What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-02 compared with 2023-11-02 · 170 added, 282 removed, 334 unchanged (58% of the section changed)

3 unchanged sentences

PENN Entertainment, Inc., together with its subsidiaries (“PENN,” the “Company,” “we,” “our,” or “us”), is North America’s leading provider of integrated entertainment, sports content, and casino gaming experiences.

As of 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.

1 unchanged sentence

(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.

1 unchanged sentence

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 “ Liquidity and Capital Resources ” 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 “ Liquidity and Capital Resources ” and collectively referred to as the “Master Leases”).

Recent Acquisitions, Dispositions, Development Projects, and Other

2 unchanged sentences

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

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

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

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

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

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

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

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

of certain warrants to purchase shares of PENN common stock, par value $0.01 per share, and setting forth certain other governance rights of ESPN, Inc., as discussed in Note 12, “Commitments and Contingencies” in the notes to our unaudited Consolidated Financial Statements.

In connection with PENN’s decision to rebrand our online sports betting business from Barstool Sportsbook to ESPN BET pursuant to the Sportsbook Agreement as discussed above, PENN concurrently entered into a stock purchase agreement with

David Portnoy (the “Barstool SPA”) pursuant to which PENN sold 100% of the outstanding shares of Barstool to David Portnoy in exchange for nominal cash consideration (one dollar) and certain non-compete and other restrictive covenants.

Pursuant to the Sportsbook Agreement, PENN rebranded its 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” in the notes to our unaudited Consolidated Financial Statements for additional information).

In connection with PENN’s decision to rebrand to ESPN BET as discussed above, PENN concurrently entered into a stock purchase agreement with David Portnoy (the “Barstool SPA”) pursuant to which PENN sold 100% of the outstanding shares of Barstool to David Portnoy in exchange for nominal cash consideration (one dollar) and certain non-compete and other restrictive covenants.

Pursuant to the Barstool SPA, PENN has the right to receive 50% of the gross proceeds received by David Portnoy in any subsequent sale or other monetization event of Barstool.

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

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

For information on the tax-related impacts from the Barstool transaction, see Note 11, “Income Taxes” in the notes to our unaudited Consolidated Financial Statements.

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

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

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

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

See Note 5, “Acquisitions and Dispositions” and Note 14, “Fair Value Measurements” in the notes to our unaudited Consolidated Financial Statements.

On February 21, 2023, as described in “Liquidity and Capital Resources,” the Company and GLPI entered into an agreement to amend and restate the 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).

The AR PENN Master Lease remains subject to annual rent escalators and a percentage rent reset every five years.

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

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

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

The 2023 Master Lease incurs a 1.5% fixed escalator on November 1 each year, and is also subject to a one-time increase of $1.4 million effective November 1, 2027.

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

2 unchanged sentences

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

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

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

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

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

The Aurora Project and the Other Development Projects have all commenced and are anticipated to open in late 2025 to early 2026.

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

We expect to continue to expand our gaming operations through the implementation and execution of a disciplined capital expenditure program at our existing properties, the pursuit of strategic acquisitions and investments, and the development of new gaming properties.

In addition, the acquisition of theScore and our Sportsbook Agreement with ESPN reflects our strategy to continue evolving from the nation’s largest regional gaming operator to a best-in-class omni-channel provider of retail and online gaming and sports betting entertainment.

Operating and Competitive Environment

Most of our properties operate in mature, competitive markets.

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

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

improvements, expansions, or relocations of our existing properties;

2 unchanged sentences

and strategic investments and acquisitions;

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

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

We continuously adjust operations, offerings, and cost structures to reflect changing economic conditions.

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

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

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

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

dockside casinos;

land-based casinos;

video lottery;

iCasinos and social casinos;

online and retail sports betting;

sports media companies;

gaming at taverns;

gaming at truck stop establishments;

sweepstakes and poker machines not located in casinos;

the potential for increased fantasy sports;

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

and other forms of gaming in the U.S.

See the “Segment comparison of the three and nine months ended September 30, 2023 and 2022” section below for discussions of the impact of competition on our results of operations by reportable segment.

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

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

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

In addition, strategic acquisitions (e.g.

theScore) and strategic relationships (e.g.

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

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

We compete with a variety of gaming operations, including casinos and hotel casinos of varying quality and size and other gaming options such as state and province-sponsored internet lotteries, sweepstakes, charitable gaming, video gaming terminals at bars, restaurants, taverns and truck stops, illegal slot machines and skill games, fantasy sports and third-party internet or mobile-based gaming platforms, including both legal and illegal iCasino and sports betting operations.

See the “Segment comparison of the three months ended March 31, 2024 and 2023” section below for discussions on our results of operations by reportable segment.

Key Performance Indicators

3 unchanged sentences

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

For example, decreases in discretionary consumer spending have historically been brought about by weakened general economic conditions, such as recessions, inflation, rising interest rate environments, high unemployment levels, higher income taxes, low levels of consumer confidence, weakness in the housing market, high fuel or other transportation costs, and the effects of the COVID-19 pandemic.

In addition, visitation and the volume of play have historically been negatively impacted by significant construction surrounding our properties, adverse regional weather conditions and natural disasters.

1 unchanged sentence

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

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

Our gaming revenue is derived primarily from slot machines (which represented approximately 85% and 84% of our gaming revenue for the three months ended March 31, 2024 and 2023, respectively) and, to a lesser extent, table games, online sports betting, and iCasino.

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

3 unchanged sentences

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

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

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

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

1 unchanged sentence

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

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

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

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

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

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

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

4 unchanged sentences

Northeast, South, West, and Midwest.

The Interactive segment includes all of our online sports betting, iCasino and social gaming operations, management of retail sports betting, media, and the operating results of Barstool.

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.

The Interactive segment includes all of our online sports betting, online casino/iCasino, and social gaming (collectively referred to as “online gaming”) operations, management of retail sports betting, media, and in the prior year, the operating results of Barstool subsequent to the Barstool Acquisition on February 17, 2023 and prior to the Barstool divestiture on August 8, 2023 (as defined and discussed in Note 5, “Acquisitions and Dispositions” ).

We view each of our gaming and racing properties as an operating segment with the exception of our two properties in Jackpot, Nevada, which we view as one operating segment.

7 unchanged sentences

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

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

2023 2022 2023 2022

For the three months ended March 31,

Northeast segment $ 684.7 $ 700.5

3 unchanged sentences

Interactive segment 207.7 233.5

4.5 4.2 16.5 17.4

Intersegment eliminations (2)

(5.1) (8.0) (19.9) (23.8)

Total $ 1,606.9 $ 1,673.3

7 unchanged sentences

(26.8) (27.3)

445.1 471.9 1,400.1 1,471.1

Rent expense associated with triple net operating leases (4)

5 unchanged sentences

Adjusted EBITDA margin

18.4 % 27.1 % 19.3 % 28.1 %

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

2 unchanged sentences

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 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.

1 unchanged sentence

As noted within “Non-GAAP Financial Measures” below, Adjusted EBITDAR, and the related margin, is presented on a consolidated basis outside the financial statements solely as a valuation metric.

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

(4) Pertains to the following operating leases:

(i) AR PENN Master Lease;

2 unchanged sentences

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 Hollywood Gaming at Dayton Raceway and Hollywood Gaming at

Mahoning Valley Race Course);

(ii) Meadows Lease;

(iii) Margaritaville Lease;

(iv) Greektown Lease;

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

Consolidated comparison of the three and nine months ended September 30, 2023 and 2022

Consolidated comparison of the three months ended March 31, 2024 and 2023

The following table presents our consolidated revenues:

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

For the three months ended March 31, Change

(dollars in millions) 2024 2023 $ %

2 unchanged sentences

Total revenues $ 1,606.9 $ 1,673.3 $ (66.4) (4.0) %

Gaming revenues for the three months ended September 30, 2023 decreased $65.4 million compared to the corresponding prior year period, primarily due to a decrease in visitation in the South segment, decreases in online gaming revenues in our Interactive segment, and the sale of the Tropicana Las Vegas operations in September 2022 .

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

Gaming revenues for the nine months ended September 30, 2023 decreased by $64.8 million compared to the corresponding prior year period, primarily due to a decrease in visitation in the South segment and the sale of the Tropicana Las Vegas operations in September 2022 .

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

Food, beverage, hotel, and other revenues for the three and nine months ended September 30, 2023 increased $59.8 million and $216.2 million, respectively, compared to the corresponding prior year periods, primarily due to the inclusion of 100% of the operating results of Barstool subsequent to the Barstool Acquisition on February 17, 2023, until the disposition on August 8, 2023, as well as increases in gaming tax reimbursement amounts charged to third-party online sports betting and/or iCasino partners for online sports betting and iCasino market access .

See “Segment comparison of the three and nine months ended September 30, 2023 and 2022” below for more detailed explanations of the fluctuations in revenues.

Gaming revenues for the three months ended March 31, 2024 decreased by $66.3 million compared to the corresponding prior year period, primarily due to a decrease in slots and table games revenues within our South and Northeast segments and a decrease in online gaming revenue at our Interactive segment.

In the current year quarter, severe weather affected weekends and holidays across all our regional property segments negatively impacting our operations.

Additionally, retail gaming revenues decreased as new supply continues to impact visitation in certain retail property segments.

The decrease in online gaming revenues within our Interactive segment was due to unfavorable sports betting hold rates and increased promotional expense related to ESPN BET.

Food, beverage, hotel, and other revenues for the three months ended March 31, 2024 remained flat compared to the corresponding prior year period.

Increases in hotel and other revenue were offset by decreases in advertising and retail revenue.

See “Segment comparison of the three months ended March 31, 2024 and 2023” below for more detailed explanations of the fluctuations in revenues.

Operating expenses

The following table presents our consolidated operating expenses:

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

For the three months ended March 31, Change

(dollars in millions) 2024 2023 $ %

4 unchanged sentences

Depreciation and amortization 108.7 107.5 1.2 1.1 %

Impairment losses — 104.6 (104.6) N/M — 104.6 (104.6) N/M

Loss on disposal of Barstool

923.2 — 923.2 N/M 923.2 — 923.2 N/M

Total operating expenses $ 1,628.3 $ 1,474.2 $ 154.1 10.5 %

N/M - Not meaningful

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

Gaming expenses for the three and nine months ended September 30, 2023 decreased $48.9 million and $9.0 million, respectively, compared to the corresponding prior year periods, primarily due to the decreases in gaming revenues as described above, partially offset by increased payroll costs.

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

Fo od, beverage, hotel, and other expenses for the three and nine months ended September 30, 2023 increased $62.2 million and $215.6 million, respectively, compared to the corresponding prior year periods, primarily due to the inclusion of operating expenses related to Barstool subsequent to the Barstool Acquisition on February 17, 2023, until the disposition on August 8, 2023, as well as increases in gaming tax reimbursement amounts related to third-party online sports betting and/or iCasino partners for online sports betting and iCasino market access.

Gaming expenses for the three months ended March 31, 2024 increased $150.0 million compared to the corresponding prior year period, primarily due to increased marketing expense within our Interactive segment related to ESPN and higher labor and other gaming costs driven by increased ESPN BET volumes.

Gaming expenses at our retail properties decreased due to the decrease in gaming revenues described above.

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

Fo od, beverage, hotel, and other expenses for the three months ended March 31, 2024 increased $6.9 million , compared to the corresponding prior year period, primarily due to increases in gaming tax reimbursement amounts related to third-party online sports betting and/or iCasino partners for online sports betting and iCasino market access, partially offset by the inclusion of Barstool operating expenses in the prior year quarter subsequent to the Barstool Acquisition on February 17, 2023.

Due to the August 2023 Barstool disposal, the current year quarter does not include any Barstool operating expenses.

General and administrative expenses include items such as compliance, facility maintenance, utilities, property and liability insurance, surveillance and security, and lobbying expenses, as well as all expenses for administrative departments such as accounting, purchasing, human resources, legal and internal audit.

7 unchanged sentences

and rent expense associated with our triple net operating leases.

For the three and nine months ended September 30, 2023, general and administrative expenses increased by $128.5 million and $332.4 million, respectively, compared to the corresponding prior year periods, primarily due to an increase in rent expense associated with triple net operating leases of $115.1 million and $319.4 million, respectively, stemming from the execution on February 21, 2023 of both the AR PENN Master Lease and 2023 Master Lease.

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

Depreciation and amortization for the three and nine months ended September 30, 2023 decreased $42.9 million and $93.3 million, respectively, compared to the corresponding prior year periods, primarily due to a decrease in depreciation and amortization costs stemming from the execution on February 21, 2023 of both the AR PENN Master Lease and 2023 Master Lease.

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

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

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

Impairment losses for both the three and nine months ended September 30, 2022 primarily relate to impairment charges at our Hollywood Casino at Greektown property for goodwill and other intangible assets of $37.4 million and $65.4 million, respectively, as a result of an interim impairment assessment during the third quarter of 2022.

See Note 7, “Goodwill and Other Intangible Assets” to our unaudited Consolidated Financial Statements for further discussion.

There were no impairment losses for the three and nine months ended September 30, 2023.

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

For the three months ended March 31, 2024, general and administrative expenses decreased by $4.0 million, compared to the corresponding prior year period, primarily due to decreases in stock-based compensation, cash-settled stock-based awards, and legal settlements, partially offset by an increase in payroll expense and an increase in rent expense associated with triple net operating leases of $8.8 million, stemming, primarily, from annual escalators on our triple net operating leases.

Depreciation and amortization for the three months ended March 31, 2024 increased $1.2 million compared to the corresponding prior year period.

Other income (expenses)

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

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

For the three months ended March 31, Change

(dollars in millions) 2024 2023 $ %

3 unchanged sentences

Income from unconsolidated affiliates $ 7.2 $ 2.6 $ 4.6 176.9 %

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

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

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

Other $ (0.3) $ (8.8) $ 8.5 (96.6) % $ 4.5 $ (67.3) $ 71.8 N/M

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

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

Other $ (1.3) $ (1.0) $ (0.3) 30.0 %

Income tax benefit (expense) $ 12.6 $ (167.9) $ 180.5 (107.5) %

$ 161.7 $ 182.0 $ (20.3) (11.2) % $ (40.9) $ 78.1 $ (119.0) N/M

N/M - Not meaningful

Interest expense, net decreased by $81.0 million and $208.6 million for the three and nine months ended September 30, 2023, respectively, compared to the corresponding prior year periods, primarily due to a net decrease in Master Lease interest costs due to changes in lease classifications as a result of the amendment of the PENN Master Lease, as described in “Liquidity and Capital Resources,” of $93.7 million and $255.2 million, respectively, partially offset by an increase in interest expense on our Senior Secured Credit Facilities related to an overall increase in interest rates.

Interest income increased by $5.0 million and $23.5 million for the three and nine months ended September 30, 2023, respectively, compared to the corresponding prior year periods, primarily due to executing on our short term investing strategy utilizing money market funds which commenced during the year ended December 31, 2022.

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

The change in income from the corresponding prior year periods is due to fluctuations in earnings from our investments in unconsolidated affiliates.

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

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

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

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

Interest expense, net increased by $6.1 million for the three months ended March 31, 2024, compared to the corresponding prior year period, primarily due to an increase in interest expense on our Senior Secured Credit Facilities related to an overall increase in interest rates.

Interest income decreased by $3.3 million for the three months ended March 31, 2024, compared to the corresponding prior year period, primarily due to a decrease in the amount invested in money market funds, which we use for short term investing.

Income from unconsolidated affiliates relates principally to our investment in Kansas Entertainment and Freehold Raceway joint ventures.

The increase of $4.6 million for the three months ended March 31, 2024, compared to the corresponding prior year period, is due to the three months ended March 31, 2023 including a $5.1 million loss for Barstool prior to the Barstool Acquisition on February 17, 2023.

Gain on Barstool Acquisition, net for the three months ended March 31, 2023 relates to the gain on our acquisition of all the outstanding shares of Barstool common stock not already owned by us on February 17, 2023 as described in Note 5, “Acquisitions and Dispositions” in the notes to our unaudited Consolidated Financial Statements.

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

Gain on REIT transactions, net for the three months ended March 31, 2023 relates to the execution of both the AR PENN Master Lease and 2023 Master Lease on February 21, 2023, which resulted in the (i) derecognition of $1.6 billion of financing obligations and (ii) derecognition of $1.1 billion of Property and Equipment, net.

In conjunction with entering into the 2023 Master Lease, the individual triple net leases associated with Meadows and Perryville were terminated which resulted in a $6.5 million loss from the derecognition of right-of-use assets and lease liabilities.

See Note 8, “Leases” to our unaudited Consolidated Financial Statements for additional details on both of these transactions.

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

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

Other primarily relates to realized and unrealized gains and losses on equity securities, held by PENN Interactive, unrealized gains and losses related to certain Barstool shares (prior to the Barstool Acquisition on February 17, 2023) as well as miscellaneous income and expense items.

Equity securities were provided to the Company in conjunction with entering into multi-year agreements with sports betting operators for online sports betting and iCasino market access across our portfolio.

For the three m onths ended September 30, 2023 and 2022, other income primarily consisted of unrealized holding losses of $11.6 million and $10.8 million, respectively.

For the nine m onths ended September 30, 2023 and 2022, other income primarily

consisted of unrealized holding losses of $8.5 million and $66.4 million, respectively.

In addition, during the three and nine months ended September 30, 2023, these losses were partially offset by dividend income received.

Income tax benefit (expense) was a benefit of $161.7 million and $182.0 million for the three m onths ended September 30, 2023 and 2022, respectively, and an expense of $40.9 million as compared to a benefit of $78.1 million for the nine m onths ended September 30, 2023 and 2022, respectively.

Our effective tax rate (income taxes as a percentage of income from operations before income taxes), including discrete items, was 19.0% and 226.7% for the three months ended September 30, 2023 and 2022, respectively, and 1,698.9% and (62.9)% for the nine months ended September 30, 2023 and 2022, respectively.

The change in the effective rate for the three and nine months ended September 30, 2023 compared to the corresponding prior year periods was primarily due to the projections of pre-tax income, changes to the valuation allowance, and the Barstool transactions discussed in Note 6, “Acquisitions and Dispositions” and Note 11, “Income Taxes.” Excluding the Barstool transactions, the Company’s annualized effective tax rate for the nine months ended September 30, 2023 would have been approximately 28%.

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

For the three m onths ended March 31, 2024, other income primarily consisted of an unrealized holding loss of $1.5 million, compared to an unrealized holding loss of $3.2 million for the three m onths ended March 31, 2023.

The prior year quarter included a $3.1 million gain related to remeasurement and settlement of Barstool put/call options prior to the Barstool Acquisition .

Income tax benefit was $12.6 million for the three months ended March 31, 2024, compared to income tax expense of $167.9 million for the three months ended March 31, 2023.

Our effective tax rate (income taxes as a percentage of income or loss from operations 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.

See Note 10, “Income Taxes” to our unaudited Consolidated Financial Statements for additional details.

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.

Additionally, as a result of the Barstool SPA entered into in August 2023, the $115.9 million deferred tax liability associated with the Barstool tradename and other intangibles was written off to income tax expense, which had a material impact on our unaudited Consolidated Statements of Operations and unaudited Consolidated Balance Sheets, as discussed in Note 11, “Income Taxes” to our unaudited Consolidated Financial Statements.

Segment comparison of the three and nine months ended September 30, 2023 and 2022

Segment comparison of the three months ended March 31, 2024 and 2023

Northeast Segment

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

For the three months ended March 31, Change

(dollars in millions) 2024 2023 $ %

3 unchanged sentences

Adjusted EBITDAR $ 202.6 $ 212.9 $ (10.3) (4.8) %

Adjusted EBITDAR margin 30.3 % 31.8 % -150 bps 30.8 % 31.4 % -60 bps

The Nort heast segment’s revenues for the three months ended September 30, 2023 increased by $1.6 million due to an increase in hotel and food and beverage revenues, primarily due to the completion of room renovations at our Hollywood Casino at Greektown property, as well as increased visitation to our food and beverage outlets, offset by a reduction in gaming revenues, primarily at our Hollywood Casino Lawrenceburg and Ameristar East Chicago properties due to increased competition.

The Northeast segment’s revenues for the nine months ended September 30, 2023 increased $46.7 million, primarily due to increases in gaming and non-gaming revenues at our Hollywood Casino at Greektown property due to the completion of room renovations, an increase in non-gaming revenues as visitation to our food and beverage outlets increased, and strong visitation in the first quarter of the year.

These increases were partially offset by decreases in gaming revenues at our Hollywood Casino Lawrenceburg and Ameristar East Chicago properties as described above.

For the three months ended September 30, 2023, the Northeast segment’s Adjusted EBITD AR decreased $9.6 million primarily due to the decrease in revenues at our Hollywood Casino Lawrenceburg and Ameristar East Chicago as described above.

Ad justed EBITDAR margin decreased to 30.3%, primarily due to increases in payroll and other operating costs at our food and beverage outlets driven by increased volumes as discussed above.

For the nine months ended September 30, 2023, the Northeast segment’s Adjusted EBITDAR increased $1.0 million, primarily due to increased gaming and non-gaming revenues.

Ad justed EBITDAR margin decreased to 30.8% primarily due to increased payroll costs.

Adjusted EBITDAR margin 29.6 % 30.4 % -80 bps

The Northeast segment’s revenues for the three months ended March 31, 2024 decreased $15.8 million, primarily due to severe weather events negatively impacting our operations and decreases in gaming revenues at several of our properties due to increased competition.

Food and beverage revenues for the three months ended March 31, 2024 decreased as weather events resulted in a decline in visitation compared to the prior year period.

For the three months ended March 31, 2024, the Northeast segment’s Adjusted EBITDAR decreased $10.3 million, primarily due to decreased gaming and non-gaming revenues.

Ad justed EBITDAR margin decreased to 29.6% primarily due to higher labor costs.

South Segment

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

For the three months ended March 31, Change

(dollars in millions) 2024 2023 $ %

3 unchanged sentences

Adjusted EBITDAR $ 113.5 $ 123.6 $ (10.1) (8.2) %

Adjusted EBITDAR margin 44.3 % 42.4 % 190 bps 40.9 % 42.6 % -170 bps

The South segment’s revenues for the three and nine months ended September 30, 2023 decreased by $21.6 million and $78.5 million, respectively, compared to the corresponding prior year periods, primarily due to a decrease in visitation at many properties, partially due to increased competition that affected our L’Auberge Lake Charles and Margaritaville properties and inclement weather during the first half of the year.

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

For the three months ended September 30, 2023, the South segment’s Adjusted EBITDAR decreased $3.3 million, primarily due to the decrease in gaming revenue combined with increased payroll costs and cost of sales, partially offset by the receipt of business interruption insurance proceeds related to the loss experienced in 2020 due to Hurricane Laura, resulting in an overall increase in Adjusted EBITDAR margin of 190 basis points.

For the nine months ended September 30, 2023, the South segment’s Adjusted EBITDAR decreased $48.6 million and Adjusted EBITDAR margin decreased to 40.9%, primarily due to the decrease in gaming revenues as described above, combined with increased payroll costs.

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

Adjusted EBITDAR margin 38.0 % 39.3 % -130 bps

The South segment’s revenues for the three months ended March 31, 2024 decreased by $16.3 million, compared to the prior year period, primarily due to a decrease in gaming revenues as severe weather events negatively impacted our operations and increased competition negatively impacted visitation at several of our properties.

For the three months ended March 31, 2024, the South segment’s Adjusted EBITDAR decreased $10.1 million, and Adjusted EBITDAR margin decreased to 38.0%, primarily due to the decrease in revenues as described above.

For the three months ended March 31, Change

(dollars in millions) 2024 2023 $ %

3 unchanged sentences

Adjusted EBITDAR $ 45.9 $ 49.1 $ (3.2) (6.5) %

Adjusted EBITDAR margin 40.5 % 38.7 % 180 bps 38.9 % 38.0 % 90 bps

The West segment’s revenues for the three and nine months ended September 30, 2023 decreased by $21.4 million and $56.4 million, respectively, compared to the corresponding prior year periods, primarily due to the sale of the Tropicana Las Vegas operations in September 2022, partially offset by an increase in revenues at Zia Park Casino.

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

For the three months ended September 30, 2023, the West segment’s Adjusted EBITDAR decreased $5.8 million, primarily due to the sale of Tropicana Las Vegas, discussed above.

Adjusted EBITDAR margin increased to 40.5% primarily resulting from the sale of Tropicana Las Vegas which had a negative impact on margins in the prior year qua rter.

For the nine months ended September 30, 2023, the West segment’s Adjusted EBITDAR decreased $18.0 million primarily due to the sale of Tropicana Las Vegas, as discussed above.

Additionally, Adjusted EBITDAR margin increased to 38.9% primarily due to the sale of Tropicana which had a negative impact on margins in the prior year period.

Adjusted EBITDAR margin 35.6 % 37.9 % -230 bps

The West segment’s revenues for the three months ended March 31, 2024 decreased by $0.9 million, compared to the prior year period, primarily due to a decrease in gaming revenues as isolated weather events negatively impacted visitation , partially offset by an increase in hotel and food and beverage revenues.

For the three months ended March 31, 2024, the West segment’s Adjusted EBITDAR decreased $3.2 million and Adjusted EBITDAR margin decreased to 35.6%, primarily due to the decrease in gaming revenues discussed above and higher labor costs.

Midwest Segment

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

For the three months ended March 31, Change

(dollars in millions) 2024 2023 $ %

3 unchanged sentences

Adjusted EBITDAR $ 117.0 $ 125.6 $ (8.6) (6.8) %

Adjusted EBITDAR margin 42.2 % 43.4 % -120 bps 42.7 % 44.0 % -130 bps

The Midwest segment’s revenues for the three months ended September 30, 2023 decreased by $5.0 million, compared to the prior year quarter, primarily due to a decrease in gaming revenues as new competition in the region negatively impacted several properties within our Midwest segment, partially offset by increases in non-gaming revenues due to increased visitation at our hotel, and food and beverage outlets.

The Midwest segment’s revenues for the nine months ended September 30, 2023 increased by $4.4 million, compared to the corresponding prior year period, primarily due to increased visitation at our hotels, and food and beverage outlets, partially offset by declines in gaming revenues due to new competition in the region.

For the three months ended September 30, 2023, the Midwest segment’s Adjusted EBITDAR decreased $5.6 million primarily due to a decrease in gaming revenues.

A djusted EBITDAR margin decreased to 42.2% primarily due to a decrease in gaming margins driven by an increase in payroll costs,

For the nine months ended September 30, 2023, the Midwest segment’s Adjusted EBITDAR decreased $9.7 million primarily due to increase in payroll costs, partially offset by increased non-gaming revenues, reflected in A djusted EBITDAR margin, which decreased to 42.7%.

Adjusted EBITDAR margin 40.2 % 42.5 % -230 bps

The Midwest segment’s revenues for the three months ended March 31, 2024 decreased by $4.1 million, compared to the prior year period, where severe weather events negatively impacted visitation at our Midwest segment properties.

For the three months ended March 31, 2024, the Midwest segment’s Adjusted EBITDAR decreased $8.6 million and A djusted EBITDAR margin decreased to 40.2%, primarily due to the decrease in gaming revenues discussed above, higher labor costs, and an increase in general and administrative costs.

Interactive Segment

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

For the three months ended March 31, Change

(dollars in millions) 2024 2023 $ %

3 unchanged sentences

Adjusted EBITDAR $ (196.0) $ (5.7) $ (190.3) N/M

$ (68.7) $ (80.1) $ 11.4 N/M

Adjusted EBITDAR margin (94.4) % (2.4) % N/M

(10.0) % (17.6) % N/M

The Interactive segment’s revenues for the three months ended September 30, 2023 increased by $37.6 million, compared to the corresponding prior year period, due to the inclusion of 100% of the operating results of Barstool, until the disposition on August 8, 2023, partially offset by a decrease in U.S.

online gaming revenues during the transition period prior to the launch of ESPN BET.

Additionally, revenues are inclusive of a tax gross-up of $102.6 million and $63.0 million for the three months ended September 30, 2023 and 2022, respectively.

The Interactive segment’s revenues for the nine months ended September 30, 2023 increased by $232.2 million, compared to the corresponding prior year period, due to the inclusion of 100% of the operating results of Barstool subsequent to the Barstool Acquisition on February 17, 2023 until the disposition on August 8, 2023, as well as an increase in gaming revenue related to operating in additional jurisdictions, inclusive of the launch of theScore Bet in April 2022.

Additionally, revenues are inclusive of a tax gross-up of $283.4 million and $168.7 million for the nine months ended September 30, 2023 and 2022, respectively.

For the three months ended September 30, 2023, the Interactive segment’s Adjusted EBITDAR decreased primarily due to the inclusion of 100% of the operating results of Barstool until the disposition on August 8, 2023 and a decrease in U.S.

gaming revenues driven by minimal external marketing of the existing platforms in the U.S.

Additionally, the third quarter results were negatively i mpacted by increased expenses related to ramping and preparing for the November launch of ESPN BET .

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

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

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

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

The Interactive segment’s revenues for the three months ended March 31, 2024 decreased by $25.8 million, compared to the prior year period, primarily due to a decrease in online gaming revenue, driven by increased promotional expense related to customer acquisitions for ESPN BET and lower sportsbook hold rates.

Food, beverage, hotel, and other revenues are inclusive of a tax gross-up of $116.6 million for the three months ended March 31, 2024, compared to $92.3 million for the three months ended March 31, 2023.

Additionally, in the prior year quarter f ood, beverage, hotel, and other revenues included $28.2 million of Barstool revenues subsequent to the Barstool Acquisition on February 17, 2023.

Due to the August 2023 Barstool disposal, the current year quarter does not include any Barstool operating results.

For the three months ended March 31, 2024, the Interactive segment’s Adjusted EBITDAR and Adjusted EBITDAR margin decreased primarily due to the decrease in gaming revenues as discussed above as well as an increase in marketing expense due to the continued promotion of ESPN BET.

For the three months ended March 31, Change

(dollars in millions) 2024 2023 $ %

1 unchanged sentence

Total revenues $ 6.0 $ 5.8 $ 0.2 3.4 %

Adjusted EBITDAR $ (28.1) $ (26.5) $ (1.6) N/M

$ (80.7) $ (73.6) $ (7.1) N/M

Adjusted EBITDAR $ (26.8) $ (27.3) $ 0.5 1.8 %

Other consists of the Company’s stand-alone racing operations, as well as corporate overhead costs, which primarily includes certain expenses such as payroll, professional fees, travel expenses, and other general and administrative expenses that do not directly relate to or have not otherwise been allocated.

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

Changes in Adjusted EBITDAR for the three and nine months ended September 30, 2023 primarily relate to an increase in payroll costs.

Revenues for the three months ended March 31, 2024 have increased compared to the prior ye ar period, primarily due to fluctuations in racing revenues.

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

Changes in Adjusted EBITDAR for the three months ended March 31, 2024 primarily relate to a decrease in general and administrative costs, slightly offset by higher labor costs.

Non-GAAP Financial Measures

15 unchanged sentences

pre-opening expenses;

loss on disposal of a business;

loss on disposal of business;

non-cash gains/losses associated with REIT transactions as described in Note 8, “Leases” to our unaudited Consolidated Financial Statements;

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

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

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

8 unchanged sentences

We present Adjusted EBITDA because it is used by some investors and creditors as an indicator of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations.

These calculations are commonly used as a basis for investors, analysts and

credit rating agencies to evaluate and compare operating performance and value companies within our industry.

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

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

13 unchanged sentences

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

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

For the three months ended March 31,

(dollars in millions) 2024 2023

1 unchanged sentence

Income tax (benefit) expense (12.6) 167.9

(161.7) (182.0) 40.9 (78.1)

Interest expense, net 119.1 113.0

3 unchanged sentences

Gain on REIT transactions, net — (500.8)

Loss on early extinguishment of debt — — — 10.4

Other (income) expenses 0.3 8.8 (4.5) 67.3

Other 1.3 1.0

Operating income (loss) (21.4) 199.1

(786.4) 136.7 (381.8) 731.1

Loss on disposal of Barstool 923.2 — 923.2 —

Stock-based compensation (1)

35.2 13.6 71.4 45.1

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

(2.9) (3.8) (12.0) (16.2)

Loss (gain) on disposal of assets (1)

— (0.2) — 7.0

Gain on disposal of assets (1)

Contingent purchase price (1)

1.3 0.1 1.8 (0.9)

Pre-opening expenses (1)

Depreciation and amortization 108.7 107.5

Impairment losses (3)

— 104.6 — 104.6

Insurance recoveries, net of deductible charges (1)

(0.3) (1.9) (13.9) (10.7)

Income from unconsolidated affiliates 7.2 2.6

Non-operating items of equity method investments (3)

1.0 2.6 6.4 4.7

Other expenses (1)(4)

14.4 32.9 25.1 48.4

Adjusted EBITDA 101.4 332.2

Rent expense associated with triple net operating leases (1)

146.6 31.5 439.0 119.6

Adjusted EBITDAR $ 256.2 $ 478.2

5 unchanged sentences

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

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

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

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

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

2 unchanged sentences

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

For the nine months ended September 30, Change

For the three months ended March 31, Change

(dollars in millions) 2024 2023 $ %

Net cash provided by operating activities $ 540.7 $ 760.0 $ (219.3) (28.9)%

Net cash provided by (used in) operating activities $ (68.7) $ 147.7 $ (216.4) N/M

Net cash used in investing activities $ (47.3) $ (378.2) $ 330.9 (87.5) %

1 unchanged sentence

Operating Cash Flow

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

Net cash provided by operating activities decreased by $219.3 million for the nine months ended September 30, 2023, primarily due to a decrease in income before taxes and additional cash paid for income taxes.

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

Net cash provided by (used in) operating activities decreased by $216.4 million for the three months ended March 31, 2024, primarily due to a decrease in earnings and a negative impact in changes in working capital related to the timing of advanced deposits.

Investing Cash Flow

Cash used in investing activities for the nine months ended September 30, 2023 of $586.0 million is primarily due to consideration paid for the Barstool Acquisition, net of cash acquired, of $314.6 million and capital expenditures of $207.8 million.

For the nine months ended September 30, 2022, cash used in investing activities of $180.0 million primarily related to capital expenditures of $189.6 million and the acquisition of a $15.0 million cost method investment, offset by insurance proceeds received for losses incurred due to Hurricane Laura in 2020.

Cash used in investing activities for the three months ended March 31, 2024, of $47.3 million, primarily relates to capital expenditures of $41.4 million.

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

Capital Expenditures

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

Cash provided by operating activities, as well as cash available under our Amended Revolving Credit Facility and Revolving Facility, was available to fund our capital expenditures for the nine months ended September 30, 2023 and 2022, as applicable.

Capital expenditures for the nine months ended September 30, 2023 and 2022 were $207.8 million and $189.6 million, respectively.

For the year ending December 31, 2023, our anticipated capital expenditures, inclusive of insurance proceeds, are approximately $368.0 million, which include capital expenditures of $207.8 million incurred for the nine months ended September 30, 2023 and capital expenditures required under our Triple Net Leases, which require us to spend a specified percentage of total revenues.

Cash provided by operating activities, as well as cash available under our Amended Revolving Credit Facility, was available to fund our capital expenditures for the three months ended March 31, 2024 and 2023, as applicable.

Capital expenditures for the three months ended March 31, 2024 and 2023, were $41.4 million and $63.2 million, respectively.

For the year ending December 31, 2024 , our anticipated capital expenditures, inclusive of insurance proceeds, are approximately $225.0 million, which include capital expenditures of $22.8 million, incurred for the three months ended March 31, 2024 and capital expenditures required under our Triple Net Leases, which require us to spend a specified percentage of total revenues.

Additionally f or the year ending December 31, 2024 , we anticipate capital project expenditures of $275.6 million in connection with the Aurora Project and Other Development Projects as a result of our Master Development Agreement with GLPI (as described in Note 8, “Leases” in the notes to our unaudited Consolidated Financial Statements), which include capital expenditures of $18.6 million for the three months ended March 31, 2024.

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

Financing Cash Flow

For the nine months ended September 30, 2023, net cash used in financing activities totaled $257.9 million, primarily related to repurchases of our common stock of $149.8 million, as well as $64.4 million in principal payments on our finance leases and finance obligations and debt repayments of $28.1 million.

For the nine months ended September 30, 2022, net cash used in financing activities totaled $705.2 million, primarily related to $510.1 million common stock repurchases, net debt repayments of $28.1 million, $18.2 million in debt issuance costs, and $129.4 million in principal payments on our finance leases and finance obligations.

At September 30, 2023, we had $2.8 billion in aggregate principal amount of indebtedness, including $1.5 billion outstanding under our Amended Credit Facilities, $400.0 million outstanding under our 5.625% senior unsecured notes, $400.0 million outstanding under our 4.125% senior unsecured notes, $330.5 million outstanding under our 2.75% Convertible Notes, and $172.6 million outstanding in other long-term obligations.

No amounts were drawn on our Amended Revolving Credit Facility.

For the three months ended March 31, 2024, net cash used in financing activities totaled $50.1 million, primarily related to principal payments of $22.2 million on our finance leases and finance obligations, $12.2 million in payments on insurance financing, as well as $9.4 million in principal payments on long-term debt.

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

As of March 31, 2024, we had $2.8 billion in aggregate principal amount of indebtedness, including $1.5 billion outstanding under our Amended Credit Facilities (as defined in Note 7, “Long-term Debt” in the notes to our unaudited Consolidated Financial Statements), $400.0 million outstanding under our 5.625% Notes due 2027 (the “5.625% Notes”), $400.0 million outstanding under our 4.125% Notes due 2029 (the “4.125% Notes”), $330.5 million outstanding under our 2.75% Convertible Notes due 2026, and $183.4 million outstanding in other long-term obligations.

No amounts were drawn on our Amended Revolving Credit Facility (as defined in Note 7, “Long-term Debt” in the notes to our unaudited Consolidated Financial Statements).

We have no debt maturing prior to 2026.

As of September 30, 2023 we had conditional obligations under letters of

credit issued pursuant to the Amended Credit Facilities with face amounts aggregating to $21.8 million resulting in $978.2 million available borrowing capacity under our Amended Revolving Credit Facility.

As of March 31, 2024 we had conditional obligations under letters of credit issued pursuant to the Amended Credit Facilities with face amounts aggregating to $20.7 million resulting in $979.3 million available borrowing capacity under our Amended Revolving Credit Facility.

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

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

Our debt agreements also contain customary events of default, including cross-default provisions that require us to meet certain requirements under the AR PENN Master Lease, the 2023 Master Lease, PENN Master Lease (prior to January 1, 2023), and the Pinnacle Master Lease (all of which are defined below), each with GLPI.

Our debt agreements also contain customary events of default, including cross-default provisions that require us to meet certain requirements under the AR PENN Master Lease, the 2023 Master Lease, and the Pinnacle Master Lease (all of which are defined below), each with GLPI.

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

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

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 the notes to our unaudited Consolidated Financial Statements ) in its calculations to comply with the maximum total net leverage ratio or minimum interest coverage ratio (as such terms are defined in the Second Amended and Restated Credit Agreement).

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

As of 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.

1 unchanged sentence

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.

1 unchanged sentence

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 nine months ended September 30, 2023, the Company repurchased 5,438,221 shares of its common stock in open market transactions for $149.8 million, at an average price of $27.54 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.

Other Factors Affecting Liquidity

1 unchanged sentence

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

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

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

In consideration for the media marketing services and brand and other rights provided by ESPN, PENN will pay $150.0 million per year in cash pursuant to the Sportsbook Agreement for the initial 10-year term and issue the warrants pursuant to the Investment Agreement (see Note 12, “Commitments and Contingencies” for additional information).

In consideration for the media marketing services and brand and other rights provided by ESPN, PENN will pay $150.0 million per year in cash pursuant to the Sportsbook Agreement for the initial 10-year term and issue warrants pursuant to the Investment Agreement (see Note 11, “Commitments and Contingencies” in the notes to our unaudited Consolidated Financial Statements for additional information).

Triple Net Leases

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

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

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

the most significant of which are the AR PENN Master Lease, 2023 Master Lease, and Pinnacle Master Lease (as such terms are defined in Note 8, “Leases” in the notes to our unaudited Consolidated Financial Statements, and collectively referred to as the “Master Leases”), with GLPI.

We refer to the Master Leases, the Margaritaville Lease, the Greektown Lease, and the Morgantown Lease, collectively, as our “Triple Net Leases”.

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

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

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

On February 21, 2023, as described in Note 8, “Leases” in the notes to our unaudited Consolidated Financial Statements, the Company and GLPI entered into the AR PENN Master Lease, effective January 1, 2023, to (i) remove the land and buildings for Aurora, Joliet, Columbus, Toledo and the M Resort, and (ii) make associated adjustments to the rent after which the initial rent in the AR PENN Master Lease 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).

The AR PENN Master Lease remains subject to annual rent escalators and a percentage rent reset every five years.

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

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

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

The 2023 Master Lease incurs a 1.5% fixed escalator on November 1 each year, and is also subject to a one-time increase of $1.4 million effective November 1, 2027.

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

2 unchanged sentences

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

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

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

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

The Aurora Project and the Other Development Projects have all commenced and are anticipated to open in late 2025 to early 2026.

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

4 unchanged sentences

and (v) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties.

Additionally, our Triple Net Leases are subject to

annual escalators and periodic percentage rent resets, as applicable.

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

See Note 8, “Leases” in the notes to our unaudited Consolidated Financial Statements for further discussion and disclosure related to the Company’s leases.

1 unchanged sentence

Total payments made to our REIT Landlords, GLPI and VICI, 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

1 unchanged sentence

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

1 unchanged sentence

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

Based on our current level of operations, we believe that cash generated from operations and cash on hand, together with amounts available under our Amended Credit Facilities, will be adequate to meet our anticipated obligations under our Triple Net Leases, debt service requirements, capital expenditures and working capital needs for the foreseeable future.

2 unchanged sentences

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

economy, slowing economic growth, geopolitical uncertainty, and instability in the banking sector following multiple bank failures;

economy, slowing economic growth, and geopolitical uncertainty;

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

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

and (iv) that future borrowings will be available under our Amended Credit Facilities or otherwise will be available in the credit markets to enable us to service our indebtedness or to make anticipated capital expenditures.

(iv) that we will achieve the anticipated financial returns from our Sportsbook Agreement with ESPN;

(v) that future borrowings will be available under our Amended Credit Facilities or otherwise will be available in the credit markets to enable us to service our indebtedness or to make anticipated capital expenditures.

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

13 unchanged sentences

A complete discussion of our critical accounting estimates is included in our Form 10-K for the year ended December 31, 2023.

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

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

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

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

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

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

Business Combination

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

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

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

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

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

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

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

(1) revenue growth;

(2) discount rates;

(3) effective income tax rates;

(4) future terminal values;

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

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

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

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

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

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

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

There have been no significant changes in our critical accounting estimates during the three months ended March 31, 2024.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

4 unchanged sentences

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

the Company’s anticipated share repurchases;

the Company’s expectations of future results of operations and financial condition, the assumptions provided regarding the guidance, including the scale and timing of the Company’s product and technology investments;

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

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

the expected timing of the rebrand of Barstool Sportsbook;

the benefits of the agreement between the Company and ESPN;

the Company’s expectations regarding its Sportsbook Agreement with ESPN and the future success of its products;

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

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

the benefits of the Sportsbook Agreement between the Company and ESPN;

the Company’s expectations regarding its Sportsbook Agreement with ESPN and the future success of ESPN BET;

the Company’s expectations with respect to the integration and synergies related to the Company’s integration of theScore and the continued growth and monetization of the Company’s media business;

the Company’s

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

the Company’s development projects, including the prospective development projects at Hollywood Casinos Aurora, Joliet, Columbus, and the M Resort Spa Casino;

the Company’s expectations that its portfolio of assets provides a benefit of geographically-diversified cash flows from operations;

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

the Company’s plan to expand gaming operations through the implementation and execution of a disciplined capital expenditure program at our existing properties, the pursuit of strategic acquisitions and investments, and the development of new gaming properties, including the anticipated opening in 2026 of development projects at Hollywood Casinos Aurora, Joliet, Columbus, and the M Resort Spa Casino;

improvements, expansions, or relocations of our existing properties;

entrance into new jurisdictions;

expansion of gaming in existing jurisdictions;

strategic investments and acquisitions;

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

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

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

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

our expectation that the Company 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;

our expectation that, based on our current level of operations, cash generated from operations and cash on hand, together with amounts available under our Amended Credit Facilities, will be adequate to meet our anticipated obligations under our Triple Net Leases, debt service requirements, capital expenditures and working capital needs for the foreseeable future;

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

the anticipated impact of accounting pronouncements;

and the Company’s expected payment of $30.5 million in settlement costs in the second quarter of 2024 relating to Barstool SPA indemnification obligations.

Such statements are all subject to risks, uncertainties and changes in circumstances that could significantly affect the Company’s future financial results and business.

1 unchanged sentence

Such factors include:

the effects of economic and market conditions in the markets in which the Company operates;

the effects of economic and market conditions in the markets in which the Company operates or otherwise, including the impact of global supply chain disruptions, price inflation, rising interest rates, slowing economic growth, and geopolitical uncertainty;

competition with other entertainment, sports content, and casino gaming experiences;

the timing, cost and expected impact of product and technology investments;

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

collective bargaining activity and strikes;

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

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

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

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

the Company may not achieve expected synergies from acquisitions;

future borrowings may not be available under our Amended Credit Facilities and capital may not be otherwise available to enable us to service our indebtedness, make anticipated capital expenditures or pay off or refinance our indebtedness prior to maturity;

the impact of indemnification obligations under the Barstool SPA;

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

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

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

7 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis