What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-22 compared with 2023-02-23 · 275 added, 261 removed, 409 unchanged (57% of the section changed)

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EXECUTIVE OVERVIEW

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

was renamed PENN Entertainment, Inc.

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 December 31, 2022, PENN operated 43 properties in 20 states, online sports betting in 15 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 ® .

As of the issuance date of this report, PENN operates online sports betting in 16 jurisdictions upon the addition of Ohio in January 2023.

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 my choice ® customer loyalty program (the “my choice program”), which offers our approximately 26 million members a unique set of rewards and experiences across business channels.

As of December 31, 2023, PENN operated 43 properties in 20 states, online sports betting in 18 jurisdictions and iCasino in five jurisdictions, under a portfolio of well-recognized brands including Hollywood Casino ® , L’Auberge ® , ESPN BET™, 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.

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 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 over 29 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 PENN Master Lease and the 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.

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

Impact of the COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the novel coronavirus (known as “COVID-19”) outbreak to be a global pandemic.

To help combat the spread of COVID-19 and pursuant to various orders from state gaming regulatory bodies or governmental authorities, operations at all of our properties were temporarily suspended for single, or multiple, time periods during 2020 and into 2021, and we operated with reduced gaming and hotel capacity with limited food and beverage offerings.

As of the date of this filing, none of our properties are closed.

Although the impact of the COVID-19 pandemic has lessened as of late, we could still experience adverse effects from the lingering macroeconomic issues that have resulted from the COVID-19 pandemic.

These could include, though are not limited to, labor shortages and increased turnover, interruption of domestic and global supply chains, and the reinstatement of mask mandates.

the most significant of which are with Gaming and Leisure Properties, Inc.

GLPI) (“GLPI”), a real estate investment trust (“REIT”), and include 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 12, “Leases” in the notes to our Consolidated Financial Statements and collectively referred to as the “Master Leases”).

Recent Acquisitions, Development Projects and Other

As previously disclosed, in February 2020, we closed on our investment in Barstool Sports, Inc.

(“Barstool”) pursuant to a stock purchase agreement with Barstool and certain stockholders of Barstool, in which we purchased 36% (inclusive of 1% on a delayed basis) of the common stock, par value $0.0001 per share, of Barstool for a purchase price of $161.2 million.

Under this strategic relationship, Barstool exclusively promotes the Company’s retail gaming and racing properties, iCasinos and sports betting products, including the Barstool Sportsbook and Casino mobile app, to its national audience, and granted us the sole right to utilize Barstool Sportsbook for all of our online and retail sports betting and iCasino products.

Subsequent to year end, on February 17, 2023, we completed the acquisition of all of the outstanding shares of common stock of Barstool not already owned by us for approximately $388 million, excluding transaction expenses, repayment of Barstool indebtedness and other purchase price adjustments (the “Barstool Acquisition”).

We issued 2,442,809 shares of our common stock to certain former stockholders of Barstool for the Barstool Acquisition (see Note 15, “Stockholders’ Equity,” for further information) and utilized approximately $315 million of cash to complete the Barstool Acquisition, inclusive of transaction expenses and repayment of Barstool indebtedness.

As of the closing of the Barstool Acquisition, Barstool became an indirect wholly owned subsidiary of PENN and accordingly we will consolidate Barstool in our financial statements and no longer account for our interest under the equity method of accounting.

See Note 7, “Investments in and Advances to Unconsolidated Affiliates” to our Consolidated Financial Statements for additional detail on our acquisition of the remaining Barstool shares.

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

(“Tropicana”) to GLPI in exchange for rent credits of $307.5 million, and utilized the rent credits to pay rent under our existing Master Leases and the Meadows Lease, beginning in May 2020.

Contemporaneous with the sale, the Company entered into the Tropicana Lease, (as defined and discussed in Note 12, “Leases” to our Consolidated Financial Statements).

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.

The transaction closed on September 26, 2022.

On October 1, 2020, we sold the land underlying Hollywood Casino Morgantown (“Morgantown”) to GLPI in exchange for rent credits of $30.0 million.

Contemporaneous with the sale, the Company entered into a triple net lease with GLPI for the land underlying Morgantown (as defined and discussed in Note 12, “Leases” to our Consolidated Financial Statements).

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

and Lucky Point Inc.

(collectively, “Hitpoint”).

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

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

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

In conjunction with entering into the 2023 Master Lease, (as defined within “Liquidity and Capital Resources” ) the Perryville Lease was terminated effective January 1, 2023.

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

In conjunction with the acquisition, we recorded a gain of $29.9 million on our equity method investment.

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

(“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.

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

Each Exchangeable Share will be exchangeable into one share of PENN common stock at the option of the holder, subject to certain adjustments.

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

On October 9, 2022, as described in Note 12, “Leases” , the Company entered into a binding term sheet (the “Term Sheet”) with GLPI.

Pursuant to the Term Sheet, the Company and GLPI agreed to amend and restate the PENN Master Lease (the “Amended and Restated PENN Master Lease”) 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”);

(ii) make associated adjustments to the rent after which the initial rent in the Amended and Restated 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 Amended and Restated PENN Master Lease);

(iii) terminate the existing leases associated with Hollywood Casino at The Meadows (“Meadows”) and Perryville;

and (iv) enter into a new master lease (the “2023 Master Lease”) specific to the properties associated with Aurora, Joliet, Columbus, Toledo, M Resort, Meadows and Perryville.

Subsequent to year end, on February 21, 2023, both the Amended and Restated PENN Master Lease and the 2023 Master Lease agreement were executed with an effective date of January 1, 2023, and a master development agreement (the “Master Development Agreement”) was executed on February 22, 2023.

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 and determined the fair value of Barstool 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,” Note 7, “Investments in and Advances to Unconsolidated Affiliates,” and Note 15, “Stockholders’ Equity” in the notes to our 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 rebranded the existing Barstool Sportsbook across all online platforms in the United States as ESPN BET (the “Sportsbook”) and oversees 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, and setting forth certain other governance rights of ESPN, Inc., as discussed in Note 13, “Commitments and Contingencies” in the notes to our 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 nominal cash consideration (one 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.

In connection with the Barstool SPA, we recognized a pre-tax loss on disposal of $923.2 million (inclusive of $714.8 million in goodwill and intangible assets write-offs and a $70.0 million indemnification liability) during the third quarter of 2023.

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

For information on the tax-related impacts from the Barstool transaction, see Note 14, “Income Taxes” in the notes to our Consolidated Financial Statements.

On February 21, 2023, as described in Note 12, “Leases” in the notes to our Consolidated Financial Statements, 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 was reset to $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 lease contains real estate assets associated with 14 of the Company’s gaming facilities used in its operations.

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.

Concurrent with the execution of the AR PENN Master Lease, the Company and GLPI entered into a new master lease (the “2023 Master Lease”), effective January 1, 2023, specific to the properties associated with Aurora, Joliet, Columbus, Toledo, M Resort, Hollywood Casino at The Meadows (“Meadows”) and Hollywood Casino Perryville (“Perryville”) and a master development agreement (the “Master Development Agreement”).

The 2023 Master Lease has an initial term through October 31, 2033 with three subsequent five-year renewal periods on the same terms and conditions, exercisable at the Company’s option.

The 2023 Master Lease is cross-defaulted, cross-collateralized, and coterminous with the Amended and Restated PENN Master Lease, and subject to a parent guarantee.

The 2023 Master Lease terminated the individual triple net leases associated with Meadows and Perryville.

The 2023 Master Lease and AR PENN Master Lease are cross-defaulted, cross-collateralized, and coterminous, and subject to a parent guarantee.

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.

The 2023 Master Lease Rent will be

subject to a one-time increase of $1.4 million, effective the fifth anniversary of the effective date.

The 2023 Master Lease Rent will be further subject to a fixed escalator of 1.5% on November 1, 2023 and annually thereafter.

The Master Development Agreement provides that PENN may elect not to proceed with a development project prior to GLPI’s commencement of any equity or debt offering or credit facility draw intended to fund such project or after such time in certain instances, provided that GLPI will be reimbursed for all costs and expenses incurred in connection with such discontinued project.

The Master Development Agreement provides that PENN may elect not to proceed with a development project prior to GLPI’s commencement of any equity or debt offering or credit facility draw intended to fund such a project or after such time in certain instances, provided that GLPI will be reimbursed for all costs and expenses incurred in connection with such discontinued project.

The Aurora Project and the Other Development Projects are all subject to necessary regulatory and other government approvals.

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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 Score Media and Gaming, Inc.

(“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 gaming, iCasino, and sports betting entertainment.

Operating and Competitive Environment

Most of our properties operate in mature, competitive markets.

We expect that the majority of our future growth will come from new business lines or distribution channels, such as retail and online gaming and sports betting;

We expect the majority of our future growth to come from our online sports betting and iCasino businesses;

improvements, expansions, or relocations of our existing properties;

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and strategic investments and acquisitions;

and cross-sell opportunities between our retail gaming, online sports betting, and iCasino businesses.

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

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

We continue to adjust operations, offerings and cost structures to reflect the changing economic and health and safety conditions.

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

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

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

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

dockside casinos;

land-based casinos;

video lottery;

iCasino and online social casino;

online and retail sports betting;

sports media companies;

gaming at taverns;

gaming at truck stop establishments;

sweepstakes and poker machines not located in casinos;

the potential for increased fantasy sports;

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

and other forms of gaming in the U.S.

We continuously adjust operations, offerings, and cost structures to reflect changing economic conditions, as well as consumer demand and behaviors.

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

We seek to grow our customer database and PENN Play TM loyalty program through our online sports betting and iCasino businesses, the development of new properties, the expansion of existing properties and other business lines, and through partnerships with third-party partners, such as Norwegian Cruise Line Holdings Ltd., Live Nation Entertainment, Inc., and Choice Hotels International, Inc.

In addition, strategic acquisitions (e.g.

theScore) and strategic relationships (e.g.

our Sportsbook Agreement with ESPN), allow us to acquire new customers, expand our player database, and provide additional revenue streams, all in furtherance of our omnichannel strategy.

The gaming, media, and entertainment industries are characterized by an increasingly high degree of competition among a large number of participants.

We compete with a variety of gaming operations, including casinos and hotel casinos of varying quality and size and other gaming options such as state and province-sponsored internet lotteries, sweepstakes, charitable gaming, video gaming terminals at bars, restaurants, taverns and truck stops, illegal slot machines and skill games, fantasy

sports and third-party internet or mobile-based gaming platforms, including both legal and illegal iCasino and sports betting operations.

See the “Segment comparison of the years ended December 31, 2023 and 2022” section below for discussions on our results of operations by reportable segment.

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

For example, decreases in discretionary consumer spending have historically been brought about by weakened general economic conditions, such as 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.

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

Our gaming revenue is derived primarily from slot machines (which represented approximately 84%, 84% and 87% of our gaming revenue in 2022, 2021 and 2020, 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.

Our gaming revenue is derived primarily from slot machines (which represented approximately 85%, 84%, and 84% of our gaming revenue in 2023, 2022, and 2021, respectively) and, to a lesser extent, table games, online sports betting, and iCasino.

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.

Key performance indicators related to gaming revenue are slot handle and table game drop, which are volume indicators, and “win” or “hold” percentage.

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The win or hold percentage is the net amount of gaming wins and losses, with liabilities recognized for accruals related to the anticipated payout of progressive jackpots.

Given the stability in our slot hold percentages on a historical basis, we have not experienced significant impacts to net income from changes in these percentages.

Given the stability in our slot hold percentages on a historical basis, we have not experienced significant impacts to net income (loss) from changes in these percentages.

For table games, customers usually purchase chips at the gaming tables.

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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 online gaming, including sports betting.

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.

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

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.

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Northeast, South, West, and Midwest.

Our Interactive segment includes all of our online sports betting, iCasino and online social gaming operations, management of retail sports betting, media, and our proportionate share of earnings attributable to our equity method investment in Barstool.

The Interactive segment includes all of our online sports betting, online casino/iCasino, and social gaming (collectively referred to as “online gaming”) operations, management of retail sports betting, media, and the operating results of Barstool subsequent to the Barstool Acquisition on February 17, 2023 and prior to the Barstool divestiture on August 8, 2023 (as defined and discussed in Note 6, “Acquisitions and Dispositions” ).

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.

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

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

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and our management contract for Retama Park Racetrack.

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

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

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

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

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 $106.7 million, $98.5 million, and $103.3 million for the years ended December 31, 2023, 2022, and 2021, respectively.

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

(3) The total is a mathematical calculation derived from the sum of reportable segments (as well as the Other category).

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 (terminated on September 26, 2022) and Hollywood Casino at The Meadows, and our individual triple net leases with VICI (“VICI”) for the real estate assets used in the operations of Margaritaville Resort Casino

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 12, “Leases” to our 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 are 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 Master Lease properties are primarily classified as finance leases.

(4) For the year ended December 31, 2023, pertains to the following operating leases:

(i) AR PENN Master Lease;

(ii) 2023 Master Lease;

(iii) Margaritaville Lease;

and (iv) Greektown Lease.

For the year ended December 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 Gaming at Mahoning Valley

Race Course);

(ii) Meadows Lease;

(iii) Margaritaville Lease;

(iv) Greektown Lease;

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

For the year ended December 31, 2021, pertains to the operating lease components contained within the (i) PENN Master Lease (specific to the land, inclusive of the variable expense associated with Columbus and Toledo) ;

(ii) Pinnacle Master Lease (specific to the land);

(iii) Meadows Lease;

(iv) Margaritaville Lease;

(v) Greektown Lease;

and (vi) Tropicana Lease.

Consolidated comparison of the years ended December 31, 2023 and 2022

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Total revenues $ 6,362.9 $ 6,401.7 $ 5,905.0 $ (38.8) $ 496.7 (0.6) % 8.4 %

Gaming revenues for the year ended December 31, 2022 increased by $256.4 million compared to the prior year primarily due to increases in our Interactive segment resulting from continued growth in our online revenues, partially due to the acquisition of theScore, and the inclusion of the full period operating results of three new properties in our Northeast segment:

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.

Food, beverage, hotel and other revenues for the year ended December 31, 2022 increased by $240.3 million compared to the prior year, primarily due to increases in food, beverage and hotel revenues across all our segments, due to easing of restrictions, strong visitation levels among all age groups, increased offerings and hours of operations at our outlets, increases in gaming tax reimbursement amounts charged to third-party partners for online sports betting and iCasino market access, the inclusion of operating results from our new properties as discussed above, and media revenues from theScore, which was acquired on October 19, 2021.

Gaming revenues for the year ended December 31, 2023 decreased by $295.9 million compared to the prior year primarily due to a decrease in visitation in the South segment, decreases in online gaming revenues in our Interactive segment due to elevated promotional expense related to customer acquisitions through the launch of ESPN BET , and the sale of the Tropicana Las Vegas Hotel and Casino, Inc.

(“Tropicana”) operations in September 2022.

The prior year included Tropicana revenues through the sale on September 26, 2022, compared to none in the current year.

Food, beverage, hotel, and other revenues for the year ended December 31, 2023 increased by $257.1 million compared to the prior year, 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 until the disposition on August 8, 2023.

See “Segment comparison of the years ended December 31, 2023 and 2022” below for more detailed explanations of the fluctuations in revenues.

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Depreciation and amortization 435.1 567.5 344.5 (132.4) 223.0 (23.3) % 64.7 %

Impairment losses 118.2 — 623.4 118.2 (623.4) N/M N/M

Impairment losses 130.6 118.2 — 12.4 118.2 10.5 % N/M

Loss on disposal of Barstool 923.2 — — 923.2 — N/M N/M

Total operating expenses $ 7,053.1 $ 5,427.7 $ 4,845.4 $ 1,625.4 $ 582.3 29.9 % 12.0 %

N/M - Not meaningful

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

Gaming expenses for the year ended December 31, 2022 increased by $323.7 million compared to the prior year primarily due to higher third-party service provider fees from higher online gaming activity, higher payroll expenses related to volume, an increase in gaming taxes resulting from the increase in gaming revenue s, and increased variable marketing and promotional expenses compared to the pri or period .

Also included in gaming expenses are non-

recurring transaction costs of $26.0 million for the year ended December 31, 2022 , related to third-party contract termination fees as we execute on our strategy to deploy our internally built technology stack, consisting of a player account management system and proprietary risk and trading platform, specific to the Interactive segment.

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.

Food, beverage, hotel and other expenses for the year ended December 31, 2022 increased $159.9 million compared to the prior year, primarily due to increased volumes as we operated with increased offerings and extended hours of operations at our outlets, which resulted in increases in payroll expenses and cost of sales, and increases in gaming tax reimbursement amounts charged to third-party partners for online sports betting and iCasino market access .

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

Gaming expenses for the year ended December 31, 2023 increased by $125.0 million compared to the prior year primarily due to increased payroll and marketing costs, partially offset by a decrease in gaming taxes due to the decrease in gaming revenues as described above .

Also included in gaming expenses are certain non-recurring transaction costs of $16.8 million and $26.0 million for the years ended December 31, 2023 and 2022, respectively , related to third-party contract termination fees as we executed on our strategy to deploy our internally built technology stack, consisting of a player account management system and proprietary risk and trading platform, specific to the Interactive segment.

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

Food, beverage, hotel and other expenses for the year ended December 31, 2023 increased $244.2 million compared to the prior year, 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 operating expenses related to Barstool subsequent to the Barstool Acquisition on February 17, 2023 until the disposition on August 8, 2023.

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.

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and rent expense associated with our triple net operating leases.

General and administrative expenses for the year ended December 31, 2022 decreased by $242.5 million compared to the prior year primarily due to a decrease in rent costs associated with our Master Leases of $304.8 million representing changes in lease classifications from operating to finance as a result of the Lease Modification as described in Note 12, “Leases” to our Consolidated Financial Statements.

The decrease was partially offset by increased payroll costs of $43.2 million, which reflect the current operating environment, a $24.2 million increase in facility costs due to increased volumes, and a $6.4 million loss on the sale of land at our L’Auberge Baton Rouge property.

Depreciation and amortization for the year ended December 31, 2022 increased year over year primarily due to increased amortization costs associated with our Master Leases of $171.0 million representing changes in lease classifications from operating to finance as a result of the Lease Modification as described in Note 12, “Leases” to our Consolidated Financial Statements.

In addition, amortization on other intangible assets increased by $37.1 million primarily due to the amortization of other intangible assets that resulted from our acquisition of theScore.

Impair ment losses for the year ended December 31, 2022 primarily relate to impairment charges at our Hollywood Casino at Greektown property for goodwill and other intangible assets of $37.4 million and $65.4 million, respectively, as a result of an interim impairment assessment during the third quarter of 2022 as well as an impairment charge at our Hollywood Casino at PENN National Race Course (“PNRC”) property for other intangible assets of $13.6 million as a result of our annual impairment assessment during the fourth quarter of 2022.

The impairment charges at Hollywood Casino at Greektown were due to revised cash flow projections as the majority of the hotel was out of service for longer than anticipated during renovations caused by water damage.

The impairment charge at PNRC was largely due to the expansion of gaming legislation in the market and increased supply, particularly from our recent openings of Hollywood Casino York and Hollywood Casino Morgantown, which reduced long-term projections of the property.

General and administrative expenses for the year ended December 31, 2023 increased by $453.0 million compared to the prior year primarily due to an increase in rent expense associated with triple net operating leases of $441.5 million stemming from the execution on February 21, 2023 of both the AR PENN Master Lease and 2023 Master Lease.

The impact of those 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 12, “Leases” to our Consolidated Financial Statements.

Depreciation and amortization for the year ended December 31, 2023 decreased year over year 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 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 and 2023 Master Lease to be operating leases with the associated rent expense recorded to “General and administrative” as described in Note 12, “Leases” to our Consolidated Financial Statements.

Impair ment losses for the year ended December 31, 2023 relate to impairment charges taken on our goodwill and other intangible assets of $30.0 million and $100.6 million, respectively, as a result of our annual impairment assessment during the fourth quarter of 2023.

The impairment of goodwill was specific to our Hollywood Casino at Greektown (“Greektown”) reporting unit and is due to continued economic challenges in the region in which it operates.

As a result, we revised the cash flow projections for the reporting unit to be reflective of the current operating results and related economic environment.

The impairment of gaming licenses related to (i) Greektown due to the reasons discussed above;

(ii) Hollywood Casino at PENN National Race Course (“PNRC”) and was largely due to the former expansion of gaming legislation in the market and increased supply, particularly from our recent openings of Hollywood Casino York and Hollywood Casino Morgantown, which continues to reduce the long-term projections of the property;

and (iii) Ameristar East Chicago and was largely due to increased supply in the region.

See Note 9, “Goodwill and Other Intangible Assets” to our Consolidated Financial Statements for further discussion.

There were no impairment losses during the year ended December 31, 2021.

Impairment losses for the year ended December 31, 2022 primarily relate to impairment charges at our Greektown property for goodwill and other intangible assets of $37.4 million and $65.4 million, respectively, as a result of an interim impairment assessment during the third quarter of 2022 as well as an impairment charge at our PNRC property for other intangible assets of $13.6 million as a result of our annual impairment assessment during the fourth quarter of 2022.

The impairment charges recorded in 2022 at Greektown were due to revised cash flow projections as the majority of the hotel was out of service for longer than anticipated during renovations caused by water damage.

Loss on disposal of Barstool relates to the loss on the sale of 100% of the outstanding shares of Barstool to David Portnoy in exchange for nominal cash consideration (one dollar) as described in Note 6, “Acquisitions and Dispositions” in the notes to our Consolidated Financial Statements.

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

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Income from unconsolidated affiliates $ 25.3 $ 23.7 $ 38.7 $ 1.6 $ (15.0) 6.8 % (38.8) %

Gain on Barstool Acquisition, net $ 83.4 $ — $ — $ 83.4 $ — N/M N/M

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

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

Other $ (72.1) $ 2.5 $ 106.6 $ (74.6) $ (104.1) N/M (97.7) %

Income tax benefit (expense) $ 46.4 $ (118.6) $ 165.1 $ 165.0 $ (283.7) N/M N/M

Other $ 5.5 $ (72.1) $ 2.5 $ 77.6 $ (74.6) N/M N/M

Income tax benefit (expense) $ 8.2 $ 46.4 $ (118.6) $ (38.2) $ 165.0 (82.3) % N/M

N/M - Not meaningful

Interest expense, net increased for the year ended December 31, 2022, as compared to the prior year, primarily due to a $171.3 million net increase in Master Lease interest costs due to changes in lease classifications as a result of the Lease Modification as described in Note 12, “Leases” to our Consolidated Financial Statements.

Interest expense, net decreased for the year ended December 31, 2023, as compared to the prior year, primarily due to a net decrease in Master Lease interest costs of $348.2 million due to changes in lease classifications as a result of the amendment of the PENN Master Lease, as described in Note 12, “Leases” to our Consolidated Financial Statements, 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 for the year ended December 31, 2023, as compared to the prior year, 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 Barstool, and our Kansas Entertainment and Freehold Raceway joint ventures.

The decrease for the year ended December 31, 2022, compared to the prior year, is due to lower income earned from our investments in these unconsolidated affiliates.

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

Loss on early extinguishment of debt for the year ended December 31, 2022 related to the refinancing of the previous Senior Secured Credit Facilities in May 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 change in income from the prior year is due fluctuations in earnings from our investments in these 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” to our 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 and the Perryville Lease were terminated which resulted in a $6.5 million loss from the derecognition of ROU assets and lease liabilities.

See Note 12, “Leases” to our Consolidated Financial Statements for additional details on both of these transactions.

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

See Note 11, “Long-term Debt” to our 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 or losses resulting from foreign currency translation, unrealized gains and losses related to certain Barstool shares as well as miscellaneous income and expense items.

Other primarily relates to realized and unrealized gains and losses on equity securities held by PENN Interactive, 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 year ended December 31, 2022, other income primarily consisted of unrealized holding losses of $69.9 million on equity shares.

For the year ended December 31, 2021, other income was comprised primarily of a $29.9 million gain related to the valuation of our joint venture investment in Sam Houston and Valley Race Parks prior to the acquisition of the remaining 50% on August 1, 2021, offset by a net $24.9 million loss related to realized and unrealized losses on equity securities.

Income tax benefit (expense) fo r the year ended December 31, 2022, was a $46.4 million benefit, as compared to a $118.6 million expense for the year ended December 31, 2021.

Our effective tax rate (income taxes as a percentage of income from operations before income taxes) was (26.5)% for the year ended December 31, 2022, as compared to 22.0% for the year ended December 31, 2021.

The change in the effective rate as compared to the prior year period was primarily due to the decreases to income before taxes coupled with the release of our valuation allowance.

The reversal of our valuation allowance during the third quarter of 2022, was primarily due to (i) sustained growth in our three-year cumulative pre-tax earnings;

(ii) substantial total revenues and earnings growth in our retail business operations, and (iii) lack of significant asset impairment charges expected to be indicative of the Company’s retail business operations or projections for the foreseeable future.

Accordingly, the valuation allowance has been reduced by $113.4 million resulting in a substantial decrease to income tax expense for the year ended December 31, 2022 .

For the year ended December 31, 2023, other income primarily consisted of dividend income of $10.8 million, offset by unrealized holding losses of $6.4 million on equity shares.

For the year ended December 31, 2022, other income primarily related to unrealized holding losses of $69.9 million on equity shares.

Income tax benefit (expense) fo r the year ended December 31, 2023, was an $8.2 million benefit, as compared to a $46.4 million benefit for the year ended December 31, 2022.

Our effective tax rate (income taxes as a percentage of income from operations before income taxes) was 1.7% for the year ended December 31, 2023, as compared to (26.5)% for the ye ar ended

December 31, 2022.

The effective tax rates for both 2023 and 2022 are not correlated to the amount of our income or loss before income taxes due to the impact of the significant nondeductible losses sustained from the Barstool divestiture and releasing the federal valuation allowance, respectively.

The Company’s effective tax rate in the current year is lower than the federal statutory rate of 21% due to the effect of nondeductible officers’ compensation, increase in the valuation allowance and the nondeductible loss sustained from the Barstool divestiture as discussed in Note 6, “Acquisitions and Dispositions” and Note 14, “Income Taxes.”

Accordingly, the valuation allowance was reduced by $113.4 million resulting in a substantial decrease in income tax expense for the year ended De cember 31, 2022.

During 2023, the Company increased the valuation allowance by $179.0 million for the capital loss carryforward generated from the Barstool divestiture transaction and for certain foreign and state deferred tax assets that are not more likely than not to be realized, resulting in an increase to income tax expense for the year ended December 31, 2023.

See Note 14, “Income Taxes” to our Consolidated Financial Statements for further discussion.

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Adjusted EBITDAR margin 30.3 % 31.3 % 33.2 % (100) bps (190) bps

The Northeast segment’s revenues for the year ended December 31, 2022 increased by $143.5 million over the prior year, primarily due to the inclusion of the operating results of 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, and increased food, beverage, hotel and other revenues as we operated with increased offerings and extended hours of operations at our outlets.

These revenue increases were partially offset by a decrease in gaming revenues at our Ameristar East Chicago, Hollywood Casino at PENN National Race Course, and Hollywood Casino at Greektown properties.

For the year ended December 31, 2022 the Northeast Adjusted EBITDAR decreased by $5.9 million as compared to the prior year, primarily due to increased gaming taxes, variable marketing and promotional expenses, which remain below pre-pandemic levels, and payroll expenses , resulting in an Adjusted EBITDAR margin of 31.3%.

The Northeast segment’s revenues for the year ended December 31, 2023 increased by $42.5 million over the prior year, primarily due to increases in gaming and non-gaming revenues at our Greektown, Plainridge Park Casino, and Columbus properties, 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.

For the year ended December 31, 2023 the Northeast segment’s Adjusted EBITDAR decreased by $11.5 million as compared to the prior year, and Adjusted EBITDAR margin decreased to 30.3%, due to increased payroll costs and the negative impact of the union strike at Greektown in November 2023.

South Segment

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Adjusted EBITDAR margin 40.6 % 41.7 % 44.4 % (110) bps (270) bps

The South segment’s revenues for the year ended December 31, 2022 decreased by $8.0 million over the prior year, primarily due to a decrease in gaming revenues driven primarily by record setting results in the second and fourth quarters of 2021 combined with minor disruptions from various capital projects across the South region portfolio in the current year.

The decrease in gaming revenues was partially offset by increased food, beverage, hotel and other revenues primarily due to easing of restrictions, strong visitation levels among all age groups, and increased offerings and hours of operations at our outlets.

For the year ended December 31, 2022 , the South segment’s Adjusted EBITDAR decreased by $38.9 million and Adjusted EBITDAR margin decreased to 41.7% as the current year was negatively impacted by the decrease in gaming revenues, discussed above, higher payroll expenses associated with hotel and food and beverage offerings, and higher variable marketing and promotional expenses, which remain below pre-pandemic levels.

The prior year benefited from increased gaming revenues and reduced labor costs yielding a higher overall Adjusted EBITDAR margin.

The South segment’s revenues for the year ended December 31, 2023 decreased by $97.8 million over the prior year, primarily due to a decrease in visitation at many properties, partially due to increased competition that affected our L’Auberge

Lake Charles and Margaritaville properties and inclement weather during the first half of the year.

During the prior year period, 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 year ended December 31, 2023 , the South segment’s Adjusted EBITDAR decreased by $54.0 million and Adjusted EBITDAR margin decreased to 40.6%, primarily due to the decrease in gaming revenues as described above.

For the year ended December 31, $ Change % / bps Change

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Adjusted EBITDAR margin 38.6 % 37.8 % 37.4 % 80 bps 40 bps

The West segment’s revenues for the year ended December 31, 2022 increased by $60.5 million over the prior year, primarily due to increased spend per guest on gaming and increased visitation at our food and beverage outlets, partially offset by the sale of our Tropicana Las Vegas property on September 26, 2022.

During the year ended December 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 and for an additional thirteen days in April of 2021, and our properties operated within locally restricted gaming and hotel capac ity and limited food and beverage and other amenity offerings .

For the year ended December 31, 2022, the West segment’s Adjusted EBITDAR increased by $25.1 million primarily d ue to increases in gaming and non-gaming revenues, partially offset by higher payroll expenses related to volume increases and higher variable marketing and promotional expenses, which remain below pre-pandemic levels.

The West segment’s revenues for the year ended December 31, 2023 decreased by $53.4 million over the prior year, primarily due to the sale of the Tropicana operations in September 2022 and a decrease in gaming revenues at Ameristar Black Hawk, partially offset by an increase in revenues at Zia Park Casino.

The corresponding prior year included Tropicana revenues through the sale on September 26, 2022, compared to none in the current year .

For the year ended December 31, 2023, the West segment’s Adjusted EBITDAR decreased by $15.9 million primarily d ue to the decrease in revenues at Ameristar Black Hawk and the sale of Tropicana, as discussed above.

Additionally, Adjusted EBITDAR margin increased to 38.6% primarily due to the sale of Tropicana which had a negative impact on margins in the prior year period .

Midwest Segment

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Adjusted EBITDAR margin 42.4 % 43.2 % 45.4 % (80) bps (220) bps

The Midwest segment’s revenues for the year ended December 31, 2022 increased by $56.9 million over the prior year, primarily due to increased length of play and increased spend per guest resulting in increased gaming and non-gaming revenues.

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

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

For the year ended December 31, 2022, the Midwest segment’s Adjusted EBITDAR increased by $1.1 million primarily due to increases in gaming and non-gaming revenues, offset by higher payroll expenses and higher variable marketing and promotional expenses, which remain below pre-pandemic levels , reflected in Adjusted EBITDAR margin, which decreased by 220 bps to 43.2%.

The Midwest segment’s revenues for the year ended December 31, 2023 increased by $13.0 million over the prior year, primarily due to increased visitation at our hotels and food and beverage outlets.

For the year ended December 31, 2023, the Midwest segment’s Adjusted EBITDAR decreased by $4.6 million primarily due to an increase in payroll costs, partially offset by increased non-gaming revenues.

The increase in payroll costs also affected A djusted EBITDAR margin, which decreased to 42.4%.

Interactive Segment

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N/M - Not meaningful

Total revenues for the Interactive segment for the year ended December 31, 2022 increased by $230.2 million, as compared to the prior year, primarily due to continued increases in online activity with the launch of theScore Bet Sportsbook and Casino 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 $251.6 million for the year ended December 31, 2022, compared to $180.2 million for year ended December 31, 2021 .

For the year ended December 31, 2022, Adjusted EBITDAR and Adjusted EBITDAR margin decreased primarily due to higher payroll expenses stemming from our transition to our proprietary technology platform and integrating employees from theScore acquisition.

Additionally, there were increased expenses related to online sports betting launches, ramping and launching theScore Bet Sportsbook and Casino in Ontario, and launching the Barstool Sportsbook in additional states.

The Interactive segment’s revenues for the year ended December 31, 2023 increased by $55.7 million, compared to the prior year, primarily due to an increase in food, beverage, hotel, and other revenue, partially offset by a decrease in gaming revenue.

Food, beverage, hotel, and other revenue increased primarily due to the inclusion of 100% of the operating results of Barstool until its disposition on August 8, 2023 and the inclusion of a tax gross-up of $390.4 million for the year ended December 31, 2023, compared to $251.6 million for year ended December 31, 2022.

Online gaming revenue decreased due to elevated promotional expense resulting from the high volume of customers acquired through the launch of ESPN BET and unfavorable hold from sports results.

For the year ended December 31, 2023, the Interactive segment’s Adjusted EBITDAR decreased primarily due to increases in promotional incentives and marketing expense upon the launch of ESPN BET in November 2023.

This also caused a decrease in Adjusted EBITDAR margin .

For the year ended December 31, $ Change % / bps Change

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2022 2022 vs.

Gaming $ — $ — $ 0.3 $ — $ (0.3) N/M (100.0) %

Food, beverage, hotel, and other $ 20.2 $ 21.3 $ 10.6 $ (1.1) $ 10.7 (5.2) % 100.9 %

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N/M - Not meaningful

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 have increased compared to the prior ye ar, primarily due to the acquisition of Sam Houston, the remaining 50% of which was acquired on August 1, 2021.

Changes in Adjusted EBITDAR for the year ended December 31, 2022 primarily relate to changes in corporate overhead costs, which are reflective of the current operating environment.

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 have decreased slightly compared to the prior ye ar, primarily due to fluctuations in racing revenues.

Changes in Adjusted EBITDAR for the year ended December 31, 2023 primarily relate to an increase in payroll costs.

Non-GAAP Financial Measures

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impairment losses;

insurance recoveries, net of deductible charges;

insurance recoveries, net of

deductible charges;

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

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pre-opening expenses;

loss on disposal of a business;

non-cash gains/losses associated with REIT transactions as described in Note 12, “Leases” to our 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;

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depreciation and amortization;

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

Adjusted EBITDA is inclusive of rent expense associated with our triple net operating leases (the operating lease components contained within our triple net master lease dated November 1, 2013 with GLPI and the triple net master lease assumed in connection with our acquisition of Pinnacle Entertainment, Inc., our individual triple net leases with GLPI for the real estate assets used in the operations of Tropicana Las Vegas Hotel and Casino, Inc.

(terminated on September 26, 2022) and Hollywood Casino at The Meadows, and our individual triple net leases with VICI for the real estate assets used in the operations of Margaritaville Resort Casino and Hollywood Casino at Greektown).

and stock-based compensation expense) added back for Barstool (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.

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.

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

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

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

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

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Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures

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

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

For the year ended December 31,

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Net income (loss) $ (491.4) $ 221.7 $ 420.5

Income tax expense (benefit) (46.4) 118.6 (165.1)

Loss on early extinguishment of debt 10.4 — 1.2

Income from unconsolidated affiliates (23.7) (38.7) (13.8)

Income tax (benefit) expense (8.2) (46.4) 118.6

Interest expense, net 464.7 758.2 562.8

Interest income (40.3) (18.3) (1.1)

Other (income) expenses 72.1 (2.5) (106.6)

Income from unconsolidated affiliates (25.3) (23.7) (38.7)

Gain on Barstool Acquisition, net (83.4) — —

Gain on REIT transactions, net (500.8) — —

Loss on early extinguishment of debt — 10.4 —

Other (income) expense (5.5) 72.1 (2.5)

Operating income (loss) (690.2) 974.0 1,059.6

Loss on disposal of Barstool 923.2 — —

Stock-based compensation (1)

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(13.8) (15.5) 1.2

Loss (gain) on disposal of assets (1)

7.9 1.1 (29.2)

Loss on disposal of assets (1)

Contingent purchase price (1)

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Impairment losses (4)

130.6 118.2 —

Insurance recoveries, net of deductible charges (1)

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

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

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

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

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

(5) Consists of non-recurring acquisition and transaction costs, finance transformation costs associated with the implementation of our new Enterprise Resource Management system and non-recurring restructuring charges (primarily severance), specific to the year ended December 31, 2020, associated with a company-wide initiative, triggered by the COVID-19 pandemic, designed to (i) improve the operational effectiveness across our property portfolio;

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

(4) For the years ended December 31, 2023 and 2022, amounts relate to impairment charges in our Northeast segment of $130.6 million and $116.4 million, respectively.

See Note 9, “ Goodwill and Other Intangible Assets .

(5) 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” ) and our Kansas Entertainment joint venture.

(6) Consists of non-recurring acquisition and transaction costs, and finance transformation costs associated with the implementation of our new Enterprise Resource Management system.

LIQUIDITY AND CAPITAL RESOURCES

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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 $17.9 million for the year ended December 31, 2022 primarily due to a negative impact in changes in working capital related to payroll and gaming and racing liabilities, partially offset by a decrease in cash paid for taxes.

Net cash provided by operating activities decreased by $422.3 million for the year ended December 31, 2023 primarily due to a decrease in income before taxes and an increase in payments associated with the operating components contained within our Triple Net Leases (as defined below).

Investing Cash Flow

Cash used in investing activities for the year ended December 31, 2022 of $258.6 million is primarily due to capital expenditures of $263.4 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 year ended December 31, 2021, cash used in investing activities was primarily related to the acquisition of theScore as well as other acquired businesses and interests, and capital expenditures.

Cash used in investing activities for the year ended December 31, 2023 of $742.6 million is primarily due to consideration paid for the Barstool Acquisition, net of cash acquired, of $314.6 million and capital expenditures of $360.0 million.

For the year ended December 31, 2022, cash used in investing activities was primarily related to capital expenditures and the acquisition of a cost method investment, offset by insurance proceeds received for losses incurred due to Hurricane Laura in 2020 .

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.

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 years ended December 31, 2023, 2022, and 2021, as applicable.

During the year ended December 31, 2022, we spent $263.4 million on capital expenditures, which consisted of maintenance capital expenditures (as discussed above), $17.1 million in capital expenditures for our York and Morgantown development projects and $26.0 million in construction costs related to hurricane damage sustained at our Lake Charles property for which insurance proceeds were previously received.

For the year ending December 31, 2023, our anticipated capital expenditures are approximately $413 million, which include capital expenditures under our Triple Net Leases, which require us to spend a specified percentage of revenues.

Capital expenditures for the year ended December 31, 2023 and 2022 were $360.0 million and $263.4 million, respectively.

For the year ending December 31, 2024, our anticipated capital maintenance expenditures are approximately $225.0 million, which include capital expenditures under our Triple Net Leases, which require us to spend a specified percentage of revenues.

Additionally f or the year ending December 31, 2024, we anticipate capital project expenditures of $275.6 million in connection with the Aurora Project and Other Development Projects as a result of our Master Development Agreement with GLPI (as described in Note 12, “Leases” in the notes to our Consolidated Financial Statements).

The Master Development Agreement provides that GLPI will fund up to $225.0 million for the Aurora Project and, upon PENN’s request, up to $350.0 million in the aggregate for the Other Development Projects, in accordance with certain terms and conditions set forth in the Master Development Agreement.

Financing Cash Flow

For the year ended December 31, 2022, net cash used in financing activities totaled $853.0 million compared to $339.9 million in net cash provided by financing activities in the prior year.

During the year ended December 31, 2022, net cash used in financing activities primarily related to $601.1 million of common stock repurchases, net debt repayments of $37.5 million, $18.2 million in debt issuance costs, and $173.7 million in principal payments on our finance leases and finance obligations.

During the year ended December 31, 2021, cash provided by financing activities of $339.9 million was primarily due to net cash proceeds of $400.0 million related to the issuance of our 4.125% Notes due 2029.

Debt Issuances, Redemptions and Other Long-term Obligations

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

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

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

The amount included in interest expense related to this obligation was $27.6 million and $17.9 million for the years ended December 31, 2022 and 2021, respectively.

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

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

For the year ended December 31, 2023, net cash used in financing activities totaled $262.6 million compared to $853.0 million in net cash used in financing activities in the prior year.

During the year ended December 31, 2023, net cash used in financing activities primarily related to $149.8 million of common stock repurchases, $47.1 million in principal payments on our finance leases, $39.2 million in principal payments on our financing obligations, and $37.5 million in principal debt repayments.

During the year ended December 31, 2022, cash used in financing activities of $853.0 million primarily related to $601.1 million of common stock repurchases, net debt repayments of $37.5 million, $18.2 million in debt issuance costs, and $173.7

million in principal payments on our finance leases and finance obligations.

Debt Issuance and Other long-term Obligations

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”).

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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 December 31, 2022, we had $2.8 billion in aggregate principal amount of indebtedness, including $1.5 billion outstanding under our Amended Credit Facilities, $330.5 million outstanding under our Convertible Notes, $400.0 million outstanding under our 5.625% senior unsecured notes, $400.0 million outstanding under our 4.125% Notes, and $156.1 million outstanding in other long-term obligations.

At December 31, 2023, we had $2.8 billion in aggregate principal amount of indebtedness, including $1.5 billion outstanding under our Amended Credit Facilities, $330.5 million outstanding under our 2.75% unsecured convertible notes due 2026 (the “Convertible Notes”), $400.0 million outstanding under our 5.625% senior unsecured notes due 2027 (the “5.625% Notes”), $400.0 million outstanding under our 4.125% senior unsecured notes due 2029 (the “4.125% Notes”), and $173.5 million outstanding in other long-term obligations.

No amounts were drawn on our Amended Revolving Credit Facility.

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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 12, “Leases” ), each with GLPI.

Our debt agreements also contain customary events of default, including cross-default provisions that require us to meet certain requirements under the AR PENN Master Lease, the 2023 Master Lease, PENN Master Lease (prior to January 1, 2023), and the Pinnacle Master Lease (all of which are defined in Note 12, “Leases” in the notes to our Consolidated Financial Statements ), 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.

On February 15, 2024 (the “Amendment Effective Date”), PENN entered into a First Amendment (the “Amendment Agreement”) with its various lenders amending its Amended Credit Facilities (as amended, amended and restated, supplemented, or otherwise modified from time to time prior to the Amendment Effective Date, the “Existing Credit Agreement”).

The Amendment Agreement amends the Existing Credit Agreement to provide that during the period beginning on the Amendment Effective Date and ending on the earlier of (i) the date that is two business days after the date on which the Company delivers a covenant relief period termination notice to the administrative agent and (ii) the date on which the administrative agent receives a compliance certificate for the quarter ending December 31, 2024 (the “Covenant Relief Period”), the Company will make an adjustment to exclude specified amounts of Interactive segment Adjusted EBITDAR (as defined in Note 18, “Segment Information” in the notes to our Consolidated Financial Statements ) in its calculations to comply with the maximum total net leverage ratio or minimum interest coverage ratio (as such terms are defined in the Second Amended and Restated Credit Agreement).

We will continue to be required to maintain specified financial ratios and to satisfy certain financial tests when our Covenant Relief Period terminates after December 31, 2024.

As of December 31, 2023, the Company was in compliance with all required financial covenants.

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Share Repurchase Authorizations

On February 1, 2022, the Board of Directors of PENN authorized a $750 million share repurchase program, which expires on January 31, 2025 (the “February 2022 Authorization”).

During the second quarter of 2023, we completed our $750 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 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.

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 year ended December 31, 2022, the Company repurchased 17,561,288 shares of its common stock in open market transactions for $601.1 million at an average price of $34.23 per share under the February 2022 Authorization.

The Company utilized the 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 years ended December 31, 2023 and 2022, respectively, the Company repurchased 5,438,221 and 17,561,288 shares of its common stock in open market transactions for $149.8 million and $601.1 million at an average price of $27.54 and $34.23 per share under the February 2022 and December 2022 Authorizations.

The cost of all repurchased shares is recorded as “Treasury stock” in the Consolidated Balance Sheets.

Subsequent to the year ended December 31, 2022, the Company repurchased 1,065,688 shares of its common stock at an average price of $31.41 per share for an aggregate amount of $33.5 million.

As of February 23, 2023, the remaining availability under our February 2022 Authorization and our December 2022 Authorization was $115.8 million and $750 million, respectively.

Barstool Acquisition

On August 17, 2022, the Company exercised its call rights to bring its ownership of Barstool to 100%.

Subsequent to year end, on February 17, 2023, the Company completed the acquisition of all of the outstanding shares of common stock of Barstool not already owned by us for approximately $388 million, excluding transaction expenses, repayment of Barstool indebtedness and other purchase price adjustments.

No shares of the Company’s common stock were repurchased subsequent to the year ended December 31, 2023.

As of February 22, 2024, the remaining availability under our December 2022 Authorization was $749.5 million.

Other Factors Affecting Liquidity

ESPN BET Sportsbook Agreemen t

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 November 2023, the existing Barstool Sportsbook was rebranded and launched across all online platforms in the United States as ESPN BET, and our online product includes 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 warrants pursuant to the Investment Agreement (see Note 13, “Commitments and Contingencies” in the notes to our Consolidated Financial Statements for additional information).

Triple Net Leases

The majority of the real estate assets used in the Company’s operations are subject to triple net master leases;

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

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

As of December 31, 2022, five 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, and the Morgantown Lease, each of which is defined in Note 12, “Leases” to our Consolidated Financial Statements, collectively, as our “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 with GLPI, and include 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 12, “Leases” in the notes to our Consolidated Financial Statements, and collectively referred to as the “Master Leases”).

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”.

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

On February 21, 2023, the Company and GLPI entered into an agreement to amend and restate the 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 was reset to $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 lease contains real estate assets associated with 14 of the Company’s gaming facilities used in its operations.

Concurrent with the execution of the AR PENN Master Lease, the Company and GLPI entered into the 2023 Master Lease, effective January 1, 2023, specific to the property associated with Aurora, Joliet, Columbus, Toledo, M Resort, Meadows, and Perryville and the Master Development Agreement.

The 2023 Master Lease has an initial term through October 31, 2033 with three subsequent five-year renewal periods on the same terms and conditions, exercisable at the Company’s option.

The 2023 Master Lease terminated the individual triple net leases associated with Meadows and Perryville.

The 2023 Master Lease and AR PENN Master Lease are cross-defaulted, cross-collateralized, and coterminous, and subject to a parent guarantee.

The 2023 Master Lease includes the 2023 Master Lease Base Rent equal to $232.2 million and the Master Development Agreement contains additional 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.

accordance with certain terms and conditions set forth in the Master Development Agreement.

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

The 2023 Master Lease Rent will be subject to a one-time increase of $1.4 million, effective November 1, 2027.

The 2023 Master Lease Rent was subject to a fixed escalator of 1.5% on November 1, 2023 and will be annually thereafter.

The Master Development Agreement provides that PENN may elect not to proceed with a development project prior to GLPI’s commencement of any equity or debt offering or credit facility draw intended to fund such a project or after such time in certain instances, provided that GLPI will be reimbursed for all costs and expenses incurred in connection with such discontinued project.

The Aurora Project and the Other Development Projects are all subject to necessary regulatory and other government approvals.

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

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As of December 31, 2023 , we are required to make total annual minimum rent payments of $962.7 million , of which $943.6 million relates to our Triple Net Leases.

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

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

See Note 12, “Leases” in the notes to our Consolidated Financial Statements for further discussion and disclosure related to the Company’s leases.

On January 14, 2022, the ninth amendment to the PENN Master Lease between the Company and GLPI became effective.

The ninth amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at a leased property, establishes a “floor” with respect to the Hollywood Casino at PENN National Race Course Net Revenue amount used in the calculation of the annual rent escalator and PENN Percentage Rent, and modifies the rent calculations upon a lease termination event as defined in the amendment.

The lease term and the four five-year optional renewal periods, which if exercised would extend the PENN Master Lease through October 31, 2048, were not modified in the ninth amendment.

We concluded the ninth amendment constituted a modification event under ASC 842, which required us to reassess the classifications of the lease components and remeasure the associated lease liabilities.

As a result of our reassessment of the lease classifications, (i) the land components of substantially all of the PENN Master Lease properties, which were previously classified as operating leases, are now primarily classified as finance leases, and (ii) the land and building components associated with the operations of Dayton and Mahoning Valley, which were previously classified as finance leases, are now classified as operating leases.

As a result of our measurement of the associated lease liabilities, we recognized additional right-of-use (“ROU”) assets and corresponding lease liabilities of $455.4 million.

The building components of substantially all of the PENN Master Lease properties continue to be classified as financing obligations.

On January 14, 2022, the fifth amendment to the Pinnacle Master Lease between the Company and GLPI became effective.

The fifth amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a

patron is physically present at a leased property and modifies the rent calculations upon a lease termination event as defined in the amendment.

The lease term and the five five-year optional renewal periods, which if exercised would extend the Pinnacle Master Lease through April 30, 2051, were not modified in the fifth amendment.

We concluded the fifth amendment to the Pinnacle Master Lease constituted a modification event under ASC 842 (collectively with the ninth amendment to the PENN Master Lease, the “Lease Modification”).

As a result of the modification, the land components of substantially all of the Pinnacle Master Lease properties, which were previously classified as operating leases, are now primarily classified as finance leases.

As a result of our measurement of the associated lease liabilities, we recognized additional ROU assets and corresponding lease liabilities of $937.6 million.

The building components of substantially all of the Pinnacle Master Lease properties continue to be classified as financing obligations.

On October 9, 2022, as described in Note 12, “Leases” , the Company entered into the Term Sheet with GLPI.

(iii) terminate the existing leases associated with Meadows and Perryville;

and (iv) enter into the 2023 Master Lease specific to the properties associated with Aurora, Joliet, Columbus, Toledo, M Resort, Meadows and Perryville.

The 2023 Master Lease has an initial term through October 31, 2033 with three subsequent five-year renewal periods on the same terms and conditions, exercisable at the Company’s option.

The 2023 Master Lease will be cross-defaulted, cross-collateralized, and coterminous with the Amended and Restated PENN Master Lease, and subject to a parent guarantee.

The 2023 Master Lease includes a 2023 Master Lease 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”).

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

The 2023 Master Lease Rent will be subject to a one-time increase of $1.4 million, effective the fifth anniversary of the effective date.

The 2023 Master Lease Rent will be further subject to a fixed escalator of 1.5% on November 1, 2023 and annually thereafter.

The Aurora Project and the Other Development Projects are all subject to necessary regulatory and other government approvals.

We concluded the Amended and Restated PENN Master Lease constitutes a modification event under ASC 842 and are currently reassessing, remeasuring, and quantifying the impact of the modification to the Consolidated Financial Statements, which may be material.

The modification event is expected to result in (i) a non-cash debt extinguishment charge recorded to our Consolidated Statements of Operations and corresponding change in our financing obligations on our Consolidated Balance Sheets;

and (ii) a revaluation of our lease ROU assets and corresponding lease liabilities on our Consolidated Balance Sheets.

Payments to our REIT Landlords under Triple Net Leases

Total payments made to our REIT Landlords, GLPI and VICI, inclusive of rent credits utilized, were as follows:

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

For the year ended December 31,

(in millions) 2023 2022 2021

AR PENN Master Lease $ 284.1 $ — $ —

2023 Master Lease 232.8 — —

PENN Master Lease — 480.3 475.7

$ 480.3 $ 475.7 $ 457.9

Pinnacle Master Lease 339.4 334.1 328.3

334.1 328.3 326.9

Perryville Lease — 7.8 3.9

Meadows Lease — 24.6 24.9

24.6 24.9 26.4

Margaritaville Lease 26.2 23.8 23.5

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$ 937.8 $ 925.0 $ 912.4

(1) During the twelve months ended December 31, 2020, we utilized rent credits to pay $190.7 million, $135.5 million, $11.0 million and $0.3 million of rent under the PENN Master Lease, Pinnacle Master Lease, Meadows Lease and Morgantown Lease, respectively.

(1) Cash rent payable under the Tropicana Lease was nominal prior to the lease termination on September 26, 2022.

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Based on our current level of operations, we believe that cash generated from operations and cash on hand, together with amounts available under our 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, such as supply chain disruption and resulting inflationary pressures, labor shortages, the ebb and flow of COVID-19 and its impacts on specific North American geographies, and changes in national economic policy.

If we are unable to respond to and manage the impact of any such events effectively, our business will be harmed.

While we anticipate that a significant amount of our future growth will come through the pursuit of opportunities within other distribution channels, such as retail and online sports betting and iCasino, acquisitions of gaming properties at reasonable valuations, greenfield projects, and jurisdictional and property expansions in under-penetrated markets, there can be no assurance that this will occur.

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 price inflation, changes in interest rates on the U.S.

economy, economic uncertainty, and geopolitical uncertainty;

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

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

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 that the performance and trends seen across our portfolio may not continue.

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

from acquisitions of gaming properties at reasonable valuations;

greenfield projects;

development projects;

and jurisdictional expansions and property expansion in under-penetrated markets;

there can be no assurance that this will be the case.

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

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

We vary our leverage to pursue opportunities in the marketplace and to maximize our enterprise value for our shareholders.

We expect to service our debt obligations using funds from operations or by refinancing them prior to maturity.

We vary our leverage to pursue opportunities in the marketplace in an effort to maximize our enterprise value for our shareholders.

We expect to meet our debt obligations as they come due through internally-generated funds from operations and/or refinancing them through the debt or equity markets prior to their maturity.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our Consolidated Financial Statements, the resulting changes could have a material adverse effect on our financial condition, results of operations and cash flows.

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 12, “Leases” in the notes to our 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;

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

and (iii) the discount rate (collateralized incremental borrowing rate) over the lease term.

Additionally, management assessed whether the agreements should be accounted for as a separate or combined contract and whether the AR PENN Master Lease should be considered a lease modification or a new lease.

Business Combination

In connection with the Company’s acquisition of Barstool (as described in Note 6, “Acquisitions and Dispositions” in the notes to our 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.

We allocated the business combination purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values.

The excess of the purchase price over those fair values was recorded as goodwill.

Accounting for this business combination required management to make significant estimates and assumptions, including our estimate of intangible assets, such as the Barstool trade name, advertising relationships, other tradenames and brands, and customer relationships.

Although we believe the estimates and assumptions made have been reasonable and appropriate, they are inherently uncertain.

The most significant of the assumptions used in the valuations included:

(1) revenue growth;

discount rates;

(3) effective income tax rates;

(4) future terminal values;

and (5) gaming royalties for the use of the Barstool tradename assumptions.

These assumptions were developed based on historical trends in the current competitive markets in which Barstool and PENN operate as well as projections of future performance.

Significant assumptions with respect to our trade names and customer relationships involved selecting the appropriate royalty rates and cost estimates for replacement cost analyses.

Advertising relationships were valued utilizing a with-and-without method.

Where a relief-from-royalty method was utilized, significant assumptions included projecting revenues attributable to the asset, royalty rates, obsolescence factors, estimated synergies and discount rates.

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.

Goodwill and other intangible assets

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Our annual goodwill and other indefinite-lived intangible assets impairment test is performed on October 1st of each year, or more frequently if indicators of impairment exist.

During the third quarter of 2022, we identified an indicator of impairment on goodwill and other intangible assets at Hollywood Casino at Greektown and performed tests to assess for impairment, which resulted in impairment charges on our goodwill and gaming licenses of $37.4 million and $65.4 million, respectively.

As a result of our annual test completed during the fourth quarter of 2022, we recognized a $13.6 million impairment charge on our gaming licenses specific to PNRC.

As a result of our annual test completed during the fourth quarter of 2023, we recognized $30.0 million in impairment charges on our goodwill, which related to our Hollywood Casino at Greektown reporting unit, and $100.6 million in impairment charges on our gaming licenses, which related to our Hollywood Casino at Greektown, Hollywood Casino at PENN National Race Course, and Ameristar East Chicago properties.

For further discussion, see Note 9, “Goodwill and Other Intangible Assets” to our Consolidated Financial Statements.

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In determining the carrying amount of each reporting unit that utilizes real estate assets subject to the Triple Net Leases, if and as applicable, (i) the Company allocates each reporting unit their pro-rata portion of the ROU assets, lease liabilities, and/or financing obligations, and (ii) pushes down the carrying amount of the property and equipment subject to such leases.

In general, as it pertains to the Master Leases, such amounts are allocated based on the reporting unit’s projected Adjusted EBITDA as a percentage of the aggregate estimated Adjusted EBITDA of all reporting units subject to either of the Master Leases, as applicable.

The Company compares the fair value of its reporting units to the carrying amounts.

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If our ongoing estimates of future cash flows are not met, we may have to record impairment charges in future periods.

Our estimates of cash flows are based on the current regulatory and economic climates (including as a result of COVID-19), recent operating information and budgets of the various properties where it conducts operations.

Our estimates of cash flows are based on the current regulatory and economic climates, recent operating information and budgets of the various properties where it conducts operations.

These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events affecting our properties.

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Risk Factors” of this Annual Report on Form 10-K.

Circumstances include, for instance, temporary property closures as a result of COVID-19, changes in legislation that approves gaming in nearby jurisdictions, further expansion of gaming in jurisdictions where we currently operate, new state legislation that requires the implementation of smoking restrictions at our casinos or any other events outside of our control that make the customer experience less desirable.

Reporting units with goodwill, gaming licenses or trademarks which were identified during our 2022 interim and annual impairment assessments as having less than a substantial passing margin were subject to a sensitivity analysis to determine the potential impairment losses:

Reporting units with goodwill, gaming licenses or trademarks which were identified during our 2023 annual impairment assessment as having less than a substantial passing margin were subject to a sensitivity analysis to determine the potential impairment losses:

Amount of impairment loss as a result of:

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+100 bps Terminal Growth Rate -50 bps

Hollywood Casino at Greektown $30.0 — % $— $—

Argosy Casino Riverside $161.2 19.0 % $— $—

Gaming License

Ameristar East Chicago $24.0 — % $5.5 $0.5

Boomtown New Orleans $63.3 13.8 % $0.3 $—

Hollywood Casino at Greektown $51.0 — % $9.0 $—

PNRC $74.0 — % $11.0 $2.5

Ameristar Black Hawk $27.5 7.3 % $0.5 $—

Hollywood Casino at PENN National Race Course

$55.0 — % $9.0 $—

L’Auberge Lake Charles $221.3 5.8 % $18.3 $—

Ameristar East Chicago $16.0 12.5 % $— $—

L’Auberge Lake Charles $47.5 16.8 % $— $—

theScore $91.2 2.5 % $7.2 $0.2

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PENN Interactive $1,626.2 9.7 % $1.3

Under ASC Topic 740, “Income Taxes” (“ASC 740”), deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities and are measured at the prevailing enacted tax rates that will be in effect when these differences are settled or realized.

ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more-likely-than-not that some portion or all the deferred tax assets will not be realized.

The realizability of the net deferred tax assets is evaluated each reporting period by assessing the valuation allowance and by adjusting the amount of the allowance, if necessary.

Pursuant to ASC 740, in evaluating the more-likely-than-not standard, we consider all available positive and negative evidence including projected future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.

In the event the Company determines that the deferred tax assets would be realized in the future in excess of their net recorded amount, an adjustment to the valuation allowance would be recorded, which would reduce the provision for income taxes.

ASC 740 suggests that additional scrutiny should be given to deferred tax assets of an entity with cumulative pre‑tax losses during the three most recent years and is widely considered significant negative evidence that is objective and verifiable and therefore, difficult to overcome.

During the third quarter of 2022, the Company determined that a valuation allowance was no longer required against its federal, foreign, and state net deferred tax assets for the portion that will be realized.

As such, the Company released $113.4 million of its total valuation allowance for the year ended December 31, 2022, due to the positive evidence outweighing the negative evidence thereby allowing the Company to achieve the “more-likely-than-not” realization standard.

See Note 14, “ Income Taxes ” for additional information.

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-K

Item 7. Management’s Discussion and Analysis