin increased to 31.6%, primarily due to an increase in non-gaming revenues, as well as a reversal of accrued gaming taxes that are no longer expected to be incurred, partially offset by increased labor costs.

For the six months ended June 30, 2023, the Northeast segment’s Adjusted EBITDAR increased $10.6 million, primarily due to increased gaming and non-gaming revenues and the reversal of gaming taxes discussed above.

Ad justed EBITDAR margin decreased to 31.0% primarily due to higher labor costs and cost of sales.

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) 2023 2022 $ % 2023 2022 $ %

3 unchanged sentences

Adjusted EBITDAR $ 120.9 $ 143.3 $ (22.4) (15.6) % $ 244.5 $ 289.8 $ (45.3) (15.6) %

Adjusted EBITDAR margin 39.3 % 42.9 % -360 bps

The South segment’s revenues for the three months ended March 31, 2023 decreased by $26.6 million from the prior year period, primarily due to a decrease in visitation at many of our properties.

During the three months ended March 31, 2022, there were COVID restrictions in place in downtown New Orleans which increased visitation to our Hollywood Casino Gulf Coast, Boomtown New Orleans, and L’Auberge Baton Rouge properties.

Additionally, significant ice storms at Hollywood Casino Tunica and tornados near Ameristar Vicksburg affected visitation at those properties during the three months ended March 31, 2023.

Furthermore, L’Auberge Lake Charles was affected during the three months ended March 31, 2023 by a new competitor beginning operations in December 2022.

F or the three months ended March 31, 2023, the South segment’s Adjusted EBITDAR decreased $22.9 million and Adjusted EBITDAR margin decreased to 39.3% primarily due to the decrease in gaming revenue described above.

For the three months ended March 31, Change

Adjusted EBITDAR margin 39.2 % 42.3 % -310 bps 39.2 % 42.6 % -340 bps

The South segment’s revenues for the three and six months ended June 30, 2023 decreased by $30.3 million and $56.9 million respectively, compared to the corresponding prior year periods, primarily due to a decrease in visitation at many properties, partially due to unfavorable weather and increased competition that affected our L’Auberge Lake Charles and Margaritaville properties.

During the prior year periods, particularly in the first quarter, there were COVID restrictions in place in downtown New Orleans which increased visitation to our Hollywood Casino Gulf Coast, Boomtown New Orleans, and L’Auberge Baton Rouge properties.

For the three and six months ended June 30, 2023, the South segment’s Adjusted EBITDAR decreased $22.4 million and $45.3 million respectively, and Adjusted EBITDAR margin decreased to 39.2%, primarily due to the decrease in revenues as described above.

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

(dollars in millions) 2023 2022 $ % 2023 2022 $ %

3 unchanged sentences

Adjusted EBITDAR $ 49.6 $ 59.7 $ (10.1) (16.9) % $ 98.7 $ 110.9 $ (12.2) (11.0) %

Adjusted EBITDAR margin 37.9 % 36.3 % 160 bps

The West segment’s revenues for the three months ended March 31, 2023 decreased by $11.2 million from the prior year period, primarily due to the three months ended March 31, 2023 not including any revenue for Tropicana Las Vegas as the operations were sold on September 26, 2022, partially offset by an increase in revenue at Zia Park Casino.

For the three months ended March 31, 2023, the West segment’s Adjusted EBITDAR decreased $2.1 million primarily due to the sale of Tropicana Las Vegas, discussed above.

For the three months ended March 31, 2023, the West segment’s Adjusted EBITDAR margin increased to 37.9% primarily driven by increased revenues at Zia Park Casino.

Adjusted EBITDAR margin 38.2 % 38.8 % -60 bps 38.0 % 37.6 % 40 bps

The West segment’s revenues for the three and six months ended June 30, 2023 decreased by $23.8 million and $35.0 million, respectively, compared to the corresponding prior year periods, primarily due to the three and six months ended June 30, 2023 not including any revenue for Tropicana Las Vegas as the operations were sold on September 26, 2022, partially offset by an increase in revenue at Zia Park Casino.

For the three months ended June 30, 2023, the West segment’s Adjusted EBITDAR decreased $10.1 million primarily due to the sale of Tropicana Las Vegas, discussed above.

For the three months ended June 30, 2023, the West segment’s Adjusted EBITDAR margin decreased to 38.2% primarily due to increases in labor costs and promotional offerings.

For the six months ended June 30, 2023, the West segment’s Adjusted EBITDAR decreased $12.2 million primarily due to the sale of Tropicana Las Vegas, discussed above.

For the six months ended June 30, 2023, the West segment’s Adjusted EBITDAR margin increased to 38.0% primarily driven by increased revenues at Zia Park Casino.

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) 2023 2022 $ % 2023 2022 $ %

3 unchanged sentences

Adjusted EBITDAR $ 127.1 $ 131.3 $ (4.2) (3.2) % $ 252.7 $ 256.8 $ (4.1) (1.6) %

Adjusted EBITDAR margin 42.5 % 44.4 % -190 bps

The Midwest segment’s revenues for the three months ended March 31, 2023 increased by $12.4 million over the prior year period, due to increased visitation at the Midwest segment properties’ casinos, hotels, and food and beverage outlets.

For the three months ended March 31, 2023, the Midwest segment’s Adjusted EBITDAR increased $0.1 million primarily due to increased gaming and non-gaming revenues, partially offset by higher labor costs and cost of sales, reflected in A djusted EBITDAR margin, which decreased by 190 basis points to 42.5%.

Adjusted EBITDAR margin 43.3 % 44.3 % -100 bps 42.9 % 44.3 % -140 bps

The Midwest segment’s revenues for the three months ended June 30, 2023 decreased by $3.0 million, compared to the corresponding prior year period, due to a decrease in casino attendance, partially due to new competition in Nebraska which has affected our Ameristar Council Bluffs property.

The Midwest segment’s revenues for the six months ended June 30, 2023 increased by $9.4 million, compared to the corresponding prior year period, due to increased visitation at the Midwest segment properties particularly in the first quarter, partially offset by a decline in gaming revenues during the second quarter described above.

For the three months ended June 30, 2023, the Midwest segment’s Adjusted EBITDAR decreased $4.2 million primarily due to decreased total revenues and higher labor costs, reflected in A djusted EBITDAR margin, which decreased to 43.3%.

For the six months ended June 30, 2023, the Midwest segment’s Adjusted EBITDAR decreased $4.1 million primarily due to higher labor costs and cost of sales, partially offset by increased gaming and non-gaming revenues, reflected in A djusted EBITDAR margin, which decreased to 42.9%.

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) 2023 2022 $ % 2023 2022 $ %

3 unchanged sentences

Adjusted EBITDAR $ (12.8) $ (20.8) $ 8.0 (38.5) % $ (18.5) $ (30.8) $ 12.3 (39.9) %

Adjusted EBITDAR margin (2.4) % (7.1) % 470 bps

The Interactive segment’s revenues for the three months ended March 31, 2023 increased by $92.0 million over the prior year period, due to the inclusion of 100% of the operating results of Barstool subsequent to the Barstool Acquisition on February 17, 2023 as well as an increase in gaming revenue related to operating in additional jurisdictions, inclusive of the launch of theScore Bet in April 2022.

Additionally, revenues are inclusive of a tax gross-up of $92.3 million for the three months ended March 31, 2023, compared to $50.3 million for the three months ended March 31, 2022, respectively.

For the three months ended March 31, 2023, the Interactive segment’s Adjusted EBITDAR increased primarily due to increases in total revenues due to operating in additional gaming jurisdictions over the prior year.

Adjusted EBITDAR margin (5.0) % (13.4) % 840 bps (3.8) % (10.4) % 660 bps

The Interactive segment’s revenues for the three and six months ended June 30, 2023 increased by $102.6 million and $194.6 million, respectively, compared to the corresponding prior year periods, due to the inclusion of 100% of the operating results of Barstool subsequent to the Barstool Acquisition on February 17, 2023 as well as an increase in gaming revenue related to operating in additional jurisdictions, inclusive of the launch of theScore Bet in April 2022.

Additionally, revenues are inclusive of a tax gross-up of $88.5 million and $180.8 million for the three and six months ended June 30, 2023, respectively, compared to $55.4 million and $105.7 million for the three and six months ended June 30, 2022, respectively.

For the three and six months ended June 30, 2023, the Interactive segment’s Adjusted EBITDAR increased primarily due to increases in total revenues due to operating in additional gaming jurisdictions over the prior year.

Adjusted EBITDAR margin increased due to revenues increasing at a greater rate year-over-year than the rate at which operating expenses increased.

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) 2023 2022 $ % 2023 2022 $ %

2 unchanged sentences

Adjusted EBITDAR $ (25.3) $ (23.4) $ (1.9) 8.1 % $ (52.6) $ (47.1) $ (5.5) 11.7 %

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.

Revenues for the three months ended March 31, 2023 have decreased as compared to the prior ye ar corresponding periods, primarily due to a decrease in racing revenues.

Changes in Adjusted EBITDAR for the three months ended March 31, 2023 primarily relate to an increase in payroll expenses.

Revenues for the three and six months ended June 30, 2023 have increased and decreased respectively, compared to the prior ye ar corresponding periods, primarily due to fluctuations in racing revenues.

Changes in Adjusted EBITDAR for the three and six months ended June 30, 2023 primarily relate to an increase in payroll expenses.

Non-GAAP Financial Measures

15 unchanged sentences

pre-opening expenses;

Adjusted EBITDA excludes (i) non-cash gains/losses associated with REIT transactions (including our transactions with GLPI entered into on February 21, 2023 as described in Note 9, “Leases” to our unaudited Consolidated Financial Statements);

and (ii) non-cash gains/losses associated with partial and step acquisitions as measured in accordance with ASC 805 “Business Combinations” (including the Barstool Acquisition).

non-cash gains/losses associated with REIT transactions as described in Note 9, “Leases” to our unaudited Consolidated Financial Statements;

non-cash gains/losses associated with partial and step acquisitions as measured in accordance with ASC 805 “Business Combinations”;

Adjusted EBITDA is inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (such as interest expense, net;

2 unchanged sentences

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

(prior to our acquisition of Barstool on February 17, 2023) and our Kansas Entertainment, LLC joint venture.

(prior to our acquisition of the remaining 64% of Barstool common stock on February 17, 2023) and our Kansas Entertainment, LLC joint venture.

Adjusted EBITDA is inclusive of rent expense associated with our triple net operating leases with our REIT landlords.

19 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) 2023 2022 2023 2022

1 unchanged sentence

Income tax expense 34.7 56.3 202.6 103.9

Income from unconsolidated affiliates (2.6) (8.7)

Interest expense, net 115.6 195.0 228.6 356.2

Interest income (9.9) (1.4) (20.3) (1.8)

Income from unconsolidated affiliates (7.2) (1.8) (9.8) (10.5)

Gain on Barstool Acquisition, net — — (83.4) —

Gain on REIT transactions, net — — (500.8) —

Other expenses 1.0 40.7

Loss on early extinguishment of debt — 10.4 — 10.4

Other (income) expenses (5.8) 17.8 (4.8) 58.5

Operating income 205.5 302.4 404.6 594.4

Stock-based compensation (1)

19.7 14.5 36.2 31.5

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

Gain on disposal of assets (1)

(6.2) (9.5) (9.1) (12.4)

Loss on disposal of assets (1)

Contingent purchase price (1)

0.2 (0.9) 0.5 (1.0)

Pre-opening expenses (1)

1 unchanged sentence

Insurance recoveries, net of deductible charges (1)

(13.6) — (13.6) (8.8)

Income from unconsolidated affiliates 7.2 1.8 9.8 10.5

Non-operating items of equity method investments (3)

0.9 0.3 5.4 2.1

Other expenses (1)(4)

6.1 8.2 10.7 15.5

Adjusted EBITDA 330.4 476.5 662.6 911.1

Rent expense associated with triple net operating leases (1)

146.4 28.0 292.4 88.1

Adjusted EBITDAR $ 476.8 $ 504.5 $ 955.0 $ 999.2

5 unchanged sentences

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

(3) Consists principally of interest expense, net, income taxes, depreciation and amortization, and stock-based compensation expense associated with Barstool prior to us acquiring the remaining 64% of Barstool common stock (see Note 6, “ Acq uisition s ” in the notes to our unaudited Consolidated Financial Statements), and our Kansas Entertainment joint venture.

(3) Consists principally of interest expense, net, income taxes, depreciation and amortization, and stock-based compensation expense associated with Barstool prior to us acquiring the remaining 64% of Barstool common stock (see Note 6, “Acquisitions and Dispositions” in the notes to our unaudited Consolidated Financial Statements), and our Kansas Entertainment joint venture.

(4) 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) 2023 2022 $ %

4 unchanged sentences

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 $77.2 million for the three months ended March 31, 2023, primarily due to a negative impact in changes in working capital related to accrued racing liabilities, accrued capital expenditures, payroll related liabilities, and timing of payments to third party service providers.

Net cash provided by operating activities decreased by $112.7 million for the six months ended June 30, 2023, primarily due to a decrease in earnings, a negative impact in changes in working capital related to payroll related liabilities and an increase in cash paid for taxes.

Investing Cash Flow

Cash used in investing activities for the three months ended March 31, 2023 of $378.2 million is primarily due to consideration paid for the Barstool Acquisition, net of cash acquired, of $314.6 million and capital expenditures of $63.2 million.

For the three months ended March 31, 2022, cash used in investing activities of $39.6 million primarily related to capital expenditures of $65.6 million offset by Hurricane Laura insurance proceeds.

Cash used in investing activities for the six months ended June 30, 2023 of $462.9 million is primarily due to consideration paid for the Barstool Acquisition, net of cash acquired, of $314.6 million and capital expenditures of $132.8 million.

For the six months ended June 30, 2022, cash used in investing activities of $113.7 million primarily related to capital expenditures of $125.6 million and the acquisition of a $15.0 million cost method investment, offset by Hurricane Laura insurance proceeds.

Capital Expenditures

Capital expenditures are accounted for as either project capital (new facilities or expansions) or maintenance (replacement) which is inclusive of projects such as our Barstool branded retail sportsbooks, our cashless, cardless and contactless technology and hotel renovations.

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 the three months ended March 31, 2023 and 2022, as applicable.

Capital expenditures for the three months ended March 31, 2023 and 2022 were $63.2 million and $65.6 million, respectively.

For the year ending December 31, 2023, our anticipated capital expenditures, inclusive of insurance proceeds, are approximately $413 million, which include capital expenditures of $63.2 million incurred for the three months ended March 31, 2023 and capital expenditures required under our Triple Net Leases, which require us to spend a specified percentage of total revenues.

Capital expenditures are accounted for as either project capital (new facilities or expansions) or maintenance (replacement) which is inclusive of projects such as our retail sportsbooks, our cashless, cardless and contactless technology and hotel renovations.

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 the six months ended June 30, 2023 and 2022, as applicable.

Capital expenditures for the six months ended June 30, 2023 and 2022 were $132.8 million and $125.6 million, respectively.

For the year ending December 31, 2023, our anticipated capital expenditures, inclusive of insurance proceeds, are approximately $413 million, which include capital expenditures of $132.8 million incurred for the six months ended June 30, 2023 and capital expenditures required under our Triple Net Leases, which require us to spend a specified percentage of total revenues.

Financing Cash Flow

For the three months ended March 31, 2023 and 2022, net cash used in financing activities totaled $83.0 million and $239.2 million respectively, primarily related to repurchases of our common stock of $50.0 million and $175.1 million, respectively.

At March 31, 2023, we had $2.8 billion in aggregate principal amount of indebtedness, including $1.5 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, and $163.5 million outstanding in other long-term obligations.

For the six months ended June 30, 2023, net cash used in financing activities totaled $214.1 million, primarily related to repurchases of our common stock of $149.8 million, as well as $42.7 million in principal payments on our finance leases and finance obligations and debt repayments of $18.8 million.

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.

At June 30, 2023, we had $2.8 billion in aggregate principal amount of indebtedness, including $1.5 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, and $172.2 million outstanding in other long-term obligations.

No amounts were drawn on our Amended Revolving Credit Facility.

We have no debt maturing prior to 2026.

As of March 31, 2023 we had conditional obligations under letters of credit issued

As of June 30, 2023 we had conditional obligations under letters of credit issued

pursuant to the Amended Credit Facilities with face amounts aggregating to $23.4 million resulting in $976.6 million available borrowing capacity under our Amended Revolving Credit Facility.

3 unchanged sentences

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, 2023, the Company was in compliance with all required financial covenants.

As of June 30, 2023, 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.

1 unchanged sentence

Share Repurchase Authorization

On February 1, 2022, the Board of Directors of PENN approved a $750.0 million share repurchase authorization, which expires on January 31, 2025 (the “February 2022 Authorization”).

During the quarter, we completed our $750.0 million share repurchase authorization approved by the Board of Directors on February 1, 2022 (the “February 2022 Authorization”).

On December 6, 2022, a second share repurchase program was authorized for an additional $750.0 million (the “December 2022 Authorization”).

The December 2022 Authorization expires on December 31, 2025.

The Company plans to utilize the remaining capacity under the February 2022 Authorization prior to effecting any repurchases under the December 2022 Authorization.

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.

The Company utilized the remaining capacity under the February 2022 Authorization prior to effecting any repurchases under the December 2022 Authorization.

Repurchases by the Company are 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 Rule 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, 2023, the Company repurchased 1,646,963 shares of its common stock in open market transactions for $50.0 million at an average price of $30.36 per share under the February 2022 Authorization.

During the three and six months ended June 30, 2023 respectively, the Company repurchased 3,791,258 and 5,438,221 shares of its common stock in open market transactions for $99.8 million and $149.8 million, at an average price of $26.31 and $27.54 per share under the February 2022 and December 2022 Authorizations.

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

Subsequent to the quarter ended March 31, 2023, the Company repurchased 647,319 shares of its common stock at an average price of $29.21 per share for an aggregate amount of $18.9 million.

The remaining availability under February 2022 Authorization and our December 2022 Authorization was $80.4 million and $750.0 million, respectively, as of May 3, 2023.

No shares of the Company’s common stock were repurchased subsequent to the quarter ended June 30, 2023.

As of August 8, 2023, the remaining availability under our December 2022 Authorization was $749.5 million.

Other Factors Affecting Liquidity

ESPN Bet Sportsbook Agreement

On August 8, 2023, PENN entered into the Sportsbook Agreement with ESPN which provides for a long-term strategic relationship between PENN and ESPN relating to online sports betting in the United States.

In the fall of 2023, the existing Barstool Sportsbook will be rebranded across all online platforms in the United States as ESPN Bet and our online product will include a Hollywood-branded integrated iCasino where permitted.

The Sportsbook Agreement has an initial 10-year term and may be extended for an additional ten years upon mutual agreement of PENN and ESPN.

In consideration for the media marketing services and brand and other rights provided by ESPN, PENN will pay $150.0 million per year in cash pursuant to the Sportsbook Agreement for the initial 10-year term and issue the warrants pursuant to the Investment Agreement (see Note 17, “Subsequent Events” for additional information).

Triple Net Leases

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

the most significant of which are the AR PENN Master Lease, 2023 Master Lease, PENN Master Lease (prior to January 1, 2023), and Pinnacle Master Lease (as such terms are defined in Note 9, “Leases,” in the notes to our unaudited Consolidated Financial Statements, and collectively referred to as the “Master Leases”), with GLPI.

the most significant of which are the AR PENN Master Lease, 2023 Master Lease, PENN Master Lease (prior to January 1,

2023), and Pinnacle Master Lease (as such terms are defined in Note 9, “Leases” in the notes to our unaudited Consolidated Financial Statements, and collectively referred to as the “Master Leases”), with GLPI.

We refer to the Master Leases, Perryville Lease (where applicable), the Meadows Lease (where applicable), the Margaritaville Lease, the Greektown Lease, the Tropicana Lease (terminated September 26, 2022) and the Morgantown Lease, collectively, as our “Triple Net Leases”.

1 unchanged sentence

On February 21, 2023, as described in Note 9, “Leases” in the notes to our unaudited Consolidated Financial Statements, the Company and GLPI entered into the AR PENN Master Lease, effective January 1, 2023, to (i) remove the land and buildings for Aurora, Joliet, Columbus, Toledo and the M Resort, and (ii) make associated adjustments to the rent after which the initial rent in the AR PENN Master Lease will be $284.1 million, consisting of $208.2 million of building base rent, $43.0 million of land base rent and $32.9 million of percentage rent (as such terms are defined in the AR PENN Master Lease).

Subsequent to the execution of the AR PENN Master Lease, the Company leases real estate assets associated with 14 of the

gaming facilities used in its operations via a triple net master lease.

Subsequent to the execution of the AR PENN Master Lease, the Company leases real estate assets associated with 14 of the gaming facilities used in its operations via a triple net master lease.

The current term of the AR PENN Master Lease expires on October 31, 2033 and thereafter contains three renewal terms of five years each on the same terms and conditions, exercisable at the Company’s option.

4 unchanged sentences

The 2023 Master Lease includes the 2023 Master Lease Base Rent equal to $232.2 million and the Master Development Agreement contains additional rent (together with the 2023 Master Lease Base Rent, the “2023 Master Lease Rent”) equal to (i) 7.75% of any project funding received by PENN from GLPI for the Aurora Project and (ii) a percentage, based on the then-current GLPI stock price, of any project funding received by PENN from GLPI for the Other Development Projects.

These funding obligations of GLPI expire on January 1, 2026.

13 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) 2023 2022 2023 2022

9 unchanged sentences

$ 234.2 $ 231.8 $ 467.4 $ 461.1

(1) For the three months ended March 31, 2022, rent payable under the Tropicana Lease was nominal.

(1) For the three and six months ended June 30, 2022, rent payable under the Tropicana Lease was nominal.

Therefore, it has been excluded from the table above.

The Tropicana Lease was terminated on September 26, 2022.

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.

20 unchanged sentences

A complete discussion of our critical accounting estimates is included in our Form 10-K for the year ended December 31, 2022.

Other than discussed below, there have been no significant changes in our critical accounting estimates during the three months ended March 31, 2023.

Other than discussed below, there have been no significant changes in our critical accounting estimates during the six months ended June 30, 2023.

The assessment of lease classifications of land and building components contained within each of the AR PENN Master Lease and the 2023 Master Lease (as described in Note 9, “Leases” in the notes to our unaudited Consolidated Financial Statements) required management to make significant estimates and assumptions.

These included estimates for the (i) fair value of the land and building assets;

These included estimates for the (i) fair value

of the land and building assets;

(ii) the term of the lease, including whether any renewal terms are reasonably assured of being exercised;

2 unchanged sentences

Business Combination

In connection with the Company’s acquisition of Barstool (as described in Note 6, “Acquisition s ” in the notes to our unaudited Consolidated Financial Statements), valuations were completed to determine the allocation of the purchase price.

In connection with the Company’s acquisition of Barstool (as described in Note 6, “Acquisitions and Dispositions” in the notes to our unaudited Consolidated Financial Statements), valuations were completed to determine the allocation of the purchase price.

The factors considered in the valuation include data gathered as a result of the Company’s due diligence in connection with the acquisition, projections for future operations, and data obtained from third-party valuation specialists, as deemed appropriate.

14 unchanged sentences

Where a replacement cost method was utilized, significant assumptions included estimating cost and time required to replace, determining the opportunity cost over the replacement period, and estimating a mark-up on development costs.

Where a with-and-without method was utilized, significant assumptions included projecting

revenues with direct advertising relationships and projecting revenues without direct advertising relationships, and determining discount rates.

Where a with-and-without method was utilized, significant assumptions included projecting revenues with direct advertising relationships and projecting revenues without direct advertising relationships, and determining discount rates.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

4 unchanged sentences

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

the Company’s expectations of 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 regarding results, and the impact of competition, in retail/mobile/online sportsbooks, iCasino, social gaming, and retail operations;

the Company’s development and launch of its Interactive segment’s products in new jurisdictions and enhancements to existing Interactive segment products, including the content for the Barstool Sportsbook and Casino and theScore Bet Sportsbook and Casino apps and the migration of the Barstool Sportsbook into both our proprietary player account management system and risk and trading platforms;

the Company’s expectations regarding its acquisition of Barstool Sports Inc.

(“Barstool”) 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 Score Media and Gaming, Inc.

and Barstool;

the continued growth and monetization of the Company’s media business;

the Company’s development and launch of its Interactive segment’s products in new jurisdictions and enhancements to existing Interactive segment products, including the content for the ESPN Bet and theScore Bet Sportsbook and Casino apps and the relaunch of the Barstool Sportsbook as ESPN Bet on our proprietary player account management system and risk and trading platforms;

the expected timing of the rebrand of Barstool Sportsbook;

the benefits of the agreement between the Company and ESPN;

the Company’s expectations regarding its Sportsbook Agreement with ESPN 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 the continued growth and monetization of the Company’s media business;

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

1 unchanged sentence

our ability to obtain financing for our development projects on attractive terms;

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

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

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

6 unchanged sentences

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

the Company may not be able to achieve the anticipated financial returns from the Sportsbook Agreement with ESPN, including due to fees, costs, taxes or circumstances beyond the Company’s or ESPN’s control;

the rebranding of the Barstool Sportsbook as ESPN Bet may be delayed, or in certain jurisdictions may not occur at all, for reasons beyond our control, including due to any delays in the receipt of, or failure to receive, any required regulatory approvals;

potential adverse reactions or changes to business or regulatory relationships resulting from the announcement or performance of the Sportsbook Agreement with ESPN or the divestiture of Barstool Sports;

the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the Company and ESPN to terminate the Sportsbook Agreement between the companies;

liabilities, costs and fees in connection with the divestiture of Barstool Sports and the transition from the Barstool Sportsbook and other uses of intellectual property of Barstool Sports, including in the Company’s retail locations;

the ability of the Company and ESPN to agree to extend the initial 10-year term of the Sportsbook Agreement on mutually satisfactory terms, if at all, and the costs and obligations of such terms if agreed;

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

the ability of the Company or ESPN to retain and hire key personnel;

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

and additional risks and uncertainties described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each as filed with the U.S.

3 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