What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-02 compared with 2023-11-02 · 290 added, 545 removed, 775 unchanged (52% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data) September 30,

(in millions, except share and per share data) March 31,

2024 December 31,

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Prepaid expenses 156.6 225.6

Inventory, net 11.4 11.1

Other current assets 50.4 42.6

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Other intangible assets, net 1,605.5 1,618.2

Lease right-of-use assets 6,261.8 6,103.3

Operating lease right-of-use assets 4,189.3 4,264.7

Finance lease right-of-use assets 2,019.1 2,041.0

Other assets 190.7 187.3

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Current portion of financing obligations 41.9 41.3

Current portion of lease liabilities 321.0 194.3

Current portion of operating lease liabilities 307.4 302.3

Current portion of finance lease liabilities 37.4 40.3

Accrued expenses and other current liabilities 865.2 1,021.9

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Long-term portion of financing obligations 2,375.6 2,386.1

Long-term portion of lease liabilities 5,968.6 5,903.0

Long-term portion of operating lease liabilities 3,868.8 3,944.1

Long-term portion of finance lease liabilities 2,053.3 2,062.5

Deferred income taxes 44.8 117.6

5 unchanged sentences

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 no shares and 581 shares outstanding)

Common stock ($ 0.01 par value, 400,000,000 shares authorized in both periods, 176,320,721 and 172,632,389 shares issued, and 151,153,819 and 152,903,708 shares outstanding)

Exchangeable shares ($ 0.01 par value, 768,441 shares authorized in both periods, 700,393 and 697,539 shares issued, 560,388 and 620,019 shares outstanding)

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

Series D Preferred stock ($ 0.01 par value, 5,000 shares authorized, no shares issued and outstanding)

Common stock ($ 0.01 par value, 400,000,000 shares authorized, 177,037,707 and 176,719,596 shares issued, and 151,870,805 and 151,552,694 shares outstanding)

Exchangeable shares ($ 0.01 par value, 768,441 shares authorized, 768,441 and 700,393 shares issued, 557,174 and 560,267 shares outstanding)

Treasury stock, at cost, ( 25,166,902 shares repurchased in both periods)

( 779.5 ) ( 779.5 )

Additional paid-in capital 4,459.9 4,436.6

Retained earnings 22.6 154.5

Accumulated deficit ( 450.2 ) ( 335.5 )

Accumulated other comprehensive loss ( 157.3 ) ( 121.3 )

Total PENN Entertainment stockholders’ equity 3,482.6 3,597.7

Total PENN Entertainment, Inc.

stockholders’ equity 3,074.7 3,202.1

Non-controlling interest ( 2.7 ) ( 2.5 )

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CONSOLIDATED STATEMENTS OF OPERATIONS

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

For the three months ended March 31,

(in millions, except per share data) 2024 2023

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Depreciation and amortization 108.7 107.5

Impairment losses — 104.6 — 104.6

Loss on disposal of Barstool 923.2 — 923.2 —

Total operating expenses 1,628.3 1,474.2

Operating income (loss) ( 21.4 ) 199.1

( 786.4 ) 136.7 ( 381.8 ) 731.1

Other income (expenses)

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Gain on REIT transactions, net — 500.8

Loss on early extinguishment of debt — — — ( 10.4 )

Other ( 1.3 ) ( 1.0 )

Total other expenses ( 100.4 ) ( 195.5 ) 290.1 ( 608.3 )

Total other income (expenses) ( 106.1 ) 483.2

Income (loss) before income taxes ( 127.5 ) 682.3

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Net loss attributable to non-controlling interest 0.2 0.1

Net income (loss) attributable to PENN Entertainment $ ( 724.8 ) $ 123.5 $ ( 131.9 ) $ 201.3

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

$ ( 114.7 ) $ 514.5

Earnings per share:

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

For the three months ended March 31,

(in millions) 2024 2023

Net income (loss) $ ( 114.9 ) $ 514.4

Other comprehensive loss:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment during the period ( 36.0 ) 8.2

Other comprehensive loss ( 44.7 ) ( 119.8 ) ( 0.1 ) ( 146.7 )

Other comprehensive income (loss) ( 36.0 ) 8.2

Total comprehensive income (loss) ( 150.9 ) 522.6

Comprehensive loss attributable to non-controlling interest 0.2 0.1

Comprehensive income (loss) attributable to PENN Entertainment $ ( 769.5 ) $ 3.7 $ ( 132.0 ) $ 54.6

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

$ ( 150.7 ) $ 522.7

See accompanying notes to the unaudited Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended September 30, 2023 and 2022

Preferred Stock Common Stock Treasury Stock Additional

Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Total PENN Stockholders’ Equity Non-Controlling Interest Total Stockholders’ Equity

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

Balance as of July 1, 2023 354 $ 11.8 150,373,466 $ 1.8 560,388 $ — $ ( 779.7 ) $ 4,353.0 $ 747.4 $ ( 124.0 ) $ 4,210.3 $ ( 1.5 ) $ 4,208.8

Share-based compensation arrangements — — 426,553 — — — — 35.2 — — 35.2 — 35.2

Preferred stock conversions ( 354 ) ( 11.8 ) 353,800 — — — — 11.8 — — — — —

Currency translation adjustment — — — — — — — — — ( 44.7 ) ( 44.7 ) — ( 44.7 )

Net loss — — — — — — — — ( 724.8 ) — ( 724.8 ) ( 0.3 ) ( 725.1 )

Other — — — — — — 0.1 6.5 — — 6.6 — 6.6

Balance as of September 30, 2023 — $ — 151,153,819 $ 1.8 560,388 $ — $ ( 779.6 ) $ 4,406.5 $ 22.6 $ ( 168.7 ) $ 3,482.6 $ ( 1.8 ) $ 3,480.8

Balance as of July 1, 2022 581 $ 19.4 160,725,723 $ 1.7 624,658 $ — $ ( 370.5 ) $ 4,187.3 $ 10.2 $ ( 81.3 ) $ 3,766.8 $ ( 0.8 ) $ 3,766.0

Share-based compensation arrangements — — 62,935 — — — — 13.6 — — 13.6 — 13.6

Share repurchases — — ( 5,348,809 ) — — — ( 168.0 ) — — — ( 168.0 ) — ( 168.0 )

Common stock issuance — — 4,055 — — — — 0.2 — — 0.2 — 0.2

Exchangeable shares conversions — — 4,305 — ( 4,305 ) — — — — — — — —

Currency translation adjustment — — — — — — — — — ( 119.8 ) ( 119.8 ) — ( 119.8 )

Net income (loss) — — — — — — — — 123.5 — 123.5 ( 0.3 ) 123.2

Other — — — — — — — 0.8 — — 0.8 — 0.8

Balance as of September 30, 2022 581 $ 19.4 155,448,209 $ 1.7 620,353 $ — $ ( 538.5 ) $ 4,201.9 $ 133.7 $ ( 201.1 ) $ 3,617.1 $ ( 1.1 ) $ 3,616.0

See accompanying notes to the unaudited Consolidated Financial Statements.

Nine Months Ended September 30, 2023 and 2022

Three Months Ended March 31, 2024 and 2023

Preferred Stock Common Stock Treasury Stock Additional

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Share-based compensation arrangements — — 246,970 — — — — 11.9 — — 11.9 — 11.9

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 — — — — 68,048 — — — — — — — —

Exchangeable shares conversions — — 62,485 — ( 62,485 ) — — — — — — — —

Exchangeable share conversions — — 71,141 — ( 71,141 ) — — — — — — — —

Investment Agreement warrants (Note 11) — — — — — — — 14.3 — — 14.3 — 14.3

Currency translation adjustment — — — — — — — — — ( 36.0 ) ( 36.0 ) — ( 36.0 )

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Other — — — — — — — ( 2.9 ) — — ( 2.9 ) — ( 2.9 )

Balance as of September 30, 2023 — $ — 151,153,819 $ 1.8 560,388 $ — $ ( 779.6 ) $ 4,406.5 $ 22.6 $ ( 168.7 ) $ 3,482.6 $ ( 1.8 ) $ 3,480.8

Balance as of March 31, 2024 — $ — 151,870,805 $ 1.8 557,174 $ — $ ( 779.5 ) $ 4,459.9 $ ( 450.2 ) $ ( 157.3 ) $ 3,074.7 $ ( 2.7 ) $ 3,072.0

Balance as of January 1, 2023 581 $ 19.4 152,903,708 $ 1.7 620,019 $ — $ ( 629.5 ) $ 4,220.2 $ 154.5 $ ( 168.6 ) $ 3,597.7 $ ( 1.1 ) $ 3,596.6

Share-based compensation arrangements — — 148,439 — — — — 16.5 — — 16.5 — 16.5

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

Share repurchases — — ( 1,646,963 ) — — — ( 50.0 ) — — — ( 50.0 ) — ( 50.0 )

Preferred stock conversions ( 227 ) ( 7.6 ) 226,800 — — — — 7.6 — — — — —

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

Exchangeable shares conversions — — 32,706 — ( 32,706 ) — — — — — — — —

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

Exchangeable share conversions — — 62,115 — ( 62,115 ) — — — — — — — —

Currency translation adjustment — — — — — — — — — 8.2 8.2 — 8.2

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

Net income (loss) — — — — — — — — 514.5 — 514.5 ( 0.1 ) 514.4

Other — — — 0.1 — — — 8.5 — — 8.6 — 8.6

Balance as of September 30, 2022 581 $ 19.4 155,448,209 $ 1.7 620,353 $ — $ ( 538.5 ) $ 4,201.9 $ 133.7 $ ( 201.1 ) $ 3,617.1 $ ( 1.1 ) $ 3,616.0

Balance as of March 31, 2023 354 $ 11.8 154,136,908 $ 1.8 560,758 $ — $ ( 679.5 ) $ 4,333.6 $ 669.0 $ ( 160.4 ) $ 4,176.3 $ ( 1.2 ) $ 4,175.1

See accompanying notes to the unaudited Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30,

For the three months ended March 31,

(in millions) 2024 2023

1 unchanged sentence

Net income (loss) $ ( 114.9 ) $ 514.4

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 108.7 107.5

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Non-cash operating lease expense 77.7 86.5

Loss on disposal of Barstool 923.2 —

Gain on Barstool Acquisition, net — ( 83.4 )

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Holding loss on equity securities 1.5 3.2

Loss on sale or disposal of property and equipment — 7.0

Gain on Hurricane Laura ( 13.9 ) ( 10.7 )

Gain on sale or disposal of property and equipment ( 0.2 ) —

Income from unconsolidated affiliates ( 7.2 ) ( 2.6 )

2 unchanged sentences

Stock-based compensation 11.9 16.5

Impairment losses — 104.6

Loss on early extinguishment of debt — 10.4

Investment Agreement warrant expense 18.7 —

Changes in operating assets and liabilities, net of businesses acquired

Accounts receivable 35.9 31.1

Inventory ( 0.1 ) ( 1.0 )

Prepaid expenses and other current assets ( 0.5 ) ( 25.8 )

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Other 4.9 0.8

Net cash provided by operating activities 540.7 760.0

For the nine months ended September 30,

(in millions) 2023 2022

Net cash provided by (used in) operating activities ( 68.7 ) 147.7

Investing activities

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Consideration paid for Barstool, net of cash acquired — ( 314.6 )

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

Proceeds from sale of property and equipment 0.2 4.9

Hurricane Laura insurance proceeds 9.0 25.4

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

Consideration paid for gaming licenses and other intangible assets ( 17.1 ) ( 4.1 )

Other ( 5.9 ) ( 0.4 )

Net cash used in investing activities ( 47.3 ) ( 378.2 )

For the three months ended March 31,

(in millions) 2024 2023

Financing activities

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

Repayments on credit facilities — ( 1,543.2 )

Principal payments on long-term debt ( 9.4 ) ( 9.4 )

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Repurchase of common stock — ( 50.0 )

Payments on insurance financing ( 12.2 ) —

Other ( 3.5 ) ( 2.9 )

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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 September 30, 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®, Barstool Sportsbook® and theScore Bet Sportsbook and Casino®.

As of March 31, 2024, PENN operated 43 properties in 20 states, online sports betting in 19 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.

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

In November 2023, pending regulatory approval, the existing Barstool Sportsbook will be rebranded and launched across all online platforms in the United States as ESPN BET, and our online product will include a Hollywood-branded integrated iCasino where permitted.

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

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

PENN’s ability to leverage the leading sports media brands in the United States (ESPN) and Canada (theScore) is central to our highly differentiated strategy to expand our footprint and efficiently grow our customer ecosystem.

The Company’s focus 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 30 million members a unique set of rewards and experiences across business channels.

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

GLPI) (“GLPI”), a real estate investment trust (“REIT”), and include the AR PENN Master Lease, 2023 Master Lease, and Pinnacle Master Lease (as such terms are defined in Note 8, “Leases” and collectively referred to as the “Master Leases”).

Basis of Presentation:

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Reclassifications:

Certain reclassifications have been made to conform the prior period presentation.

Certain reclassifications have been made to conform the prior period presentation with current year presentation.

Use of Estimates:

The preparation of unaudited 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 financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period.

Estimates used by us may 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 fl ows 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 the periods presented within our unaudited Consolidated Financial Statements.

Actual results may differ from those estimates.

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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, iCasino and social gaming operations, management of retail sports betting, media, and the operating results of Barstool Sports, Inc.

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 bet ting, media, and in the prior year, the operating results of Barstool Sports, Inc.

(“Barstool” or “Barstool Sports”).

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

(4) 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.

(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.

Revenue Recognition:

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

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.

Revenues recorded to “Food, beverage, hotel, and other” and offset to “Gaming” revenues were as follows:

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

For the three months ended March 31,

(in millions) 2024 2023

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Total complimentaries associated with gaming contracts $ 90.2 $ 87.3

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 PENN Play 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 operators for online sports betting and iCasino market access.

Our PENN Play 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 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 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 program, which is included in “Accrued expenses and other current liabilities” within our unaudited Consolidated Balance Sheets, was $ 34.4 million and $ 39.3 million as of September 30, 2023 and December 31, 2022, 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 unaudited Consolidated Balance Sheets, was $ 35.8 million and $ 33.1 million as of March 31, 2024 and December 31, 2023, 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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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 $ 114.9 million and $ 125.8 million as of September 30, 2023 and December 31, 2022, respectively, and are included in “Accrued expenses and other current liabilities” within our unaudited Consolidated Balance Sheets.

The Company’s advance payments on goods and services yet to be provided and for unpaid wagers were $ 144.4 million and $ 192.6 million as of March 31, 2024 and December 31, 2023, respectively, and are included in “Accrued expenses and other current liabilities” within our unaudited Consolidated Balance Sheets.

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 $ 0.7 million and $ 0.5 million of previously deferred revenue during the three months ended September 30, 2023 and 2022, respectively, and $ 2.4 million and $ 4.2 million during the nine months ended September 30, 2023 and 2022, 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 unaudited Consolidated Balance Sheets, was $ 56.5 million and $ 46.5 million as of September 30, 2023 and December 31, 2022, respectively.

During the three months ended March 31, 2024 and 2023, we recognized $ 0.9 million and $ 0.7 million, respectively.

As of March 31, 2024 and December 31, 2023, our deferred revenue liability was $ 43.8 million and $ 41.9 million, respectively, majority of which is included in “Other long-term liabilities” within our unaudited Consolidated Balance Sheets.

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

Advertising expenses, which generally relate to media placement costs and are primarily included in “Gaming” expenses within the unaudited Consolidated Statements of Operations, were $ 18.4 million and $ 27.1 million for the three months ended September 30, 2023 and 2022, respectively, and $ 62.8 million and $ 69.7 million for the nine months ended September 30, 2023 and 2022, respectively.

Advertising expenses, which primarily relate to media marketing services and brand and other rights provided by ESPN pursuant to the Sportsbook Agreement (as defined in Note 5, “Acquisitions and Dispositions” ), and other media placement costs and are primarily included in “Gaming” expenses within the unaudited Consolidated Statements of Operations, were $ 136.0 million and $ 23.6 million for the three months ended March 31, 2024 and 2023, respectively.

Gaming and Pari-mutuel Taxes:

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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” expenses or “Food, beverage, hotel, and other” expenses within the unaudited Consolidated Statements of Operations, and were $ 562.9 million and $ 540.3 million for the three months ended September 30, 2023 and 2022, respectively, and $ 1.7 billion and $ 1.6 billion for the nine months ended September 30, 2023 and 2022, respectively.

Inventory, net:

Inventory is accounted for using the average cost or first-in or first-out (“FIFO”) method.

Inventory accounted for under the average cost and FIFO methods are stated at the lower of cost or net realizable value.

Inventory balances substantially consist of finished goods and were $ 5.3 million and $ 5.0 million as of September 30, 2023 and December 31, 2022, respectively.

Gaming and pari-mutuel taxes are recorded in “Gaming” expenses or “Food, beverage, hotel, and other” expenses within the unaudited Consolidated Statements of Operations and were $ 592.0 million and $ 584.8 million for the three months ended March 31, 2024 and 2023, 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.

Earnings (Loss) Per Share:

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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.

As described in Note 13, “Stockholders’ Equity and Stock-based Compensation,” on August 11, 2023 all remaining 354 outstanding shares of the Company’s Series D Preferred Stock (as defined in Note 13, “Stockholders’ Equity and Stock-based Compensation” ) became eligible for the conversion and were converted to common stock.

There are no outstanding shares of Series D Preferred Stock as of September 30, 2023.

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

therefore, in reporting periods where the Company is 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.

Holders of the Company’s Series D Preferred Stock (as defined in Note 12, “Stockholders' Equity and Stock-based Compensation” ) 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.

See Note 13, “Earnings per Share” for more information.

As discussed in Note 12, “Stockholders' Equity and Stock-based Compensation , ” all remaining outstanding shares of Series D Preferred Stock were converted to common stock during the third quarter of 2023.

There were no outstanding shares of Series D Preferred Stock as of March 31, 2024.

Guarantees and Indemnifications:

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

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

The Company accounts for indemnity obligations in accordance with Accounting Standards Codification (“ASC”) Topic 460-20, “Contingencies” and records a liability at fair value.

Pursuant to the Barstool SPA, 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.

The Company has recorded liabilities of $ 70.0 million and none for this agreement as of September 30, 2023 and December 31, 2022, respectively.

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

Claims under the indemnification are paid upon demand.

In the second quarter of 2024, the Company expects $ 30.5 million in settlement costs under this indemnification obligation.

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.

As of both March 31, 2024 and December 31, 2023, the Company has recorded liabilities of $ 70.0 million for this agreement.

See Note 5, “Acquisitions and Dispositions” and Note 14, “Fair Value Measurements ” for more information.

Voting Interest Entities and Variable Interest Entities:

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Note 3— New Accounting Pronouncements

Accounting Pronouncements Adopted

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

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

ASU 2022-03 will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted.

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.

ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The adoption of ASU 2022-03, which was effective January 1, 2024, did not have a material impact on our unaudited Consolidated Financial Statements.

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

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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 .

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, 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 unaudited Consolidated Balance Sheets.

As we deemed it probable that the proceeds to be recovered from our insurers would exceed the total of our insurance recovery recorded and our insurers’ deductible and coinsurance, we did not record any loss associated with the impact of this natural disaster.

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 unaudited Consolidated Financial Statements.

During the three months ended September 30, 2023 and 2022, we received $ 0.3 million and $ 1.9 million of insurance claim proceeds related to property damage, respectively, which resulted in a gain of $ 0.3 million and $ 1.9 million, respectively.

During the nine months ended September 30, 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 unaudited Consolidated Statements of Operations.

Additionally, during the three and nine months ended September 30, 2023, we received $ 14.0 million in business interruption insurance proceeds, which are included in “General and administrative” expenses within the unaudited Consolidated Statements of Operations.

Subsequent to September 30, 2023, the Company received its final insurance payment related to business interruption proceeds totaling $ 5.6 million.

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

Life to date through

(in millions) September 30, 2023 December 31, 2022

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 $ 14.0 $ —

Deductible $ 15.0 $ 15.0

Coinsurance $ 2.5 $ 2.5

Clean-up, restoration, and other costs $ 52.8 $ 52.8

Fixed asset write-off $ 23.2 $ 23.2

Inventory write-off $ 0.2 $ 0.2

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

The adoption of ASU 2023-02, which was effective January 1, 2024, did not have a material impact on our unaudited Consolidated Financial Statements.

Accounting Pronouncements to be Implemented

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 expects that any impact would be limited to additional disclosures in the notes to the unaudited 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 unaudited Consolidated Financial Statements.

Note 4— Revenue Disaggregation

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(ii) food and beverage;

(iv) advertising;

and (vi) other.

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, and commissions received on ATM transactions.

and (iv) other.

Other revenues are principally comprised of PENN Interactive’s revenue from third-party online sports betting 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:

For the three months ended September 30, 2023

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

Other Intersegment Eliminations (2)

Gaming $ 610.8 $ 236.8 $ 94.5 $ 260.1 $ 49.9 $ — $ — $ 1,252.1

Food and beverage 35.4 35.5 18.2 15.0 — 0.5 — 104.6

Hotel 16.9 25.5 17.5 10.8 — — — 70.7

Advertising — — — — 19.8 — — 19.8

Retail 1.8 1.5 1.4 1.0 6.0 — — 11.7

Other 22.1 8.9 3.5 6.5 120.6 4.0 ( 5.1 ) 160.5

Total revenues $ 687.0 $ 308.2 $ 135.1 $ 293.4 $ 196.3 $ 4.5 $ ( 5.1 ) $ 1,619.4

For the three months ended September 30, 2022

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

Other Intersegment Eliminations (2)

Gaming $ 616.8 $ 260.0 $ 102.8 $ 268.7 $ 69.2 $ — $ — $ 1,317.5

Food and beverage 32.6 32.8 21.7 13.7 — 0.5 — 101.3

Hotel 13.0 26.4 25.7 9.1 — — — 74.2

Advertising — — — — 7.2 — — 7.2

Retail 1.6 1.6 1.8 0.4 — — — 5.4

Other 21.4 9.0 4.5 6.5 82.3 3.7 ( 8.0 ) 119.4

Total revenues $ 685.4 $ 329.8 $ 156.5 $ 298.4 $ 158.7 $ 4.2 $ ( 8.0 ) $ 1,625.0

For the nine months ended September 30, 2023

For the three months ended March 31, 2024

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

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Hotel 11.7 22.4 15.6 8.5 — — — 58.2

Advertising — — — — 92.5 — — 92.5

Retail 5.6 4.5 4.0 2.4 29.8 — — 46.3

Other 19.8 10.1 4.0 6.9 151.7 4.9 ( 10.0 ) 187.4

Total revenues $ 684.7 $ 298.5 $ 128.8 $ 291.2 $ 207.7 $ 6.0 $ ( 10.0 ) $ 1,606.9

For the nine months ended September 30, 2022

For the three months ended March 31, 2023

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

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Hotel 11.2 21.6 13.5 7.6 — — — 53.9

Advertising — — — — 23.9 — — 23.9

Retail 4.6 5.0 4.6 1.5 — — — 15.7

Other 21.7 10.1 4.5 6.9 150.6 4.8 ( 6.3 ) 192.3

Total revenues $ 700.5 $ 314.8 $ 129.7 $ 295.3 $ 233.5 $ 5.8 $ ( 6.3 ) $ 1,673.3

(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 $ 102.6 million and $ 63.0 million for the three months ended September 30, 2023 and 2022, respectively, and $ 283.4 million and $ 168.7 million for the nine months ended September 30, 2023, and 2022, respectively.

(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 $ 116.6 million and $ 92.3 million for the three months ended March 31, 2024 and 2023, respectively.

Additionally, the period ending March 31, 2023 included $ 19.9 million in advertising revenue and $ 8.3 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 .

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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 13, “Stockholders’ Equity and Stock-Based Compensation” 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.

We issued 2,442,809 shares of our common stock and utilized $ 315.3 million of cash to complete the Barstool Acquisition.

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 equity method 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 unaudited 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 unaudited 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

Lease right-of-use assets 13.5

Property and equipment 3.8

Goodwill 231.9

Other intangible assets

Barstool tradename 420.0

Advertising relationships 32.0

Other tradenames and brands 29.0

Customer relationships 11.0

Other long-term assets 18.7

Total assets $ 845.0

Accounts payable, accrued expenses and other current liabilities $ 38.7

Deferred income taxes 115.9

Other long-term liabilities 30.4

Total liabilities 185.0

Net assets acquired $ 660.0

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 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

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

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 July 1, 2023 through August 7, 2023, included in the unaudited Consolidated Statements of Operations, were $ 18.3 million and $ 7.8 million, respectively.

Barstool’s revenue and net loss for the period beginning February 17, 2023 through August 7, 2023, included in the unaudited 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 will rebrand its existing Barstool Sportsbook across all online platforms in the United States as ESPN BET (the “Sportsbook”) and will oversee daily operations of the Sportsbook.

For the period beginning February 17, 2023 through March 31, 2023, Barstool’s revenue and net loss included in the unaudited Consolidated Statements of Operations were $ 28.2 million and $ 3.3 million, respectively.

On August 8, 2023, PENN entered into a 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 11, “Commitments and Contingencies” for more information related to the Sportsbook Agreement.

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 Sports 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 unaudited 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 $ 70.0 million were recorded at September 30, 2023, in “Other long-term liabilities” within our unaudited Consolidated Balance Sheets.

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.

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 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.

Additionally , 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.

Upon the disposal of Barstool in the third quarter of 2023, PENN recognized a pre-tax loss 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).

See Note 14, “Fair Value Measurements ” for more information related to the indemnification liability.

For information on the tax-related impacts from the Barstool transactions, see Note 10, “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

P ursuant to the Barstool SPA, PEN N will indemnify Barstool and its subsidiaries and David Portnoy for certain tax matters.

Note 6— Goodwill and Other Intangible Assets

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Goodwill, net $ 94.7 $ 175.6 $ 200.2 $ 560.6 $ 1,664.0 $ — $ 2,695.1

Goodwill acquired during the period $ — $ — $ — $ — $ 231.9 $ — $ 231.9

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

Effect of foreign currency exchange rates — — — — ( 30.4 ) — ( 30.4 )

Balance as of September 30, 2023

Balance as of March 31, 2024

Goodwill, gross $ 923.5 $ 236.6 $ 216.8 $ 1,116.7 $ 1,633.6 $ 87.7 $ 4,214.9

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Goodwill, net $ 94.7 $ 175.6 $ 200.2 $ 560.6 $ 1,633.6 $ — $ 2,664.7

There were no impairment charges recorded to goodwill during the three and nine months ended September 30, 2023, as compared to a $ 37.4 million impairment charge recorded to goodwill during both the three and nine months ended September 30, 2022 which pertained to our Northeast segment.

During the three months ended September 30, 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.”

There were no impairment charges recorded to goodwill during the three months ended March 31, 2024 and 2023.

The table below presents the gross carrying amount, accumulated amortization, and net carrying amount of each major class of other intangible assets:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

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Total other intangible assets, net $ 1,871.0 $ ( 265.5 ) $ 1,605.5 $ 1,869.4 $ ( 251.2 ) $ 1,618.2

There were no impairment charges recorded to other intangible assets, net during the three and nine months ended September 30, 2023, as compared to a $ 65.4 million impairment charge recorded to other intangible assets, net during both the three and nine months ended September 30, 2022 which pertained to our Northeast segment.

During the three months ended September 30, 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 $ 14.3 million for both the three months ended September 30, 2023 and 2022, and $ 46.2 million and $ 44.2 million for the nine months ended September 30, 2023 and 2022, respectively.

The following table presents the estimated amortization expense based on our amortizing intangible assets as of September 30, 2023 (in millions):

There were no impairment charges recorded to other intangible assets, net during the three months ended March 31, 2024 and 2023.

Amortization expense related to our amortizing intangible assets was $ 12.6 million and $ 14.0 million for the three months ended March 31, 2024 and 2023, respectively.

The following table presents the estimated amortization expense based on our amortizing intangible assets as of March 31, 2024 (in millions):

Years ending December 31,

2023 (excluding the nine months ended September 30, 2023)

2024 (excluding the three months ended March 31, 2024)

Thereafter 8.3

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The table below presents long-term debt, net of current maturities, debt discounts and issuance costs:

(in millions) September 30,

(in millions) March 31,

2024 December 31,

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$ 2,718.1 $ 2,718.0

The following is a schedule of future minimum repayments of long-term debt as of September 30, 2023 (in millions):

The following is a schedule of future minimum repayments of long-term debt as of March 31, 2024 (in millions):

Years ending December 31:

2023 (excluding the nine months ended September 30, 2023)

2024 (excluding the three months ended March 31, 2024)

Thereafter 1,341.4

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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.

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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 8, “Leases” ).

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 nine months ended September 30, 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 will be amortized to interest expense over the life of the Amended Term Loan B Facility.

As of September 30, 2023 and December 31, 2022, the Company had conditional obligations under letters of credit issued pursuant to the Amended Credit Facilities with face amounts aggregating to $ 21.8 million and $ 22.5 million, respectively, resulting in $ 978.2 million and $ 977.5 million of available borrowing capacity under the Amended Revolving Credit Facility, respectively.

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 15, “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.

As of March 31, 2024 and December 31, 2023, the Company had conditional obligations under letters of credit issued pursuant to the Amended Credit Facilities with face amounts aggregating to $ 20.7 million and $ 21.7 million, respectively, resulting in $ 979.3 million and $ 978.3 million of available borrowing capacity under the Amended Revolving Credit Facility, respectively.

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 (the “Convertible Notes”) that mature, unless earlier converted, redeemed, or repurchased, on May 15, 2026 at a price of par.

As of September 30, 2023 and December 31, 2022, no Convertible Notes have been converted into the Company’s common stock.

The maximum number of shares that could be issued to satisfy the conversion feature of the Convertible Notes was 18,360,815 and the amount by which the Convertible Notes if-converted value exceeded its principal amount was $ 90.9 million, as of September 30, 2023.

As of March 31, 2024 and December 31, 2023, no Convertible Notes have been converted into the Company’s common stock.

The Convertible Notes consisted of the following components:

(in millions) September 30,

(in millions) March 31,

2024 December 31,

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The table below presents interest expense, net:

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

For the three months ended March 31,

(in millions) 2024 2023

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The table below presents interest expense related to the Convertible Notes:

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

For the three months ended March 31,

(in millions) 2024 2023

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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 2.6 years as of September 30, 2023.

Our Amended Credit Facilities, 5.625 % Notes and 4.125 % Notes, require us, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests.

The remaining term of the Convertible Notes was 2.1 years as of March 31, 2024.

Our Amended Credit Facilities, 5.625 % Notes due 2027 (the “ 5.625 % Notes”) and 4.125 % Notes due 2029 (the “ 4.125 % Notes”), require us, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests.

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

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If we are unable to meet our financial covenants or in the event of a cross-default, it could trigger an acceleration of payment terms.

As of September 30, 2023, the Company was in compliance with all required financial covenants.

As of March 31, 2024, the Company was in compliance with all required financial covenants.

The Company believes that it will remain in compliance with all of its required financial covenants for at least the next twelve months following the date of filing this Quarterly Report on Form 10-Q with the SEC.

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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 $ 9.3 million and $ 7.1 million for the three months ended September 30, 2023 and 2022, respectively, and $ 26.1 million and $ 20.0 million for the nine months ended September 30, 2023 and 2022, respectively.

The amount included in interest expense related to this obligation was $ 10.6 million and $ 8.1 million for the three months ended March 31, 2024 and 2023, respectively.

Ohio Relocation Fees

Other long-term obligations included $ 18.5 million and $ 27.4 million at September 30, 2023 and December 31, 2022, respectively, related to the relocation fees for Hollywood Gaming at Dayton Raceway (“Dayton”) and Hollywood Gaming at Mahoning Valley Race Course (“Mahoning Valley”), which opened in August 2014 and September 2014, respectively.

Other long-term obligations included $ 9.4 million at both March 31, 2024 and December 31, 2023 related to the relocation fees for Hollywood Gaming at Dayton Raceway (“Dayton”) and Hollywood Gaming at Mahoning Valley Race Course (“Mahoning Valley”), which opened in August 2014 and September 2014, respectively.

The relocation fee for each facility is payable as follows:

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

As of September 30, 2023 and December 31, 2022, other long-term obligations included $ 9.9 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.

As of March 31, 2024, the remaining balance of the relocation obligation of $ 9.4 million is included in “Current maturities of long-term debt” within our unaudited Consolidated Balance Sheets.

As of March 31, 2024 and December 31, 2023, other long-term obligations included $ 9.3 million and $ 10.0 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.

Effective in January 2015, by contractual agreement, we assumed a repayment obligation for the hotel and event center in the amount of $ 15.3 million, which was financed through a loan with the City of Lawrenceburg Department of Redevelopment, in exchange for conveyance of the property.

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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 right-of-use (“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 will be $ 284.1 million, consisting of $ 208.2 million of building base rent, $ 43.0 million of land base rent and $ 32.9 million of percentage rent (as such terms are defined in the AR PENN Master Lease).

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

On February 21, 2023, the Company and GLPI entered into an agreement to amend and restate the triple net master lease dated November 1, 2013 (the “AR PENN Master Lease”), effective January 1, 2023, to (i) remove the land and buildings for Hollywood Casino Aurora (“Aurora”), Hollywood Casino Joliet (“Joliet”), Hollywood Casino Columbus (“Columbus”), Hollywood Casino Toledo (“Toledo”) and the M Resort Spa Casino (“M Resort”), and (ii) make associated adjustments to the rent after which the initial rent in the AR PENN Master Lease was reset to $ 284.1 million, consisting of $ 208.2 million of building base rent, $ 43.0 million of land base rent, and $ 32.9 million of percentage rent (as such terms are defined in the AR PENN Master Lease).

Subsequent to the execution of the AR PENN Master Lease, the lease contains real estate assets associated with 14 of the Company’s gaming facilities used in its operations.

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

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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 November 1, 2023, for the lease year ending October 31, 2023, the fixed component of rent increased by $ 4.2 million.

The PENN Percentage Rent test date occurred on November 1, 2023 of which we are currently determining the impact to the performance component of rent which will be in effect until October 31, 2028.

We concluded the execution of the AR PENN Master Lease constituted a modification event under ASC Topic 842, “Leases” (“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.

As a result of the annual escalator, effective November 1, 2023, the fixed component of rent increased by $ 4.2 million.

The next annual escalator test date is scheduled to occur on 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.

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, 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 Topic 842, “Leases,” (“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 Topic 470, “Debt,” (“ASC 470”), and continued recognition of the underlying asset in “Property and equipment, net” within our unaudited Consolidated Balance Sheets.

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

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

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

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

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

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

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 Hollywood Casino at PENN National Race Course 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, 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 continued to be classified as financing obligations.

2023 Master Lease

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

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

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

The 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 unaudited Consolidated Balance Sheets;

Additionally, the 2023 Master Lease terminated the individual triple net leases associated with Meadows and Perryville, as such we (i) derecognized $ 171.9 million in ROU assets within our unaudited Consolidated Balance Sheets;

(ii) derecognized $ 165.5 million in lease liabilities within our unaudited 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 unaudited Consolidated Statements of Operations.

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

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

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 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 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.

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

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

The 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.

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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 of the Pinnacle Master Lease.

Both the next annual escalator and the next Pinnacle Percentage Rent reset are scheduled to occur on May 1, 2024.

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.

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”).

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

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

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

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

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

Both the next annual escalator and Pinnacle Percentage Rent reset are scheduled to occur on May 1, 2024.

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 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.

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.

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

Initial annual rent under the Morgantown Lease is $ 3.0 million, subject to a 1.50 % fixed annual escalation in each of the first three years subsequent to the facility opening, which occurred on December 22, 2021.

Thereafter, the lease will be subject to an annual escalator consisting 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 %.

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 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 unaudited Consolidated Balance Sheets.

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

Meadows Lease

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.

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 unaudited Consolidated Statements of Operations.

Margaritaville Lease

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On February 1, 2024, 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 $ 2.7 million.

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

Additionally, 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.

The next annual escalator test date and the next Margaritaville Percentage Rent reset are both scheduled to occur on February 1, 2025.

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

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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.

The payment structure under the Greektown Lease includes a fixed component, a portion subject to an annual escalator of up to 2 %

depending on an Adjusted Revenue to Rent Ratio (as defined in the Greektown Lease) of 1.85 :1, and a component that is based on performance, which is prospectively adjusted every two years by an amount equal to 4 % of the average change in net revenues of the property compared to a contractual baseline during the preceding two years (Greektown Percentage Rent”).

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.

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

The payment structure under the Greektown Lease includes a fixed component, a portion subject to an annual escalator of up to 2 % depending on an Adjusted Revenue to Rent Ratio (as defined in the Greektown Lease) of 1.85 :1, and a component that is based on performance, which is prospectively adjusted every two years by an amount equal to 4 % of the average change in net revenues of the property compared to a contractual baseline during the preceding two years (Greektown Percentage Rent”).

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

The next Greektown Percentage Rent reset is scheduled to occur on June 1, 2025.

In April 2024, 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 ninth lease year (June 1, 2027).

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 unaudited Consolidated Statements of Operations.

Tropicana Lease

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

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 our unaudited Consolidated Balance Sheets.

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 unaudited 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 (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.

In addition to any operating lease components contained within the Master Leases, Margaritaville Lease, and Greektown 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.

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.

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

The following is a maturity analysis of our operating leases, finance leases and financing obligations as of September 30, 2023:

The following is a maturity analysis of our operating leases, finance leases and financing obligations as of March 31, 2024:

(in millions) Operating Leases Finance Leases Financing Obligations

Year ended December 31,

2023 (excluding the nine months ended September 30, 2023) $ 148.4 $ 39.7 $ 41.6

2024 (excluding the three months ended March 31, 2024) $ 463.7 $ 109.7 $ 124.9

2025 611.5 144.7 166.5

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Long-term portion of lease obligations $ 3,868.8 $ 2,053.3 $ 2,375.6

The Company modified the presentation of its December 31, 2023 balance sheet to separately reflect assets and liabilities associated with our operating and finance leases.

Total payments made under the Triple Net Leases were as follows:

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

For the three months ended March 31,

(in millions) 2024 2023

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2023 Master Lease 58.9 58.0

PENN Master Lease — 120.2 — 360.0

Pinnacle Master Lease 85.2 84.1

Perryville Lease — 1.9 — 5.8

Meadows Lease — 6.2 — 18.6

Margaritaville Lease 6.7 6.4

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Morgantown Lease 0.8 0.8

$ 235.0 $ 232.0 $ 702.4 $ 693.1

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

Therefore, it has been excluded from the table above.

The Tropicana Lease was terminated on September 26, 2022.

Total $ 235.8 $ 233.2

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Weighted-Average Remaining Lease Term

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Location on unaudited

Consolidated Statements of Operations For the three months ended September 30, For the nine months ended September 30,

Consolidated Statements of Operations For the three months ended March 31,

(in millions) 2024 2023

Operating Lease Costs

Rent expense associated with triple net operating leases (1)

General and administrative $ 146.6 $ 31.5 $ 439.0 $ 119.6

Rent expense associated with triple net operating leases General and administrative $ 154.8 $ 146.0

Operating lease cost (1)

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Interest expense, net $ 36.6 $ 36.4

(1) For the three and nine months ended September 30, 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 three and nine months ended September 30, 2022, pertains to the operating lease components contained within the (i) PENN Master Lease (specific to the land and building components associated with the operations of Dayton and Mahoning Valley);

(ii) Meadows Lease;

(iii) Margaritaville Lease;

(iv) Greektown Lease;

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

(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) For the three and nine months ended September 30, 2023, pertains to the finance lease components associated with the Pinnacle Master Lease.

For the three and nine months ended September 30, 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 consist of the land, inclusive of the variable expense associated with Columbus and Toledo.

(4) For the three and nine months ended September 30, 2023, pertains to the components contained within the Pinnacle Master Lease (primarily buildings) and the Morgantown Lease.

For the three and nine months ended September 30, 2022, pertains to the components contained within the PENN Master Lease (primarily buildings) inclusive of the variable expense associated with Columbus and Toledo for the financing obligation components, Pinnacle Master Lease (primarily buildings), and the Morgantown Lease.

(1) Excludes the operating lease costs and variable lease costs pertaining to our triple net leases with our REIT landlords classified as operating leases.

(2) Pertains to finance lease components associated with the Pinnacle Master Lease (primarily land).

(3) Pertains to the components contained within the Pinnacle Master Lease (buildings) and the Morgantown Lease.

Supplemental cash flow information related to leases was as follows:

For the nine months ended September 30,

For the three months ended March 31,

(in millions) 2024 2023

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Derecognition of operating lease liabilities $ — $ 307.7

Commencement of finance leases $ 33.3 $ 1,417.3

Derecognition of finance lease liabilities $ — $ 2,933.6

Derecognition of finance obligations $ 1,567.8 $ —

Derecognition of financing obligations

$ — $ 1,567.8

Note 9— Investments in and Advances to Unconsolidated Affiliates

As of September 30, 2023, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 50 % investment in Kansas Entertainment, the joint venture with NASCAR that owns Hollywood Casino at Kansas Speedway.

As of March 31, 2024, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 50 % investment in Kansas Entertainment, the joint venture with NASCAR that owns Hollywood Casino at Kansas Speedway.

Kansas Entertainment Joint Venture

As of September 30, 2023 and December 31, 2022, our investment in Kansas Entertainment was $ 77.8 million and $ 81.5 million, respectively.

The Company received distributions from Kansas Entertainment totaling $ 11.0 million and $ 10.5 million for the three months ended September 30, 2023 and 2022, respectively, and $ 27.8 million and $ 27.5 million for the nine months ended September 30, 2023 and 2022, respectively.

As of March 31, 2024 and December 31, 2023, our investment in Kansas Entertainment was $ 81.5 million and $ 80.8 million, respectively.

During the three months ended March 31, 2024 and 2023, the Company received distributions from Kansas Entertainment totaling $ 7.3 million and $ 8.5 million, respectively.

The Company deems these distributions to be returns on its investment based on the source of those cash flows from the normal business operations of Kansas Entertainment.

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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 NASCAR.

Therefore, the Company did not consolidate the financial position of Kansas Entertainment as of September 30, 2023 and December 31, 2022, nor the results of operations for the three and nine months ended September 30, 2023 and 2022.

Therefore, the Company did not consolidate the financial position of Kansas Entertainment as of March 31, 2024 and December 31, 2023, nor the results of operations for the three months ended March 31, 2024 and 2023.

Note 10— Income Taxes

The Company calculates the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate to its year-to-date pretax book income or loss.

The Company calculates the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate to its year-to-date pre-tax book income or loss.

The tax effects of discrete items, including but not limited to, excess tax benefits associated with stock-based compensation, are reported in the interim period in which they occur.

The effective tax rate (income taxes as a percentage of income or loss before income taxes) including discrete items was 19.0 % and 226.7 % for the three months ended September 30, 2023 and 2022, respectively.

The effective tax rate (income taxes as a percentage of income or loss before income taxes) including discrete items was 1,698.9 % and ( 62.9 )% for the nine months ended September 30, 2023 and 2022, respectively.

Our effective income tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings, acquisitions and dispositions, and changes to our valuation allowance positions.

The primary drivers causing fluctuations in our effective tax rate each period were (i) the Barstool transactions, (ii) excluding certain foreign losses for which no tax benefit can be recognized in our worldwide effective tax rate calculation, and (iii) changes to the valuation allowance.

As of each reporting date, the Company considers all available positive and negative evidence that could affect its view of the future realization of deferred tax assets pursuant to ASC Topic 740, “Income Taxes.” As of September 30, 2023, we intend to continue maintaining a valuation allowance on our deferred tax assets that are not more likely than not to be realized, until there is sufficient positive evidence to support the reversal of all or some portion of these allowances.

The effective tax rate (income taxes as a percentage of income or loss before income taxes) including discrete items was 14.8 % for the three months ended March 31, 2024, as compared to 23.8 % for the three months ended March 31, 2023.

The effective tax rate for the three months ended March 31, 2024, was lower than the statutory federal tax rate of 21% primarily due to non-deductible executive compensation, tax credit utilization, and the decrease in our valuation allowance.

We excluded certain foreign losses from our worldwide effective tax rate calculation due to a year-to-date ordinary loss for which no benefit may be recognized.

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

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

As of each reporting date, the Company considers all available positive and negative evidence that could affect its view of the future realization of deferred tax assets pursuant to ASC Topic 740, “Income Taxes.” As of March 31, 2024, we intend to continue maintaining a valuation allowance on our deferred tax assets not more than likely than not to be realized until there is sufficient positive evidence to support the reversal of all or some portion of these allowances.

A reduction in the valuation allowance could result in a significant decrease to income tax expense in the period the release is recorded.

Although the exact timing and valuation reversal amount are estimated, the actual determination is contingent upon the earnings level we achieve in 2024 as well as our projected income levels in future periods.

During the three and nine months ended September 30, 2023, the Company’s valuation allowance increased in the amount of $ 53.0 million and $ 50.9 million, respectively, primarily due to a capital loss carryforward generated on the Barstool disposition, that is more likely than not to be realized.

During the three months ended March 31, 2023, the Company recorded a net deferred tax liability of $ 115.9 million with respect to the Barstool stock acquisition on February 17, 2023, which was subsequently written off to income tax expense on August 8, 2023, as part of the Barstool disposition, as discussed in Note 6, “Acquisitions and Dispositions.” These temporary differences were primarily related to the fair value accounting adjustments on the acquired intangible assets (excluding goodwill) and existing carryover tax basis, including acquired federal and state net operating losses.

Barstool’s operations are included in our consolidated federal, state and local tax returns for the stub period ended August 8, 2023, which has an immaterial impact on our effective tax rate in certain jurisdictions.

The Company recorded prepaid income taxes of $ 54.4 million and $ 15.2 million as of September 30, 2023 and December 31, 2022, respectively, which are included in “Prepaid expenses” within our unaudited Consolidated Balance Sheets.

During the three months ended March 31, 2024, the Company released a portion of its valuation allowance, in the amount of $ 5.1 million, on certain state deferred tax assets that are more likely than not to be realized.

During the three months ended March 31, 2023, the Company recorded a net deferred tax liability of $ 115.9 million with respect to the Barstool stock acquisition on February 17, 2023.

These temporary differences were primarily related to existing carryover tax basis, acquired federal and state net operating losses, and other acquired intangible assets excluding goodwill.

The net deferred tax liability was subsequently written off as part of the Barstool disposition discussed in Note 5, “Acquisitions and Dispositions.”

As of March 31, 2024 and December 31, 2023, the Company had prepaid income taxes of $ 7.0 million and $ 65.3 million, respectively, which were included in “Prepaid expenses” within our unaudited Consolidated Balance Sheets.

Note 11— Commitments and Contingencies

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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 will rebrand its 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 will provide certain marketing, content integration and promotional services in support of the Sportsbook, including access to ESPN talent, and will exclusively promote 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 3 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 3 or year 7 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 consideration for the media marketing services and brand and other rights provided by ESPN, PENN will pay $ 150.0 million per year in cash pursuant to the Sportsbook Agreement for the initial 10-year term and issue warrants pursuant to the Investment Agreement (as defined and described in more detail below).

The Sportsbook Agreement may be terminated by either party 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, and other terms pursuant to the agreement.

In connection with the Sportsbook Agreement, PENN and ESPN, Inc.

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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 .

During the three months ended March 31, 2024 , the Company recognized $ 18.7 million related to the Investment Agreement warrants.

Expenses related to these warrants are recorded within “Gaming” expenses on the unaudited Consolidated Statements of Operations and recognized when services are received.

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.

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Common and Preferred Stock

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 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 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.

In conjunction with the February 20, 2020 stock purchase agreement between PENN and Barstool, 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.

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

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.

Series D Preferred Stock is nonvoting stock.

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 became eligible for conversion and 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.

There are no outstanding shares of Series D Preferred Stock as of September 30, 2023.

On June 29, 2023, in connection with the acquisition of HitPoint Inc.

and Lucky Point Inc.

(collectively, “Hitpoint”) which were acquired in 2021, the Company issued 4,055 shares of common stock with a par value of $ 0.01 , representing the achievement of the second of three annual mutual goals established by the Company and Hitpoint.

In connection with the acquisition of theScore in October 2021, the Company issued 12,319,340 of common stock with a par value of $ 0.01 , and 697,539 exchangeable shares (“Exchangeable Shares”) through the capital of an indirect wholly-owned subsidiary of PENN, in addition to cash consideration.

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

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 5, “Acquisitions and Dispositions” for additional information related to the Barstool SPA.

As of both March 31, 2024 and December 31, 2023, there were 5,000 shares authorized of Series D Preferred Stock and no shares were outstanding.

In connection with the acquisition of Score Media and Gaming, Inc.

(“theScore”) in October 2021, the Company issued 12,319,340 of common stock with a par value of $ 0.01 , and 697,539 exchangeable shares, par value $ 0.01 (“Exchangeable Shares”) through the capital of an indirect wholly-owned subsidiary of PENN, in addition to cash consideration.

Each Exchangeable Share is exchangeable into one share of PENN Common Stock at the option of the holder, subject to certain adjustments.

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

We issued no Exchangeable Shares during the three months ended September 30, 2023 or 2022.

During the nine months ended September 30, 2023, we issued 2,854 Exchangeable Shares.

No Exchangeable Shares were issued during the nine months ended September 30, 2022.

As of both September 30, 2023 and December 31, 2022, there were 768,441 Exchangeable Shares authorized, of which 560,388 shares and 620,019 shares were outstanding, respectively.

During the three months ended March 31, 2024 and 2023, we issued 68,048 and 2,854 Exchangeable Shares, respectively.

As of both March 31, 2024 and December 31, 2023, there were 768,441 Exchangeable Shares authorized, of which 557,174 shares and 560,267 shares were outstanding, respectively.

Share Repurchase Authorization

During the second quarter of 2023, we completed our $ 750.0 million share repurchase authorization approved by the Board of Directors on February 1, 2022 (the “February 2022 Authorization”).

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

On December 6, 2022, the Board of Directors approved a share repurchase authorization for $ 750.0 million (the “December 2022 Authorization”).

The December 2022 Authorization expires on December 31, 2025.

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

The Company utilized the capacity under the previous 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.

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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.

No shares of the Company’s common stock were repurchased during the three months ended September 30, 2023.

During the three months ended September 30, 2022, the Company repurchased 5,348,809 shares of its common stock in open market transactions for $ 168.0 million, at an average price of $ 31.40 per share under the February 2022 Authorization.

During the nine months ended September 30, 2023 and 2022, respectively, the Company repurchased 5,438,221 and 14,690,394 shares of its common stock in open market transactions for $ 149.8 million and $ 510.1 million, at an average price of $ 27.54 and $ 34.72 per share under the February 2022 and December 2022 Authorizations.

No shares of the Company’s common stock were repurchased during the three months ended March 31, 2024.

During the three months ended March 31, 2023, the Company repurchased 1,646,963 shares of its common stock in open market transactions for $ 50.0 million, at an average price of $ 30.36 per share under the previous $ 750.0 million February 2022 authorization.

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

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

As of November 1, 2023, the remaining availability under our December 2022 Authorization was $ 749.5 million.

No shares of the Company’s common stock were repurchased subsequent to the quarter ended March 31, 2024.

As of May 1, 2024, the remaining availability under our December 2022 Authorization was $ 749.5 million.

2022 Long Term Incentive Compensation Plan

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Non-employee directors and consultants are eligible to receive all such awards, other than incentive stock options.

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.

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Any awards that are not settled in shares of common stock are not counted against the share limit.

As of September 30, 2023, there are 10,960,721 shares available for future grants under the 2022 Amended Plan.

As of March 31, 2024, there are 9,214,702 shares available for future grants under the 2022 Amended Plan.

Performance Share Program

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.

An aggregate of 461,747 and 244,955 restricted units with performance-based vesting conditions, at target, were granted during the nine months ended September 30, 2023 and 2022, respectively.

The Company did not grant any restricted units with performance-based vesting conditions during the three months ended March 31, 2024, as compared to an aggregate of 461,747 restricted units granted at target, during the three months ended March 31, 2023.

Restricted performance units granted prior to the adoption of the 2022 Plan were awarded under a performance share program (“the Performance Share Program II”).

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The awards have the potential to be earned at between 0 % and 150 % of the number of shares granted 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 nine months ended September 30, 2023, the Company granted employees of theScore 200,634 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 100 % and consist of two , one-year performance periods, each containing an applicable milestone.

The awards also contain a one-year vesting requirement and vesting is subject to:

(a) the satisfaction of the milestones on or before the applicable expiration date and (b) continued service through the date on which the respective portion of the awards vests.

Stock-based Compensation Expense

Stock-based compensation expense, which pertains principally to our stock options and restricted stock, including restricted stock with performance conditions, is included within the unaudited Consolidated Statements of Operations under “General and administrative,” and was $ 35.2 million and $ 13.6 million for the three months ended September 30, 2023 and 2022, respectively, and $ 71.4 million and $ 45.1 million for the nine months ended September 30, 2023 and 2022, respectively.

Stock-based compensation expense for the three and nine months ended September 30, 2023 included $ 14.5 million related to immediate vesting, pursuant to the Barstool SPA, of all unvested restricted shares and stock appreciation rights issued under

PENN’s long term incentive compensation plans to Barstool employees.

See Note 6, “Acquisitions and Dispositions” for additional information related to the Barstool SPA.

Stock-based compensation expense pertains to our stock options and restricted stock, including restricted stock with performance conditions.

The Company recognized $ 11.9 million and $ 16.5 million of stock-based compensation expense during the three months ended March 31, 2024 and 2023, respectively, which is included in “General and administrative” expense within the unaudited Consolidated Statements of Operations.

Stock Options

The Company granted 905 and 1,516 stock options during the three months ended September 30, 2023 and 2022, respectively, and 841,140 and 397,881 during the nine months ended September 30, 2023 and 2022, respectively.

The Company granted 795,913 and 837,873 stock options during the three months ended March 31, 2024 and March 31, 2023, respectively.

Cash-settled Phantom Stock Units

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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 unaudited Consolidated Balance Sheets, associated with its cash-settled CPUs of $ 0.8 million and $ 2.1 million as of September 30, 2023 and December 31, 2022, respectively.

As of September 30, 2023, there was a total of $ 0.8 million unrecognized compensation cost related to CPUs that will be recognized over the awards remaining weighted-average vesting period of 1.5 years.

The Company recognized $ 1.3 million and $ 1.0 million of compensation expense associated with these awards for the three months ended September 30, 2023 and 2022, respectively, and $ 2.9 million and $ 2.4 million for the nine months ended September 30, 2023 and 2022, respectively.

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Consolidated Balance Sheets, associated with its cash-settled CPUs of $ 0.7 million and $ 1.2 million as of March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024, there was a total of $ 1.3 million unrecognized compensation cost related to CPUs that will be recognized over the awards remaining weighted-average vesting period of 1.7 years.

During the three months ended March 31, 2024 and 2023, the Company recognized $ 0.1 million and $ 0.7 million of compensation expense associated with these awards, respectively.

Compensation expense associated with our CPUs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations.

We paid $ 4.2 million and $ 9.9 million during the nine months ended September 30, 2023 and 2022, respectively, pertaining to cash-settled CPUs.

We paid $ 0.5 million and $ 1.4 million for the three months ended March 31, 2024 and 2023, respectively, pertaining to cash-settled CPUs.

Stock Appreciation Rights

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The fair value of cash-settled SARs is calculated each reporting period and estimated using the Black-Scholes option pricing model.

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Consolidated Balance Sheets, associated with its cash-settled SARs of $ 4.7 million and $ 9.2 million as of September 30, 2023 and December 31, 2022, respectively.

For SARs held by employees of the Company, there was $ 1.6 million of total unrecognized compensation cost as of September 30, 2023 that will be recognized over the awards remaining weighted-average vesting period of 1.6 years.

The Company recognized a reduction to compensation expense of $ 0.7 million and $ 1.3 million for the three months ended September 30, 2023 and 2022, respectively, and a reduction to compensation expense of $ 4.4 million and $ 8.1 million for the nine months ended September 30, 2023 and 2022, respectively.

The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Consolidated Balance Sheets, associated with its cash-settled SARs of $ 0.8 million and $ 5.8 million as of March 31, 2024 and December 31, 2023, respectively.

For SARs held by employees of the Company, there was $ 0.4 million of total unrecognized compensation cost as of March 31, 2024 that will be recognized over the awards remaining weighted-average vesting period of 1.8 years.

For the three months ended March 31, 2024 and 2023, the Company recognized a reduction to compensation expense of $ 4.6 million and $ 0.1 million, respectively.

Compensation expense associated with our SARs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations.

We paid $ 0.6 million and $ 2.8 million during the nine months ended September 30, 2023 and 2022, respectively, related to cash-settled SARs.

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 were unsecured with interest of 2.25 %.

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 unaudited Consolidated Balance Sheets.

We paid $ 0.1 million and $ 0.5 million during the three months ended March 31, 2024 and 2023, respectively, related to cash-settled SARs.

Note 13— Earnings per Share

For the three and nine months ended September 30, 2023, we recorded a net loss attributable to PENN.

As such, because the dilution from potential common shares was anti-dilutive, we used basic weighted-average common shares outstanding, rather than diluted weighted-average common shares outstanding when calculating diluted loss per share for the three and nine months ended September 30, 2023.

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:

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

For the three months ended March 31, 2024, we recorded a net loss attributable to PENN.

Stock options, restricted stock, 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:

(in millions)

For the three months ended March 31, 2024

Assumed conversion of dilutive stock options 0.2

Assumed conversion of dilutive restricted stock 0.2

Assumed conversion of convertible preferred shares 0.2 0.3

Assumed conversion of convertible debt 14.1

For the three and nine months ended September 30, 2022, we recorded net income attributable to PENN.

As such, we used diluted weighted-average common shares outstanding when calculating diluted income per share for the three and nine months ended September 30, 2022.

For the three months ended March 31, 2023, 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.

The following table sets forth the allocation of net income (loss) for the three and nine months ended September 30, 2023 and 2022 under the two-class method.

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

The following table sets forth the allocation of net income for the three months ended March 31, 2023 under the two-class method.

For the three months ended March 31, 2024, we did not utilize the two-class method due to all preferred shares being converted as part of the Barstool SPA during the third quarter of 2023 as discussed in Note 12, “Stockholders’ Equity and Stock-Based Compensation” .

(in millions)

Net income (loss) attributable to PENN Entertainment $ ( 724.8 ) $ 123.5 $ ( 131.9 ) $ 201.3

For the three months ended March 31, 2023

Net income attributable to PENN Entertainment, Inc.

Net income applicable to preferred stock 1.7

Net income (loss) applicable to common stock $ ( 724.8 ) $ 123.0 $ ( 131.9 ) $ 200.5

The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three and nine months ended September 30, 2023 and 2022:

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

Net income applicable to common stock $ 512.8

For the three months ended March 31,

(in millions) 2024 2023

Weighted-average common shares outstanding—basic 151.9 153.3

150.9 157.6 152.3 163.5

Assumed conversion of:

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Weighted-average common shares outstanding—diluted 151.9 168.6

150.9 173.0 152.3 179.0

Restricted stock with performance and market based vesting conditions that have not been met as of September 30, 2023 were excluded from the computation of diluted EPS.

In addition to the 0.5 million and 0.7 million options included in the table above for the three and nine months ended September 30, 2023, respectively, options to purchase 2.0 million and 0.9 million shares were outstanding during the three months ended September 30, 2023 and 2022, respectively, and 1.7 million and 0.8 million during the nine months ended September 30, 2023 and 2022, respectively, but were not included in the computation of diluted EPS because they were anti-dilutive.

The assumed conversion of 0.2 million and 0.6 million preferred shares were excluded from the computation of diluted EPS for the three months ended September 30, 2023 and 2022, respectively, and 0.3 million and 0.6 million preferred shares for the nine months ended September 30, 2023 and 2022, respectively, because including them would have been anti-dilutive.

The Company’s calculation of weighted-average common shares outstanding includes the Exchangeable Shares as discussed in Note 13, “Stockholders’ Equity and Stock-Based Compensation.” The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three and nine months ended September 30, 2023 and 2022:

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

Restricted stock with performance and market based vesting conditions that have not been met as of March 31, 2024 were excluded from the computation of diluted EPS.

Options and warrants to purchase 34.6 million shares and options to purchase 1.5 million shares were outstanding during the three months ended March 31, 2024 and March 31, 2023, respectively, but were not included in the computation of diluted EPS because they were anti-dilutive.

The assumed conversion of 0.5 million preferred shares were excluded from the computation of diluted EPS for the three months ended March 31, 2023, because including them would have been anti-dilutive.

The Company’s calculation of weighted-average common shares outstanding includes the Exchangeable Shares as discussed Note 12, “Stockholders’ Equity and Stock-Based Compensation.” The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three months ended March 31, 2024 and 2023:

For the three months ended March 31,

(in millions, except per share data) 2024 2023

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Net income (loss) applicable to common stock $ ( 114.7 ) $ 512.8

Weighted-average shares outstanding — PENN Entertainment

150.3 157.0 151.7 162.9

Weighted-average shares outstanding — PENN Entertainment, Inc.

Weighted-average shares outstanding — Exchangeable Shares

0.6 0.6 0.6 0.6

Weighted-average common shares outstanding — basic

150.9 157.6 152.3 163.5

Basic earnings (loss) per share $ ( 0.76 ) $ 3.35

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Weighted-average common shares outstanding — diluted

150.9 173.0 152.3 179.0

Diluted earnings (loss) per share $ ( 0.76 ) $ 3.05

(1) The three and nine months ended September 30, 2022 were tax-affected at a rate of 21 %.

(1) The three months ended March 31, 2023 were tax-affected at a rate of 21 %.

Note 14— Fair Value Measurements

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The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate.

The fair value of the Company’s trade accounts receivable and payables approximates the carrying amounts.

The fair value of the Company’s trade accounts receivable and payable approximates the carrying amounts.

Cash and Cash Equivalents

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Equity Securities

As of September 30, 2023 and December 31, 2022, we held $ 8.6 million and $ 17.1 million in equity securities of ordinary shares, respectively, which are reported as “Other assets” in our unaudited Consolidated Balance Sheets.

As of March 31, 2024 and December 31, 2023, we held $ 9.2 million and $ 10.7 million in equity securities of ordinary shares, respectively, which are reported as “Other assets” in our unaudited 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 $ 11.6 million and $ 10.8 million related to these equity securities during the three months ended September 30, 2023 and 2022, respectively, and unrealized holding losses of $ 8.5 million and $ 66.4 million

for the nine months ended September 30, 2023 and 2022, respectively, which are included in “Other,” as reported in “Other income (expenses)” within our unaudited Consolidated Statements of Operations.

As of September 30, 2023, the fair value of the equity securities was determined using Level 1 inputs, which use market approach valuation techniques.

During the three months ended March 31, 2024 and March 31, 2023, we recognized unrealized holding losses of $ 1.5 million and $ 3.2 million related to these equity securities, respectively, which is included in “Other,” as reported in “Other income (expenses)” within our unaudited Consolidated Statements of Operations.

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 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.

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 unaudited Consolidated Balance Sheets.

The Company acquired 12.0 % secured convertible notes in a technology provider on April 7, 2023 for $ 20.0 million, due on the third-year anniversary of the date of issuance.

The terms contain optional and mandatory conversion provisions pursuant to which we will receive common stock upon conversion.

As of September 30, 2023, the fair value of the convertible notes approximates the transaction price, as such we did not record any unrealized gains or losses to “Other comprehensive income (loss)” within our unaudited Consolidated Statements of Comprehensive Income (Loss).

As of both periods ended March 31, 2024 and December 31, 2023, the balance of the convertible notes was $ 24.2 million, which are reported in “Other assets” in our unaudited Consolidated Balance Sheets.

As of March 31, 2024, the fair value of the convertible notes approximates the carrying value as of December 31, 2023.

Therefore, we did not record any unrealized gains or losses to “Other comprehensive income (loss)” within our unaudited 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.

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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 September 30, 2023 and December 31, 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.

As of both periods ended March 31, 2024 and December 31, 2023, 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.

As of September 30, 2023 and December 31, 2022, the promissory notes and the local government corporation bonds were included in “Other assets” within our unaudited Consolidated Balance Sheets.

As of March 31, 2024 and December 31, 2023, the promissory notes and the local government corporation bonds were included in “Other assets” within our unaudited Consolidated Balance Sheets.

The contractual terms of these promissory notes include interest payments due at maturity;

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Long-term Debt

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 September 30, 2023 and December 31, 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.

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.

During the current quarter, we reassessed the trading frequency of our previously described long-term debt instruments and reclassified them from a Level 1 measurement to a Level 2 measurement as of March 31, 2024.

Other long-term obligations as of March 31, 2024 and December 31, 2023 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.

See Note 7, “Long-term Debt” for details.

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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.

The financing obligation has been classified as

a Level 3 measurement and is included within our unaudited Consolidated Balance Sheets in “Long-term debt, net of current maturities, debt discount and debt issuance costs.” See Note 8, “Long-term Debt.”

The financing obligation has been classified as a Level 3 measurement and is included within our unaudited Consolidated Balance Sheets in “Long-term debt, net of current maturities, debt discount, and debt issuance costs.” See Note 7, “Long-term Debt.”

Other Liabilities

Other liabilities as of September 30, 2023 and December 31, 2022 includes contingent purchase price liabilities related to Plainridge Park Casino and Hitpoint, of which Hitpoint was acquired on May 11, 2021.

Other liabilities as of March 31, 2024 and December 31, 2023 include contingent purchase price liabilities related to Plainridge Park Casino and HitPoint Inc.

and Lucky Point Inc.

(collectively, “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 September 30, 2023, there is one annual achievement period remaining.

As of March 31, 2024, 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 September 30, 2023, we were contractually obligated to make two additional annual payments.

As of March 31, 2024, 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 unaudited 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 September 30, 2023, includes the $ 70.0 million indemnification as described in Note 6, “Acquisitions and Dispositions.” The indemnification liabilities were recorded at September 30, 2023, in “Other long-term liabilities” within our unaudited Consolidated Balance Sheets and have 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 September 30, 2023.

Additionally, Other liabilities include a $ 70.0 million tax indemnification described in Note 2, “Significant Accounting Policies” for both periods ended as of March 31, 2024 and December 31, 2023.

Liabilities associated with the indemnification of $ 35.0 million are recorded in “Accrued expenses and other current liabilities” and $ 35.0 million are recorded in “Other long-term liabilities” within our unaudited Consolidated Balance Sheets.

The indemnity has been classified as a Level 3 measurement.

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:

September 30, 2023

March 31, 2024

(in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3

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Equity securities $ 10.7 $ 10.7 $ 10.7 $ — $ —

Available-for-sale 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 $ —

The following table summarizes the changes in fair value of our Level 3 assets and liabilities measured on a recurring basis:

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Balance as of January 1, 2024 $ 254.5

Additions 90.0

Interest 10.6

Payment installments ( 2.8 )

Included in earnings (1)

Balance as of September 30, 2023

(1) The expense is included in “General and administrative” within our unaudited Consolidated Statements of Operations.

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 September 30, 2023:

Balance as of March 31, 2024

The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 assets and liabilities as of March 31, 2024:

Valuation Technique Unobservable Input Discount Rate

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

Interactive includes all of our online sports betting, iCasino and social 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 the Barstool SPA, and we sold 100 % of the outstanding shares of Barstool common stock (as defined in Note 6, “Acquisitions and Dispositions” ).

Interactive includes all of our online gaming operations, management of retail sports betting, media, and in the prior year, 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 5, “Acquisitions and Dispositions” for further information.

The Company utilizes Adjusted EBITDAR (as defined below) as its measure of segment profit or loss.

The following table highlights our revenues and Adjusted EBITDAR for each reportable segment and reconciles Adjusted EBITDAR on a consolidated basis to net income (loss).

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

For the three months ended March 31,

(in millions) 2024 2023

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Interactive segment 207.7 233.5

4.5 4.2 16.5 17.4

Intersegment eliminations (2)

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( 26.8 ) ( 27.3 )

445.1 471.9 1,400.1 1,471.1

Other operating benefits (costs) and other income (expenses):

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Cash-settled stock-based awards variance 8.0 2.9

Gain (loss) on disposal of assets — 0.2 — ( 7.0 )

Gain on disposal of assets 0.2 —

Contingent purchase price — ( 0.3 )

Pre-opening expenses — ( 0.5 ) — ( 4.1 )

Depreciation and amortization ( 108.7 ) ( 107.5 )

Impairment losses (5)

— ( 104.6 ) — ( 104.6 )

Insurance recoveries, net of deductible charges 0.3 1.9 13.9 10.7

Non-operating items of equity method investments (5)

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Interest income 7.1 10.4

Loss on disposal of Barstool (7)

( 923.2 ) — ( 923.2 ) —

Gain on Barstool Acquisition, net (6)

Gain on REIT transactions, net (7)

Loss on early extinguishment of debt — — — ( 10.4 )

( 3.4 ) ( 5.6 )

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Income tax benefit (expense) 12.6 ( 167.9 )

161.7 182.0 ( 40.9 ) 78.1

Net income (loss) $ ( 114.9 ) $ 514.4

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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 $ 27.0 million and $ 26.5 million for the three months ended September 30, 2023 and 2022, respectively, and $ 78.1 million and $ 74.9 million for the nine months ended September 30, 2023 and 2022, respectively.

Corporate overhead costs were $ 24.9 million and $ 26.3 million for the three months ended March 31, 2024 and 2023, respectively.

(2) Primarily represents the elimination of intersegment revenues associated with our 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;

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

pre-opening expenses;

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”;

loss on disposal of business;

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

Adjusted EBITDAR is also inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (see footnote (5) below) added back for Barstool and our Kansas Entertainment joint venture.

(4) For the three and nine months ended September 30, 2023, pertains to the operating lease components contained within the:

(4) Amounts pertain to the operating lease components contained within the:

(i) AR PENN Master Lease;

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and (iv) Greektown Lease.

(ii) Meadows Lease;

(iii) Margaritaville Lease;

(iv) Greektown Lease;

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

(5) Amount primarily relates to a $ 102.8 million impairment charge in the Northeast segment.

(5) Consists principally of interest expense, net, income taxes, depreciation and amortization, and stock-based compensation expense associated with Barstool prior to us acquiring the remaining 64 % of Barstool common stock (see Note 5, “Acquisitions and Dispositions” ), and our Kansas Entertainment joint venture.

(7) 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” ).

(6) 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 5, “Acquisitions and Dispositions” ).

(7) 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 8, “Leases” ).

(10) Primarily relates to unrealized holding losses on our equity securities of $ 11.6 million and $ 10.8 million for the three months ended September 30, 2023 and 2022, respectively.

Primarily relates to unrealized holding losses of $ 8.5 million and $ 66.4 million for the nine months ended September 30, 2023 and 2022, respectively.

In addition, during the three and nine months ended September 30, 2023, the unrealized holding losses were partially offset by dividend income received (see Note 15, “Fair Value Measurements ”).

Also consists of non-recurring acquisition and transaction costs of $ 31.9 million and $ 46.3 million for the three and nine months ended September 30, 2022, respectively.

(8) Primarily relates to unrealized holding losses on our equity securities of $ 1.5 million and $ 3.2 million for the three months ended March 31, 2024 and 2023, respectively, which are discussed in Note 14, “Fair Value Measurements.

The table below presents capital expenditures by segment:

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

For the three months ended March 31,

(in millions) 2024 2023

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

Balance sheet as of September 30, 2023

Balance sheet as of March 31, 2024

Investment in and advances to unconsolidated affiliates $ — $ — $ — $ 81.5 $ — $ 3.3 $ 84.8

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Total assets $ 1,827.4 $ 1,244.5 $ 388.6 $ 1,241.1 $ 2,549.9 $ 8,812.7 $ 16,064.2

(1) The real estate assets subject to the Master Leases, which are classified as either property and equipment, operating lease ROU assets, or finance lease ROU assets, are included within the Other category.

(1) The real estate assets subject to the Master Leases, which are classified as either property and equipment, net, operating lease ROU assets, or finance lease ROU assets, are included within the Other category.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements