What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-23 · 780 added, 584 removed, 1353 unchanged (50% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of

To the stockholders and the Board of Directors of

PENN Entertainment, Inc.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill and Gaming License – Refer to Notes 2 and 9 to the financial statements

Goodwill – Refer to Notes 2 and 9 to the financial statements

Critical Audit Matter Description

The Company’s goodwill and gaming license indefinite-lived intangible assets are tested annually for impairment, or more frequently if indicators of impairment exist, by comparing the fair value of each reporting unit, as it relates to goodwill, or gaming license to their carrying amount.

The Company’s goodwill is tested annually for impairment, or more frequently if indicators of impairment exist, by comparing the fair value of each reporting unit to their carrying amount.

The Company determines the fair value of its reporting units using a combination of income-based and market-based approaches.

The Company assesses the fair value of its gaming licenses using an income approach, which estimates the fair value of the gaming license using a discounted cash flow model assuming the Company built a new casino with similar utility to that of the existing casino.

The key inputs in determining the fair value of reporting units and gaming licenses, among others, include projected operating cash flows discounted to reflect the level of risk associated with receiving future cash flows.

Changes in these assumptions could have a significant impact on the determined fair values and a significant change in fair value could cause a significant change in recorded impairment.

During the third quarter of 2022, the Company identified an indicator of impairment on goodwill and other intangible assets at the Hollywood Casino at Greektown

(“Greektown”).

As a result of the interim assessment for impairment, during the third quarter of 2022, the Company recognized impairment charges on Greektown’s goodwill and gaming licenses of $37.4 million and $65.4 million, respectively.

In addition, as a result of the Company’s annual assessment for impairment, the Company recognized a $13.6 million impairment charge on the gaming license of PENN National Race Course (“PNRC”).

As of December 31, 2022, the book value of goodwill and gaming licenses are $2.7 billion and $1.2 billion, respectively, of which $30.0 million in goodwill is allocated to Greektown and $101.0 million and $74.0 million in gaming licenses are allocated to Greektown and PNRC, respectively.

Auditing the fair value of the Greektown reporting unit and gaming licenses of Greektown and PNRC involved a high degree of subjectivity in evaluating whether management’s estimates and assumptions of projected revenue and operating cash flows and the selection of the discount rates used to derive the fair value were reasonable, including the need to involve our fair value specialists.

The key inputs in determining the fair value of its reporting units include projected operating cash flows discounted to reflect the level of risk associated with receiving future cash flows.

As of December 31, 2023, the book value of goodwill was $2,695.1 million of which $1,663.9 million was allocated to the Interactive reporting unit (“Interactive”).

The fair value of the Interactive reporting unit exceeded its carrying value by 9.7% as of the measurement date, therefore, no impairment was recognized.

Auditing the fair value of the Interactive reporting unit involved a high degree of subjectivity in evaluating whether management’s estimates and assumptions of projected revenue and operating cash flows and the selection of the discount rate used to derive the fair value were reasonable, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to forecasts of revenue and operating cash flows and the determination of the discount rates used by management to estimate the fair value of the property and gaming license included the following, among others:

• We tested the effectiveness of controls over determining the respective fair values, including those over the forecasts of revenue and operating cash flows and the selection of the discount rates.

Our audit procedures related to forecasts of revenue and operating cash flows and the determination of the discount rates used by management to estimate the fair value of the reporting unit included the following, among others:

• We tested the effectiveness of controls over determining the fair value, including those over the forecasts of revenue and operating cash flows and the selection of the discount rates.

• We evaluated management’s ability to accurately forecast revenues and operating cash flows by comparing actual results to management’s historical forecasts.

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◦ Forecasted information included in the Company’s press release as well as in analyst and industry reports for the Company and certain of its peer companies

◦ The impact of the regulatory environment on management’s projections.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rates by:

◦ Testing the source information underlying the determination of the discount rates and the mathematical accuracy of the calculations.

◦ Developing a range of independent estimates and comparing those to the discount rates selected by management.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by:

◦ Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculations;

◦ Developing a range of independent estimates and comparing those to the discount rate selected by management.

Lease Amendments – Refer to Notes 2 and 12 to the financial statements

Critical Audit Matter Description

The Company amended the PENN and Pinnacle Master Lease between the Company and GLPI on January 14, 2022 (collectively the “Lease Amendments”).

The Company concluded the Lease Amendments constituted a modification event under Accounting Standards Codification Topic 842, (“ASC 842”).

As a result of the modification, the Company reassessed the lease classifications resulting in:

(i) the land components of substantially all of the PENN Master Lease and Pinnacle 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 of the PENN Master Lease, which were previously classified as finance leases, are now classified as operating leases.

As a result of the Company’s measurement of the associated lease liabilities, the Company recognized additional ROU assets and corresponding lease liabilities of $455.4 million and $937.6 million for the PENN Master Lease and Pinnacle Master Lease, respectively.

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

The application of the lease modification framework in ASC 842 to the Lease Amendments was complex with respect to lease modifications conclusions and required an increased extent of effort, including involving professional with expertise in lease accounting.

The Company amended the PENN Master Lease between the Company and Gaming and Leisure Properties, Inc.

(“GLPI”) on February 21, 2023 (the “AR PENN Master Lease”) and concurrently entered into a new triple net master lease (the “2023 Master Lease”) with GLPI.

The Company concluded the AR PENN Master Lease amendment constituted a modification event under Accounting Standards Codification Topic 842, (“ASC 842”).

The Company determined that it is not reasonably certain it will exercise any of the renewal options under the AR PENN Master Lease and 2023 Master Lease and therefore determined the lease terms should not extend through the optional three renewal terms of five years each.

The Company performed a lease classification test to apply ASC 842 to the 2023 Master Lease and AR Penn Master Lease modification to determine if the lease will be accounted for as an operating, sales-type lease, or direct financing lease.

The lease classification tests and the resulting calculations require subjective judgments, such as determining the likelihood the Company will exercise all renewal options, in order to determine the lease term.

A change in this judgment can result in a material difference in the financial statement presentation.

Given the significant judgments made by management to determine the expected lease term, we performed audit procedures to assess the reasonableness of such judgments, which required a high degree of auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our procedures related to the Lease Amendments included the following among others:

• We tested the operating effectiveness of internal controls over the initial recognition of balances relating to the Lease Amendments, inclusive of controls over the evaluation of accounting conclusions.

• We tested the accuracy and completeness of contract terms utilized in key accounting determinations through comparison to the underlying lease contracts and supporting documentation.

• With the assistance of professionals with expertise in lease accounting, we evaluated the appropriateness of the accounting conclusions with respect to lease modifications.

Our audit procedures related to the judgments surrounding the determination of the lease term for the new and modified lease included the following, among others:

• We tested the effectiveness of the controls over management’s assessment of the likelihood the Company would exercise all renewal options.

• We evaluated the significant judgments made by management to determine the expected lease term by:

◦ Obtaining lease agreements to examine material lease provisions considered by management in their analysis;

◦ Evaluating the Company’s historical pattern of lease modifications by examining both confirming and contradictory evidence;

◦ Assessing the significance of the leased assets to the Company’s operations by examining financial information.

Barstool Acquisition – Refer to Notes 2 and 6 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Barstool Sports, Inc.

(“Barstool”) on February 17, 2023, by purchasing the remaining 64% of the outstanding shares of Barstool common stock for $405.5 million (“Barstool Acquisition”) and at the closing date of the acquisition, determined the fair value of Barstool to be $660.0 million, which resulted in a gain of $83.4 million.

The Company allocated the fair value of Barstool to the underlying tangible and identifiable intangible assets acquired and liabilities assumed and any noncontrolling interests assumed based on their estimated fair values, including tradename, with any excess recorded as goodwill.

The fair value determination of the fair value of Barstool and the tradename required management to make significant estimates and assumptions around expected cash flows and projected financial results, including forecasted revenues (collectively the “forecast”) and the selection of a discount rate.

Changes to these assumptions and estimates could have a significant impact on the value of the tradename and recognition of goodwill.

Therefore, auditing the forecast and the selection of the discount rate involved a higher degree of auditor judgement and subjectivity, including the involvement of fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts and selection of discount rate used in the determining the fair value of Barstool and the tradename included the following, among others:

• We tested the effectiveness of controls over the valuation of Barstool and the tradename, including management's controls over forecasted revenue growth rates, forecasted cash flows and selection of the discount rate.

• We evaluated the reasonableness of management's forecasts by:

▪ Comparing the forecasts to information included in the company’s communications to the Board of Directors;

▪ Comparing the forecast to historical financial results and industry reports;

▪ Conducting inquiries with management.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by:

▪ Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculations;

▪ Developing a range of independent estimates and comparing those to the discount rate selected by management.

Barstool Disposition and Indemnification Liability – Refer to Notes 6 and 19 to the financial statements

Critical Audit Matter Description

On August 8, 2023, the Company entered into a stock purchase agreement (the “Barstool SPA”) and 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 (the “Barstool Disposition”).

Under the Barstool SPA, the Company has the right to receive 50% of the gross proceeds received by David Portnoy in any subsequent sale or other monetization event of Barstool and the Company will indemnify Barstool and its subsidiaries and David Portnoy for certain tax matters.

As of December 31, 2023, the Company recorded a $70.0 million indemnification liability associated with this obligation.

Additional audit effort was required to assess whether the Barstool Disposition and indemnification liability were properly accounted for and disclosed in the financial statements.

The indemnification liability required management to make significant

estimates and assumptions, including the fair value of the shares of Barstool at the time of the disposition and the probability of potential outcomes.

Auditing the fair value of the shares of Barstool and the probability of potential outcomes involved a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value and tax specialists, in evaluating whether management’s estimates and assumptions, including the valuation methodology and key inputs in determining the fair value of the shares of Barstool (revenue multiples and revenue forecasts) and the probability of potential outcomes, were reasonable.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to evaluating whether the Barstool Disposition and indemnification liability were accounted for and disclosed properly in the financial statements included the following, among others:

• We tested the effectiveness of controls over the Company’s determination of the accounting and disclosure of the Barstool Disposition, including the determination of key inputs in the determination of the indemnification liability.

• We evaluated the form and substance of the transaction by:

◦ Examining the terms and provisions included in the Barstool SPA;

◦ Conducting inquiries with management and the audit committee and examining board of director meeting minutes to corroborate discussions;

◦ Examining analyses provided to the board of directors to be considered in their approval of the disposition.

• We evaluated the reasonableness of the indemnification liability, including the valuation methodology, key inputs, and potential outcomes by:

◦ Comparing the forecasted revenue to actual financial results and industry reports;

◦ With the assistance of our tax specialist, evaluating the reasonableness of the probability of potential outcomes by:

▪ Assessing the tax position taken, including reviewing opinions provided to the Company from outside tax specialists.

◦ With the assistance of our fair value specialists, evaluating the reasonableness of the valuation methodology and revenue multiples by:

• Testing the source information underlying the determination of the business valuation and testing the mathematical accuracy of the calculations;

• Developing a range of independent estimates and comparing those to the revenue multiples selected by management.

▪ Evaluating whether the value of Barstool was reasonable in consideration of evidence obtained in other areas of the audit.

• We evaluated whether the financial statement disclosures were consistent with the terms and purpose of the disposition.

/s/ Deloitte & Touche LLP

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Series C preferred stock ($ 0.01 par value, 18,500 shares authorized, no shares issued and outstanding)

Series D Preferred stock ($ 0.01 par value, 5,000 shares authorized, 969 shares issued in both periods, and 581 and 775 shares outstanding)

Common stock ($ 0.01 par value, 400,000,000 shares authorized in both periods, 172,632,389 and 171,729,276 shares issued, and 152,903,708 and 169,561,883 shares outstanding)

Exchangeable shares ($ 0.01 par value, 697,539 shares authorized and issued in both periods, 620,019 and 653,059 shares outstanding)

Series D Preferred stock ($ 0.01 par value, 5,000 shares authorized, 969 shares issued for both periods, and no shares and 581 shares outstanding)

Common stock ($ 0.01 par value, 400,000,000 shares authorized, 176,719,596 and 172,632,389 shares issued, and 151,552,694 and 152,903,708 shares outstanding)

Exchangeable shares ($ 0.01 par value, 768,441 shares authorized in both periods, 700,393 and 697,539 issued, and 560,267 and 620,019 shares outstanding)

Treasury stock, at cost, ( 25,166,902 and 19,728,681 shares)

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Accumulated other comprehensive loss ( 121.3 ) ( 168.6 )

Total PENN Entertainment stockholders’ equity 3,597.7 4,097.8

Total PENN Entertainment, Inc.

stockholders’ equity 3,202.1 3,597.7

Non-controlling interest ( 2.5 ) ( 1.1 )

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Impairment losses 130.6 118.2 —

Loss on disposal of Barstool 923.2 — —

Total operating expenses 7,053.1 5,427.7 4,845.4

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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 5.5 ( 72.1 ) 2.5

Total other expenses ( 798.7 ) ( 520.5 ) ( 424.0 )

Total other income (expenses) 190.6 ( 798.7 ) ( 520.5 )

Income (loss) before income taxes ( 499.6 ) 175.3 539.1

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Net income (loss) ( 491.4 ) 221.7 420.5

Net (income) loss attributable to non-controlling interest 0.4 0.3 ( 0.4 )

Net income (loss) attributable to PENN Entertainment $ 222.1 $ 420.8 $ ( 669.5 )

Net loss attributable to non-controlling interest 1.4 0.4 0.3

Net income (loss) attributable to PENN Entertainment, Inc.

$ ( 490.0 ) $ 222.1 $ 420.8

Earnings (loss) per share

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

Other comprehensive loss:

Other comprehensive income (loss):

Unrealized gain on debt securities, net of tax expense of $ 1.0

Foreign currency translation adjustment during the period 44.1 ( 114.2 ) ( 54.4 )

Other comprehensive loss ( 114.2 ) ( 54.4 ) —

Other comprehensive income (loss) 47.3 ( 114.2 ) ( 54.4 )

Total comprehensive income (loss) ( 444.1 ) 107.5 366.1

Comprehensive loss (income) attributable to non-controlling interest 0.4 0.3 ( 0.4 )

Comprehensive income (loss) attributable to PENN Entertainment $ 107.9 $ 366.4 $ ( 669.5 )

Comprehensive loss attributable to non-controlling interest 1.4 0.4 0.3

Comprehensive income (loss) attributable to PENN Entertainment, Inc.

$ ( 442.7 ) $ 107.9 $ 366.4

See accompanying notes to the Consolidated Financial Statements.

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Income (Loss) Total PENN Stock-holders’

Equity (Deficit) Non-Controlling Interest Total

Stock-holders’ Equity (Deficit)

Equity Non-Controlling Interest Total

Stock-holders’ Equity

(in millions, except share data) Shares Amount PENN Entertainment Shares Amount Exchangeable Shares Amount

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Share-based compensation arrangements — — 1,061,242 — — — — 35.1 — — 35.1 — 35.1

Common stock offerings (Note 15) — — 35,266,667 0.4 — — — 1,288.4 — — 1,288.8 — 1,288.8

Convertible debt offering (Note 11) — — — — — — — 88.2 — — 88.2 — 88.2

Barstool Sports investment (Note 7) 883 23.1 — — — — — — — — 23.1 — 23.1

Cumulative-effect adjustment upon adoption of ASU 2016-13 — — — — — — — — 0.6 — 0.6 — 0.6

Share issuance in connection with acquisitions — — 12,561,127 0.1 697,539 — — 1,039.5 — — 1,039.6 — 1,039.6

Preferred stock issuance 86 8.1 — — — — — — — — 8.1 — 8.1

Preferred stock conversions ( 194 ) ( 5.4 ) 194,200 — — — — 5.4 — — — — —

Exchangeable shares conversions — — 44,480 — ( 44,480 ) — — — — — — — —

Currency translation adjustment — — — — — — — — — ( 54.4 ) ( 54.4 ) — ( 54.4 )

Net income (loss) — — — — — — — — 420.8 — 420.8 ( 0.3 ) 420.5

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Share-based compensation arrangements — — 607,818 — — — — 58.1 — — 58.1 — 58.1

Share issuance in connection with acquisitions (Note 15) — — 12,561,127 0.1 697,539 — — 1,039.5 — — 1,039.6 — 1,039.6

Preferred stock issuance (Note 15) 86 8.1 — — — — — — — — 8.1 — 8.1

Preferred stock conversions (Note 15) ( 194 ) ( 5.4 ) 194,200 — — — — 5.4 — — — — —

Exchangeable shares conversions (Note 15) — — 44,480 — ( 44,480 ) — — — — — — — —

Share repurchases — — ( 17,561,288 ) — — — ( 601.1 ) — — — ( 601.1 ) — ( 601.1 )

Preferred stock conversions ( 194 ) ( 6.4 ) 194,200 — — — — 6.4 — — — — —

Common stock issuance — — 68,055 — — — — 2.2 — — 2.2 — 2.2

Exchangeable shares conversions — — 33,040 — ( 33,040 ) — — — — — — — —

Currency translation adjustment — — — — — — — — — ( 114.2 ) ( 114.2 ) — ( 114.2 )

Cumulative-effect adjustment upon adoption of ASU 2020-06 — — — — — — — ( 88.2 ) 18.9 — ( 69.3 ) — ( 69.3 )

Net income (loss) — — — — — — — — 222.1 — 222.1 ( 0.4 ) 221.7

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Share-based compensation arrangements — — 997,137 — — — — 85.9 — — 85.9 — 85.9

Share repurchases (Note 15) — — ( 17,561,288 ) — — — ( 601.1 ) — — — ( 601.1 ) — ( 601.1 )

Preferred stock conversions (Note 15) ( 194 ) ( 6.4 ) 194,200 — — — — 6.4 — — — — —

Common stock issuance (Note 15) — — 68,055 — — — — 2.2 — — 2.2 — 2.2

Exchangeable shares conversions (Note 15) — — 33,040 — ( 33,040 ) — — — — — — — —

Share issuance in connection with acquisitions — — 2,442,809 — — — — 80.8 — — 80.8 — 80.8

Share repurchases — — ( 5,438,221 ) — — — ( 149.8 ) — — — ( 149.8 ) — ( 149.8 )

Preferred stock conversions ( 581 ) ( 19.4 ) 580,600 — — — — 19.4 — — — — —

Common stock issuance — — 4,055 — — — — 0.1 — — 0.1 — 0.1

Exchangeable share issuance — — — — 2,854 — — — — — — — —

Exchangeable shares conversions — — 62,606 — ( 62,606 ) — — — — — — — —

Investment Agreement warrants (Note 13) — — — — — — — 22.8 — — 22.8 — 22.8

Unrealized gain on debt securities — — — — — — — — — 3.2 3.2 — 3.2

Currency translation adjustment — — — — — — — — — 44.1 44.1 — 44.1

Cumulative-effect adjustment upon adoption of ASU 2020-06 — — — — — — — ( 88.2 ) 18.9 — ( 69.3 ) — ( 69.3 )

Net income (loss) — — — — — — — — 222.1 — 222.1 ( 0.4 ) 221.7

Net loss — — — — — — — — ( 490.0 ) — ( 490.0 ) ( 1.4 ) ( 491.4 )

Other — — — 0.1 — — ( 0.2 ) 7.4 — — 7.3 — 7.3

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Gain on acquisition of Sam Houston — — ( 29.9 )

Holding loss (gain) on equity securities 69.9 24.9 ( 106.7 )

Loss (gain) on sale or disposal of property and equipment 7.9 1.1 ( 29.2 )

Gain on Barstool Acquisition, net ( 83.4 ) — —

Gain on REIT transactions, net ( 500.8 ) — —

Loss on disposal of Barstool 923.2 — —

Holding loss on equity securities 6.4 69.9 24.9

Loss on sale or disposal of property and equipment 0.1 7.9 1.1

Gain on Hurricane Laura ( 13.9 ) ( 10.7 ) —

Noncash rent and interest expense related to the utilization of rent credits — — 287.1

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

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Stock-based compensation 85.9 58.1 35.1

Investment Agreement warrant expense 12.5 — —

Impairment losses 130.6 118.2 —

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Hurricane Laura insurance proceeds 9.0 25.4 —

Consideration paid for Barstool Sports investment — — ( 135.0 )

Sale of Barstool Sports, net of cash ( 50.9 ) — —

Consideration paid for acquisitions of businesses, net of cash acquired ( 314.6 ) — ( 877.6 )

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Acquisition of equity securities — — ( 26.0 )

Consideration paid for a cost method investment ( 15.0 ) — —

For the year ended December 31,

(in millions) 2022 2021 2020

Additional contributions to joint ventures — ( 1.4 ) ( 5.4 )

Cost method investment proceeds received (consideration paid) 8.0 ( 15.0 ) —

Other ( 12.7 ) ( 1.5 ) ( 9.4 )

Net cash used in investing activities ( 742.6 ) ( 258.6 ) ( 1,221.8 )

For the year ended December 31,

(in millions) 2023 2022 2021

Financing activities

Proceeds from revolving credit facility — — 540.0

Repayments on revolving credit facility — — ( 680.0 )

Proceeds from issuance of long-term debt, net of discounts — 1,545.0 400.0

Repayments on credit facilities (Note 11) ( 1,543.2 ) — —

Repayments on credit facilities — ( 1,543.2 ) —

Principal payments on long-term debt ( 37.5 ) ( 39.3 ) ( 64.4 )

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Principal payments on finance leases ( 47.1 ) ( 110.5 ) ( 8.5 )

Proceeds from common stock offerings, net of discounts and fees — — 1,288.8

Proceeds from exercise of options 5.3 6.9 10.8

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Cash paid for interest, net of amounts capitalized $ 420.1 $ 721.7 $ 514.6

Cash payments (refunds) related to income taxes, net $ 72.8 $ 108.3 $ ( 15.2 )

Cash payments related to income taxes, net $ 73.9 $ 72.8 $ 108.3

Non-cash activities:

Rent credits received upon sale of Tropicana land and buildings and Morgantown land $ — $ — $ 337.5

Commencement of operating leases $ 58.5 $ 96.4 $ 73.6

Commencement of finance leases $ 1,462.1 $ 106.1 $ —

Accrued capital expenditures $ 23.5 $ 21.1 $ 27.6

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Organization:

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 Note 12, “Leases,” 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,” and collectively referred to as the “Master Leases”).

Basis of Presentation:

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The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, and (iii) the reported amounts of revenues and expenses during the reporting period.

Estimates used by us include, among other things, the useful lives for depreciable and amortizable assets, the provision for credit losses, income tax provisions, the evaluation of the future realization of deferred tax assets, determining the adequacy of reserves for self-insured liabilities, the liabilities associated with our my choice program, the initial measurements of financing obligations and lease liabilities associated with our Master Leases, projected cash flows in assessing the recoverability of long-lived assets, asset impairments, goodwill and other intangible assets, projected cash flows in assessing the initial valuation of intangible assets in conjunction with acquisitions, the initial selection of useful lives for depreciable and amortizable assets in conjunction with acquisitions, contingencies and litigation inclusive of financing arrangements in which the Company receives up-front cash proceeds, and stock-based compensation expense.

Estimates used by us include, among other things, the useful lives for depreciable and amortizable assets, the provision for credit losses, income tax provisions, the evaluation of the future realization of deferred tax assets, indemnification liabilities associated with certain tax matters, determining the adequacy of reserves for self-insured liabilities, the liabilities associated with our PENN Play TM program, the initial measurements of financing obligations and lease liabilities associated with our Master Leases, projected cash flows in assessing the recoverability of long-lived assets, asset impairments, goodwill and other intangible assets, projected cash flows in assessing the initial valuation of intangible assets in conjunction with acquisitions, the initial selection of useful lives for depreciable and amortizable assets in conjunction with acquisitions, contingencies, and litigation inclusive of financing arrangements in which the Company receives up-front cash proceeds, and stock-based compensation expense.

We applied estimation methods consistently for all periods presented within our Consolidated Financial Statements.

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

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

(“Barstool”).

See Note 18, “Segment Information,” for further information.

Interactive 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.

We owned 36 % of Barstool common stock prior to the February 17, 2023 Barstool Acquisition (as defined in Note 6, “Acquisitions and Dispositions” ) pursuant to which we acquired the remaining 64 % of Barstool common stock.

On August 8, 2023, we entered into a stock purchase agreement with David Portnoy (the “Barstool SPA”), and we sold 100 % of the outstanding shares of Barstool common stock.

See Note 18, “Segment Information” and Note

12, “ Leases ” for further segment and lease structure information, respectively.

For financial reporting purposes, we aggregate our operating segments into the following reportable segments:

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Ameristar East Chicago East Chicago, Indiana Pinnacle Master Lease

Hollywood Casino Bangor Bangor, Maine PENN Master Lease

Hollywood Casino at Charles Town Races Charles Town, West Virginia PENN Master Lease

Hollywood Casino Columbus Columbus, Ohio PENN Master Lease

Hollywood Casino Bangor Bangor, Maine AR PENN Master Lease

Hollywood Casino at Charles Town Races Charles Town, West Virginia AR PENN Master Lease

Hollywood Casino Columbus Columbus, Ohio 2023 Master Lease

Hollywood Casino at Greektown Detroit, Michigan Greektown Lease

Hollywood Casino Lawrenceburg Lawrenceburg, Indiana PENN Master Lease

Hollywood Casino Lawrenceburg Lawrenceburg, Indiana AR PENN Master Lease

Hollywood Casino Morgantown Morgantown, Pennsylvania Morgantown Lease (1)

Hollywood Casino at PENN National Race Course Grantville, Pennsylvania PENN Master Lease

Hollywood Casino Perryville Perryville, Maryland Perryville Lease

Hollywood Casino at The Meadows Washington, Pennsylvania Meadows Lease

Hollywood Casino Toledo Toledo, Ohio PENN Master Lease

Hollywood Casino at PENN National Race Course Grantville, Pennsylvania AR PENN Master Lease

Hollywood Casino Perryville Perryville, Maryland 2023 Master Lease

Hollywood Casino at The Meadows Washington, Pennsylvania 2023 Master Lease

Hollywood Casino Toledo Toledo, Ohio 2023 Master Lease

Hollywood Casino York York, Pennsylvania Operating Lease (not with REIT Landlord)

Hollywood Gaming at Dayton Raceway Dayton, Ohio PENN Master Lease

Hollywood Gaming at Mahoning Valley Race Course Youngstown, Ohio PENN Master Lease

Hollywood Gaming at Dayton Raceway Dayton, Ohio AR PENN Master Lease

Hollywood Gaming at Mahoning Valley Race Course Youngstown, Ohio AR PENN Master Lease

Marquee by PENN (2)

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1 st Jackpot Casino

Tunica, Mississippi PENN Master Lease

Tunica, Mississippi AR PENN Master Lease

Ameristar Vicksburg Vicksburg, Mississippi Pinnacle Master Lease

Boomtown Biloxi Biloxi, Mississippi PENN Master Lease

Boomtown Biloxi Biloxi, Mississippi AR PENN Master Lease

Boomtown Bossier City Bossier City, Louisiana Pinnacle Master Lease

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Hollywood Casino Gulf Coast Bay St.

Louis, Mississippi PENN Master Lease

Hollywood Casino Tunica Tunica, Mississippi PENN Master Lease

Louis, Mississippi AR PENN Master Lease

Hollywood Casino Tunica Tunica, Mississippi AR PENN Master Lease

L’Auberge Baton Rouge Baton Rouge, Louisiana Pinnacle Master Lease

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Cactus Petes and Horseshu Jackpot, Nevada Pinnacle Master Lease

M Resort Spa Casino Henderson, Nevada PENN Master Lease

Tropicana Las Vegas (3)

Las Vegas, Nevada Tropicana Lease

Zia Park Casino Hobbs, New Mexico PENN Master Lease

M Resort Spa Casino Henderson, Nevada 2023 Master Lease

Zia Park Casino Hobbs, New Mexico AR PENN Master Lease

Midwest segment

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Argosy Casino Alton (3)

Alton, Illinois PENN Master Lease

Argosy Casino Riverside Riverside, Missouri PENN Master Lease

Hollywood Casino Aurora Aurora, Illinois PENN Master Lease

Hollywood Casino Joliet Joliet, Illinois PENN Master Lease

Alton, Illinois AR PENN Master Lease

Argosy Casino Riverside Riverside, Missouri AR PENN Master Lease

Hollywood Casino Aurora Aurora, Illinois 2023 Master Lease

Hollywood Casino Joliet Joliet, Illinois 2023 Master Lease

Hollywood Casino at Kansas Speedway (4)

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Hollywood Casino St.

Louis Maryland Heights, Missouri PENN Master Lease

Louis Maryland Heights, Missouri AR PENN Master Lease

Prairie State Gaming (2)

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(2) VGT route operations.

(3) On September 26, 2022, PENN sold its equity interest in the Tropicana Las Vegas Hotel and Casino Inc.

(“Tropicana”), which consisted of the gaming license to operate the property as described in Note 6, “Acquisitions and Dispositions” , and as a result of the sale, the Tropicana Lease (as defined in Note 12, “Leases” ) was terminated.

(4) The riverboat is owned by us and not subject to the PENN Master Lease.

(5) Pursuant to a joint venture with NASCAR and includes the Company’s 50 % investment in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns Hollywood Casino at Kansas Speedway.

(3) The riverboat is owned by us and not subject to the AR PENN Master Lease.

(4) Pursuant to a joint venture with NASCAR Holdings LLC (“NASCAR”) and includes the Company’s 50 % investment in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns Hollywood Casino at Kansas Speedway.

Cash and Cash Equivalents:

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Media receivables 16.0 15.0

Insurance Receivable - Hurricane Laura — 28.7

Other 43.9 45.7

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Property and equipment are stated at cost, less accumulated depreciation.

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

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

Project capital expenditures are for fixed asset additions associated with constructing new facilities, or expansions of existing facilities.

Maintenance capital expenditures (replacement) are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost-effective to repair.

Maintenance capital expenditures are expenditures to replace existing fixed assets with a useful life greater than one year that are obsolete, worn out or no longer cost-effective to repair.

Maintenance and repairs that neither add materially to the value of the asset nor appreciably prolong its useful life are charged to expense as incurred.

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The factors considered by the Company in performing this assessment include current operating results, trends and prospects, as well as the effect of obsolescence, demand, competition, and other regulatory and economic factors.

For purposes of recognizing and measuring impairment, assets are grouped at the individual property level representing the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets.

For purposes of recognizing and measuring impairment, assets are grouped at the individual property level representing the lowest level for which identifiable cash flows are largely

independent of the cash flows of other assets.

In assessing the recoverability of the carrying amount of property and equipment, we must make assumptions regarding future cash flows and other factors.

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Convertible Debt:

Our Convertible Notes (as defined in Note 3, “New Accounting Pronouncements” ) are accounted for in accordance with Accounting Standards Codification (“ASC”) 470-20, “Debt with Conversion and Other Options” (“ASC 470-20”).

Our Convertible Notes (as defined within Note 11, “Long-term Debt” ) are accounted for in accordance with Accounting Standards Codification (“ASC”) 470-20, “Debt with Conversion and Other Options” (“ASC 470-20”).

Prior to January 1, 2022, pursuant to ASC 470‑20, we accounted for the Convertible Notes using the separate liability (debt) and equity (conversion option) components of the instrument.

The equity component was included in “Additional paid-in capital” within our Consolidated Balance Sheets at the issuance date and the value of the equity component was treated as a debt discount.

Effective January 1, 2022, we adopted ASU 2020-06 (as defined in Note 3, “New Accounting Pronouncements” ), using the modified retrospective approach.

Effective January 1, 2022, we adopted ASU 2020-06, using the modified retrospective approach.

As a result, the Convertible Notes are accounted for as a single liability measured at its amortized cost, as no other embedded features require bifurcation.

See Note 3, “New Accounting Pronouncements” and Note 11, “Long-term Debt” for additional information.

See Note 11, “Long-term Debt” for additional information.

Financing Obligations:

In accordance with ASC 842, “ Leases” (“ASC 842”), for transactions in which the Company enters into a contract to sell an asset and leases it back from the seller under a sale and leaseback transaction, the Company must determine whether control of the asset has transferred from the Company.

determine whether control of the asset has transferred from the Company.

In cases whereby control has not transferred from the Company, we continue to recognize the underlying asset as “Property and equipment, net” within the Consolidated Balance Sheets, which is then depreciated over the shorter of the remaining useful life or lease term.

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The Company recognizes interest expense on the minimum lease payments related to a financing obligation under the effective yield method.

Contingent payments are recorded as interest expense as incurred.

Contingent payments are recorded to interest expense as incurred.

Principal payments associated with financing obligations are presented as financing cash outflows and interest payments associated with financing obligations are presented as operating cash outflows within our Consolidated Statements of Cash Flows.

For more information, see Note 8, “Property and Equipment” and Note 12, “Leases.”

We concluded that the components contained within the Master Leases (primarily buildings) and the Morgantown Lease are required to be accounted for as financing obligations on our Consolidated Balance Sheets in accordance with ASC 842, as control of the underlying assets were not considered to have transferred from the Company.

We concluded that certain components contained within the Master Leases and the Morgantown Lease are required to be accounted for as financing obligations on our Consolidated Balance Sheets in accordance with ASC 842, as control of the underlying assets were not considered to have transferred from the Company.

Operating and Finance Leases:

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The liability for operating and finance leases is based on the present value of future lease payments.

Operating lease expenses are primarily recorded as rent expense, which are included within general and administrative expense, within the Consolidated Statements of Operations and presented as operating cash outflows within the Consolidated Statements of Cash Flows.

Finance lease expenses are recorded as depreciation expense, which is included within depreciation and amortization expense within the Consolidated Statements of Operations and interest expense over the lease term.

Operating lease expenses are primarily recorded as rent expense, which are included within “General and administrative” within the Consolidated Statements of Operations and presented as operating cash outflows within the Consolidated Statements of Cash Flows.

Finance lease expenses are recorded as depreciation expense, which is included within “Depreciation and amortization” and “Interest expense, net” within the Consolidated Statements of Operations over the lease term.

Principal payments associated with finance leases are presented as financing cash outflows and interest payments associated with finance leases are presented as operating cash outflows within our Consolidated Statements of Cash Flows.

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ASC 740 also creates a single model to address uncertainty in tax positions and clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in an enterprise’s financial statements.

It also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.

It also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

See Note 14, “Income Taxes.”

Revenue Recognition:

Our revenue from contracts with customers consists primarily of gaming wagers, inclusive of sports betting and iCasino products, food and beverage transactions, retail transactions, hotel room sales, racing wagers, and third-party revenue sharing agreements.

Our revenue from contracts with customers consists primarily of gaming wagers, inclusive of sports betting and iCasino products, food and beverage transactions, hotel room sales, retail transactions, racing wagers, and third-party revenue sharing agreements.

See Note 5, “Revenue Disaggregation” for information on our revenue by type and geographic location.

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The transaction price for our management service contracts is the amount collected for services rendered in accordance with the contractual terms.

Gaming revenue contracts involve two performance obligations for those customers earning points under our my choice program and a single performance obligation for customers that do not participate in the my choice program.

Gaming revenue contracts involve two performance obligations for those customers earning points under our PENN Play TM program and a single performance obligation for customers that do not participate in the PENN Play TM program.

The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as opposed to an individual wagering contract.

For purposes of allocating the transaction price in a gaming contract between the wagering performance obligation and the obligation associated with the loyalty points earned, we allocate an amount to the loyalty point contract liability based on the standalone selling price (“SSP”) of the points earned, which is determined by the value of a point that can be redeemed for slot play and complimentaries such as, food and beverage at our restaurants, lodging at our hotels and products offered at our

my choice mall and retail stores, less estimated breakage.

The allocated revenue for gaming wagers is recognized when the wagering occurs as all such wagers settle immediately.

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Complimentaries Associated with Gaming Contracts

Food, beverage, hotel, and other services furnished to patrons for free as an inducement to gamble or through the redemption of our customers’ loyalty points are recorded as food, beverage, hotel, and other revenues, at their estimated standalone selling prices with an offset recorded as a reduction to gaming revenues.

Food, beverage, hotel, and other services furnished to patrons for free as an inducement to gamble at our retail properties or through the redemption of our customers’ loyalty points are recorded as “Food, beverage, hotel, and other” revenues at their estimated standalone selling prices, with an offset recorded as a reduction to “Gaming” revenues.

The cost of providing complimentary goods and services to patrons as an inducement to gamble as well as for the fulfillment of our loyalty point obligation is included in “Food, beverage, hotel, and other” expenses.

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Total complimentaries associated with gaming contracts $ 366.9 $ 360.1 $ 309.3

Additionally, the Company provides discretionary complimentaries in the form of online casino gaming slots and table games and online sports betting free play bonuses.

Free play bonuses provided to patrons indirectly contribute to the gaming revenue earned by the Company and are recorded as a reduction of “Gaming” revenues.

Customer-related Liabilities

The Company has three general types of liabilities related to contracts with customers:

(i) the obligation associated with its my choice program (loyalty points and tier status benefits), (ii) advance payments on goods and services yet to be provided and for unpaid wagers, and (iii) deferred revenue associated with third-party sports betting operators for online sports betting and iCasino market access.

Our my choice program allows members to earn loyalty points that are redeemable for slot play and complimentaries, such as food and beverage at our restaurants, lodging at our hotels, my choice redemption mall, and products offered at our retail stores across the vast majority of our properties.

In addition, members of the my choice program earn credit toward tier status, which entitles them to receive certain other benefits, such as priority access, discounts, gifts, and free play.

The obligation associated with our my choice program, which is included in “Accrued expenses and other current liabilities” within our Consolidated Balance Sheets, was $ 39.3 million and $ 37.6 million as of December 31, 2022 and 2021, respectively, and consisted principally of the obligation associated with the loyalty points.

(i) the obligation associated with its PENN Play TM program (loyalty points and tier status benefits), (ii) advance payments on goods and services yet to be provided and for unpaid wagers, and (iii) deferred revenue associated with third-party online sports betting and/or iCasino for online sports betting and iCasino market access.

Our PENN Play TM program connects the Company’s brands under one loyalty program and allows members to earn loyalty points, or “PENN Cash,” redeemable for slot play and complimentaries, such as food and beverage at our restaurants, lodging at our hotels, the PENN Play TM redemption marketplace that features popular retailers, and products offered at our retail stores across the vast majority of our properties.

In addition, members of the PENN Play TM program earn credit toward tier status, which entitles them to receive certain other benefits, such as priority access, discounts, gifts, trips to PENN destinations, partner experiences, and PENN Cash.

The obligation associated with our PENN Play TM program, which is included in “Accrued expenses and other current liabilities” within our Consolidated Balance Sheets, was $ 33.1 million and $ 39.3 million as of December 31, 2023 and 2022, respectively, and consisted principally of the obligation associated with the loyalty points.

Our loyalty point obligations are generally settled within six months of issuance.

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The Company’s advance payments on goods and services yet to be provided and for unpaid wagers primarily consist of the following:

(i) deposits on rooms and convention space, (ii) money deposited on behalf of a customer in advance of their property visit (referred to as “safekeeping” or “front money”), (iii) money deposited in an online wallet not yet wagered or wagered and not yet withdrawn, (iv) outstanding tickets generated by slot machine play or pari-mutuel wagering, (v) outstanding chip liabilities, (vi) unclaimed jackpots, and (vii) gift cards redeemable at our properties.

(i) deposits on rooms and convention space, (ii) money deposited on behalf of a customer in advance of their property visit (referred to as “safekeeping” or “front money”), (iii) money deposited in an online wallet not yet wagered or wagered and not yet withdrawn, (iv) outstanding tickets generated by slot machine play, sports betting, or pari-mutuel wagering, (v) outstanding chip liabilities, (vi) unclaimed jackpots, and (vii) gift cards redeemable at our properties.

Unpaid wagers generally represent obligations stemming from prior wagering events, of which revenue was previously recognized.

The Company’s advance payments on goods and services yet to be provided and for unpaid wagers were $ 192.6 million and $ 125.8 million as of December 31, 2023 and 2022, respectively, and are included in “Accrued expenses and other current liabilities” within our Consolidated Balance Sheets.

PENN Interactive enters into multi-year agreements with sports betting operators for online sports betting and iCasino market access across our portfolio of properties.

Certain of the operations contemplated by these agreements commenced, resulting in the recognition of $ 22.4 million, $ 16.3 million and $ 5.6 million of revenue (most of which was previously deferred) during the years ended December 31, 2022, 2021 and 2020 respectively.

Deferred revenue associated with third-party sports betting operators for online sports betting and iCasino market access, which is included in “Other long-term liabilities” within our Consolidated Balance Sheets was $ 46.2 million and $ 52.2 million as of December 31, 2022 and 2021, respectively.

The Company’s deferred revenue is primarily related to PENN Interactive, our wholly-owned interactive division, which enters into multi-year agreements with third party online sports betting and/or iCasino operators for online sports betting and iCasino market access across our portfolio of properties.

We recognized $ 21.6 million, $ 10.7 million, and $ 8.2 million of previously deferred revenue during the years ended December 31, 2023, 2022, and 2021 respectively.

Deferred revenue primarily associated with third-party online sports betting and/or iCasino operators for online sports betting and iCasino market access, which is included in “Other long-term liabilities” within our Consolidated Balance Sheets was $ 39.0 million and $ 46.5 million as of December 31, 2023 and 2022, respectively.

The Company expenses advertising costs the first time the advertising takes place or as incurred.

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Gaming and Pari-mutuel Taxes:

We are subject to gaming and pari-mutuel taxes based on gross gaming revenue and pari-mutuel revenue in the jurisdictions in which we operate, as well as taxes on revenues derived from arrangements which allow for third-party partners to operate iCasinos and online sportsbooks under our gaming licenses.

The Company primarily

recognizes gaming and pari-mutuel tax expense based on the statutorily required percentage of revenue that is required to be paid to state, provincial and/or local jurisdictions in the states and provinces where or in which the wagering occurs.

We are subject to gaming and pari-mutuel taxes based on gross gaming revenue and pari-mutuel revenue in the jurisdictions in which we operate, as well as taxes on revenues derived from arrangements which allow for third-party online sports betting and/or iCasino partners to operate online sportsbooks and iCasinos under our gaming licenses.

The Company primarily recognizes gaming and pari-mutuel tax expense based on the statutorily required percentage of revenue that is required to be paid to state, provincial and/or local jurisdictions in the states and provinces where or in which the wagering occurs.

Also, included in gaming and pari-mutuel taxes are costs to support the operations of local regulatory authorities which some jurisdictions require us to pay.

Gaming and pari-mutuel taxes are recorded in “Gaming” expense or “Food, beverage, hotel, and other” expenses within the Consolidated Statements of Operations, and were $ 2.2 billion, $ 2.0 billion, and $ 1.1 billion for the years ended December 31, 2022, 2021 and 2020, respectively.

Gaming and pari-mutuel taxes are recorded in “Gaming” expenses or “Food, beverage, hotel, and other” expenses within the Consolidated Statements of Operations, and were $ 2.3 billion, $ 2.2 billion, and $ 2.0 billion for the years ended December 31, 2023, 2022, and 2021, respectively.

Foreign Currency Translation:

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Comprehensive income (loss) includes net income (loss) and all other non-stockholder changes in equity, or other comprehensive income (loss).

The balance of accumulated other comprehensive loss consists solely of foreign currency translation adjustments.

The balance of accumulated other comprehensive loss consists of foreign currency translation adjustments and unrealized gains or losses on debt securities.

Stock-Based Compensation:

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The Company accounts for forfeitures in the period in which they occur based on actual amounts.

The fair value of stock options is estimated at the grant date using the Black-Scholes option-pricing model, which requires us to make assumptions, including the expected term, which is based on the contractual term of the stock option and historical exercise data of the Company’s employees;

The fair value of stock options is estimated at the grant date using the Black-Scholes option-pricing model, which requires us to make assumptions, including the

expected term, which is based on the contractual term of the stock option and historical exercise data of the Company’s employees;

the risk-free interest rate, which is based on the U.S.

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See Note 16, “Stock-based Compensation.”

Earnings Per Share:

Basic earnings per share (“EPS”) is computed by dividing net income (loss) applicable to common stock by the weighted-average number of common shares outstanding during the period.

Diluted EPS reflects the additional dilution, if any, for all potentially-dilutive securities such as stock options, unvested restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) (collectively with RSAs, “restricted stock”), outstanding convertible preferred stock, and convertible debt.

Holders of the Company’s Series D Preferred Stock (as defined in Note 7, “Investments in and Advances to Unconsolidated Affiliates” ) are entitled to participate equally and ratably in all dividends and distributions paid to holders of PENN common stock irrespective of any vesting requirement.

Accordingly, the Series D Preferred Stock shares are considered a participating security and the Company is required to apply the two-class method to consider the impact of the preferred shares on the calculation of basic and diluted EPS.

The holders of the Company’s Series D Preferred Stock are not obligated to absorb losses;

therefore, in reporting periods where the Company is in a net loss position, it does not apply the two-class method.

In reporting periods where the Company is in a net income position, the two-class method is applied by allocating all earnings during the period to common shares and preferred shares.

Earnings (Loss) Per Share:

Basic earnings (loss) per share (“EPS”) is computed by dividing net income or loss applicable to common stock by the weighted-average number of common shares outstanding during the period.

Diluted EPS reflects the additional dilution, if any, for all potentially-dilutive securities such as warrants, stock options, unvested restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) (collectively with RSAs, “restricted stock”), outstanding convertible preferred stock, and convertible debt.

Holders of the Company’s Series D Preferred Stock (as defined in Note 7, “Investments in and Advances to Unconsolidated Affiliates” ) were entitled to participate equally and ratably in all dividends and distributions paid to holders of PENN common stock irrespective of any vesting requirement.

Accordingly, the Series D Preferred Stock shares were considered a participating security, and the Company was required to apply the two-class method to consider the impact of the preferred shares on the calculation of basic and diluted EPS.

The previous holders of the Company’s Series D Preferred Stock were not obligated to absorb losses;

therefore, in reporting periods where the Company was in a net loss position, it did not apply the two-class method.

In reporting periods where the Company was in a net income position, the two-class method was applied by allocating all earnings during the period to common shares and preferred shares.

See Note 17, “Earnings (Loss) per Share” for more information.

As discussed in Note 15, “Stockholders’ Equity,” all remaining outstanding shares of Series D Preferred Stock became eligible for the conversion and were converted to common stock during the third quarter of 2023.

There are no outstanding shares of Series D Preferred Stock as of December 31, 2023.

Guarantees and Indemnifications:

The Company accounts for indemnity obligations in accordance with the ASC 460-20, “Contingencies” and records a liability at fair value.

Pursuant to the Barstool SPA, as described in Note 6, “Acquisitions and Dispositions,” the Company agreed to indemnify Barstool and its subsidiaries and David Portnoy for certain tax matters.

The indemnity provisions generally provide for the Company’s control of defense and settlement of claims, as well as certain other costs associated with potential tax matters related to Barstool and its subsidiaries and David Portnoy.

The Company has not previously incurred costs to settle claims under this indemnification obligation, nor did we did have a liability associated with this obligation as of December 31, 2022.

As of December 31, 2023, the Company recorded $ 70.0 million in liabilities associated with this obligation.

See Note 6, “Acquisitions and Dispositions” for more information.

Application of Business Combination Accounting:

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For those entities that qualify as a VIE, the primary beneficiary is generally defined as the party who has a controlling financial interest in the VIE.

The Company consolidates the financial position and results of operations of every VOE in which it has a controlling

financial interest and VIEs in which it is considered to be the primary beneficiary.

The Company consolidates the financial position and results of operations of every VOE in which it has a controlling financial interest and VIEs in which it is considered to be the primary beneficiary.

See Note 7, “Investments in and Advances to Unconsolidated Affiliates.”

Note 3—New Accounting Pronouncements

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820):

In June 2022, the Financial Accounting Standard Board (the “FASB”) issued ASU 2022-03, “Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”).

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Specifically, ASU 2022-03 clarifies that a “contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security” and is not included in the equity security’s unit of account.

Accordingly, the Company is no longer permitted to apply a discount related to the contractual sale restriction, or lack of marketability, when measuring the equity security’s fair value.

Accordingly, the Company is no longer permitted to apply a discount

related to the contractual sale restriction, or lack of marketability, when measuring the equity security’s fair value.

In addition, ASU 2022-03 prohibits an entity from recognizing a contractual sale restriction as a separate unit of account.

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Early adoption is permitted.

The Company is currently evaluating the impact of the adoption of ASU 2022-03 on our Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”).

ASU 2020-04 provides an optional expedient and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate (referred to as “LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation.

ASU 2020-04 also provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued.

The interest rates associated with the Company’s previous borrowings under its Senior Secured Credit Facilities (as defined in Note 11, “Long-term Debt” ) were tied to LIBOR.

Subsequent to the amendment of the Senior Secured Credit Facilities on May 3, 2022, the Company’s borrowings are tied to SOFR (see Note 11, “Long-term Debt” ), upon which the Company adopted ASU 2020-04.

The adoption of ASU 2020-04 did not have an impact on our Consolidated Financial Statements.

In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Topic 814):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”).

ASU 2020-06 eliminates the number of accounting models used to account for convertible debt instruments and convertible preferred stock.

The update also amends the disclosure requirements for convertible instruments and EPS in an effort to increase financial reporting transparency.

The new standard impacts the Company’s existing 2.75 % convertible senior notes due May 2026 (“Convertible Notes”) which prior to adoption of the new standard, were accounted for under the cash conversion feature model.

The cash conversion feature model is eliminated under the new standard and entities will no longer separately present in stockholders’ equity an embedded conversion feature of a debt instrument.

The new guidance also requires the use of the if-converted method when calculating diluted EPS for convertible instruments and the treasury stock method should no longer be used.

Under the new guidance, convertible instruments that may be settled in cash or shares (e.g., the Company’s Convertible Notes) are to be included in the calculation of diluted EPS if the effect is more dilutive, with no option for rebutting the presumption of share settlement based on stated policy or past experience.

Each of these requirements are consistent with the Company’s previous method for calculating diluted EPS.

The Company adopted ASU 2020-06 effective January 1, 2022, using the modified retrospective approach.

Adoption of ASU 2020-06 resulted in reclassification of the $ 88.2 million cash conversion feature related to the Company’s Convertible Notes, from stockholders’ equity to liabilities.

As a result of the adoption, the Company recognized as a cumulative effect adjustment an increase to the January 1, 2022 opening balance of retained earnings of $ 18.9 million, net of taxes.

Although we are still finalizing our assessment of the impact of the adoption of ASU 2022-03, which is effective January 1, 2024, we currently do not expect it to have a material impact on our Consolidated Financial Statements.

In March 2023, the FASB issued ASU 2023-02, “Investments—Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)” (“ASU 2023-02”).

ASU 2023-02 introduced the option to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met.

In addition, ASU 2023-02 limited the proportional amortization method to investments in low-income-housing tax credit structures.

ASU 2023-02 will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Although we are still finalizing our assessment of the impact of the adoption of ASU 2023-02, which is effective January 1, 2024, we currently do not expect it to have a material impact on our Consolidated Financial Statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

ASU 2023-07 updates the requirements for a public entity to disclose its significant segment expense categories and amounts for each reportable segment.

A significant segment expense is considered an expense that is;

significant to the segment, regularly provided to or easily computed from information regularly provided to the chief operating decision maker, and included in the reported measure of segment profit or loss.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early Adoption is permitted.

The Company is currently evaluating the impact of the adoption of ASU 2023-07 and expect that any impact would be limited to additional disclosures in the notes to the Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”).

ASU 2023-09 updates the requirements for a public entity to enhance income tax disclosures to provide a better assessment on how an entity’s operations, related tax risks, tax planning, and operational opportunities affect its tax rate and prospects for future cash flows.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The primary purpose of the new ASU 2023-09 is to enhance the transparency of income tax disclosures and we expect that any impact would be limited to additional disclosures in the notes to the Consolidated Financial Statements.

Note 4—Hurricane Laura

On August 27, 2020, Hurricane Laura made landfall in Lake Charles, Louisiana, which caused significant damage to our L’Auberge Lake Charles property and closure of the property for approximately two weeks.

On August 27, 2020, Hurricane Laura made landfall in Lake Charles, Louisiana, which caused significant damage to our L’Auberge Lake Charles property, which closed for approximately two weeks.

The Company maintains insurance, subject to certain deductibles and coinsurance, that covers business interruption, including lost profits, and covers the repair or replacement of assets that suffered losses.

The Company recorded a receivable relating to our estimate of repairs and maintenance costs which have been incurred and property and equipment which have been written off, and for which we deem the recovery of such costs and property and

equipment from our insurers to be probable.

The insurance recovery receivable was included in “Accounts Receivable, net” within the Consolidated Balance Sheets.

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Timing differences exist between the recognition of (i) impairment losses and capital expenditures made to repair or restore the assets and (ii) the receipt of insurance proceeds within the Consolidated Financial Statements.

As of December 31, 2021, the receivable was $ 28.7 million.

During the year ended December 31, 2022, we received insurance claim proceeds totaling $ 39.4 million, resulting in a gain of $ 10.7 million, which is included in “General and administrative” within our Consolidated Statements of Operations.

No proceeds were received from our insurers during the year ended December 31, 2021.

As of February 23, 2023, the insurance claim remains open, and we expect to receive additional future proceeds.

We will record proceeds in excess of the recognized losses and lost profits under our business interruption insurance as a gain contingency in accordance with ASC 450, “Contingencies,” which we expect to recognize at the time of final settlement or when nonrefundable cash advances are made in a period subsequent to December 31, 2022.

The following tables summarize the financial impact of Hurricane Laura related matters:

During the years ended December 31, 2023 and 2022, we received $ 13.9 million and $ 39.4 million of insurance claim proceeds related to property damage, respectively, which resulted in a gain of $ 13.9 million and $ 10.7 million, respectively.

The property damage proceeds are included in “Other” expenses within the Consolidated Statements of Operations.

Additionally, during the year ended December 31, 2023, we received final proceeds of $ 19.6 million related to business interruption insurance, which are included in “General and administrative” expenses within the Consolidated Statements of Operations.

The following table summarizes the financial impact of Hurricane Laura related matters:

Life to date through December 31,

(in millions) 2023 2022

Insurance proceeds received through the end of the period $ 86.9 $ 47.5

Insurance proceeds related to property damage received through the end of the period $ 100.8 $ 86.9

Insurance proceeds related to business interruption received through the end of the period $ 19.6 $ —

Deductible $ 15.0 $ 15.0

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Inventory write-off $ 0.2 $ 0.2

(in millions) 2022 2021

Insurance receivable $ — $ 28.7

Note 5—Revenue Disaggregation

Our revenues are generated principally by providing the following types of services:

(i) gaming, including iCasino, retail and online sports betting;

(i) gaming, inclusive of retail sports betting, iCasino, and online sports betting;

(ii) food and beverage;

and (iv) other.

Other revenues are principally comprised of ancillary gaming-related activities, such as commissions received on ATM transactions, racing, PENN Interactive’s social gaming, and revenue from third-party sports betting operators and the related gross-up for taxes.

Other revenues are principally comprised of PENN Interactive’s revenue from third-party online sports betting and/or iCasino operators and the related gross-up for taxes, racing operations, advertising, retail, and commissions received on ATM transactions.

Our revenue is disaggregated by type of revenue and geographic location of the related properties, which is consistent with our reportable segments, as follows:

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For the year ended December 31, 2021

(in millions) Northeast South West Midwest Interactive Other Intersegment Eliminations (2)

(in millions) Northeast South West Midwest Interactive (1)

Other Intersegment Eliminations (2)

Gaming $ 2,344.2 $ 1,080.4 $ 352.7 $ 1,009.6 $ 158.4 $ — $ — $ 4,945.3

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Total revenues $ 2,552.4 $ 1,322.2 $ 521.4 $ 1,102.7 $ 432.9 $ 10.6 $ ( 37.2 ) $ 5,905.0

(1) Other revenues within the Interactive segment are inclusive of gaming tax reimbursement amounts charged to third-party partners for online sports betting and iCasino market access of $ 251.6 million and $ 180.2 million for the years ended December 31, 2022 and 2021, respectively.

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

(1) Other revenues within the Interactive segment are inclusive of gaming tax reimbursement amounts related to third-party online sports betting and/or iCasino partners for online sports betting and iCasino market access of $ 390.4 million, $ 251.6 million, and $ 180.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Additionally, the year ended December 31, 2023 included $ 105.8 million in advertising revenue and $ 29.8 million in retail revenue due to the inclusion of Barstool operating results prior to the disposition on August 8, 2023.

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

Note 6—Acquisitions and Dispositions

Tropicana Las Vegas

On April 16, 2020, we sold the real estate assets associated with the operations of 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, (as defined and discussed in Note 12, “Leases” ), beginning in May 2020.

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

We recognized a gain on this transaction of $ 29.8 million during the year ended December 31, 2020, which is included in “General and administrative” within our Consolidated Statements of Operations.

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

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” ).

As of December 31, 2020, we utilized all of the rent credits pertaining to the Tropicana and Morgantown transactions which totaled $ 337.5 million (see Note 12, “Leases” ).

HitPoint Inc.

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(“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.

The acquisition provided 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.

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

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.

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.

See Note 15, “Stockholders’ Equity” for further information.

The Company held shares of theScore common stock prior to the acquisition and, as such, the acquisition date estimated fair value of this previously held investment was a component of the purchase consideration.

Based on the acquisition date fair value of this investment of $ 58.9 million, the Company recorded a gain of $ 2.9 million related to remeasurement of the equity security investment immediately prior to the acquisition date which was included in “Other” within our Consolidated Statements of Operations.

The following table reflects the allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed, with the excess recorded as goodwill.

During the year ended December 31, 2022, we made the following purchase price measurement period adjustment:

(in millions) Estimated fair value, as previously reported .

Measurement period adjustments Final fair value

Based on the acquisition date fair

value of this investment of $ 58.9 million, the Company recorded a gain of $ 2.9 million related to remeasurement of the equity security investment immediately prior to the acquisition date which was included in “Other” within our Consolidated Statements of Operations.

For the period beginning October 19, 2021 through December 31, 2021 theScore’s revenue and net loss included in the Consolidated Statements of Operations were $ 7.5 million and $ 11.9 million, respectively.

Tropicana Las Vegas

On January 11, 2022, PENN entered into a definitive purchase agreement to sell its outstanding equity interest in Tropicana, which had the gaming license and operated the Tropicana, to Bally’s Corporation.

The transaction closed on September 26, 2022.

Barstool Acquisition and Disposition

On February 17, 2023, we acquired the remaining 64 % of the outstanding shares of Barstool common stock not already owned by us for 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, as discussed below.

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

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 $ 315.3 million of cash to complete the Barstool Acquisition, inclusive of transaction expenses and repayment of Barstool indebtedness.

The Company held 36 % of the outstanding shares of Barstool common stock prior to the Barstool Acquisition and, as such, the acquisition date estimated fair value of this previously held investment was a component of the purchase consideration.

Based on the acquisition date fair value of Barstool of $ 660.0 million and the carrying amount of this investment of $ 171.1 million, the Company recorded a gain of $ 66.5 million related to remeasurement of the equity investment immediately prior to the acquisition date, which is included in “Gain on Barstool Acquisition, net” within our Consolidated Statements of Operations.

The Company also recorded a gain of $ 16.9 million related to the acquisition of the remaining 64 % of Barstool common stock, which is included in “Gain on Barstool Acquisition, net” within our Consolidated Statements of Operations.

The following table reflects the allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed, with the excess recorded as goodwill, at the February 17, 2023 acquisition date.

(in millions) Fair value

Cash and cash equivalents $ 10.1

Accounts receivable 44.8

Inventory 25.2

Other current assets 5.0

ROU assets 2.6 — 2.6

Lease right-of-use assets 13.5

Property and equipment 3.8

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Other intangible assets

Gaming technology 160.0 — 160.0

Media technology 57.0 — 57.0

Tradename 100.0 — 100.0

Barstool tradename 420.0

Advertising relationships 32.0

Other tradenames and brands 29.0

Customer relationships 11.0

Re-acquired right 2.6 — 2.6

Other long-term assets 18.7

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Accounts payable, accrued expenses and other current liabilities $ 38.7

Deferred tax liabilities 69.2 — 69.2

Other non-current liabilities 1.7 — 1.7

Deferred income taxes 115.9

Other long-term liabilities 30.4

Total liabilities 185.0

Net assets acquired $ 660.0

(1) Amounts were initially reported within the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022.

The Company used the income, or cost approach for the valuation, as appropriate, and used valuation inputs in these models and analyses that were based on market participant assumptions.

Market participants are considered to be buyers and sellers unrelated to the Company in the principal or most advantageous market for the asset or liability.

Acquired identifiable intangible assets consist of gaming technology, media technology, tradename, advertising relationships, customer relationships, and a re-acquired right.

Tradename is an indefinite-lived intangible asset.

All other intangible assets are definite-lived with assigned useful lives primarily ranging from 1 - 7 years.

The re-acquired right intangible asset was assigned a 17.8 year useful life based on the remaining term of a pre-acquisition market access contract between PENN and theScore.

Goodwill, none of which is deductible under the Canadian Income Tax Act, is approximately 81.2 % of the net assets acquired and represents synergies, incremental market share capture and expansion into new markets not existing as of the acquisition date, and future technology development.

The following valuation approaches were utilized to determine the fair value of each intangible asset:

Acquired identifiable intangible assets consisted of the Barstool tradename, advertising relationships, other tradenames and brands, and customer relationships.

The Barstool tradename was determined to be an indefinite-lived intangible asset.

All other intangible assets were determined to be definite-lived with assigned useful lives primarily ranging from 2 - 5 years.

Goodwill, none of which was deductible for tax purposes, represented approximately 35.1 % of the net assets acquired and was allocated to the Company’s Interactive segment.

Goodwill was primarily attributable to synergies and cross selling opportunities to Barstool’s existing customer base.

The following valuation approaches were utilized to determine the fair value of each intangible asset at the February 17, 2023 acquisition date:

Intangible Asset Valuation Approach

Gaming technology Relief-from-royalty (variation of income approach)

Media technology Replacement cost

Tradename Relief-from-royalty (variation of income approach)

Barstool tradename Relief-from-royalty (variation of income approach)

Advertising relationships With-and-without (variation of income approach)

Other tradenames and brands Relief-from-royalty (variation of income approach)

Customer relationships Replacement cost

Re-acquired right Replacement cost

Barstool’s revenue and net loss were included in our results for the period beginning February 17, 2023 through August 7, 2023, the day prior to the Barstool SPA, as described below.

Barstool’s revenue and net loss for the period beginning February 17, 2023 through August 7, 2023, included in the Consolidated Statements of Operations, were $ 99.2 million and $ 23.9 million, respectively.

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.

See Note 13, “Commitments and Contingencies” for more information related to the Sportsbook Agreement.

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 entered into the Barstool SPA with David Portnoy on August 8, 2023.

Pursuant to the Barstool SPA, 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.

On August 8, 2023, the Company’s Board of Directors approved the sale of Barstool to David Portnoy, and we classified the assets and liabilities to be disposed of as held-for-sale.

These assets and liabilities were measured at the lower of (i) the carrying value when we classified the disposal group as held-for-sale or (ii) the fair value of the disposal group, less costs to sell.

The Company 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 discussed below) during the third quarter of 2023, included in “Loss on disposal of Barstool” within our Consolidated Statements of Operations.

Pursuant to the Barstool SPA, PENN will indemnify Barstool and its subsidiaries and David Portnoy for certain tax matters.

Liabilities associated with the indemnification of $ 35.0 million were recorded in “Accrued expenses and other current liabilities” and $ 35.0 million were recorded in “Other long-term liabilities” within our Consolidated Balance Sheets as of December 31, 2023.

The indemnity provisions generally provide for the Company’s control of defense and settlement of claims, as well as certain other costs, associated with potential tax matters related to Barstool and its subsidiaries and David Portnoy.

Claims under the indemnification are paid upon demand.

The Company has not previously incurred costs to settle claims under this indemnification obligation and provisions in the Barstool SPA limit the time within which an indemnification claim can be made to the later of the resolution of the indemnification claim or the relevant statutes of limitations.

The maximum potential amount of future payments the Company could be required to make under this indemnification agreement is not estimable at this time due to uncertainties related to potential outcomes and other unique facts and circumstances involved in the Barstool SPA.

For information on the tax-related impacts from the Barstool transactions, see Note 14, “Income Taxes.”

The following table reflects the major classes of assets and liabilities disposed of pursuant to the Barstool SPA, which were part of the Interactive Segment:

(in millions) August 8, 2023

Current assets

Cash and cash equivalents $ 50.9

Accounts receivable, net 53.5

Inventory, net 21.9

Other current assets 6.4

Total current assets 132.7

Property and equipment, net 8.8

Goodwill 231.9

Other intangible assets, net 482.9

Lease right-of-use assets 21.4

Other assets 21.0

Total assets $ 898.7

Current liabilities

Accounts payable $ 11.1

Accrued expenses and other current liabilities 23.1

Total current liabilities 34.2

Other long-term liabilities 19.9

Total liabilities $ 54.1

Unaudited Pro Forma Financial Information

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For the year ended December 31, 2021, pro forma adjustments directly attributable to the acquisitions include acquisition and transaction related costs of $ 77.1 million incurred by both PENN and the respective acquirees, gains of $ 51.0 million related to our purchase of the remaining 50 % of Sam Houston and a net unrealized gain on the equity security investment in theScore.

For the year ended December 31, 2020, pro forma adjustments directly attributable to the acquisitions primarily include a net unrealized gain of $ 8.3 million on the equity security investment in theScore.

For the year ended December 31,

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Revenues $ 5,978.0

Net income (loss) $ 347.6 $ ( 705.4 )

Net income $ 347.6

Note 7—Investments in and Advances to Unconsolidated Affiliates

As of December 31, 2022 and 2021, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 36 % interest in Barstool;

our 50 % investment in Kansas Entertainment, the joint venture with NASCAR that owns Hollywood Casino at Kansas Speedway;

and our 50 % interest in Freehold Raceway.

On August 1, 2021, the Company purchased the remaining 50 % ownership interest of Sam Houston.

Prior to August 1, 2021, the Company had a 50 % interest in Sam Houston.

See Note 6, “Acquisitions and Dispositions” for further information, specific to Sam Houston.

Investment in Barstool

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

The purchase price consisted of $ 135.0 million in cash and $ 23.1 million in shares of a new class of non-voting convertible preferred stock of the Company (as discussed below).

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

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

On October 1, 2021, the terms of the February 2020 stock purchase agreement were amended and restated (“Amended and Restated Stockholders’ Agreement”) to (i) set a definitive purchase price of $ 325.0 million on the second 50 % of Barstool common stock, which eliminated the floor of 2.25 times the annual revenue of Barstool and (ii) fix a number of PENN common shares to be delivered to existing February 2020 employee holders of Barstool common stock, to the extent PENN’s stock price exceeded a specified value defined in the Amended and Restated Stockholders’ Agreement and PENN elected to settle using a combination of cash and equity.

Consistent with the February 2020 stock purchase agreement:

(i) the Barstool common stock

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

On July 7, 2022, we entered into the first amendment to the Amended and Restated Stockholders’ Agreement (“First Amendment”).

The First Amendment updated the share price specified value used to calculate the fixed number of PENN common shares to be delivered to existing February 2020 employee holders of Barstool common stock, to the extent PENN’s stock price exceeded the updated specified value and PENN elected to settle using a combination of cash and equity.

In conjunction with the February 20, 2020 stock purchase agreement, the Company issued 883 shares of Series D Preferred Stock, par value $ 0.01 (the “Series D Preferred Stock”) to certain individual stockholders affiliated with Barstool.

1/1,000 th of a share of Series D Preferred Stock is convertible into one share of PENN common stock.

The Series D Preferred stockholders are entitled to participate equally and ratably in all dividends and distributions paid to holders of PENN common stock based on the number of shares of PENN common stock into which such Series D Preferred Stock could convert.

Series D Preferred Stock is nonvoting stock.

The Series D Preferred Stock issued to certain individual stockholders affiliated with Barstool continue to be available for conversion into PENN common stock in tranches over four years as stipulated in the February 2020 stock purchase agreement, with the first and second 20 % tranches having been available for conversion into PENN common stock in the first quarter of 2021 and first quarter of 2022, respectively.

As of December 31, 2022, 51 shares of the Series D Preferred Stock can be converted into PENN common stock.

During the years ended December 31, 2022 and 2021, the Company acquired an additional 0.3 %, and 0.6 % of Barstool common stock, par value $ 0.0001 per share, respectively, which represented a partial settlement of the 1 % purchase on a delayed basis as noted above.

The acquisitions of the acquired Barstool common stock that occurred during the years ended December 31, 2022 and 2021, were settled through a predetermined number of PENN common stock and Series D Preferred Stock, respectively, as contained within the Amended and Restated Stockholders’ Agreement (see Note 15, “Stockholders’ Equity,” for further information).

As a part of the stock purchase agreement, we entered into a commercial agreement that provides us with access to Barstool’s customer list and exclusive advertising on the Barstool platform over the term of the agreement.

The initial term of the commercial agreement was ten years and, unless earlier terminated and subject to certain exceptions, would have automatically renewed for three additional ten-year terms (a total of 40 years assuming all renewals were exercised).

As of December 31, 2022 and 2021, we had an amortizing intangible asset pertaining to the customer list of $ 0.1 million and $ 0.8 million, respectively.

As of December 31, 2022 and 2021, we had a prepaid expense pertaining to the advertising in the amount of $ 14.2 million and $ 15.4 million, respectively, of which $ 13.0 million and $ 14.2 million was classified as long-term, respectively.

The long-term portion of the prepaid advertising expense is included in “Other assets” within our Consolidated Balance Sheets.

As of December 31, 2022 and 2021, our investment in Barstool was $ 160.9 million and $ 162.5 million, respectively.

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

Prior to acquisition of the remaining Barstool shares (which occurred on February 17, 2023) as described below, the Company determined that Barstool qualified as a VIE.

However, the Company determined that it did not qualify as the primary beneficiary of Barstool either at the commencement date of its investment or for subsequent periods, primarily as a result of the Company not having the power to direct the activities of the VIE that most significantly affect Barstool’s economic performance.

Therefore, the Company did not consolidate the financial position of Barstool as of December 31, 2022 and 2021, nor the results of operations for the years ended December 31, 2022, 2021, and 2020.

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 (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.

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

Due to the timing of the acquisition of the remaining 64 % interest and its proximity to the date of this report, the preliminary purchase price

allocation has not been completed as the Company is currently in the process of determining the purchase price allocation to tangible and identifiable intangible assets acquired and liabilities assumed.

In February 2020, we closed on our investment in 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.

The purchase price consisted of $ 135.0 million in cash and $ 23.1 million in shares of a new class of non-voting convertible preferred stock of the Company, in which we issued 883 shares of Series D Preferred Stock, par value $ 0.01 (the “Series D Preferred Stock”), to certain individual stockholders affiliated with Barstool.

With respect to the remaining Barstool shares, we had immediately exercisable call rights and the existing Barstool stockholders had put rights, exercisable beginning three years after closing.

Pursuant to the Barstool SPA, on August 11, 2023, all remaining outstanding shares of Series D Preferred Stock were converted to common stock.

See Note 15, “Stockholders’ Equity” for further information.

Prior to the acquisition of the remaining Barstool shares (which occurred on February 17, 2023 as discussed in Note 6, “Acquisitions and Dispositions” ), the Company determined that it did not qualify as the primary beneficiary of Barstool either at the commencement date of its investment or for subsequent periods prior to the acquisition, primarily as a result of the Company not having the power to direct the activities of the VIE that most significantly affect Barstool’s performance.

Therefore, the Company did not consolidate the financial position nor the results of operations of Barstool and we recorded our proportionate share of Barstool’s net income or loss one quarter in arrears.

As of December 31, 2022, our investment in Barstool was $ 160.9 million.

Kansas Joint Venture

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Net income $ 65.2 $ 62.9 $ 60.8

Net income attributable to PENN Entertainment $ 31.5 $ 30.4 $ 14.4

Net income attributable to PENN Entertainment, Inc.

$ 32.6 $ 31.5 $ 30.4

Texas and New Jersey Joint Ventures

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In conjunction with the acquisition, we recorded a gain of $ 29.9 million on our equity method investment, which is included in “Other” within our Consolidated Statements of Operations.

See Note 6, “Acquisitions and Dispositions” for further information.

During the first quarter of 2020, we recorded an other-than-temporary impairment on our investment in the joint venture of $ 4.6 million, which is included in “Impairment losses” within our Consolidated Statements of Operations.

No further impairment loss was recorded for the years ended December 31, 2021 and 2020.

Prior to the August 1, 2021 acquisition of the remaining 50 % interest, the Company determined that our Texas joint venture did not qualify as a VIE.

Using the guidance for entities that are not VIEs, the Company determined that it did not have a controlling financial interest in the joint venture, primarily as it did not have the ability to direct the activities of the joint venture that most significantly impacted the joint venture’s economic performance without the input of Sam Houston.

Therefore, the Company did not consolidate the financial position of our Texas joint venture as of December 31, 2020, nor the results of operations for the period of January 1, 2021 through July 31, 2021 or for the year ended December 31, 2020.

Therefore, the Company did not consolidate the results of operations of our Texas joint venture for the period of January 1, 2021 through July 31, 2021.

The Company has a 50 % interest in a joint venture with Greenwood, which owns and operates Freehold Raceway, in Freehold, New Jersey.

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$ 288.7 $ 329.1 $ 314.3

(1) Of such amounts, $ 175.6 million, $ 183.4 million, and $ 156.1 million, respectively, pertained to real estate assets subject to our Master Leases.

Hurricane Laura

In August 2020, Hurricane Laura made landfall in Lake Charles, Louisiana, which caused significant damage to our L’Auberge Lake Charles property.

During the year ended December 31, 2021, we wrote off property and equipment with a net book value of $ 23.2 million, of which $ 2.1 million and $ 21.1 million had been included in Property and equipment – Not subject to Master Leases, and Property and equipment – Subject to Master Leases, respectively.

During the year ended December 31, 2020, we recorded $ 7.3 million of impairment on the property and equipment associated with Tropicana, relating to the operating assets, which is included in “Impairment losses” within our Consolidated Statements of Operations.

The charge was the result of an impairment assessment performed after reviewing the projected results of this property over the remaining lease term contained within the Tropicana Lease.

There were no impairment charges recorded to property and equipment during the years ended December 31, 2022 and 2021.

(1) As of a result of the lease modification that occurred on January 1, 2023, we derecognized $ 1.1 billion of “Property and equipment, net” associated with building assets within our Consolidated Balance Sheets, with an offset to “Gain on REIT transaction, net” within our Consolidated Statements of Operations.

Refer to Note 12, “Leases” for more information related to the January 1, 2023 lease modification.

(2) During the years ended December 31, 2023, 2022, and 2021, we recorded depreciation expense of $ 112.4 million, $ 175.6 million, and $ 183.4 million, related to real estate assets subject to our Master Leases.

Note 9—Goodwill and Other Intangible Assets

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Goodwill, net $ 162.1 $ 175.6 $ 200.2 $ 560.6 $ 1,724.0 $ — $ 2,822.5

Goodwill acquired during year 9.2 — — — 1,699.0 — 1,708.2

Effect of foreign currency exchange rates — — — — ( 97.1 ) — ( 97.1 )

Impairment losses during year ( 37.4 ) — — — — — ( 37.4 )

— — — — 1.5 — 1.5

Balance as of December 31, 2022

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Goodwill, net $ 124.7 $ 175.6 $ 200.2 $ 560.6 $ 1,628.4 $ — $ 2,689.5

Goodwill acquired during year — — — — 231.9 — 231.9

Goodwill disposed of during the year — — — — ( 231.9 ) — ( 231.9 )

Effect of foreign currency exchange rates — — — — 35.6 — 35.6

Impairment losses during year ( 30.0 ) — — — — — ( 30.0 )

— — — — 1.5 — 1.5

Balance as of December 31, 2023

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(1) Amount relates to theScore purchase price measurement period adjustment.

During the year ended December 31, 2023, in connection with the Barstool SPA, we recorded a pre-tax loss on disposal of $ 923.2 million, inclusive of a goodwill write-off of $ 231.9 million within our Interactive segment.

See Note 6, “Acquisitions and Dispositions.”

2023 Annual Assessment for Impairment

As a result of our 2023 annual assessment for impairment as of October 1, 2023, we recognized impairments on our goodwill and gaming licenses of $ 30.0 million and $ 100.6 million, respectively.

The impairment of goodwill was specific to our Hollywood Casino 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 estimated fair value of the reporting unit was determined through a combination of a discounted cash flow model and a market-based approach, which utilized Level 3 inputs.

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

(ii) Hollywood Casino at PENN National Race Course (“PNRC”), which 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, which was largely due to increased supply in the region.

The estimated fair values of the gaming licenses were determined by using a discounted cash flow model, which utilized Level 3 inputs.

The annual assessment for impairment did not result in any impairment charges to trademarks.

The estimated fair values of trademarks were determined by using discounted cash flow models, which utilized Level 3 inputs.

The total 2023 goodwill and gaming license impairment charges of $ 30.0 million and $ 100.6 million, respectively, pertained to our Northeast Segment.

2022 Annual and Interim Assessment for Impairment

During the third quarter of 2022, we identified an indicator of impairment on goodwill and other intangible assets at the Hollywood Casino at Greektown reporting unit as the majority of the hotel was out of service for longer than anticipated during renovations caused by water damage.

During the third quarter of 2022, we identified an indicator of impairment on goodwill and other intangible assets at the Greektown reporting unit as the majority of the hotel was out of service for longer than anticipated during renovations caused by water damage.

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

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As a result of our 2022 annual assessment for impairment as of October 1, 2022, we recognized a $ 13.6 million impairment charge on our gaming licenses.

The impairment of gaming licenses is specific to Hollywood Casino at PENN National Race Course (“PNRC”) and 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.

The impairment of gaming licenses is specific to PNRC and 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.

The estimated fair values of our gaming licenses were determined by using discounted cash flow models, which utilized Level 3 inputs.

The annual assessment for impairment did not result in any impairment charges to goodwill or trademarks.

The estimated fair value of reporting units were determined through a combination of discounted cash flow models and market-based approaches, which utilized Level 3 inputs.

The estimated fair value of reporting units was determined through a combination of discounted cash flow models and market-based approaches, which utilized Level 3 inputs.

The estimated fair values of trademarks were determined by using discounted cash flow models, which utilized Level 3 inputs.

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The estimated fair values of our gaming licenses and trademarks were determined by using discounted cash flow models, which utilized Level 3 inputs.

2020 Annual and Interim Assessment for Impairment

During the first quarter of 2020, we identified an indicator of impairment on our goodwill and other intangible assets due to the COVID-19 pandemic.

As a result of the COVID-19 pandemic, we revised our cash flow projections to reflect the current economic environment, including the uncertainty surrounding the nature, timing and extent of reopening our gaming properties.

As a result of the interim assessment for impairment, during the first quarter of 2020, we recognized impairments on our goodwill, gaming licenses and trademarks of $ 113.0 million, $ 437.0 million and $ 61.5 million, respectively.

The estimated fair value of reporting units were determined through a combination of discounted cash flow models and market-based approaches, which utilized Level 3 inputs.

The estimated fair values of our gaming licenses and trademarks were determined by using discounted cash flow models, which utilized Level 3 inputs.

The goodwill impairments pertained to our Northeast, South and Midwest segments, in the amounts of $ 43.5 million, $ 9.0 million and $ 60.5 million, respectively.

The gaming license impairments pertained to our Northeast, South and Midwest segments in the amounts of $ 177.0 million, $ 166.0 million and $ 94.0 million, respectively.

The trademark impairments pertained to our Northeast, South, Midwest and West segments, in the amounts of $ 17.0 million, $ 17.0 million, $ 15.0 million and $ 12.5 million, respectively.

Upon reopening of our gaming facilities and throughout the fourth quarter of 2020 we undertook various initiatives to mitigate the impact of regulatory restrictions imposed as a result of the COVID-19 pandemic.

We completed our annual assessment for impairment as of October 1, 2020, which did not result in any impairment charges to goodwill, gaming licenses or trademarks.

The estimated fair value of reporting units were determined through a combination of discounted cash flow models and market-based approaches, which utilized Level 3 inputs.

The estimated fair values of our gaming licenses and trademarks were determined by using discounted cash flow models, which utilized Level 3 inputs.

Carrying Values of Goodwill and Other Intangible Assets

As of October 1, 2022, the date of the most recent annual impairment test, seven reporting units had negative carrying amounts.

As of October 1, 2023, the date of the most recent annual impairment test, four reporting units had negative carrying amounts.

The amount of goodwill at these reporting units was as follows (in millions):

Northeast segment

Hollywood Casino Toledo $ 5.8

Plainridge Park Casino $ 6.3

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Ameristar Vicksburg $ 19.5

Boomtown New Orleans $ 5.2

Hollywood Casino Gulf Coast $ 2.7

Cactus Petes and Horseshu $ 10.2

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Total other intangible assets, net $ 1,869.4 $ ( 251.2 ) $ 1,618.2 $ 1,932.2 $ ( 193.3 ) $ 1,738.9

During the year ended December 31, 2023, in connection with the Barstool SPA, we recorded a pre-tax loss on disposal of $ 923.2 million, inclusive of trademarks and other intangible assets write-offs of $ 482.9 million in our Interactive segment.

See Note 6, “Acquisitions and Dispositions.”

Amortization expense related to our amortizing intangible assets was $ 58.8 million, $ 56.7 million, and $ 19.6 million for the years ended December 31, 2023, 2022, and 2021, respectively.

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Accrued expenses and other current liabilities $ 1,021.9 $ 804.7

(1) Amounts include the obligation associated with its my choice program and the current portion of advance payments on goods and services yet to be provided and for unpaid wagers, which are discussed in Note 2, “Significant Accounting Policies.” Additionally, amounts as of December 31, 2022 and 2021 include $ 51.4 million and $ 47.6 million, respectively, pertaining to the Company’s accrued progressive jackpot liability.

(2) Amounts as of December 31, 2022 and 2021 include $ 70.8 million and $ 82.1 million, respectively, pertaining to the Company’s non-qualified deferred compensation plan that covers management and other highly-compensated employees and include $ 60.2 million and $ 52.1 million, respectively, pertaining to the Company’s advance deposits.

(1) Amounts include the obligation associated with the PENN Play TM program which are discussed in Note 2, “Significant Accounting Policies.” Additionally, amounts as of December 31, 2023 and 2022 include $ 60.8 million and $ 51.4 million, respectively, pertaining to the Company’s accrued progressive jackpot liability.

(2) Amounts as December 31, 2023 and 2022 include $ 87.7 million and $ 70.8 million, respectively, pertaining to the Company’s non-qualified deferred compensation plan that covers management.

Amounts as December 31, 2023 and 2022 also include the current portion of advance payments on goods and services yet to be provided, including deposits for hotel rooms, of $ 127.0 million and $ 63.4 million, respectively, and $ 59.6 million and $ 54.0 million, respectively, pertaining to unpaid wagers.

See Note 2, “Significant Accounting Policies” for further discussion related to advance payments on goods and services yet to be provided and unpaid wagers.

Note 11—Long-term Debt

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Amended Term Loan B Facility due 2029 985.0 995.0

Term Loan A Facility due 2023 — 583.8

Term Loan B-1 Facility due 2025 — 979.9

5.625 % Notes due 2027

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With the exception of extending the maturity date, the Incremental Joinder did not impact the Revolving Facility.

On April 14, 2020, the Company entered into a second amendment to its Credit Agreement with its various lenders to provide for certain modifications to required financial covenants and interest rates during, and subsequent to, a covenant relief period, which concluded on May 7, 2021.

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

The Second Amended and Restated Credit Agreement provides for a

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

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

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

The interest rates per annum applicable to loans under the Amended Credit Facilities are, at the Company’s option, equal to either an adjusted secured overnight financing rate (“Term SOFR”) or a base rate, plus an applicable margin.

The applicable margin for each of the Amended Revolving Credit Facility and the Amended Term Loan A Facility was initially 1.75 % for Term SOFR loans and 0.75 % for base rate loans until the Company provided financial reports for the first full fiscal quarter following closing and, thereafter, ranges from 2.25 % to 1.50 % per annum for Term SOFR loans and 1.25 % to 0.50 % per annum for base rate loans, in each case depending on the Company’s total net leverage ratio (as defined within the Second Amended and Restated Credit Agreement).

The applicable

margin for each of the Amended Revolving Credit Facility and the Amended Term Loan A Facility was initially 1.75 % for Term SOFR loans and 0.75 % for base rate loans until the Company provided financial reports for the first full fiscal quarter following closing and, thereafter, ranges from 2.25 % to 1.50 % per annum for Term SOFR loans and 1.25 % to 0.50 % per annum for base rate loans, in each case depending on the Company’s total net leverage ratio (as defined within the Second Amended and Restated Credit Agreement).

The applicable margin for the Amended Term Loan B Facility is 2.75 % per annum for Term SOFR loans and 1.75 % per annum for base rate loans.

The Amended Term Loan B Facility is subject to a Term SOFR “floor” of 0.50 % per annum and a base rate “floor” of 1.50 % per annum.

In addition, the Company pays a commitment fee on the unused portion of the commitments under the Amended Revolving Credit Facility at a rate that was initially 0.25 % per annum, until the Company provided financial reports for the first full fiscal quarter following closing, and thereafter, ranges from 0.35 % to 0.20 % per annum, depending on the Company’s total net leverage ratio.

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

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a maximum total net leverage ratio (as defined within the Second Amended and Restated Credit Agreement) of 4.50 to 1.00, which is subject to a step up to 5.00 to 1.00 in the case of certain significant acquisitions, and a minimum interest coverage ratio (as defined within the Second Amended and Restated Credit Agreement) of 2.00 to 1.00.

The Amended Credit Facilities also contain certain customary affirmative covenants and events of default, including the occurrence of a change of control (as defined in the documents governing the Second Amended and Restated Credit Agreement), termination and certain defaults under the PENN Master Lease and the Pinnacle Master Lease (both of which are defined in Note 12, “Leases” ).

In connection with the repayment of the previous Senior Secured Credit Facilities, during the year ended December 31, 2022 the Company recorded a $ 10.4 million loss on the early extinguishment of debt and additionally recorded $ 1.3 million in refinancing costs, which is included in “General and administrative” within our Consolidated Statements of Operations.

In addition, we recorded $ 5.0 million of original issue discount related to the Amended Term Loan B Facility which will be amortized to interest expense over the life of the Amended Term Loan B Facility.

As of December 31, 2022, the Company had conditional obligations under letters of credit issued pursuant to the Amended Credit Facilities with face amounts aggregating to $ 22.5 million resulting in $ 977.5 million of available borrowing capacity under the Amended Revolving Credit Facility.

As of December 31, 2021, the Company had conditional obligations under letters of credit issued pursuant to the Senior Security Credit Facilities with face amounts aggregating to $ 26.0 million resulting in $ 674.0 million of available borrowing capacity under the Revolving Facility.

The Amended Credit Facilities also contain certain customary affirmative covenants and events of default, including the occurrence of a change of control (as defined in the documents governing the Second Amended and Restated Credit Agreement), termination, and certain defaults under the Master Leases (which are defined in Note 12, “Leases” ).

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 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.

In connection with the repayment of the previous Senior Secured Credit Facilities, the Company recorded a $ 10.4 million loss on the early extinguishment of debt for the year ended December 31, 2022.

Additionally, we recorded $ 1.3 million in refinancing costs, which is included in “General and administrative” within our Consolidated Statements of Operations.

In addition, we recorded $ 5.0 million of original issue discount related to the Amended Term Loan B Facility which is amortized to interest expense over the life of the Amended Term Loan B Facility.

As of December 31, 2023 and 2022, the Company had conditional obligations under letters of credit issued pursuant to the Amended Credit Facilities with face amounts aggregating to $ 21.7 million and $ 22.5 million, respectively, resulting in $ 978.3 million and $ 977.5 million of available borrowing capacity under the Amended Revolving Credit Facility, respectively.

5.625 % Senior Unsecured Notes

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The 5.625 % Notes are not guaranteed by any of the Company’s subsidiaries except in the event that the Company, in the future, issues certain subsidiary-guaranteed debt securities.

The Company may redeem the 5.625 % Notes at any time on or after January 15, 2022, at the declining redemption premiums set forth in the indenture governing the 5.625 % Notes.

The Company may redeem the 5.625 % Notes at any time, beginning on or after January 15, 2022, at the declining redemption premiums set forth in the indenture governing the 5.625 % Notes.

4.125 % Senior Unsecured Notes

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

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

The 4.125 % Notes were issued at par and interest is payable

semi-annually on January 1st and July 1st of each year.

The 4.125 % Notes are not guaranteed by any of the Company’s subsidiaries except in the event that the Company, in the future, issues certain subsidiary-guaranteed debt securities.

The Company may redeem the 4.125 % Notes at any time on or after July 1, 2024, at the declining redemption premiums set forth in

the indenture governing the 4.125 % Notes, and, prior to July 1, 2024, at a “make-whole” redemption premium set forth in the indenture governing the 4.125 % Notes.

The Company may redeem the 4.125 % Notes at any time on or after July 1, 2024, at the declining redemption premiums set forth in the indenture governing the 4.125 % Notes, and, prior to July 1, 2024, at a “make-whole” redemption premium set forth in the indenture governing the 4.125 % Notes.

2.75 % Unsecured Convertible Notes

In May 2020, the Company completed a public offering of $ 330.5 million aggregate principal amount of 2.75 % unsecured convertible notes that mature, unless earlier converted, redeemed or repurchased, on May 15, 2026 at a price of par.

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

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

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In connection with certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their Convertible Notes in connection with such corporate events or during the relevant redemption period for such Convertible Notes.

As of December 31, 2022 and 2021, no Convertible Notes have been converted into the Company’s common stock.

As of December 31, 2023 and 2022, no Convertible Notes have been redeemed or converted into the Company’s common stock.

The Convertible Notes contain a cash conversion feature, and as a result, the Company separated it into liability and equity components.

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(in millions) 2023 2022

Liability component:

Principal $ 330.5 $ 330.5

Unamortized debt discount — ( 71.7 )

Unamortized debt issuance costs ( 4.4 ) ( 6.2 )

Net carrying amount $ 326.1 $ 324.3

Carrying amount of equity component $ — $ 88.2

Interest expense, net

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Convertible Notes interest expense $ 10.8 $ 10.8 $ 22.7

Subsequent to the adoption of ASU 2020-06, the debt issuance costs attributable to the liability component continues to be amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 3.329 %.

Debt issuance costs are amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 3.329 %.

The remaining term of the Convertible Notes was 2.4 years as of December 31, 2023.

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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 Master Leases (which are defined in Note 12, “Leases” ), 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.

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

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

The amount included in interest expense related to this obligation was $ 36.1 million, $ 27.6 million, and $ 17.9 million for the years ended December 31, 2023, 2022, and 2021,

respectively.

The balance of the financing obligation is $ 154.1 million and $ 118.0 million as of December 31, 2023 and 2022, respectively.

Ohio Relocation Fees

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$ 7.5 million upon the opening of the facilities and eighteen semi-annual payments of $ 4.8 million beginning one year after the commencement of operations.

This obligation is accreted to interest expense at an effective yield of 5.0 %.

These obligations are accreted to interest expense at an effective yield of 5.0 %.

As of December 31, 2023, the remaining balance of the relocation obligation of $ 9.4 million is included in “Current maturities of long-term debt” within our Consolidated Balance Sheets.

As of December 31, 2023 and 2022, other long-term obligations included $ 10.0 million and $ 10.7 million, respectively, related to the repayment obligation of a hotel and event center located less than a mile away from Hollywood Casino Lawrenceburg, which was constructed by the City of Lawrenceburg Department of Redevelopment.

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The components contained within the Master Leases are accounted for as either (i) operating leases, (ii) finance leases, or (iii) financing obligations.

Changes to future lease payments under the Master Leases (i.e., when future escalators become known or future variable rent resets occur), which are discussed below, require the Company to either (i) increase both the ROU assets and corresponding lease liabilities with respect to operating and finance leases or (ii) record the incremental variable payment associated with the financing obligation to interest expense.

In addition, monthly rent associated with Hollywood Casino Columbus (“Columbus”) and monthly rent in excess of the Hollywood Casino Toledo (“Toledo”) rent floor, which are discussed below, are considered contingent rent.

PENN Master Lease

Pursuant to the triple net master lease with GLPI (the “PENN Master Lease”), which became effective November 1, 2013, the Company leases real estate assets associated with 19 of the gaming facilities used in its operations.

The PENN Master Lease has an initial term of 15 years with four subsequent five-year renewal periods on the same terms and conditions, exercisable at the Company’s option.

The Company has determined that the lease term is 35 years.

The payment structure under the PENN Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2 %, depending on the Adjusted Revenue to Rent Ratio (as defined in the PENN Master Lease) of 1.8 :1, and a component that is based on performance, which is prospectively adjusted (i) every five years by an amount equal to 4 % of the average change in net revenues of all properties under the PENN Master Lease (other than Columbus and Toledo) compared to a contractual baseline during the preceding five years (“PENN Percentage Rent”) and (ii) monthly by an amount equal to 20 % of the net revenues of Columbus and Toledo in excess of a contractual baseline and subject to a rent floor specific to Toledo (see below).

Changes to future lease payments that are not fixed within the Master Leases (i.e., when future escalators become known or future variable rent resets occur), which are discussed below, require the Company to either (i) increase both the ROU assets and corresponding lease liabilities with respect to operating and finance leases or (ii) record the incremental variable payment associated with the financing obligation to interest expense.

In addition, prior to the effective date of the AR PENN Master Lease (as defined and as discussed below), monthly rent associated with Hollywood Casino Columbus (“Columbus”) and monthly rent in excess of the Hollywood Casino Toledo (“Toledo”) rent floor as contained within the PENN Master Lease (as defined and discussed below), were considered contingent rent.

AR PENN Master Lease

Prior to the effective date of the AR PENN Master Lease (as defined and discussed below), the Company leased real estate assets associated with 19 of the gaming facilities used in its operations via a triple net master lease with GLPI (the “PENN Master Lease”), which became effective November 1, 2013.

The PENN Master Lease had an initial term of 15 years with four subsequent five-year renewal periods on the same terms and conditions, exercisable at the Company’s option.

On February 21, 2023, 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”), Columbus, 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.

The AR PENN Master Lease along with the 2023 Master Lease (as defined and discussed below) are cross-defaulted, cross-collateralized, and coterminous, and subject to a parent guarantee.

The payment structure under the AR PENN Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2 %, depending on the Adjusted Revenue to Rent Ratio (as defined in the AR PENN Master Lease) of 1.8 :1, and a component that is based on performance, which is prospectively adjusted every five years by an amount equal to 4 % of the average change in net revenues of all properties associated with the AR PENN Master Lease compared to a contractual baseline during the preceding five years (“PENN Percentage Rent”).

As a result of the annual escalator, effective as of November 1, 2023 for the lease year ended October 31, 2023, the fixed component of rent increased by $ 4.2 million, and additional ROU assets and corresponding lease liabilities of $ 28.7 million were recognized associated with the operating lease components.

As a result of the annual escalator, effective as of November 1, 2022 for the lease year ended October 31, 2022, the fixed component of rent increased by $ 5.7 million, additional ROU assets and corresponding lease liabilities of $ 3.6 million were recognized associated with the operating lease components, and additional ROU assets and corresponding lease liabilities of $ 44.8 million were recognized associated with the finance lease components.

As a result of the annual escalator, effective as of November 1, 2021 for the lease year ended October 31, 2021, the fixed component of rent increased by $ 5.6 million, additional ROU assets and corresponding lease liabilities of $ 34.2 million were recognized associated with the operating lease components, and additional ROU assets and corresponding lease liabilities of $ 3.1 million were recognized associated with the finance lease components.

We did not incur an annual escalator on November 1, 2020 for the lease year ended October 31,

The next annual escalator test date and the next PENN Percentage Rent reset test date are both scheduled to occur effective November 1, 2023.

Monthly rent associated with Columbus and monthly rent in excess of the Toledo rent floor are variable and considered contingent rent.

Expense related to operating lease components associated with Columbus and Toledo are included in “General and administrative” within our Consolidated Statements of Operations and the variable expense related to financing obligations and finance lease components are included in “Interest expense, net” within our Consolidated Statements of Operations.

The next annual escalator test date is scheduled to occur effective November 1, 2024.

The November 1, 2023 PENN Percentage Rent reset resulted in an annual rent reduction of $ 4.4 million, which will be in effect until the next PENN Percentage Rent reset, scheduled to occur on November 1, 2028.

Upon reset of the PENN Percentage Rent, effective November 1, 2023, we recognized additional ROU assets and corresponding lease liabilities of $ 117.4 million.

We concluded the execution of the AR PENN Master Lease constituted a modification event under ASC 842, which required us to reassess the classifications of the lease components and remeasure the associated lease liabilities.

We concluded the lease term should end at the current lease expiration date of October 31, 2033 and the optional three renewal terms of five years each were not included in the lease term.

The Company continues to evolve from a leading retail gaming operator to a leading provider of integrated entertainment, sports content, and casino gaming experiences.

The execution of our omni-channel strategy continues to diversify our earning streams and precluded us from concluding all renewal periods were reasonably assured to be exercised.

As a result of the January 1, 2023 lease modification event, we concluded (i) the land components contained within the AR PENN Master Lease, which were previously primarily classified as finance leases under the PENN Master Lease, to be classified as operating leases, and (ii) control of the building assets have transferred from the Company to the lessor allowing for sale recognition in accordance with ASC 842 which results in the building components to be classified as operating leases.

Prior to the January 1, 2023 lease modification event, control of substantially all of the building components were concluded not to have passed from the Company to the lessor in accordance with ASC 842 which required recognition of a financing obligation in accordance with ASC 470 and continued recognition of the underlying asset in “Property and equipment, net” within our Consolidated Balance Sheets.

In conjunction with the sale recognition on the building components, we (i) derecognized $ 1.6 billion of financing obligations within our Consolidated Balance Sheets, offset to “Gain on REIT transaction, net” within our Statements of Operations;

and (ii) derecognized $ 1.1 billion of “Property and equipment, net” associated with the building assets within our Consolidated Balance Sheets, offset to “Gain on REIT transaction, net” within our Consolidated Statements of Operations.

As a result of our measurement of the associated operating lease liabilities, we recognized a reduction of the ROU assets and corresponding lease liabilities of $ 1.2 billion within our Consolidated Balance Sheets.

Lease components classified as an operating lease are recorded to “General and administrative” within our Consolidated Statements of Operations.

Prior to the effective date of the AR PENN Master Lease, monthly rent associated with Columbus and monthly rent in excess of the Toledo rent floor were variable and considered contingent rent.

Expense related to operating lease components associated with Columbus and Toledo were included in “General and administrative” within our Consolidated Statements of Operations and the variable expense related to financing obligations and finance lease components were included in “Interest expense, net” within our Consolidated Statements of Operations.

Total monthly variable expenses were as follows:

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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 PNRC 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.

The ninth amendment restated the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at a leased property, established a “floor” with respect to the PNRC Net Revenue amount used in the calculation of the annual rent escalator and PENN Percentage Rent, and modified the rent calculations upon a lease termination event as defined in the 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 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, were then 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, were then classified as operating leases.

As a result of our measurement of the associated lease liabilities, we recognized additional 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 October 9, 2022, 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”), Columbus, 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);

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

Subsequent to year end, the Amended and Restated PENN Master Lease was executed on February 21, 2023 with an effective date of January 1, 2023.

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 ROU assets and corresponding lease liabilities on our Consolidated Balance Sheets.

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

2023 Master Lease

As part of the Term Sheet and concurrent with the execution of the Amended and Restated PENN Master Lease described above, the Company and GLPI agreed to enter 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, Meadows, and Perryville, and a master development agreement (the “Master Development Agreement”).

Concurrent with the execution of the AR PENN Master Lease, the Company and GLPI entered into a new triple net master lease (the “2023 Master Lease”), effective January 1, 2023, specific to the property 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 will be cross-defaulted, cross-collateralized, and coterminous with the Amended and Restated PENN Master Lease, and subject to a parent guarantee.

We are currently assessing, measuring, and quantifying the impact of the 2023 Master Lease to the Consolidated Financial Statements, which may be material.

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 AR PENN Master Lease and the 2023 Master Lease are coterminous, as such consistent with the AR PENN Master Lease, we concluded the 2023 Master Lease term ends at the current lease expiration date of October 31, 2033 and does not include any of the remaining three renewal terms of five years each.

(See above lease term discussion for AR PENN Master Lease.)

As a result of our lease classification assessment, we concluded all land and building components contained within the 2023 Master Lease to be operating leases.

As a result of our measurement of the operating lease liabilities, we recognized ROU assets and corresponding lease liabilities of $ 1.8 billion.

Additionally, in connection with the termination of the prior Meadows Lease and Perryville Lease (both defined and discussed below), we (i) derecognized $ 171.9 million in ROU assets within our Consolidated Balance Sheets;

(ii) derecognized $ 165.5 million in lease liabilities within our Consolidated Balance Sheets;

and (iii) recognized a $ 6.5 million loss on the termination which is recorded in “Gain on REIT transaction, net” within our Consolidated Statements of Operations.

Lease components classified as an operating lease are recorded to “General and administrative” within our Consolidated Statements of Operations.

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 $ 225.0 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.

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 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 continue to increase 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.

Pinnacle Master Lease

In connection with the acquisition of Pinnacle on October 15, 2018, we assumed a triple net master lease with GLPI (the “Pinnacle Master Lease”), originally effective April 28, 2016, pursuant to which the Company leases real estate assets associated with 12 of the gaming facilities used in its operations.

In connection with the acquisition of Pinnacle on October 15, 2018, the Company assumed a triple net master lease with GLPI (the “Pinnacle Master Lease”), originally effective April 28, 2016, pursuant to which the Company leases real estate assets associated with 12 of the gaming facilities used in its operations.

Upon assumption of the Pinnacle Master Lease, as amended, there were 7.5 years remaining of the initial ten-year term, with five subsequent, five-year renewal periods, on the same terms and conditions, exercisable at the Company’s option.

The Company has determined that the lease term is 32.5 years.

The payment structure under the Pinnacle Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2 %, depending on the Adjusted Revenue to Rent Ratio (as defined in the Pinnacle Master Lease) of 1.8 :1, and a component that is based on the performance of the properties, which is prospectively adjusted every two years by an amount equal to 4 % of the average change in net revenues compared to a contractual baseline during the preceding two years (“Pinnacle Percentage Rent”).

As a result of the annual escalator, effective as of May 1, 2022, for the lease year ended April 30, 2022, the fixed component of rent increased by $ 4.6 million, and additional ROU assets and corresponding lease liabilities of $ 33.2 million were recognized associated with the finance lease components.

As a result of the annual escalator, effective as of May 1, 2021, for the lease year ended April 30, 2021, the fixed component of rent increased by $ 4.5 million, and additional ROU assets and corresponding lease liabilities of $ 17.2 million were recognized associated with the operating lease components.

We did not incur an annual escalator on May 1, 2020 for the lease year ended April 30, 2020.

The payment structure under the Pinnacle Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2 %, depending on the Adjusted Revenue to Rent Ratio (as defined in the Pinnacle Master Lease) of 1.8 :1, and a component that is based on performance of the properties, which is prospectively adjusted every two years by an amount equal to 4 % of the average change in net revenues compared to a contractual baseline during the preceding two years (“Pinnacle Percentage Rent”).

As a result of the annual escalator, effective May 1, 2023, for the lease year ended April 30, 2023, the fixed component of rent increased by $ 4.7 million, and an additional ROU asset and corresponding lease liability of $ 33.3 million were recognized associated with the finance lease components.

As a result of the annual escalator, effective as of May 1, 2022, for the lease year ended April 30, 2022, the fixed component of rent increased by $ 4.6 million, and an additional ROU asset and corresponding lease liability of $ 33.2 million were recognized associated with the finance lease components.

As a result of the annual escalator, effective as of May 1, 2021, for the lease year ended April 30, 2021, the fixed component of rent increased by $ 4.5 million, and an additional ROU asset and corresponding lease liability of $ 17.2 million were recognized associated with the operating lease components.

The next annual escalator test date is scheduled to occur on May 1, 2024.

The May 1, 2022 Pinnacle Percentage Rent reset resulted in an annual rent increase of $ 1.9 million, which will be in effect until the next Pinnacle Percentage Rent reset, scheduled to occur on May 1, 2024.

Upon reset of the Pinnacle Percentage Rent, effective May 1, 2022, we recognized additional finance lease ROU assets and corresponding lease liabilities of $ 26.1 million.

Effective May 1, 2020, the Pinnacle Percentage Rent resulted in an annual rent reduction of $ 5.0 million, and we recognized additional operating lease ROU assets and corresponding lease liabilities of $ 14.9 million.

Upon reset of the Pinnacle Percentage Rent, effective May 1, 2022, we recognized an additional finance lease ROU asset and corresponding lease liability of $ 26.1 million.

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 “2022 Lease Modification”).

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

Lease components classified as a finance lease are recorded to “Depreciation and amortization” and “Interest expense, net” within our Consolidated Statements of Operations.

The Company recognizes interest expense on the lease payments related to the financing obligation under the effective yield method.

Other Triple Net Leases with REIT Landlords

Morgantown Lease

On October 1, 2020, the Company entered into a triple net lease with a subsidiary of GLPI for the land underlying our property in Morgantown, Pennsylvania (“Morgantown Lease”) in exchange for $ 30.0 million in rent credits to be utilized to pay rent under the Master Leases, Meadows Lease, and the Morgantown Lease, as discussed in Note 6, “Acquisitions and Dispositions.”

On October 1, 2020, the Company entered into an individual triple net lease with a subsidiary of GLPI for the land underlying our development project in Morgantown, Pennsylvania (“Morgantown Lease”) in exchange for $ 30.0 million in rent credits which were utilized to pay rent under the Master Leases, Meadows Lease (as defined and discussed below), and the Morgantown Lease during the year ended December 31, 2020.

The initial term of the Morgantown Lease is 20 years with six subsequent, five-year renewal periods, exercisable at the Company’s option.

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All improvements made on the land, including the constructed building, will be owned by the Company while the lease is in effect, however, on the expiration or termination of the Morgantown Lease, ownership of all tenant improvements on the land will transfer to GLPI.

We determined the transaction to be a financing arrangement and upon execution of the Morgantown Lease, recorded a $ 30.0 million financing obligation which is included in “Long-term portion of financing obligations” within our Consolidated Balance Sheets.

Lease payments are included in “Interest expense, net” within our Consolidated Statements of Operations.

We concluded control of the land underlying the Morgantown facility was not passed from the Company to the lessor in accordance with ASC 842.

As such we recognized a financing obligation in accordance with ASC 470 and continue to recognize the underlying asset in “Property and equipment, net” within our Consolidated Balance Sheets.

The Company recognizes interest expense on the lease payments related to the financing obligation under the effective yield method.

Perryville Lease

In conjunction with the acquisition of the operations of Perryville on July 1, 2021, the Company entered into a triple net lease with GLPI for the real estate assets associated with the property (“Perryville Lease”) for initial annual rent of $ 7.8 million per year subject to escalation, as discussed in Note 6, “Acquisitions and Dispositions.”

The initial term of the Perryville Lease is 20 years with three subsequent, five-year renewal periods, exercisable at the Company’s option.

The building portion of the annual rent is subject to a fixed annual escalation of 1.50 % in each of the following three years , with subsequent annual escalations of either (i) 1.25 %, if the consumer price index increase is greater than 0.50 %, or (ii) zero , if the consumer price index increase is less than 0.50 %.

per year subject to escalation.

The initial term of the Perryville Lease was 20 years with three subsequent, five-year renewal periods, exercisable at the Company’s option.

The building portion of the annual rent was subject to a fixed annual escalation of 1.50 % in each of the following three years , with subsequent annual escalations of either (i) 1.25 %, if the consumer price index increase is greater than 0.50 %, or (ii) zero , if the consumer price index increase is less than 0.50 %.

We determined the transaction to be a finance lease arrangement and upon execution of the Perryville Lease, recorded a $ 102.9 million ROU asset and a corresponding lease liability.

The interest portion of lease payments is included in “Interest expense, net” and the depreciation of the ROU asset is included in “Depreciation and amortization”, both within our Consolidated Statements of Operations.

In conjunction with entering into the 2023 Master Lease as described above, the Perryville Lease was terminated effective January 1, 2023.

Operating Leases

In addition to the operating lease components contained within the Master Leases, the Company’s operating leases consist mainly of (i) individual triple net leases with GLPI for the real estate assets used in the operations of Tropicana (the “Tropicana Lease”), which was terminated on September 26, 2022, and Meadows (the “Meadows Lease”), (ii) individual triple net leases with VICI for the real estate assets used in the operations of Margaritaville Resort Casino (the “Margaritaville Lease”) and Hollywood Casino at Greektown (the “Greektown Lease” and collectively with the Master Leases operating lease components, the Meadows Lease, the Margaritaville Lease and the Tropicana Lease, the “Triple Net Operating Leases”), (iii) ground and levee leases to landlords which were not assumed by our REIT Landlords and remain an obligation of the Company, and (iv) building and equipment not subject to the Master Leases.

Certain of our lease agreements include rental payments based on a percentage of sales over specified contractual amounts, rental payments adjusted periodically for inflation, and rental payments based on usage.

The Company’s leases include options to extend the lease terms.

The Company’s operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Tropicana Lease

Prior to the closing of the sale of PENN’s outstanding equity interest in Tropicana on September 26, 2022, the Company leased the real estate assets used in the operations of Tropicana for nominal cash rent.

The term of the Tropicana Lease was for two years (subject to three one-year extensions at GLPI’s option) or until the real estate assets and the operations of the Tropicana were sold.

Upon execution of the Tropicana Lease, we recorded an operating lease ROU asset of $ 61.6 million, which was included in “Lease right-of-use assets” within the Consolidated Balance Sheets.

See Note 6, “Acquisitions and Dispositions ” for further details on the sale of PENN’s outstanding equity interest in Tropicana.

As discussed above, as a result of entering into the 2023 Master Lease, the Perryville Lease was terminated effective January 1, 2023.

Prior to the lease termination, the land and building components were classified as finance leases.

Lease components classified as a finance lease were recorded to “Depreciation and amortization” and “Interest expense, net” within our Consolidated Statements of Operations.

Meadows Lease

In connection with the acquisition of Pinnacle, we assumed the Meadows Lease, originally effective September 9, 2016.

In connection with the acquisition of Pinnacle, we assumed a triple net operating lease associated with the real estate assets at Meadows (“Meadows Lease”), originally effective September 9, 2016.

Upon assumption of the Meadows Lease, there were eight years remaining of the initial ten-year term, with three subsequent, five-year renewal options followed by one four-year renewal option on the same terms and conditions, exercisable at the Company’s option.

The payment structure under the Meadows Lease includes a fixed component (“Meadows Base Rent”), which is subject to an annual escalator of up to 5 % for the initial term or until the lease year in which Meadows Base Rent plus Meadows Percentage Rent (as defined below) is a total of $ 31.0 million, subject to certain adjustments, and up to 2 % thereafter, subject to an Adjusted Revenue to Rent Ratio (as defined in the Meadows Lease) of 2.0 :1.

The “Meadows Percentage Rent” is based on performance, which is prospectively adjusted for the next two-year period equal to 4.0 % of the average annual net revenues of the property during the trailing two-year period.

We did not incur an annual escalator on October 1, 2022, 2021 or 2020, for the lease years ended September 30, 2022, 2021 and 2020, respectively.

Effective October 1, 2022 and 2020, the Meadows Percentage Rent resulted in an annual rent reduction of $ 0.9 million and $ 2.1 million, respectively.

Upon reset of the Meadows Percentage Rent, effective October 1, 2022 and 2020, we recognized an additional operating lease ROU asset and corresponding lease liability of $ 15.4 million and $ 17.1 million, respectively.

On January 14, 2022, the second amendment to the Meadows Lease between the Company and GLPI became effective.

The second amendment restates the definition of “Net Revenue” to clarify the inclusion of online-based revenues derived when a patron is physically present at the facility.

This amendment did not result in a modification event under ASC 842.

In conjunction with entering into the 2023 Master Lease as described above, the Meadows Lease was terminated effective January 1, 2023.

The payment structure under the Meadows Lease included a fixed component (“Meadows Base Rent”), which was subject to an annual escalator of up to 5 % for the initial term or until the lease year in which Meadows Base Rent plus Meadows Percentage Rent (as defined below) was a total of $ 31.0 million, subject to certain adjustments, and up to 2 % thereafter, subject to an Adjusted Revenue to Rent Ratio (as defined in the Meadows Lease) of 2.0 :1.

The “Meadows Percentage Rent” was based on performance, which was prospectively adjusted for the next two-year period equal to 4.0 % of the average annual net revenues of the property during the trailing two-year period.

As discussed above, as a result of entering into the 2023 Master Lease, the Meadows Lease was terminated effective January 1, 2023.

Prior to the termination of the Meadows Lease, the land and building components were classified as operating leases.

Lease components classified as an operating lease were recorded to “General and administrative” within our Consolidated Statements of Operations.

Margaritaville Lease

On January 1, 2019, the Company entered into an individual triple net lease with VICI Properties Inc.

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

The Margaritaville Lease has an initial term of 15 years, with four subsequent five-year renewal options on the same terms and conditions, exercisable at the Company’s option.

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On February 1, 2023, the Margaritaville Lease annual escalator test resulted in an annual rent increase of $ 0.4 million and the recognition of an additional operating lease ROU asset and corresponding lease liability of $ 2.8 million.

We did not incur an annual escalator for the lease year ended January 31, 2021.

On February 1, 2022, the annual escalator test resulted in an annual rent increase of $ 0.4 million and the recognition of an additional operating lease ROU asset and corresponding lease liability of $ 2.9 million.

Subsequent to year end, on February 1, 2023, the Margaritaville Percentage Rent reset resulted in an annual rent increase of $ 2.3 million which will be in effect until the next Margaritaville Percentage Rent reset, scheduled to occur on February 1, 2025.

We did not incur an annual escalator for the lease year ended January 31, 2021.

On February 1, 2023, the Margaritaville Percentage Rent reset resulted in an annual rent increase of $ 2.3 million which will be in effect until the next Margaritaville Percentage Rent reset, scheduled to occur on February 1, 2025.

Upon reset of the Margaritaville Percentage Rent, effective February 1, 2023, we recognized an additional operating lease ROU asset and corresponding lease liability of $ 9.8 million.

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Upon reset of the Margaritaville Percentage Rent, effective February 1, 2021, we recognized an additional operating lease ROU asset and corresponding lease liability of $ 5.5 million.

The land and building components contained within the Margaritaville Lease are classified as operating leases.

Lease components classified as an operating lease are recorded to “General and administrative” within our Consolidated Statements of Operations.

Greektown Lease

On May 23, 2019, the Company entered into an individual triple net lease with VICI for the real estate assets used in the operations of Hollywood Casino at Greektown (the “Greektown Lease”).

The Greektown Lease has an initial term of 15 years, with four subsequent five-year renewal options on the same terms and conditions, exercisable at the Company’s option.

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In April 2022, the lease was further amended to provide for a Net Revenue to Rent coverage floor to be mutually agreed upon prior to the commencement of the fifth lease year (June 1, 2023).

We did not incur an annual escalator on June 1, 2020 for the lease year ended May 31, 2020.

On June 1, 2021, the Greektown Percentage Rent reset resulted in an annual rent reduction of $ 4.2 million, which will be in effect until the next Greektown Percentage Rent reset, scheduled to occur on June 1, 2023.

On April 1, 2023, the lease was amended to provide for a Net Revenue to Rent coverage floor to be mutually agreed upon prior to the commencement of the sixth lease year (June 1, 2024).

We did not incur an annual escalator for the lease year ended May 31, 2023.

On June 1, 2023, the Greektown Percentage Rent reset resulted in an annual rent increase of $ 1.5 million, which will be in effect until the next Greektown Percentage Rent reset, scheduled to occur on June 1, 2025.

Upon reset of the Greektown Percentage Rent, effective June 1, 2023, we recognized an additional operating lease ROU asset and corresponding lease liability of $ 7.0 million.

On June 1, 2021, the Greektown Percentage Rent reset resulted in an annual rent reduction of $ 4.2 million, which was in effect until the next Greektown Percentage Rent reset, which occurred on June 1, 2023.

Upon reset of the Greektown Percentage Rent, effective June 1, 2021, we recognized an additional operating lease ROU asset and corresponding lease liability of $ 4.1 million.

The land and building components contained within the Greektown Lease are classified as operating leases.

Lease components classified as an operating lease are recorded to “General and administrative” within our Consolidated Statements of Operations.

Tropicana Lease

The term of the Tropicana Lease was for two years (subject to three one-year extensions at GLPI’s option) or until the real estate assets and the operations of the Tropicana were sold.

The land and building components contained within the Tropicana Lease were classified as operating leases.

Lease components classified as an operating lease were recorded to “General and administrative” within our Consolidated Statements of Operations.

Non-REIT Operating Leases

In addition to any operating lease components contained within the Master Leases, Meadows Lease, Margaritaville Lease, Greektown Lease, and Tropicana Lease (collectively referred to as “triple net operating leases”), the Company’s operating leases consists of (i) ground and levee leases to landlords which were not assumed by our REIT Landlords and remain an obligation of the Company, and (ii) buildings and equipment not associated with our REIT Landlords.

The Company’s leases include options to extend the lease terms.

The Company’s operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Information related to lease term and discount rate was as follows:

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Financing Obligation Costs

Interest expense (4)

Interest on financing obligations (4)

Interest expense, net $ 146.6 $ 347.0 $ 416.9

(1) Pertains to the operating lease components contained within the Master Leases, inclusive of the variable expense associated with Columbus and Toledo for the operating lease components, the Meadows Lease, the Margaritaville Lease, the Greektown Lease, and the Tropicana Lease.

The Tropicana Lease was terminated on September 26, 2022.

Prior to the Lease Modification, the operating lease components contained within the Master Leases primarily consisted of the land, inclusive of the variable expense associated with Columbus and Toledo.

Subsequent to the Lease Modification, the operating lease components contained within the Master Leases consist of the land and building components associated with the operations of Dayton and Mahoning Valley.

(1) 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 Dayton and Mahoning Valley);

(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.

(2) Excludes the operating lease costs and variable lease costs pertaining to our triple net leases with our REIT landlords classified as operating leases, discussed in footnote (1) above.

(3) Pertains to the finance lease components contained within the Master Leases, and the Perryville Lease (effective July 1, 2021) which results in interest expense and amortization expense (as opposed to rent expense).

Prior to the Lease Modification, the finance lease components contained within the Master Leases consisted of the land and building components associated with the operations of Dayton and Mahoning Valley.

Subsequent to the Lease Modification, the finance lease components contained within the Master Leases primarily consist of the land, inclusive of the variable expense associated with Columbus and Toledo.

(4) Pertains to the components contained within the Master Leases (primarily buildings) and the Morgantown Lease determined to be a financing obligation, inclusive of the variable expense associated with Columbus and Toledo for the finance lease components (the buildings).

(3) For the year ended December 31, 2023, pertains to the finance lease components associated with the Pinnacle Master Lease (land).

For the year ended December 31, 2022, pertains to the finance lease components associated with the (i) PENN Master Lease;

(ii) Pinnacle Master Lease;

and (iii) Perryville Lease.

The finance lease components contained within the PENN Master Lease and the Pinnacle Master Lease primarily consisted of the land, inclusive of the variable expense associated with Columbus and Toledo.

For the year ended December 31, 2021, pertains to the finance lease components associated with the (i) PENN Master Lease;

and (ii) Perryville Lease (effective July 1, 2021).

The finance lease components contained within the PENN Master Lease consisted of the land and building components associated with the operations of Dayton and Mahoning Valley.

(4) For the year ended December 31, 2023, pertains to the components contained within the Pinnacle Master Lease (buildings) and the Morgantown Lease.

For the years ended December 31, 2022 and 2021, pertains to the components contained within the (i) PENN Master Lease (primarily buildings) inclusive of the variable expense associated with Columbus and Toledo for the financing obligation components;

(ii) Pinnacle Master Lease (buildings);

and (iii) Morgantown Lease.

Supplemental cash flow information related to leases was as follows:

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Financing cash flows from finance leases $ 47.1 $ 110.5 $ 8.5

Non-cash lease activities:

Commencement of operating leases $ 3,820.4 $ 58.5 $ 96.4

Derecognition of operating lease liabilities $ 307.7 $ — $ —

Commencement of finance leases $ 33.3 $ 1,462.1 $ 106.1

Derecognition of finance lease liabilities $ 2,933.6 $ — $ —

Derecognition of finance obligations $ 1,567.8 $ — $ —

Total payments made under the Triple Net Leases were as follows:

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(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.

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

(1) For the years ended December 31, 2022 and 2021, rent payable under the Tropicana Lease was nominal.

Therefore, it has been excluded from the table above.

The Tropicana Lease was terminated on September 26, 2022.

The classification of lease ROU assets was as follows:

(in millions) 2023 2022

Lease ROU assets

Operating leases $ 4,264.7 $ 1,068.4

Finance leases 2,041.0 5,034.9

Total $ 6,305.7 $ 6,103.3

The following is a maturity analysis of our operating leases, finance leases, and financing obligations as of December 31, 2023:

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The Company leases its hotel rooms to patrons and records the corresponding lessor revenue in “Food, beverage, hotel, and other revenues” within our Consolidated Statements of Operations.

For the years ended December 31, 2022, 2021, and 2020, the Company recognized $ 262.0 million, $ 231.1 million, and $ 146.8 million of lessor revenues related to the rental of hotel

rooms, respectively.

For the years ended December 31, 2023, 2022, and 2021, the Company recognized $ 247.3 million, $ 262.0 million, and $ 231.1 million of lessor revenues related to the rental of hotel rooms, respectively.

Hotel leasing arrangements vary in duration but are short-term in nature.

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Note 13—Commitments and Contingencies

ESPN Sportsbook and Investment Agreements

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.

Pursuant to the Sportsbook Agreement, PENN rebranded the existing Barstool Sportsbook across all online platforms in the United States as ESPN BET and will oversee daily operations of the Sportsbook.

The Sportsbook Agreement provides PENN with an exclusive license to use the ESPN BET trademark in the United States in connection with the Sportsbook.

In addition, ESPN provides certain marketing, content integration, and promotional services in support of the Sportsbook, including access to ESPN talent, and exclusively promotes the Sportsbook in the United States, subject to certain exceptions, in accordance with a mutually agreed on-channel marketing plan.

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.

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

In consideration for the media marketing services and brand and other rights provided by ESPN, PENN will pay $ 150.0 million per year in cash pursuant to the Sportsbook Agreement for the initial 10-year term and issue the warrants pursuant to the Investment Agreement (as defined and described in more detail below).

In addition, the Sportsbook Agreement may be terminated by either party (i) in the case of an uncured material breach by or bankruptcy of the other party, (ii) if at the end of year three of the term the Sportsbook has not achieved a specified level of market share based on gross gaming revenue in the states in which the Sportsbook operates while branded ESPN BET, (iii) in certain circumstances, if the other party or certain of its officers is the subject of a criminal or other investigation by federal or state authorities, is charged with certain crimes or commits certain other acts, including those which would reasonably be expected to cause material damage to the terminating party’s reputation or brand, or (iv) in certain circumstances involving non-compliance with data privacy laws.

In addition, ESPN has the right to terminate the Sportsbook Agreement if (i) a repeated material breach by PENN of the terms of the ESPN intellectual property license or an uncured material breach by PENN of the terms of the ESPN intellectual property license that results in material harm to the reputation or goodwill associated with the ESPN brand or name, (ii) in certain circumstances where PENN commits a material failure of specified product and technology guidelines or certain customer service level metrics, (iii) if at the end of year three or year seven of the term the Sportsbook’s market access is not at

least a specified percentage of the total market access by the online sportsbook operator with the most expansive market access, subject to certain exceptions, (iv) if ESPN undergoes certain transactions involving a significant change in ownership of ESPN, subject to the payment of a termination fee to PENN, or (v) in certain circumstances if PENN undergoes certain transactions involving a significant change in ownership of PENN, including such a transaction involving a competitor of The Walt Disney Company (“TWDC”).

PENN has the right to terminate the Sportsbook Agreement (i) if ESPN undergoes certain transactions resulting in a significant change in ownership of ESPN involving a competitor of PENN, (ii) in certain circumstances related to the suitability of ESPN, TWDC, or certain of their respective officers for gaming regulatory purposes, or (iii) in certain circumstances if PENN is unable to utilize the ESPN BET brand in states comprising a specified percentage of the aggregate population for all states in which PENN conducts online sports betting in the United States.

In connection with the Sportsbook Agreement, PENN and ESPN, Inc.

entered into an Investment Agreement (the “Investment Agreement”) on August 8, 2023.

The Investment Agreement provides for the issuance to ESPN, Inc.

of certain warrants to purchase shares of PENN common stock, par value $ 0.01 per share, and setting forth certain other governance rights of ESPN, Inc.

Pursuant to the Investment Agreement PENN issued to ESPN, Inc.

warrants to purchase approximately 31.8 million shares of PENN common stock.

The warrants are classified as equity and contain three separate tranches which vest quarterly over ten years from the date of the Investment Agreement, provided that any remaining unvested portion of the first tranche of warrants will vest on August 8, 2032.

If the Sportsbook Agreement is terminated due to certain breaches of the Sportsbook Agreement by PENN, then all unvested warrants will immediately vest.

If the Sportsbook Agreement is terminated for any other reason, then all unvested warrants will immediately be forfeited, subject to certain exceptions.

At the grant date, the $ 550.4 million fair value of the awards was determined using the Black Scholes pricing model with contractual terms ranging from 9.5 to 11.5 years, and strike prices ranging from $ 26.08 to $ 32.60 .

Additionally, if after February 29, 2024 and during the term of the Sportsbook Agreement PENN achieves specified performance conditions based on an average market share based on gross gaming revenue in the states in which the Sportsbook operates (as defined within the Investment Agreement), PENN could issue to ESPN, Inc.

warrants to purchase up to an additional 6.4 million shares of PENN common stock.

The additional warrants will be fully vested upon issuance, have an exercise price of $ 28.95 , and will be exercisable for 10.5 years from the date of issuance.

During the year ended December 31, 2023, the Company recognized $ 33.3 million in marketing expenses related to the Sportsbook Agreement and recognized $ 12.5 million in marketing expenses related to the Investment Agreement.

Expenses related to the Sportsbook Agreement and the Investment Agreement are recorded as marketing expense within “Gaming” expenses on the Consolidated Statements of Operations and recognized when services are received.

The Company is subject to various legal and administrative proceedings relating to personal injuries, employment matters, commercial transactions, development agreements and other matters arising in the ordinary course of business.

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PSG holds the gaming license with the state of Illinois and the location share percentage is determined by the state of Illinois.

For the years ended December 31, 2022, 2021, and 2020, the total location share payments made by PSG, which are recorded within our Consolidated Statements of Operations as gaming expenses, were $ 43.6 million, $ 43.3 million, and $ 20.2 million, respectively.

The Company records the location share payments to “Gaming” expense within the Consolidated Statements of Operations.

For the years ended December 31, 2023, 2022, and 2021, the total location share payments made by PSG were $ 45.3 million, $ 43.6 million, and $ 43.3 million, respectively.

Purchase Obligations

The Company has obligations to purchase various goods and services totaling $ 405.6 million as of December 31, 2022, of which $ 126.2 million will be incurred in 2023.

The Company has obligations to purchase various goods and services totaling $ 790.7 million as of December 31, 2023, including $ 339.4 million which will be incurred in 2024.

Purchase obligations totaled $ 405.6 million as of December 31, 2022.

The increase over the prior year is primarily due to additional contractual obligations related to theScore.

The increase over the prior year is primarily due to the Sportsbook Agreement with ESPN described above.

Additionally, 2024 amounts include capital expenditure obligations related to the Aurora Project and Other Development Projects as described below.

Capital Expenditure Commitments

Pursuant to each of our Triple Net Leases, with the exception of our Morgantown Lease (which is a land lease we entered into on October 1, 2020 with GLPI as discussed in Note 12, “Leases” ), we are obligated to spend a minimum of 1 % of annual net revenues, in the aggregate under each lease, on the maintenance of such facilities.

In addition, we are expecting to have capital expenditures in connection with the Aurora Project and Other Development Projects as a result of our Master Development Agreement with GLPI (also discussed in Note 12, “Leases” ).

Employee Benefit Plans

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Our deferred compensation liability, which is included in “Accrued expenses and other current liabilities” within the Consolidated Balance Sheets, was $ 87.7 million and $ 70.8 million as of December 31, 2023 and 2022, respectively.

As part of our initiative to reduce our cost structure while our properties were temporarily closed due to the COVID-19 pandemic, we suspended our matching contributions to the PENN 401(k) Plan and the EDC Plan from April 1, 2020 to September 30, 2020.

Labor Agreements

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As of December 31, 2023, we had 35 collective bargaining agreements covering approximately 4,180 active employees.

Eight collective bargaining agreements are scheduled to expire in 2023.

Twelve collective bargaining agreements are scheduled to expire in 2024.

Note 14—Income Taxes

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Discount on convertible notes 0.3 0.4

Net operating losses, interest limitation and tax credit carryforwards 112.7 115.7

Net operating losses and tax credit carryforwards

Capital loss carryforwards

Interest limitation carryforwards

Gross deferred tax assets 2,731.0 2,849.4

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Property and equipment, subject to the Master Leases ( 635.0 ) ( 925.0 )

Investments in and advances to unconsolidated affiliates — ( 6.8 )

Discount on convertible notes — ( 18.1 )

Intangible assets ( 259.1 ) ( 263.7 )

Lease right-of-use assets

( 1,620.1 ) ( 1,564.3 )

Net deferred tax liabilities ( 2,638.1 ) ( 2,852.1 )

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The realizability of the net deferred tax assets is evaluated quarterly by assessing the need for a valuation allowance and by adjusting the amount of the allowance, if necessary.

The Company gives appropriate consideration to all available positive and negative evidence including statutory carryback periods, projected future taxable income, and available tax planning strategies that could be implemented to realize the net deferred tax assets.

The evaluation of both positive and negative evidence is a requirement pursuant to ASC 740 in determining if the net deferred tax assets will be realized.

ASC 740 suggests that additional scrutiny should be given to deferred taxes of an entity with cumulative pre-tax book losses during the three most recent years and is considered significant negative evidence that is objective and verifiable and therefore, an entity would need sufficient quality and quantity to support a conclusion to overcome.

The Company determined that a valuation allowance was no longer required against its federal, foreign and state deferred tax assets for the portion that is more-likely-than-not to be realized.

The most significant evidence that led to the reversal of the valuation allowance during the third quarter of 2022, included (i) achievement and sustained growth in our three-year cumulative pre-tax earnings, (ii) substantial total revenue and earnings growth for the retail operating segment over the last

seven quarters and (iii) lack of significant asset impairment charges expected to be indicative of the Company’s retail business operations.

For the three months ended December 31, 2022, there were no material changes to our core business operations that altered our prior interim conclusion to release the valuation allowance against the federal, foreign and state net deferred tax assets for the portion that is more-likely-than-not to be realized.

The Company generated three-year cumulative pre-tax income of $ 67.3 million at December 31, 2022 despite the $ 118.2 million impairment charges recorded during the year ended December 31, 2022.

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.

This reversal is included in “Income tax benefit (expense)” in our Consolidated Statements of Operations.

The Company has also maintained a valuation allowance of $ 31.2 million against its net deferred tax assets primarily related to foreign and state net operating loss carryforwards, excluding net operating losses (“NOLs”) that can be realized based on statutory carryback periods and the reversal of net deferred taxes related to indefinite‑lived intangibles.

Pursuant to ASC 740, the Company considers all available (both quantitative and qualitative) positive and negative evidence including, but not limited to, statutory carryback periods, projected future taxable income, and feasible tax planning strategies that could be implemented as a source of positive evidence to realize the net deferred tax assets.

In accordance with ASC 740, the most objectively verifiable form of evidence is to evaluate an entity’s three-year history of pre-tax book income or loss by jurisdiction.

ASC 740 suggests that additional scrutiny should be given to deferred taxes of an entity with cumulative pre-tax book losses during the three most recent years and is considered significant negative evidence that is objectively verifiable and therefore, an entity would need sufficient quality and quantity to support a conclusion to overcome.

During 2023, there were no material changes to our core business operations that altered our prior year conclusion to release the valuation allowance against the federal, foreign, and state net deferred tax assets for the portion that is more-likely-than-not to be realized.

The Company continued to generate significant positive evidence in the U.S.

with three-year cumulative domestic pre-tax book income of $ 518.7 million, despite the significant pre-tax book charge related to the sale of Barstool Sports and the $ 130.6 million impairment charges recorded during the year.

The Company maintained a valuation allowance of $ 210.5 million, as of December 31, 2023, against certain net deferred tax assets primarily related to (i) a capital loss realized on the sale of Barstool Sports of $ 126.1 million, (ii) foreign jurisdictions that were in a three-year cumulative pre-tax loss position as of the balance sheet date of $ 47.1 million, (iii) certain state net operating loss (“NOL”) carryforwards of $ 30.6 million, and (iv) other state deferred tax assets of $ 6.7 million.

The Company intends to continue to maintain a valuation allowance on its net deferred tax assets until there is sufficient objectively verifiable positive evidence to support the realization of all or some portion of these deferred tax assets.

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

As of December 31, 2022, we had federal NOL carryforwards from prior acquisitions of $ 96.6 million, and various state NOL carryforwards, the majority of which will expire in periods through 2035.

Following theScore acquisition, the Company has the following NOL carryforwards, (i) indefinite gross U.S.

federal NOL of $ 17.9 million, (ii) foreign NOL of $ 102.1 million that will expire through 2042 and (iii) state NOLs of $ 24 million that will expire through 2042.

The tax benefit associated with these acquired NOLs is $ 3.8 million, $ 26.8 million, and $ 0.2 million respectively, against which a valuation allowance was recorded of $ 0.2 million for U.S.

federal and state NOLs that will not be recognized.

In the event the Company determines that the deferred income tax assets would be realized

in the future more than their net recorded amount, an adjustment to the valuation allowance would be recorded, which would reduce the provision for income taxes.

As of December 31, 2023, the Company had the following pre-tax carryforwards:

(i) pre-tax U.S.

federal NOL carryforwards of $ 100.3 million, $ 88.0 million will expire at various dates through 2037, and the residual being carried forward indefinitely;

(ii) pre-tax foreign NOL carryforwards of $ 189.4 million that will expire through 2042;

(iii) pre-tax capital losses of $ 500.0 million, the majority of which was generated from the Barstool divestiture and will expire in 2028;

and (iv) pre-tax interest expense limitation carryforwards of $ 48.5 million that can be carried forward indefinitely.

All acquired tax attributes are subject to limitations under the Internal Revenue Code and underlying Treasury Regulations.

As of December 31, 2023, the Company also had $ 1.2 billion of pre-tax state NOL carryforwards, primarily generated in the Commonwealth of Pennsylvania, Colorado, Illinois, Iowa, Louisiana, Maryland, Michigan, Missouri, New Mexico, and localities within Ohio and Michigan.

The tax benefit associated with these NOL carryforwards was $ 65.4 million and a partial valuation allowance as mentioned above has been recorded due to negative evidence of certain statutorily limitations and level of earnings projections in the respective jurisdictions.

The majority of the state NOL carryforwards will expire at various dates from December 31, 2023 through December 31, 2042 with the remaining being carried forward indefinitely.

In general, the Company has not recognized any U.S.

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operations, we would be required to accrue and pay U.S.

taxes on a portion or all these undistributed earnings.

taxes on a portion or all of these undistributed earnings.

It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries.

The undistributed foreign earnings were immaterial at December 31, 2023.

For state income tax reporting, as of December 31, 2022, the Company had gross state NOL carryforwards aggregating $ 1.2 billion available to reduce future state income taxes, primarily for the Commonwealth of Pennsylvania, Colorado, Illinois, Iowa, Louisiana, Maryland, Michigan, Missouri, New Mexico, and localities within Ohio and Michigan.

The tax benefit associated with these NOL carryforwards was $ 56.4 million.

Due to statutorily limited NOL carryforwards and the level of earnings projections in the respective jurisdictions, a valuation allowance of $ 9.0 million has been recorded.

If not used, the majority of the carryforwards will expire at various dates from December 31, 2022 through December 31, 2041 with the remaining being carried forward indefinitely.

The domestic and foreign components of income (loss) before income taxes for the years ended December 31, 2023, 2022, and 2021 were as follows:

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(in millions) 2023 2022 2021

Current tax benefit (expense)

Current tax expense

Federal $ ( 20.8 ) $ ( 89.0 ) $ ( 100.0 )

State ( 4.9 ) ( 15.3 ) ( 23.1 )

Foreign — — ( 0.4 )

Total current ( 25.7 ) ( 104.3 ) ( 123.1 )

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2023 2022 2021

(in millions, except tax rates) Amount Amount Amount

(in millions, except tax rates)

Amount of pre-tax income

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Nondeductible expenses ( 48.5 ) ( 7.8 ) ( 13.3 )

Goodwill impairment losses — — ( 19.0 )

Compensation ( 7.2 ) ( 6.2 ) 6.5

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The liability for unrecognized tax benefits as of December 31, 2023 and 2022 included $ 37.3 million and $ 36.3 million, respectively, of tax positions that, if reversed, would affect the effective tax rate.

During the years ended December 31, 2022, 2021 and 2020, we recognized $ 0.6 million, $ 0.7 million and $ 0.5 million, respectively, of interest and penalties, net of deferred taxes.

In addition, the Company had no reductions in previously accrued interest and penalties for the years ended December 31, 2022 and 2021.

During the year ended December 31, 2023, we recognized income of $ 0.2 million to interest and penalties, net of deferred taxes, as compared to an expense of $ 0.6 million and $ 0.7 million to interest and penalties, net of deferred taxes for the years ended December 31, 2022 and 2021, respectively.

In addition, the Company had an immaterial amount of reductions in previously accrued interest and penalties for the year ended December 31, 2023 and no reductions for the year ended December 31, 2022.

We classify any income tax related penalties and interest accrued related to unrecognized tax benefits in “Income tax benefit (expense)” within the Consolidated Statements of Operations.

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Generally, it is difficult to determine when these examinations will be closed, but the Company reasonably expects that its ASC 740 liabilities will not significantly change over the next twelve months.

As of December 31, 2022, the Company has open tax years 2019 through 2021 that could be subject to examination for U.S.

As of December 31, 2023, the Company has open tax years 2019

through 2021 that could be subject to examination for U.S.

federal income taxes.

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Tax Legislation

The Pennsylvania House Bill 1342.

On July 8, 2022, the Bill was signed into law that reduces the corporate income tax rate over the next nine years from the current rate of 9.99% to 4.99% by 2031.

The Company assessed the impact of the law change and recorded an additional income tax expense of $ 10.0 million in its Consolidated Statements of Operations for the period ended December 31, 2022.

Inflation Reduction Act.

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The IRA also includes a 1% excise tax on corporate stock repurchases after January 1, 2023.

Although the Company is assessing the impact of the law change and waiting on further guidance from the Department of Treasury, the Company does not believe that these new provisions will have a material impact on its Consolidated Financial Statements.

Based on our analysis of the IRA and subsequent guidance, management does not expect the CAMT to have a material effect on our future cash flows and results of operations.

In 2023, the 1% excise tax on corporate stock repurchases was an immaterial amount.

Note 15—Stockholders’ Equity

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On May 11, 2021, as part of the acquisition of Hitpoint, the Company issued 43,684 shares for a total of $ 3.5 million.

On July 8, 2022, the Company issued 4,055 shares, in connection with the achievement of the first of three annual mutual goals established by the Company and Hitpoint for a total of $ 0.2 million.

On June 17, 2021, the Company filed its Second Amended and Restated Articles of Incorporation with the Department of State of the Commonwealth of Pennsylvania.

These Articles of Incorporation, as amended and restated and approved by the Company’s shareholders at the 2021 Annual Meeting of Shareholders, increase the number of authorized shares of common stock from 200,000,000 to 400,000,000 .

On both July 8, 2022 and June 29, 2023, the Company issued 4,055 shares in connection with the achievement of the first and second of three annual mutual goals established by the Company and Hitpoint for a total of $ 0.2 million and $ 0.1 million, respectively.

On August 1, 2021, as part of the acquisition of Sam Houston, the Company issued 198,103 shares for a total of $ 15.8 million.

On October 19, 2021, as part of the acquisition of theScore, the Company issued 12,319,340 shares of common stock and authorized and issued 697,539 Exchangeable Shares for approximately $ 1.0 billion, each with a par value of $ 0.01 , as discussed in Note 6, “Acquisitions and Dispositions.” As of December 31, 2022 and 2021, there were 620,019 and 653,059 Exchangeable Shares outstanding, respectively.

Subsequent to year end, on February 17, 2023, as part of the Barstool Acquisition as discussed in Note 7, “Investments in and Advances to Unconsolidated Affiliates,” the Company issued 2,442,809 shares of common stock to certain former stockholders of Barstool (the “Share Consideration”).

The issuance of the Share Consideration was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, because such issuance did not involve a public offering.

The Share Consideration is subject to transfer restrictions providing that the former Barstool stockholders (i) may not transfer any of their Share Consideration for one year following the closing of the Barstool Acquisition, (ii) may transfer up to one-third of their Share Consideration after the first anniversary of the closing of the Barstool Acquisition, and (iii) may transfer their remaining Share Consideration after the second anniversary of the closing of the Barstool Acquisition, in each case subject to compliance with applicable securities laws.

In February 2020, the Company issued 883 shares of Series D Preferred Stock, par value $ 0.01 per share, to certain individual stockholders affiliated with Barstool as discussed in Note 7, “Investments in and Advances to Unconsolidated Affiliates.”

On October 19, 2021, as part of the acquisition of theScore, the Company issued 12,319,340 shares of common stock with a par value of $ 0.01 and 697,539 Exchangeable Shares for approximately $ 1.0 billion, as discussed in Note 6, “Acquisitions and Dispositions.” During the year ended December 31, 2023, we issued 2,854 Exchangeable Shares.

During the year ended December 31, 2022, we did not issue Exchangeable Shares.

As of both December 31, 2023 and 2022, there were 768,441 Exchangeable Shares authorized, of which 560,267 shares and 620,019 shares were outstanding, respectively.

In conjunction with the February 2020 stock purchase agreement between PENN and Barstool, the Company issued 883 shares of non-voting convertible Series D Preferred Stock, par value $ 0.01 , to certain individual stockholders affiliated with Barstool.

The Series D Preferred stockholders were entitled to participate equally and ratably in all dividends and distributions paid to holders of PENN common stock based on the number of shares of PENN common stock into which such Series D Preferred Stock could convert.

1/1,000th of a share of Series D Preferred Stock was convertible into one share of PENN common stock.

The Series D Preferred Stock was available for conversion into PENN common stock in tranches over four years , with the first and second 20 % tranches having been available for conversion into PENN common stock in the first quarter of 2021 and first quarter of 2022, respectively.

During the first quarter of 2023, an additional tranche of 30 % became available for conversion.

On each of February 22, 2021 and August 23, 2021, the Company issued 43 shares of Series D Preferred Stock in conjunction with acquiring additional shares of Barstool common stock.

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The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

The acquisition of the incremental Barstool common stock represents a partial settlement of the 1 % purchase on a delayed basis as described in Note 7, “Investments in and Advances to Unconsolidated Affiliates.”

On February 22, 2021 and August 23, 2021, 151 shares of Series D Preferred Stock and 43 shares of Series D Preferred Stock, respectively, were converted to common stock.

As a result of the conversion, the Company issued 151,200 shares of common stock and 43,000 shares of common stock, respectively, each with a par value of $ 0.01 .

On February 23, 2022 and February 24, 2022, 43 shares of Series D Preferred Stock and 151 shares of Series D Preferred Stock, respectively, were converted to common stock.

As a result of the conversion, the Company issued 43,000 shares of common stock and 151,200 shares of common stock, respectively, each with a par value of $ 0.01 .

On February 22, 2021 and August 23, 2021, 151 and 43 shares of Series D Preferred Stock, respectively, were converted to common stock.

As a result of the conversions, the Company issued 151,200 and 43,000 shares of common stock, respectively, each with a par value of $ 0.01 .

On February 23, 2022 and February 24, 2022, 43 and 151 shares of Series D Preferred Stock, respectively, were converted to common stock.

As a result of the conversions, the Company issued 43,000 and 151,200 shares of common stock, respectively, each with a par value of $ 0.01 .

The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

As of December 31, 2022 and 2021, there were 5,000 shares authorized of Series D Preferred Stock of which 581 shares and 775 shares were outstanding, respectively.

On February 17, 2023, as part of the Barstool Acquisition as discussed in Note 6, “Acquisitions and Dispositions,” the Company issued 2,442,809 shares of common stock with a par value of $ 0.01 , to certain former stockholders of Barstool (the “Share Consideration”).

The Share Consideration was subject to transfer restrictions which were waived on August 11, 2023, pursuant to the Barstool SPA.

See Note 6, “Acquisitions and Dispositions” for additional information related to the Barstool SPA.

On March 3, 2023, 227 shares of Series D Preferred Stock were converted to common stock.

As a result of the conversion, the Company issued 226,800 shares of common stock with a par value of $ 0.01 .

Pursuant to the Barstool SPA, on August 11, 2023, all remaining 354 outstanding shares of Series D Preferred Stock were converted to common stock.

As a result of the conversion, the Company issued 353,800 shares of common stock with a par value of $ 0.01 .

The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

As of both December 31, 2023 and 2022, there were 5,000 shares authorized of Series D Preferred Stock of which zero shares and 581 shares were outstanding, respectively.

The Company previously issued two series of preferred stock, Series B and Series C, each with a par value of $ 0.01 per share.

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There were no shares outstanding of either Series B or Series C preferred stock as of both December 31, 2023 and 2022.

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”).

On August 8, 2023, pursuant to the Investment Agreement with ESPN, Inc., the Company issued warrants to ESPN, Inc.

to purchase approximately 31.8 million shares of PENN common stock, par value $ 0.01 per share, as discussed in Note 13, “Commitments and Contingencies.”

Share Repurchase 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 $ 750.0 million (the “December 2022 Authorization”).

The December 2022 Authorization expires on December 31, 2025.

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

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

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

The Company utilized the 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 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 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.

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 to “Treasury stock” within the Consolidated Balance Sheets.

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.

In the second quarter of 2021, the Company entered into two promissory notes with shareholders for a total of $ 9.0 million.

The promissory notes are unsecured and bear interest of 2.25 %.

As of December 31, 2022 and 2021, the receivable is recorded as a reduction of equity within “Additional paid-in capital” in our Consolidated Balance Sheets.

The promissory notes were settled subsequent to year end in connection with the acquisition of Barstool on February 17, 2023, as described in Note 7, “Investments in and Advances to Unconsolidated Affiliates” .

The promissory notes were unsecured with interest of 2.25 %.

As of December 31, 2022, the receivable was recorded as a reduction of equity within “Additional paid-in capital” in our Consolidated Balance Sheets.

During the first quarter of 2023, the outstanding loan balance was settled and recorded as an increase of equity within “Additional paid-in capital” in our Consolidated Balance Sheets.

Note 16—Stock-Based Compensation

2022 Long Term Incentive Compensation Plan

On June 7, 2022, the Company’s shareholders, upon the recommendation of the Company’s Board of Directors, approved the Company’s 2022 Long Term Incentive Compensation Plan (the “2022 Plan”) to replace our 2018 Plan (as defined below).

The 2022 Plan authorizes the Company to issue stock options (incentive and/or non-qualified), stock appreciation rights (“SARs”), restricted stock (shares and/or units), performance awards (shares and/or units), and cash awards to executive officers, non-employee directors, other employees, consultants, and advisors of the Company and its subsidiaries.

Non-employee directors and consultants are eligible to receive all such awards, other than incentive stock options.

Pursuant to the 2022 Plan, 6,870,000 shares of the Company’s common stock are reserved for issuance, plus any shares of common stock subject to outstanding awards under both the 2018 Plan and theScore Plan (as defined below) as of June 7, 2022 and outstanding awards that are forfeited or settled for cash under each of the prior plans.

For purposes of determining the number of shares available for issuance under the 2022 Plan, stock options, restricted stock and all other equity settled awards count against the 6,870,000 limit as one share of common stock for each share granted.

Pursuant to the 2022 Plan, an initial 6,870,000 shares of the Company’s common stock were reserved for issuance, plus any shares of common stock subject to outstanding awards under both the previous 2018 Long Term Incentive Compensation Plan, as amended (“2018 Plan”) and the Score Media and Gaming Inc.

Second Amended and Restated Stock Option and Restricted Stock Unit Plan (the “theScore Plan”) as of June 7, 2022 and outstanding awards that are forfeited or settled for cash under each of the prior plans.

On June 6, 2023, the Company’s shareholders, upon the recommendation of the Company’s Board of Directors, approved an amendment to the 2022 Plan (as amended, the “2022 Amended Plan”), which increased the number of shares reserved for issuance under the plan by 7,000,000 shares to 13,870,000 shares.

For purposes of determining the number of shares available for issuance under the 2022 Amended Plan, stock options, restricted stock, and all other equity settled awards count against the 13,870,000 share limit as one share of common stock for each share granted.

Any awards that are not settled in shares of common stock are not counted against the share limit.

As of December 31, 2022, there are 6,345,906 shares available for future grants under the 2022 Plan.

2018 Long Term Incentive Compensation Plan

The Company’s 2018 Long Term Incentive Compensation Plan, as amended (the “2018 Plan”) authorized it to issue stock options (incentive and/or non-qualified), SARs, restricted stock (shares and/or units), performance awards (shares and/or units), and cash awards to employees and any consultant or advisor to the Company or subsidiary.

As of December 31, 2023, there are 11,008,469 shares available for future grants under the 2022 Amended Plan.

2018 Long Term Incentive Compensation Plan (“2018 Plan”)

The Company’s 2018 Plan authorized it to issue stock options (incentive and/or non-qualified), SARs, restricted stock (shares and/or units), performance awards (shares and/or units), and cash awards to employees and any consultant or advisor to the Company or subsidiary.

Non-employee directors were eligible to receive all such awards, other than incentive stock options.

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For purposes of determining the number of shares available for issuance under the 2018 Plan, stock options and SARs (except cash-settled SARs) counted against the 12,700,000 limit as one share of common stock for each share granted and restricted stock or any other full value stock award are counted as 2.30 shares of common stock for each share granted.

Any awards that were not settled in shares of common stock were not counted against the

Any awards that were not settled in shares of common stock were not counted against the share limit.

In connection with the approval of the 2022 Plan, the 2018 Plan remains in place until all of the awards previously granted thereunder have been paid, forfeited, or expired.

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The fair value of the restricted stock units was estimated at $ 29.3 million and segregated into four tranches with expense recognition periods ranging from 6.7 to 8.7 years.

We recognized $ 8.6 million and $ 6.3 million of stock compensation expense for the Stock Awards during the years ended December 31, 2022 and 2021, respectively.

We recognized $ 8.4 million, $ 8.6 million, and $ 6.3 million of stock compensation expense for the Stock Awards during the years ended December 31, 2023, 2022, and 2021, respectively.

Score Media And Gaming Inc.

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theScore Plan authorized the Company to issue non-qualified stock options and restricted stock units to employees and service providers affiliated with theScore prior to the acquisition date.

At the date of acquisition, the Company rolled over all outstanding, non-vested and unexercised stock options and non-vested restricted stock units equivalent to 853,904 shares of the Company.

At the date of acquisition, the Company rolled over all outstanding non-vested, unexercised stock options, and non-vested restricted stock units equivalent to 853,904 shares of the Company.

Each rollover option and restricted stock unit were subject to substantially the same terms and conditions applicable to the award immediately prior to the acquisition.

In connection with the transaction, the vesting provisions of unvested options and restricted stock unit, awarded under the theScore Plan prior to August 4, 2021, were amended to provide for a new acceleration right for legacy theScore employees and service providers.

In connection with the transaction, the vesting provisions of unvested options and restricted stock units, awarded under the theScore Plan prior to August 4, 2021, were amended to provide for a new acceleration right for legacy theScore employees and service providers.

The amendment provides that, if an involuntary termination without cause occurs at any time prior to April 19, 2023, unvested options and restricted stock units will automatically accelerate and become fully vested on the effective date of termination.

In connection with the approval of the 2022 Plan, theScore Plan remains in place until all of the awards previously granted thereunder have been paid, forfeited or expired.

In connection with the approval of the 2022 Plan, theScore Plan

remains in place until all of the awards previously granted thereunder have been paid, forfeited or expired.

However, the shares which remained available for future grants under theScore Plan are no longer available for issuance and all future equity awards will be pursuant to the 2022 Plan.

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Stock-based compensation expense pertains to our stock options and restricted stock, including restricted stock with performance conditions.

The Company recognized $ 58.1 million, $ 35.1 million and $ 14.5 million stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020, respectively, which is included within the Consolidated Statements of Operations under “General and administrative.”

The Company recognized $ 85.9 million, $ 58.1 million, and $ 35.1 million stock-based compensation expense for the years ended December 31, 2023, 2022, and 2021, respectively, which is included within the Consolidated Statements of Operations as a component of “General and administrative” expense.

Stock Options

Stock options that expire between February 9, 2023 and October 3, 2032 have been granted to officers, directors, employees, and predecessor employees to purchase common stock at prices ranging from $ 2.51 to $ 117.82 per share, including options rolled over from theScore Plan.

All options were granted at the fair market value of the common stock on the grant date (as defined in the respective plan document) and have contractual lives ranging from four to ten years .

Stock options that expire between January 4, 2024 and November 1, 2033 have been granted to officers, directors, employees, and predecessor employees to purchase common stock at prices ranging from $ 2.51 to $ 117.82 per share, including options rolled over from theScore Plan.

All options were granted at the fair market value of the common stock on the grant date (as defined in the respective plan document) and have contractual lives ranging from 4 to 10 years.

The Company issues new authorized common shares to satisfy stock option exercises.

During the year ended December 31, 2022, the Company granted 398,945 stock options.

The Company granted 587,399 stock options during the year ended December 31, 2021, of which 352,768 were rolled over under theScore Plan, and granted 652,733 stock options during the year ended December 31, 2020.

During the years ended December 31, 2023, 2022, and 2021, respectively, the Company granted 846,291 , 398,945 , and 587,399 stock options, which includes 352,768 that were rolled over under theScore Plan during the year ended December 31, 2021.

The following table presents activity related to our stock options for the year ended December 31, 2023:

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For the year ended December 31,

(in millions) 2022 2021 2020

2023 2022 2021

Weighted-average grant-date fair value of options (1)

$ 18.60 $ 30.09 $ 57.70

Aggregate intrinsic value of stock options exercised 8.6 53.1 128.9

Fair value of stock options vested 21.3 6.2 9.6

(1) For the year ended December 31, 2021, the combined weighted-average grant-date fair values of options includes those rolled over under theScore Plan.

Aggregate intrinsic value of stock options exercised (in millions) $ 4.1 $ 8.6 $ 53.1

Fair value of stock options vested (in millions) $ 15.9 $ 21.3 $ 6.2

(1) For the year ended December 31, 2021, the combined weighted-average grant-date fair values include options rolled over under theScore Plan.

As of December 31, 2023, the unamortized compensation costs not yet recognized related to stock options granted totaled $ 18.7 million and the weighted-average period over which the costs are expected to be recognized was 1.7 years.

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The Company’s performance share programs were adopted to provide our NEOs and certain other key executives with stock-based compensation tied directly to the Company’s performance, which further aligns their interests with our shareholders and provides compensation only if the designated performance goals are met for the applicable performance periods.

On February 25, 2020, an aggregate of 107,297 restricted shares with performance-based vesting conditions, at target, were granted under our performance share program (“Performance Share Program II”), to be granted in one-third increments.

On April 12, 2021, in addition to the Stock Awards mentioned above, an aggregate of 94,673 restricted shares and units with performance-based vesting conditions, at target, were granted under the Performance Share Program II.

During the year ended December 31, 2022, an aggregate of 244,955 restricted units with performance-based vesting conditions, at target, were granted under the Performance Share Program II.

On April 12, 2021, in addition to the Stock Awards mentioned above, an aggregate of 94,673 restricted shares and units with performance-based vesting conditions were granted at target under our performance share program (“Performance Share Program II”).

During the years ended December 31, 2023 and 2022, an aggregate of 461,747 and 244,955 restricted units with performance-based vesting conditions were granted at target under the Performance Share Program II.

Restricted stock issued pursuant to the Performance Share Program II consist of three one-year performance periods over a three-year service period.

The awards have the potential to be earned at between 0 % and 200 % of the number of shares granted during the years ended December 31, 2020 and 2021, and 0 % and 150 % of the number of shares granted during the year ended December 31, 2022, depending on achievement of the annual performance goals, and remain subject to vesting for the full three-year service period.

In addition, during the year ended December 31, 2022, the Company granted key employees of theScore 102,422 restricted units with performance-based vesting conditions that are dependent on the achievement of certain milestones.

The awards have the potential to be earned at between 0 % and 200 % of the number of shares granted during the year ended December 31, 2021, and 0 % and 150 % of the number of shares granted during the years ended December 31, 2023 and 2022 depending on achievement of the annual performance goals, and remain subject to vesting for the full three-year service period.

In addition to the above, during the years ended December 31, 2023 and 2022, the Company granted employees of theScore 199,733 and 102,422 restricted units, respectively, with performance-based vesting conditions that are dependent on the achievement of certain milestones.

The awards have the potential to be earned at between 0 % and 100 % and consist of two , one-year performance periods, each containing an applicable milestone.

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Cash-settled Phantom Stock Units

Our outstanding cash-settled phantom stock units (“CPUs”), are settled in cash and entitle plan recipients to receive a cash payment based on the fair value of the Company’s common stock which is based on the closing stock price of the trading day preceding the vest date.

Our outstanding phantom stock units (“CPUs”) are settled in cash and entitle plan recipients to receive a cash payment based on the fair value of the Company’s common stock which is based on the closing stock price of the trading day preceding the vest date.

Our CPUs vest over a period of one to four years .

The cash-settled CPUs are accounted for as liability awards and are re-measured at fair value each reporting period until they become vested with compensation expense being recognized over the requisite service period.

The CPUs are accounted for as liability awards and are re-measured at fair value each reporting period until they become vested with compensation expense being recognized over the requisite service period.

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the Consolidated Balance Sheets, associated with its cash-settled CPUs of $ 1.2 million and $ 2.1 million as of December 31, 2023 and 2022 respectively.

As of December 31, 2022, there was a total of $ 3.7 million unrecognized compensation cost related to CPUs that will be recognized over the remaining weighted-average vesting period of 0.7 years.

For the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 4.0 million, $ 12.1 million, and $ 11.5 million of compensation expense related to CPU awards, respectively.

Compensation expense associated with our CPUs is recorded in “General and administrative” within the

Consolidated Statements of Operations.

As of December 31, 2023, there was a total of $ 0.6 million unrecognized compensation cost related to CPUs that will be recognized over the awards remaining weighted-average vesting period of 1.9 years.

For the years ended December 31, 2023, 2022, and 2021, the Company recognized $ 3.3 million, $ 4.0 million, and $ 12.1 million of compensation expense associated with these awards, respectively.

Compensation expense associated with our CPUs is recorded in “General and administrative” within the Consolidated Statements of Operations.

We paid $ 4.2 million, $ 10.5 million, and $ 13.3 million during the years ended December 31, 2023, 2022, and 2021, respectively, pertaining to cash-settled CPSUs.

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The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the Consolidated Balance Sheets, associated with its cash-settled SARs of $ 5.8 million and $ 9.2 million as of December 31, 2023 and 2022 respectively.

For SARs held by employees of the Company, there was $ 6.5 million of total unrecognized compensation cost as of December 31, 2022 that will be recognized over the awards remaining weighted-average vesting period of 1.9 years.

For the year ended December 31, 2022, the Company recognized a reduction to compensation expense of $ 5.5 million, as compared to a charge to compensation expense of $ 3.1 million and $ 69.7 million for the years ended December 31, 2021 and 2020, respectively.

For SARs held by employees of the Company, there was $ 1.0 million of total unrecognized compensation cost as of December 31, 2023 that will be recognized over the awards remaining weighted-average vesting period of two years .

For the years ended December 31, 2023 and 2022, the Company recognized reductions to compensation expense of $ 3.1 million and $ 5.5 million, as compared to a charge to compensation expense of $ 3.1 million for the year ended December 31, 2021, respectively.

Compensation expense associated with our SARs is recorded in “General and administrative” within the Consolidated Statements of Operations.

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Note 17—Earnings (Loss) per Share

For the years ended December 31, 2022 and 2021, we recorded net income attributable to PENN.

As such, we used diluted weighted-average common shares outstanding when calculating diluted income per share.

Stock options, restricted stock, convertible preferred shares and convertible debt that could potentially dilute basic EPS in the future are included in the computation of diluted income per share.

For the year ended December 31, 2023, we recorded a net loss attributable to PENN.

As such, because the dilution from potential common shares was antidilutive, we used basic weighted-average common shares outstanding, rather than diluted weighted-average common shares outstanding when calculating diluted loss per share.

Stock options, restricted stock, convertible preferred shares and convertible debt that could potentially dilute basic EPS in the future that were not included in the computation of diluted loss per share were as follows:

Stock options, restricted stock,

convertible preferred shares, and convertible debt that could potentially dilute basic EPS in the future that are not included in the computation of diluted loss per share are as follows:

(in millions) For the year ended December 31, 2023

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Assumed conversion of convertible debt 14.1

For the years ended December 31, 2022 and 2021, we recorded net income attributable to PENN.

As such, we used diluted weighted-average common shares outstanding when calculating diluted income per share.

Stock options, restricted stock, convertible preferred shares, and convertible debt that could potentially dilute basic EPS in the future were included in the computation of diluted income per share.

The following table sets forth the allocation of net income for the years ended December 31, 2022 and 2021 under the two-class method.

For the year ended December 31, 2020, we did not utilize the two-class method due to incurring a net loss for the period.

For the year ended December 31, 2023, we did not utilize the two-class method due to incurring a net loss for the year.

For the year ended December 31,

(in millions) 2023 2022 2021

Net income (loss) attributable to PENN Entertainment $ 222.10 $ 420.80 $ ( 669.50 )

Net income (loss) attributable to PENN Entertainment, Inc.

$ ( 490.0 ) $ 222.1 $ 420.8

Net income applicable to preferred stock — 0.9 2.1

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Weighted-average common shares outstanding—diluted 152.1 176.6 175.5

Restricted stock with performance and market based vesting conditions that have not been met as of December 31, 2022 were excluded from the computation of diluted earnings per share.

Options to purchase 0.8 million, 0.2 million, and 0.0 million shares were outstanding during the years ended December 31, 2022, 2021, and 2020, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

The assumed conversion of 0.6 million and 0.8 million preferred shares were excluded from the computation of diluted earnings per share for the years ended December 31, 2022 and 2021, respectively, because including them would have been antidilutive.

Restricted stock with performance and market based vesting conditions that have not been met as of December 31, 2023 were excluded from the computation of diluted EPS.

Options and warrants to purchase 14.5 million, 0.8 million, and 0.2 million shares were outstanding during the years ended December 31, 2023, 2022, and 2021, respectively, but were not included in the computation of diluted EPS because they were anti-dilutive.

The assumed conversion of 0.3 million, 0.6 million, and 0.8 million preferred shares were excluded from the computation of diluted EPS for the years ended December 31, 2023, 2022, and 2021, respectively, because including them would have been antidilutive.

The Company’s calculation of weighted-average common shares outstanding includes the Exchangeable Shares issued in connection with theScore acquisition, as discussed in Note 6, “Acquisitions and Dispositions” and Note 15, “Stockholders’ Equity.” The following table presents the calculation of basic and diluted earnings (loss) per share for the Company’s common stock for the years ended December 31, 2023, 2022, and 2021:

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Net income (loss) applicable to common stock $ ( 490.0 ) $ 221.2 $ 418.7

Weighted-average shares outstanding - PENN Entertainment 160.6 158.6 134.0

Weighted-average shares outstanding - PENN Entertainment, Inc.

151.5 160.6 158.6

Weighted-average shares outstanding - Exchangeable Shares 0.6 0.6 0.1

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Note 18—Segment Information

We have aggregated our operating segments into five reportable segments.

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

Northeast, South, West, and Midwest.

Our Interactive segment includes 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 Other category is included in the following tables to reconcile the segment information to the consolidated information.

We have five reportable segments:

Northeast, South, West, Midwest, and Interactive.

Our gaming and racing properties are grouped by geographic location, and each is viewed as an operating segment with the exception of our two properties in Jackpot, Nevada, which are viewed as one operating segment.

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

Interactive includes all of our online gaming operations, management of retail sports betting, media, and the operating results of Barstool.

We owned 36 % of Barstool common stock prior to the February 17, 2023 Barstool Acquisition, pursuant to which we acquired the remaining 64 % of Barstool common stock.

On August 8, 2023, we entered into the Barstool SPA, and we sold 100 % of the outstanding shares of Barstool common stock.

See Note 6, “Acquisitions and Dispositions” for further information.

The Company utilizes Adjusted EBITDAR (as defined below) as its measure of segment profit or loss.

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Cash-settled stock-based awards variance 13.8 15.5 ( 1.2 )

Gain (loss) on disposal of assets ( 7.9 ) ( 1.1 ) 29.2

Loss on disposal of assets ( 0.1 ) ( 7.9 ) ( 1.1 )

Contingent purchase price ( 1.9 ) 0.6 ( 1.9 )

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Interest income 40.3 18.3 1.1

Loss on disposal of Barstool (8)

( 923.2 ) — —

Gain on Barstool Acquisition, net (9)

Gain on REIT transactions, net (10)

Loss on early extinguishment of debt — ( 10.4 ) —

Other (5)(11)

( 24.4 ) ( 127.3 ) ( 42.3 )

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

(1) The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club, Sam Houston and Valley Race Parks (the remaining 50 % was acquired by PENN on August 1, 2021), the Company’s joint venture interests in Freehold Raceway, and our management contract for Retama Park Racetrack.

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

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

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

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

(3) We define Adjusted EBITDAR as earnings before interest expense, net, interest income, income taxes, depreciation and amortization, rent expense associated with triple net operating leases (see footnote (4) below), stock-based compensation, debt extinguishment charges, impairment losses, insurance recoveries, net of deductible charges, changes in the estimated fair value of our contingent purchase price obligations, gain or loss on disposal of assets, the difference between budget and actual expense for cash-settled stock-based awards, pre-opening expenses (see footnote (5) below), and other.

payroll, professional fees, travel expenses and other general and

administrative expenses that do not directly relate or have not otherwise been allocated.

Corporate overhead costs were $ 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.

loss on disposal of a business;

non-cash gains/losses associated with REIT transactions;

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

Adjusted EBITDAR is also inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (see footnote (7) below) added back for Barstool and our Kansas Entertainment joint venture.

(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, our individual triple net leases with GLPI for the real estate assets used in the operation of Tropicana (on September 26, 2022, we sold the equity interests to Bally’s which terminated the Tropicana Lease with GLPI) and 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 (of which the Tropicana Lease, Meadows Lease, Margaritaville Lease and the Greektown Lease are defined in “ Note 12 , Leases ” ) and are referred to collectively as our “triple net operating leases”.

As a result of the Lease Modification defined in Note 12 , “Leases” , the land and building components associated with the operations of Dayton and Mahoning Valley are classified as operating leases which is recorded to rent expense, as compared to prior to the Lease Modification, whereby the land components of substantially all of the Master Lease properties were classified as operating leases and recorded to rent expense.

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

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

(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.

(ii) Meadows Lease;

(iii) Margaritaville Lease;

(iv) Greektown Lease;

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

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

(iii) Meadows Lease;

(iv) Margaritaville Lease;

(v) Greektown Lease;

and (vi) Tropicana Lease.

(5) 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.

(6) Amount for 2022 primarily relates to $ 116.4 million of impairment charges in the Northeast segment.

(7) 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.

(8) Includes unrealized holding losses on our equity securities of $ 69.9 million, realized and unrealized losses on our equity securities of $ 24.9 million, and unrealized gains on our equity securities of $ 106.7 million for the years ended December 31, 2022, 2021, and 2020, respectively, which are discussed in Note 19, “Fair Value Measurements.” Additionally, includes a $ 29.9 million gain on our equity method investment for the year ended December 31, 2021, which is discussed in Note 7, “ Investments in and Advances to Unconsolidated Affiliates .

” Also consists of non-recurring acquisition and transaction costs of $ 52.1 million and $ 43.1 million and finance transformation costs associated with the implementation of our new Enterprise Resource Management system for the years ended December 31, 2022 and 2021, respectively.

(6) 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 .

(7) 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.

(8) Relates to the loss incurred on the sale of 100 % of the outstanding shares of Barstool which was completed on August 8, 2023.

See Note 6, “Acquisitions and Dispositions.”

(9) Includes a gain of $ 66.5 million associated with Barstool related to remeasurement of the equity investment immediately prior to the acquisition date of February 17, 2023 and a gain of $ 16.9 million related to the acquisition of the remaining 64 % of Barstool common stock.

See Note 6, “Acquisitions and Dispositions.”

(10) Upon the execution of the February 21, 2023 AR PENN Master Lease and the 2023 Master Lease, both effective January 1, 2023, we recognized a gain of $ 500.8 million as a result of the reclassification and remeasurement of lease components.

See Note 12, “Leases.”

(11) For the year ended December 31, 2023, primarily relates to unrealized holding losses on our equity securities of $ 6.4 million and non-recurring acquisition and transaction costs of $ 25.0 million, partially offset by dividend income received.

See Note 19, “Fair Value Measurements.”

For the year ended December 31, 2022, primarily relates to unrealized holding losses on our equity securities of $ 69.9 million and non-recurring acquisition and transaction costs of $ 52.1 million.

See Note 19, “Fair Value Measurements.”

For the year ended December 31, 2021, primarily relates to realized and unrealized losses on our equity securities of $ 24.9 million, non-recurring acquisition and transaction costs of $ 43.1 million, offset by a gain on our equity method investment of $ 29.9 million.

See Note 19, “Fair Value Measurements” and Note 7, “Investments in and Advances to Unconsolidated Affiliates.”

The table below presents capital expenditures by segment:

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Equity Securities

As of December 31, 2022 and 2021, we held $ 17.1 million and $ 84.3 million, respectively, in equity securities of ordinary shares which are reported as “Other assets” in our Consolidated Balance Sheets.

During the year ended December 31, 2021, all warrants were exercised for ordinary shares which resulted in a loss of $ 20.1 million included in “Other,” as reported in “Other income (expenses)” within our Consolidated Statements of Operations.

These equity securities are the result of PENN Interactive entering into multi-year agreements with third-party sports betting operators for online sports betting and iCasino market access across our portfolio.

During the years ended December 31, 2022, 2021, and 2020, we recognized unrealized holding losses of $ 69.9 million, realized and unrealized losses of $ 24.9 million, and an unrealized gain of $ 106.7 million, respectively, related to these equity securities, which are included in “Other” as reported in “Other income (expenses)” within our Consolidated Statements of Operations.

The fair value of the equity securities was determined using Level 2 inputs, which use market approach valuation techniques.

The primary inputs to those techniques include the quoted market price of the equity securities, foreign currency exchange rates, a discount for lack of marketability (“DLOM”) with respect to the ordinary shares, and a Black-Scholes option pricing model previously associated with the exercised warrants.

The DLOM is based on the remaining term of the relevant lock-up periods and the volatility associated with the underlying equity securities.

The Black-Scholes option pricing model utilizes the exercise price of the warrants, a risk-free rate, volatility associated with the underlying equity securities and the expected life of the warrants.

As of December 31, 2023 and 2022, we held $ 10.7 million and $ 17.1 million, in equity securities of ordinary shares, respectively, which are reported as “Other assets” in our Consolidated Balance Sheets.

These equity securities are the result of PENN Interactive entering into multi-year agreements with third-party online sports betting and/or iCasino operators for online sports betting and iCasino market access across our portfolio.

We recognized unrealized holding losses of $ 6.4 million, unrealized holding losses of $ 69.9 million, and realized and unrealized holding losses of $ 24.9 million during the years ended December 31, 2023, 2022, and 2021, respectively, related to these equity securities, which are included in “Other” as reported in “Other income (expenses)” within our Consolidated Statements of Operations.

As of December 31, 2023, the fair value of the equity securities was determined using Level 1 inputs, which use market approach valuation techniques.

The primary inputs to those techniques include the quoted market price of the equity securities and foreign currency exchange rates.

As of December 31, 2022, the fair value of the equity securities was determined using Level 2 inputs, which use market approach valuation techniques.

The DLOM was based on the remaining term of the relevant lock-up periods and the volatility associated with the underlying equity securities.

Available-for-Sale Debt Securities

The Company acquired 12.0 % secured convertible notes on April 7, 2023 for $ 20.0 million, due on the third-year anniversary of the date of issuance, which are reported in “Other assets” in our Consolidated Balance Sheets.

The terms contain optional and mandatory conversion provisions pursuant to which we will receive common stock upon conversion.

As of December 31, 2023, the fair value of the convertible notes were valued at $ 24.2 million, as such we recorded an unrealized gain to “Other comprehensive income (loss)” within our Consolidated Statements of Comprehensive Income (Loss).

The fair value of the convertible notes was determined using a binomial lattice model and is categorized as a Level 3 measurement.

Held-to-Maturity Securities and Promissory Notes

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In addition, we own 1.0 % of the equity of Retama Nominal Holder, LLC, which holds a nominal interest in the racing license used to operate Retama Park Racetrack, and a 75.5 % interest in Pinnacle Retama Partners, LLC (“PRP”), which owns the contingent gaming rights that may arise if gaming under the existing racing license becomes legal in Texas in the future.

As of December 31, 2022 and 2021, PRP held $ 7.9 million and $ 15.1 million in promissory notes issued by RDC, respectively.

As of December 31, 2022 and 2021, PRP held $ 6.7 million in local government corporation bonds issued by RDC, at amortized cost.

As of both December 31, 2023 and 2022, PRP held $ 7.9 million in promissory notes issued by RDC and $ 6.7 million in local government corporation bonds issued by RDC, at amortized cost.

The promissory notes and the local government corporation bonds are collateralized by the assets of Retama Park Racetrack.

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Long-term Debt

The fair value of our Term Loan A Facility, Term Loan B-1 Facility, Amended Term Loan A Facility, Amended Term Loan B Facility, 5.625 % Notes, 4.125 % Notes, and the Convertible Notes is estimated based on quoted prices in active markets and is classified as a Level 1 measurement.

The fair value of our Amended Term Loan A Facility, Amended Term Loan B Facility, 5.625 % Notes, 4.125 % Notes, and the Convertible Notes is estimated based on quoted prices in active markets and is classified as a Level 1 measurement.

Other long-term obligations as of December 31, 2023 and 2022 included a financing arrangement entered in February of 2021, the relocation fees for Dayton and Mahoning Valley, and the repayment obligation of the hotel and event center located near Hollywood Casino Lawrenceburg.

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The fair values of the Dayton and Mahoning Valley relocation fees and the Lawrenceburg repayment obligation are estimated based on rates consistent with the Company’s credit rating for comparable terms and debt instruments and are classified as Level 2 measurements.

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

Additionally, in February 2021, we entered into a third-party 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 and the fair value of the financing obligation is based on what we expect to be settled in a future period of which the principal is contingent and predicated on other events, plus accreted period non-cash interest using an effective interest rate of 27.0 % until the claims and related obligation is settled.

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Other Liabilities

Other liabilities as of December 31, 2022 includes contingent purchase price liabilities related to Plainridge Park Casino and Hitpoint, of which Hitpoint was acquired on May 11, 2021.

The Hitpoint contingent purchase price liability is payable in installments up to a maximum of $ 1.0 million in the form of cash and equity, on the first three anniversaries of the acquisition close date and is based on the achievement of mutual goals established by the Company and Hitpoint.

As of December 31, 2022, there are two annual achievement periods remaining.

Other liabilities as of December 31, 2023 include contingent purchase price liabilities related to Plainridge Park Casino and Hitpoint, which was acquired on May 11, 2021.

The Hitpoint contingent purchase price liability is payable in installments up to

a maximum of $ 1.0 million in the form of cash and equity, on the first three anniversaries of the acquisition close date and is based on the achievement of mutual goals established by the Company and Hitpoint.

As of December 31, 2023, there is one annual achievement period remaining.

The Plainridge Park Casino contingent purchase price liability is calculated based on earnings of the gaming operations over the first ten years of operations, which commenced on June 24, 2015.

As of December 31, 2022, we were contractually obligated to make three additional annual payments.

As of December 31, 2023, we were contractually obligated to make two additional annual payments.

The fair value of the Plainridge Park Casino contingent purchase price liability is estimated based on an income approach using a discounted cash flow model.

These contingent purchase price liabilities have been classified as a Level 3 measurement and are included within our Consolidated Balance Sheets in “Accrued expenses and other current liabilities” or “Other long-term liabilities,” depending on the timing of the next payment.

Additionally, Other liabilities as of December 31, 2023, include $ 70.0 million tax indemnification described in Note 6, “Acquisitions and Dispositions.” Liabilities associated with the indemnification of $ 35.0 million were recorded in “Accrued expenses and other current liabilities” and $ 35.0 million were recorded in “Other long-term liabilities” within our Consolidated Balance Sheets.

The indemnity has been classified as a Level 3 measurement.

Key assumptions used to estimate the fair value of the indemnification include the expected tax rate and the probability of potential outcomes based on valuation methods that utilize unobservable inputs that are significant to the overall fair value as of December 31, 2023.

The assessment of the significance of a particular input to the fair value measurement requires judgment.

The carrying amounts and estimated fair values by input level of the Company’s financial instruments were as follows:

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Equity securities $ 10.7 $ 10.7 $ 10.7 $ — $ —

Available-for-sale debt securities $ 24.2 $ 24.2 $ — $ — $ 24.2

Held-to-maturity securities $ 6.7 $ 6.7 $ — $ 6.7 $ —

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Other liabilities $ 79.0 $ 78.9 $ — $ 2.7 $ 76.2

Puts and calls related to certain Barstool shares $ 0.4 $ 0.4 $ — $ 0.4 $ —

December 31, 2022

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Promissory notes $ 7.9 $ 7.9 $ — $ 7.9 $ —

Puts and calls related to certain Barstool shares $ 1.9 $ 1.9 $ — $ 1.9 $ —

Financial liabilities:

Long-term debt

Senior Secured Credit Facilities $ 1,544.5 $ 1,559.6 $ 1,559.6 $ — $ —

Amended Credit Facilities $ 1,503.6 $ 1,514.7 $ 1,514.7 $ — $ —

5.625 % Notes

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Other liabilities $ 9.9 $ 9.6 $ — $ 2.4 $ 7.2

The following table summarizes the changes in fair value of our Level 3 liabilities measured on a recurring basis:

(in millions) Other Liabilities

Puts and calls related to certain Barstool shares $ 0.4 $ 0.4 $ — $ 0.4 $ —

The following table summarizes the changes in fair value of our Level 3 assets and liabilities measured on a recurring basis:

(in millions) Other Assets and Liabilities

Balance as of January 1, 2021

Payments ( 9.1 )

Included in loss (1)

Balance as of December 31, 2020

Additions 75.5

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Payments ( 2.7 )

Included in earnings (1)

Included in loss (1)

Balance as of December 31, 2022

Additions 90.0

Interest 36.1

Payments ( 2.9 )

Included in loss and other comprehensive loss (1)(2)

Balance as of December 31, 2023

(1) The expense is included in “ General and administrative ” within our Consolidated Statements of Operations.

The following table sets forth the assets measured at fair value on a non-recurring basis as of December 31, 2022, which pertained to our Northeast segment.

There were no impairment charges to goodwill, gaming licenses, and trademarks for the year ended December 31, 2021.

(2) Includes unrealized gains and losses on debt securities within our Consolidated Statements of Comprehensive Income (Loss).

The following table sets forth the assets measured at fair value on a non-recurring basis as of December 31, 2023 and 2022.

(in millions) Valuation Date Valuation Technique Level 1 Level 2 Level 3 Total Balance Total

Goodwill 10/1/2023 Discounted cash flow and market approach $ — $ — $ — $ — $ 30.0

Gaming licenses 10/1/2023 Discounted cash flow $ — $ — $ 130.0 $ 130.0 $ 100.6

Gaming licenses 10/1/2022 Discounted cash flow $ — $ — $ 74.0 $ 74.0 $ 13.6

9/30/2022 Discounted cash flow and market approach $ — $ — $ 30.0 $ 30.0 $ 37.4

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See Note 9, “Goodwill and Other Intangible Assets” for more information.

The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 liabilities on a recurring basis as of December 31, 2022:

The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 assets and liabilities on a recurring basis as of December 31, 2023:

Valuation Technique Unobservable Input Discount Rate

Available-for-sale debt securities Discounted cash flow Discount rate 35.0 %

Other long-term obligation Discounted cash flow Discount rate 27.0 %

Contingent purchase price - Plainridge Park Casino Discounted cash flow Discount rate 6.7 %

As discussed in Note 9, “Goodwill and Other Intangible Assets,” we recorded impairments on goodwill and our gaming licenses, which are indefinite-lived intangible assets, at the Hollywood Casino at Greektown reporting unit as a result of the third quarter of 2022 interim assessment for impairment.

Our annual assessment for impairment as of October 1, 2022, resulted in an additional impairment charge on the gaming license at PNRC.

As discussed in Note 9, “Goodwill and Other Intangible Assets,” we recorded impairment on our goodwill at the Greektown reporting unit and on our gaming licenses associated with Greektown, PNRC, and Ameristar East Chicago, which are indefinite-lived intangible assets, as a result of our 2023 annual assessment for impairment.

Additionally, we recorded impairments on our goodwill and gaming licenses associated with Greektown as a result of the third quarter of 2022 interim assessment for impairment.

Our annual assessment for impairment as of October 1, 2022 resulted in an additional impairment charge associated with our gaming license at PNRC.

The following table presents quantitative information about the significant unobservable inputs used in the fair value measurements of other indefinite-lived intangible assets as of the valuation date below:

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Long-term revenue growth rate 2.0 %

As of December 31, 2022

Gaming licenses $ 74.0 Discounted cash flow Discount rate 13.0 %

Long-term revenue growth rate 2.0 %

As of September 30, 2022

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Rent expense was $ 1.1 million, $ 1.1 million, and $ 1.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

One lease was renewed in the current year and will expire in December 2025.

One lease was renewed in the prior year and will expire in December 2025.

The other long-term lease will expire in August 2026.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data