PENN Entertainment, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS 1 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in millions, except share and per share data) June 30, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 877.6 $ 1,071.8 Accounts receivable, net 251.9 319.0 Prepaid expenses 158.3 225.6 Other current assets 45.0 42.6 Total current assets 1,332.8 1,659.0 Property and equipment, net 3,498.1 3,514.0 Investment in and advances to unconsolidated affiliates 86.5 84.9 Goodwill 2,648.2 2,695.1 Other intangible assets, net 1,606.1 1,618.2 Operating lease right-of-use assets 4,110.7 4,264.7 Finance lease right-of-use assets 2,059.6 2,041.0 Other assets 196.0 187.3 Total assets $ 15,538.0 $ 16,064.2 Liabilities Current liabilities Accounts payable $ 46.1 $ 36.6 Current maturities of long-term debt 38.2 47.6 Current portion of financing obligations 42.4 41.3 Current portion of operating lease liabilities 311.6 302.3 Current portion of finance lease liabilities 51.8 40.3 Accrued expenses and other current liabilities 809.5 1,021.9 Total current liabilities 1,299.6 1,490.0 Long-term debt, net of current maturities, debt discount and debt issuance costs 2,722.2 2,718.0 Long-term portion of financing obligations 2,364.9 2,386.1 Long-term portion of operating lease liabilities 3,791.3 3,944.1 Long-term portion of finance lease liabilities 2,089.2 2,062.5 Deferred income taxes 74.2 117.6 Other long-term liabilities 143.7 146.3 Total liabilities 12,485.1 12,864.6 Commitments and contingencies (Note 11) Stockholders’ equity Series B Preferred stock ($ 0.01 par value, 1,000,000 shares authorized, no shares issued and outstanding) — — Series C Preferred stock ($ 0.01 par value, 18,500 shares authorized, no shares issued and outstanding) — — Series D Preferred stock ($ 0.01 par value, 5,000 shares authorized, no shares issued and outstanding) — — Common stock ($ 0.01 par value, 400,000,000 shares authorized, 177,283,486 and 176,719,596 shares issued, and 152,116,584 and 151,552,694 shares outstanding) 1.8 1.8 Exchangeable shares ($ 0.01 par value, 768,441 shares authorized, 768,441 and 700,393 shares issued, 469,878 and 560,267 shares outstanding) — — Treasury stock, at cost ( 25,166,902 shares repurchased as of both periods) ( 779.5 ) ( 779.5 ) Additional paid-in capital 4,487.4 4,436.6 Accumulated deficit ( 477.0 ) ( 335.5 ) Accumulated other comprehensive loss ( 176.8 ) ( 121.3 ) Total PENN Entertainment, Inc. stockholders’ equity 3,055.9 3,202.1 Non-controlling interest ( 3.0 ) ( 2.5 ) Total stockholders’ equity 3,052.9 3,199.6 Total liabilities and stockholders’ equity $ 15,538.0 $ 16,064.2 See accompanying notes to the unaudited Consolidated Financial Statements. 2 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the three months ended June 30, For the six months ended June 30, (in millions, except per share data) 2024 2023 2024 2023 Revenues Gaming $ 1,332.3 $ 1,292.8 $ 2,590.6 $ 2,617.4 Food, beverage, hotel, and other 330.7 382.0 679.3 730.7 Total revenues 1,663.0 1,674.8 3,269.9 3,348.1 Operating expenses Gaming 871.1 710.6 1,750.6 1,440.1 Food, beverage, hotel, and other 219.6 267.8 470.8 512.1 General and administrative 388.7 380.3 777.6 773.2 Depreciation and amortization 109.1 110.6 217.8 218.1 Total operating expenses 1,588.5 1,469.3 3,216.8 2,943.5 Operating income 74.5 205.5 53.1 404.6 Other income (expenses) Interest expense, net ( 119.4 ) ( 115.6 ) ( 238.5 ) ( 228.6 ) Interest income 5.8 9.9 12.9 20.3 Income from unconsolidated affiliates 7.8 7.2 15.0 9.8 Gain on Barstool Acquisition, net — — — 83.4 Gain on REIT transactions, net — — — 500.8 Other 1.0 5.8 ( 0.3 ) 4.8 Total other income (expenses) ( 104.8 ) ( 92.7 ) ( 210.9 ) 390.5 Income (loss) before income taxes ( 30.3 ) 112.8 ( 157.8 ) 795.1 Income tax benefit (expense) 3.2 ( 34.7 ) 15.8 ( 202.6 ) Net income (loss) ( 27.1 ) 78.1 ( 142.0 ) 592.5 Less: Net loss attributable to non-controlling interest 0.3 0.3 0.5 0.4 Net income (loss) attributable to PENN Entertainment, Inc. $ ( 26.8 ) $ 78.4 $ ( 141.5 ) $ 592.9 Earnings per share: Basic earnings (loss) per share $ ( 0.18 ) $ 0.51 $ ( 0.93 ) $ 3.86 Diluted earnings (loss) per share $ ( 0.18 ) $ 0.48 $ ( 0.93 ) $ 3.54 Weighted-average common shares outstanding—basic 152.1 152.8 152.0 153.0 Weighted-average common shares outstanding—diluted 152.1 167.9 152.0 168.2 See accompanying notes to the unaudited Consolidated Financial Statements. 3 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) For the three months ended June 30, For the six months ended June 30, (in millions) 2024 2023 2024 2023 Net income (loss) $ ( 27.1 ) $ 78.1 $ ( 142.0 ) $ 592.5 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment during the period ( 19.5 ) 36.4 ( 55.5 ) 44.6 Other comprehensive income (loss) ( 19.5 ) 36.4 ( 55.5 ) 44.6 Total comprehensive income (loss) ( 46.6 ) 114.5 ( 197.5 ) 637.1 Less: Comprehensive loss attributable to non-controlling interest 0.3 0.3 0.5 0.4 Comprehensive income (loss) attributable to PENN Entertainment, Inc. $ ( 46.3 ) $ 114.8 $ ( 197.0 ) $ 637.5 See accompanying notes to the unaudited Consolidated Financial Statements. 4 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) Three Months Ended June 30, 2024 and 2023 Preferred Stock Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total PENN Stockholders’ Equity Non-Controlling Interest Total Stockholders’ Equity (in millions, except share data) Shares Amount PENN Entertainment, Inc. Shares Amount Exchangeable Shares Amount Balance as of April 1, 2024 — $ — 151,870,805 $ 1.8 557,174 $ — $ ( 779.5 ) $ 4,459.9 $ ( 450.2 ) $ ( 157.3 ) $ 3,074.7 $ ( 2.7 ) $ 3,072.0 Share-based compensation arrangements — — 154,428 — — — — 14.2 — — 14.2 — 14.2 Common stock issuance — — 4,055 — — — 0.1 — — 0.1 — 0.1 Exchangeable share conversions — — 87,296 — ( 87,296 ) — — — — — — — — Investment Agreement warrants (Note 11) — — — — — — — 14.4 — — 14.4 — 14.4 Currency translation adjustment — — — — — — — — — ( 19.5 ) ( 19.5 ) — ( 19.5 ) Net loss — — — — — — — — ( 26.8 ) — ( 26.8 ) ( 0.3 ) ( 27.1 ) Other — — — — — — — ( 1.2 ) — — ( 1.2 ) — ( 1.2 ) Balance as of June 30, 2024 — $ — 152,116,584 $ 1.8 469,878 $ — $ ( 779.5 ) $ 4,487.4 $ ( 477.0 ) $ ( 176.8 ) $ 3,055.9 $ ( 3.0 ) $ 3,052.9 Balance as of April 1, 2023 354 $ 11.8 154,136,908 $ 1.8 560,758 $ — $ ( 679.5 ) $ 4,333.6 $ 669.0 $ ( 160.4 ) $ 4,176.3 $ ( 1.2 ) $ 4,175.1 Share-based compensation arrangements — — 23,391 — — — — 19.7 — — 19.7 — 19.7 Share repurchases — — ( 3,791,258 ) — — — ( 99.8 ) — — — ( 99.8 ) — ( 99.8 ) Common stock issuance — — 4,055 — — — 0.1 — — 0.1 — 0.1 Exchangeable share conversions — — 370 — ( 370 ) — — — — — — — — Currency translation adjustment — — — — — — — — — 36.4 36.4 — 36.4 Net income (loss) — — — — — — — — 78.4 — 78.4 ( 0.3 ) 78.1 Other — — — — — — ( 0.4 ) ( 0.4 ) — — ( 0.8 ) — ( 0.8 ) Balance as of June 30, 2023 354 $ 11.8 150,373,466 $ 1.8 560,388 $ — $ ( 779.7 ) $ 4,353.0 $ 747.4 $ ( 124.0 ) $ 4,210.3 $ ( 1.5 ) $ 4,208.8 5 Table of Contents Six Months Ended June 30, 2024 and 2023 Preferred Stock Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total PENN Stockholders’ Equity Non-Controlling Interest Total Stockholders’ Equity (in millions, except share data) Shares Amount PENN Entertainment, Inc. Shares Amount Exchangeable Shares Amount Balance as of January 1, 2024 — $ — 151,552,694 $ 1.8 560,267 $ — $ ( 779.5 ) $ 4,436.6 $ ( 335.5 ) $ ( 121.3 ) $ 3,202.1 $ ( 2.5 ) $ 3,199.6 Share-based compensation arrangements — — 401,398 — — — — 26.1 — — 26.1 — 26.1 Common stock issuance — — 4,055 — — — — 0.1 — — 0.1 — 0.1 Exchangeable share issuance — — — — 68,048 — — — — — — — — Exchangeable share conversions — — 158,437 — ( 158,437 ) — — — — — — — — Investment Agreement warrants (Note 11) — — — — — — — 28.7 — — 28.7 — 28.7 Currency translation adjustment — — — — — — — — — ( 55.5 ) ( 55.5 ) — ( 55.5 ) Net loss — — — — — — — — ( 141.5 ) — ( 141.5 ) ( 0.5 ) ( 142.0 ) Other — — — — — — — ( 4.1 ) — — ( 4.1 ) — ( 4.1 ) Balance as of June 30, 2024 — $ — 152,116,584 $ 1.8 469,878 $ — $ ( 779.5 ) $ 4,487.4 $ ( 477.0 ) $ ( 176.8 ) $ 3,055.9 $ ( 3.0 ) $ 3,052.9 Balance as of January 1, 2023 581 $ 19.4 152,903,708 $ 1.7 620,019 $ — $ ( 629.5 ) $ 4,220.2 $ 154.5 $ ( 168.6 ) $ 3,597.7 $ ( 1.1 ) $ 3,596.6 Share-based compensation arrangements — — 171,830 — — — — 36.2 — — 36.2 — 36.2 Share issuance in connection with acquisitions — — 2,442,809 — — — — 80.8 — — 80.8 — 80.8 Share repurchases — — ( 5,438,221 ) — — — ( 149.8 ) — — — ( 149.8 ) — ( 149.8 ) Preferred stock conversions ( 227 ) ( 7.6 ) 226,800 — — — — 7.6 — — — — — Common stock issuance — — 4,055 — — — — 0.1 — — 0.1 — 0.1 Exchangeable share issuance — — — — 2,854 — — — — — — — — Exchangeable share conversions — — 62,485 — ( 62,485 ) — — — — — — — — Currency translation adjustment — — — — — — — — — 44.6 44.6 — 44.6 Net income (loss) — — — — — — — — 592.9 — 592.9 ( 0.4 ) 592.5 Other — — — 0.1 — — ( 0.4 ) 8.1 — — 7.8 — 7.8 Balance as of June 30, 2023 354 $ 11.8 150,373,466 $ 1.8 560,388 $ — $ ( 779.7 ) $ 4,353.0 $ 747.4 $ ( 124.0 ) $ 4,210.3 $ ( 1.5 ) $ 4,208.8 See accompanying notes to the unaudited Consolidated Financial Statements. 6 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the six months ended June 30, (in millions) 2024 2023 Operating activities Net income (loss) $ ( 142.0 ) $ 592.5 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 217.8 218.1 Amortization of debt discount and debt issuance costs 4.3 4.1 Non-cash interest expense 22.0 16.8 Non-cash operating lease expense 156.2 154.8 Gain on Barstool Acquisition, net — ( 83.4 ) Gain on REIT transactions, net — ( 500.8 ) Holding loss (gain) on equity securities 5.4 ( 3.1 ) Loss on sale or disposal of property and equipment 8.9 — Gain on Hurricane Laura ( 2.7 ) ( 13.6 ) Income from unconsolidated affiliates ( 15.0 ) ( 9.8 ) Return on investment from unconsolidated affiliates 16.0 16.8 Deferred income taxes ( 44.2 ) 111.6 Stock-based compensation 26.1 36.2 Investment Agreement warrant expense 37.5 — Changes in operating assets and liabilities, net of businesses acquired Accounts receivable 64.2 7.2 Prepaid expenses and other current assets 29.0 ( 21.7 ) Other assets ( 23.2 ) ( 9.9 ) Accounts payable 9.3 ( 4.1 ) Accrued expenses ( 89.0 ) ( 50.8 ) Income taxes 26.5 21.0 Operating lease liabilities ( 145.5 ) ( 157.1 ) Other current and long-term liabilities ( 90.3 ) ( 7.8 ) Other 10.4 6.7 Net cash provided by operating activities 81.7 323.7 Investing activities Capital expenditures ( 129.6 ) ( 132.8 ) Consideration paid for Barstool, net of cash acquired — ( 314.6 ) Proceeds from sale of property and equipment 3.5 0.1 Hurricane Laura insurance proceeds 1.7 8.8 Consideration paid for gaming licenses and other intangible assets ( 17.2 ) ( 11.7 ) Other ( 4.5 ) ( 12.7 ) Net cash used in investing activities ( 146.1 ) ( 462.9 ) 7 Table of Contents For the six months ended June 30, (in millions) 2024 2023 Financing activities Principal payments on long-term debt ( 18.8 ) ( 18.8 ) Debt issuance costs ( 2.6 ) — Payments of other long-term obligations ( 10.1 ) ( 0.7 ) Principal payments on financing obligations ( 20.2 ) ( 19.4 ) Principal payments on finance leases ( 24.8 ) ( 23.3 ) Proceeds from exercise of options 1.2 1.1 Repurchase of common stock — ( 149.8 ) Payments on insurance financing ( 17.5 ) — Indemnification payments ( 30.5 ) — Other ( 5.3 ) ( 3.2 ) Net cash used in financing activities ( 128.6 ) ( 214.1 ) Effect of currency rate changes on cash, cash equivalents, and restricted cash ( 0.9 ) 1.0 Change in cash, cash equivalents, and restricted cash ( 193.9 ) ( 352.3 ) Cash, cash equivalents, and restricted cash at the beginning of the year 1,094.4 1,644.2 Cash, cash equivalents, and restricted cash at the end of the period $ 900.5 $ 1,291.9 Reconciliation of cash, cash equivalents, and restricted cash: Cash and cash equivalents $ 877.6 $ 1,271.6 Restricted cash included in Other current assets 21.7 19.1 Restricted cash included in Other assets 1.2 1.2 Total cash, cash equivalents, and restricted cash $ 900.5 $ 1,291.9 Supplemental disclosure: Cash paid for interest, net of amounts capitalized $ 212.4 $ 207.4 Cash payments related to income taxes, net $ 0.9 $ 66.0 Non-cash activities: Accrued capital expenditures $ 33.5 $ 15.0 See accompanying notes to the unaudited Consolidated Financial Statements. 8 Table of Contents PENN ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1— Organization Organization : 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 June 30, 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. and ESPN Enterprises, Inc. (together, “ESPN”) relating to online sports betting within the United States. PENN’s ability to leverage the leading sports media brands in the United States (ESPN) and Canada (theScore) 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 approximately 31 million members a unique set of rewards and experiences across business channels. The majority of the real estate assets (i.e., land and buildings) used in our operations are subject to triple net master leases; the most significant of which are with Gaming and Leisure Properties, Inc. (Nasdaq: GLPI) (“GLPI”), a real estate investment trust (“REIT”), and include the AR PENN Master Lease, 2023 Master Lease, and Pinnacle Master Lease (as such terms are defined in Note 8, “Leases” and collectively referred to as the “Master Leases”). Note 2— Significant Accounting Policies and Basis of Presentation Basis of Presentation: The unaudited Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Results of operations and cash flows for the interim periods presented herein are not necessarily indicative of the results that would be achieved during a full year of operations or in future periods. These unaudited Consolidated Financial Statements and notes thereto should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Principles of Consolidation: The unaudited Consolidated Financial Statements include the accounts of PENN Entertainment, Inc. and its subsidiaries. Investments in and advances to unconsolidated affiliates that do not meet the consolidation criteria of the authoritative guidance for voting interest entities (“VOEs”) or variable interest entities (“VIEs”) are accounted for under the equity method. All intercompany accounts and transactions have been eliminated in consolidation. Reclassifications: Certain reclassifications have been made to conform the prior period presentation with current year presentation. Use of Estimates: The preparation of unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. Estimates used by us may include, among other things, the useful lives for depreciable and amortizable assets, the provision for credit losses, income tax provisions, the evaluation of the future realization of deferred tax assets, indemnification liabilities associated with certain tax matters, determining the adequacy of reserves for self-insured liabilities, the liabilities associated with our PENN Play program, the initial measurements of financing obligations and lease liabilities associated with our Master Leases, projected cash fl ows in assessing the recoverability of long-lived assets, asset impairments, goodwill and other intangible assets, projected cash flows in assessing the initial valuation of intangible assets in conjunction with acquisitions, the initial selection of useful lives for depreciable and amortizable assets in conjunction with acquisitions, contingencies, and litigation inclusive of financing arrangements in which the Company receives up-front cash proceeds, and stock-based compensation expense. We applied estimation methods consistently for the periods presented within our unaudited Consolidated Financial Statements. Actual results may differ from those estimates. 9 Table of Contents Segment Information: We have five reportable segments: Northeast, South, West, Midwest, and Interactive. Our gaming and racing properties are grouped by geographic location, and each is viewed as an operating segment with the exception of our two properties in Jackpot, Nevada, which are viewed as one operating segment. We consider our combined Video Gaming Terminal (“VGT”) operations, by state, to be separate operating segments. Interactive includes all of our online sports betting, online casino/iCasino and social gaming (collectively referred to as “online gaming”) operations, management of retail sports bet ting, media, and in the prior year, the operating results of Barstool Sports, Inc. (“Barstool” or “Barstool Sports”). We owned 36 % of Barstool common stock prior to the February 17, 2023 Barstool Acquisition (as defined in Note 5, “Acquisitions and Dispositions” ) pursuant to which we acquired the remaining 64 % of Barstool common stock. On August 8, 2023 we entered into a stock purchase agreement with David Portnoy (the “Barstool SPA”), and we sold 100 % of the outstanding shares of Barstool common stock. See Note 15, “Segment Information” and Note 8, “Leases” for further segment and lease structure information, respectively. For financial reporting purposes, we aggregate our operating segments into the following reportable segments: 10 Table of Contents Location Real Estate Assets Lease or Ownership Structure Northeast segment Ameristar East Chicago East Chicago, Indiana Pinnacle Master Lease Hollywood Casino Bangor Bangor, Maine AR PENN Master Lease Hollywood Casino at Charles Town Races Charles Town, West Virginia AR PENN Master Lease Hollywood Casino Columbus Columbus, Ohio 2023 Master Lease Hollywood Casino at Greektown Detroit, Michigan Greektown Lease Hollywood Casino Lawrenceburg Lawrenceburg, Indiana AR PENN Master Lease Hollywood Casino Morgantown Morgantown, Pennsylvania Morgantown Lease (1) Hollywood Casino at PENN National Race Course Grantville, Pennsylvania AR PENN Master Lease Hollywood Casino Perryville Perryville, Maryland 2023 Master Lease Hollywood Casino at The Meadows Washington, Pennsylvania 2023 Master Lease Hollywood Casino Toledo Toledo, Ohio 2023 Master Lease Hollywood Casino York York, Pennsylvania Operating Lease (not with REIT Landlord) Hollywood Gaming at Dayton Raceway Dayton, Ohio AR PENN Master Lease Hollywood Gaming at Mahoning Valley Race Course Youngstown, Ohio AR PENN Master Lease Marquee by PENN (2) Pennsylvania N/A Plainridge Park Casino Plainville, Massachusetts Pinnacle Master Lease South segment 1 st Jackpot Casino Tunica, Mississippi AR PENN Master Lease Ameristar Vicksburg Vicksburg, Mississippi Pinnacle Master Lease Boomtown Biloxi Biloxi, Mississippi AR PENN Master Lease Boomtown Bossier City Bossier City, Louisiana Pinnacle Master Lease Boomtown New Orleans New Orleans, Louisiana Pinnacle Master Lease Hollywood Casino Gulf Coast Bay St. Louis, Mississippi AR PENN Master Lease Hollywood Casino Tunica Tunica, Mississippi AR PENN Master Lease L’Auberge Baton Rouge Baton Rouge, Louisiana Pinnacle Master Lease L’Auberge Lake Charles Lake Charles, Louisiana Pinnacle Master Lease Margaritaville Resort Casino Bossier City, Louisiana Margaritaville Lease West segment Ameristar Black Hawk Black Hawk, Colorado Pinnacle Master Lease Cactus Petes and Horseshu Jackpot, Nevada Pinnacle Master Lease M Resort Spa Casino Henderson, Nevada 2023 Master Lease Zia Park Casino Hobbs, New Mexico AR PENN Master Lease Midwest segment Ameristar Council Bluffs Council Bluffs, Iowa Pinnacle Master Lease Argosy Casino Alton (3) Alton, Illinois AR PENN Master Lease Argosy Casino Riverside Riverside, Missouri AR PENN Master Lease Hollywood Casino Aurora Aurora, Illinois 2023 Master Lease Hollywood Casino Joliet Joliet, Illinois 2023 Master Lease Hollywood Casino at Kansas Speedway (4) Kansas City, Kansas Owned - Joint Venture Hollywood Casino St. Louis Maryland Heights, Missouri AR PENN Master Lease Prairie State Gaming (2) Illinois N/A River City Casino St. Louis, Missouri Pinnacle Master Lease (1) Upon termination of the Morgantown Lease, ownership of the constructed building and all tenant improvements will transfer from the Company to GLPI. (2) VGT route operations. (3) The riverboat is owned by us and not subject to the AR PENN Master Lease. (4) Pursuant to a joint venture with NASCAR Holdings LLC (“NASCAR”) and includes the Company’s 50 % investment in Kansas Entertainment, LLC (“Kansas Entertainment”), which owns Hollywood Casino at Kansas Speedway. 11 Table of Contents Revenue Recognition: Our revenue from contracts with customers consists primarily of gaming wagers, inclusive of sports betting and iCasino products, food and beverage transactions, hotel room sales, retail transactions, racing wagers, and third-party revenue sharing agreements. See Note 4, “Revenue Disaggregation” for information on our revenue by type and geographic location. Complimentaries Associated with Gaming Contracts Food, beverage, hotel, and other services furnished to patrons for free as an inducement to gamble at our retail properties or through the redemption of our customers’ loyalty points are recorded as “Food, beverage, hotel, and other” revenues at their estimated standalone selling prices, with an offset recorded as a reduction to “Gaming” revenues. The cost of providing complimentary goods and services to patrons as an inducement to gamble as well as for the fulfillment of our loyalty point obligation is included in “Food, beverage, hotel, and other” expenses. Revenues recorded to “Food, beverage, hotel, and other” and offset to “Gaming” revenues were as follows: For the three months ended June 30, For the six months ended June 30, (in millions) 2024 2023 2024 2023 Food and beverage $ 54.9 $ 54.8 $ 108.4 $ 109.1 Hotel 35.3 35.8 69.3 65.7 Other 2.7 3.2 5.4 6.3 Total complimentaries associated with gaming contracts $ 92.9 $ 93.8 $ 183.1 $ 181.1 Additionally, the Company provides discretionary complimentaries in the form of online casino gaming slots and table games and online sports betting free play bonuses. Free play bonuses provided to patrons indirectly contribute to the gaming revenue earned by the Company and are recorded as a reduction of “Gaming” revenues. Customer-related Liabilities The Company has three general types of liabilities related to contracts with customers: (i) the obligation associated with its PENN Play program (loyalty points and tier status benefits), (ii) advance payments on goods and services yet to be provided and for unpaid wagers, and (iii) deferred revenue associated with third-party online sports betting and/or iCasino for online sports betting and iCasino market access. Our PENN Play program connects the Company’s brands under one loyalty program and allows members to earn loyalty points, or “PENN Cash,” redeemable for slot play and complimentaries, such as food and beverage at our restaurants, lodging at our hotels, the PENN Play redemption marketplace that features popular retailers, and products offered at our retail stores across the vast majority of our properties. In addition, members of the PENN Play program earn credit toward tier status, which entitles them to receive certain other benefits, such as priority access, discounts, gifts, trips to PENN destinations, partner experiences, and PENN Cash. The obligation associated with our PENN Play program, which is included in “Accrued expenses and other current liabilities” within our unaudited Consolidated Balance Sheets, was $ 32.1 million and $ 33.1 million as of June 30, 2024 and December 31, 2023, respectively, and consisted principally of the obligation associated with the loyalty points. Our loyalty point obligations are generally settled within six months of issuance. Changes between the opening and closing balances primarily relate to the timing of our customers’ election to redeem loyalty points as well as the timing of when our customers receive their earned tier status benefits. The Company’s advance payments on goods and services yet to be provided and for unpaid wagers primarily consist of the following: (i) deposits on rooms and convention space, (ii) money deposited on behalf of a customer in advance of their property visit (referred to as “safekeeping” or “front money”), (iii) money deposited in an online wallet not yet wagered or wagered and not yet withdrawn, (iv) outstanding tickets generated by slot machine play, sports betting, or pari-mutuel wagering, (v) outstanding chip liabilities, (vi) unclaimed jackpots, and (vii) gift cards redeemable at our properties. Unpaid wagers generally represent obligations stemming from prior wagering events, of which revenue was previously recognized. The Company’s advance payments on goods and services yet to be provided and for unpaid wagers were $ 116.8 million and $ 192.6 million as of June 30, 2024 and December 31, 2023, respectively, and are included in “Accrued expenses and other current liabilities” within our unaudited Consolidated Balance Sheets. The Company’s deferred revenue is primarily related to PENN Interactive, our wholly owned interactive division, which enters into multi-year agreements with third-party online sports betting and/or iCasino operators for online sports betting and iCasino market access across our portfolio of properties. 12 Table of Contents As of June 30, 2024 and December 31, 2023, our deferred revenue balance was $ 41.6 million and $ 41.9 million, respectively, the majority of which is included in “Other long-term liabilities” within our unaudited Consolidated Balance Sheets. During the three and six months ended June 30, 2024, we recognized revenue of $ 3.3 million and $ 4.2 million, respectively, that was included in the December 31, 2023 deferred revenue balance. During the three and six months ended June 30, 2023, we recognized revenue of $ 1.0 million and $ 1.7 million, respectively, that was included in the December 31, 2022 deferred revenue balance. Advertising: The Company expenses advertising costs the first time the advertising takes place or as incurred. Advertising expenses, which primarily relate to media marketing services and brand and other rights provided by ESPN pursuant to the Sportsbook Agreement (as defined in Note 5, “Acquisitions and Dispositions” ), and other media placement costs and are primarily included in “Gaming” expenses within the unaudited Consolidated Statements of Operations, were $ 112.3 million and $ 20.8 million for the three months ended June 30, 2024 and 2023, respectively, and $ 248.3 million and $ 44.4 million for the six months ended June 30, 2024 and 2023, respectively. Gaming and Pari-mutuel Taxes: We are subject to gaming and pari-mutuel taxes based on gross gaming revenue and pari-mutuel revenue in the jurisdictions in which we operate, as well as taxes on revenues derived from arrangements which allow for third-party online sports betting and/or iCasino partners to operate online sportsbooks and iCasinos under our gaming licenses. The Company primarily recognizes gaming and pari-mutuel tax expense based on the statutorily required percentage of revenue that is required to be paid to state, provincial and/or local jurisdictions in the states and provinces where or in which the wagering occurs. Also included in gaming and pari-mutuel taxes, are costs to support the operations of local regulatory authorities which some jurisdictions require us to pay. Gaming and pari-mutuel taxes are recorded in “Gaming” expenses or “Food, beverage, hotel, and other” expenses within the unaudited Consolidated Statements of Operations and were $ 568.6 million and $ 560.5 million for the three months ended June 30, 2024 and 2023, respectively, and $ 1.2 billion and $ 1.1 billion for the six months ended June 30, 2024 and 2023, respectively. Foreign Currency Translation: The functional currency of the Company’s foreign subsidiaries is the local currency in which the subsidiary operates. Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date. Translation adjustments resulting from this process are recorded to other comprehensive income or loss. Revenues and expenses are translated at the average exchange rates during the year. Gains or losses resulting from foreign currency transactions are included in “Other” within our unaudited Consolidated Statements of Operations. Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss: Comprehensive income (loss) includes net income (loss) and all other non-stockholder changes in equity, or other comprehensive income (loss). The balance of accumulated other comprehensive loss consists of foreign currency translation adjustments and unrealized gains or losses on debt securities. Earnings (Loss) Per Share: Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) applicable to common stock by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the additional dilution, if any, for all potentially-dilutive securities such as warrants, stock options, unvested restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) (collectively with RSAs, “restricted stock”), outstanding convertible preferred stock, and convertible debt. Holders of the Company’s Series D Preferred Stock (as defined in Note 12, “Stockholders’ Equity and Stock-based Compensation” ) were entitled to participate equally and ratably in all dividends and distributions paid to holders of PENN common stock irrespective of any vesting requirement. Accordingly, the Series D Preferred Stock shares were considered a participating security, and the Company was required to apply the two-class method to consider the impact of the preferred shares on the calculation of basic and diluted EPS. See Note 13, “Earnings per Share” for more information. As discussed in Note 12, “Stockholders’ Equity and Stock-based Compensation,” all remaining outstanding shares of Series D Preferred Stock were converted to common stock during the third quarter of 2023. There were no outstanding shares of Series D Preferred Stock as of June 30, 2024. Guarantees and Indemnifications: The Company accounts for indemnity obligations in accordance with Accounting Standards Codification (“ASC”) Topic 460-20, “Contingencies” and records a liability at fair value. Pursuant to the Barstool SPA, the Company agreed to indemnify Barstool and its subsidiaries and David Portnoy for certain tax matters. The indemnity provisions generally provide for the Company’s control of defense and settlement of claims, as well as certain other costs associated with potential tax matters related to Barstool and its subsidiaries and David Portnoy. Claims under the indemnification are paid upon demand. In the second quarter of 2024, the Company paid $ 30.5 million in settlement costs under this indemnification obligation. Provisions in the Barstool SPA limit the time within which an indemnification claim can be made to the later of the resolution of the indemnification claim or the relevant statutes of limitations. The maximum potential amount of future payments the Company could be required to make under this indemnification agreement is not estimable at 13 Table of Contents this time due to uncertainties related to potential outcomes and other unique facts and circumstances involved in the Barstool SPA. As of June 30, 2024 and December 31, 2023, the Company has recorded liabilities of $ 39.5 million and $ 70.0 million for this agreement, respectively. See Note 5, “Acquisitions and Dispositions” and Note 14, “Fair Value Measurements” for more information. Voting Interest Entities and Variable Interest Entities: The Company consolidates all subsidiaries or other entities in which it has a controlling financial interest. The consolidation guidance requires an analysis to determine if an entity should be evaluated for consolidation using the VOE model or the VIE model. Under the VOE model, controlling financial interest is generally defined as a majority ownership of voting rights. Under the VIE model, controlling financial interest is defined as (i) the power to direct activities that most significantly impact the economic performance of the entity and (ii) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the entity. For those entities that qualify as a VIE, the primary beneficiary is generally defined as the party who has a controlling financial interest in the VIE. The Company consolidates the financial position and results of operations of every VOE in which it has a controlling financial interest and VIEs in which it is considered to be the primary beneficiary. See Note 9, “Investments in and Advances to Unconsolidated Affiliates.” Note 3— New Accounting Pronouncements Accounting Pronouncements Adopted In June 2022, the Financial Accounting Standard Board (the “FASB”) issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”). ASU 2022-03 clarifies the guidance on the fair value measurement of an equity security that is subject to a contractual sale restriction and requires specific disclosures related to such an equity security. Specifically, ASU 2022-03 clarifies that a “contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security” and is not included in the equity security’s unit of account. Accordingly, the Company is no longer permitted to apply a discount related to the contractual sale restriction, or lack of marketability, when measuring the equity security’s fair value. In addition, ASU 2022-03 prohibits an entity from recognizing a contractual sale restriction as a separate unit of account. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The adoption of ASU 2022-03, which was effective January 1, 2024, did not have a material impact on our unaudited Consolidated Financial Statements. In March 2023, the FASB issued ASU 2023-02, “Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)” (“ASU 2023-02”). ASU 2023-02 introduced the option to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met. ASU 2023-02 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The adoption of ASU 2023-02, which was effective January 1, 2024, did not have a material impact on our unaudited Consolidated Financial Statements. Accounting Pronouncements to be Implemented In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 updates the requirements for a public entity to disclose its significant segment expense categories and amounts for each reportable segment. A significant segment expense is considered an expense that is significant to the segment, regularly provided to or easily computed from information regularly provided to the chief operating decision maker, and included in the reported measure of segment profit or loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2023-07 and expects that any impact would be limited to additional disclosures in the notes to the Consolidated Financial Statements. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 updates the requirements for a public entity to enhance income tax disclosures to provide a better assessment on how an entity’s operations, related tax risks, tax planning, and operational opportunities affect its tax rate and prospects for future cash flows. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The primary purpose of the new ASU 2023-09 is to enhance the transparency of income tax disclosures and we expect that any impact would be limited to additional disclosures in the notes to the unaudited Consolidated Financial Statements. 14 Table of Contents Note 4— Revenue Disaggregation Our revenues are generated principally by providing the following types of services: (i) gaming, inclusive of retail sports betting, iCasino, and online sports betting; (ii) food and beverage; (iii) hotel; and (iv) other. Other revenues are principally comprised of PENN Interactive’s revenue from third-party online sports betting and the related gross-up for taxes, racing operations, advertising, retail, and commissions received on ATM transactions. Our revenue is disaggregated by type of revenue and geographic location of the related properties, which is consistent with our reportable segments, as follows: For the three months ended June 30, 2024 (in millions) Northeast South West Midwest Interactive (1) Other Intersegment Eliminations (2) Total Revenues: Gaming $ 624.0 $ 230.2 $ 94.5 $ 265.1 $ 118.5 $ — $ — $ 1,332.3 Food and beverage 35.9 33.4 19.5 15.2 — 1.3 — 105.3 Hotel 13.2 24.2 16.8 10.4 — — — 64.6 Other 23.2 10.4 4.5 7.4 114.1 4.6 ( 3.4 ) 160.8 Total revenues $ 696.3 $ 298.2 $ 135.3 $ 298.1 $ 232.6 $ 5.9 $ ( 3.4 ) $ 1,663.0 For the three months ended June 30, 2023 (in millions) Northeast South West Midwest Interactive (1) Other Intersegment Eliminations (2) Total Revenues: Gaming $ 616.5 $ 239.1 $ 92.4 $ 261.5 $ 83.3 $ — $ — $ 1,292.8 Food and beverage 34.6 34.3 18.0 14.5 — 1.2 — 102.6 Hotel 14.8 25.0 14.5 10.0 — — — 64.3 Other 22.1 9.9 5.1 7.3 174.2 5.0 ( 8.5 ) 215.1 Total revenues $ 688.0 $ 308.3 $ 130.0 $ 293.3 $ 257.5 $ 6.2 $ ( 8.5 ) $ 1,674.8 For the six months ended June 30, 2024 (in millions) Northeast South West Midwest Interactive (1) Other Intersegment Eliminations (2) Total Revenues: Gaming $ 1,240.4 $ 464.0 $ 186.1 $ 525.6 $ 174.5 $ — $ — $ 2,590.6 Food and beverage 72.7 65.6 37.1 30.5 — 2.4 — 208.3 Hotel 24.9 46.6 32.4 18.9 — — — 122.8 Other 43.0 20.5 8.5 14.3 265.8 9.5 ( 13.4 ) 348.2 Total revenues $ 1,381.0 $ 596.7 $ 264.1 $ 589.3 $ 440.3 $ 11.9 $ ( 13.4 ) $ 3,269.9 For the six months ended June 30, 2023 (in millions) Northeast South West Midwest Interactive (1) Other Intersegment Eliminations (2) Total Revenues: Gaming $ 1,245.8 $ 491.2 $ 186.8 $ 527.4 $ 166.2 $ — $ — $ 2,617.4 Food and beverage 72.9 65.3 35.3 29.4 — 2.2 — 205.1 Hotel 26.0 46.6 28.0 17.6 — — — 118.2 Other 43.8 20.0 9.6 14.2 324.8 9.8 ( 14.8 ) 407.4 Total revenues $ 1,388.5 $ 623.1 $ 259.7 $ 588.6 $ 491.0 $ 12.0 $ ( 14.8 ) $ 3,348.1 (1) Other revenues within the Interactive segment are inclusive of gaming tax reimbursement amounts related to third-party online sports betting and/or iCasino partners for online sports betting and iCasino market access of $ 82.1 million and $ 88.5 million for the three months ended June 30, 2024 and 2023, respectively, and $ 198.7 million and $ 180.8 million for the six months ended June 30, 2024 and 2023, respectively. Additionally, due to the inclusion of Barstool operating results prior to the disposition on August 8, 2023, other revenues within the Interactive segment for the three months ended June 30, 2023 included $ 37.2 million in advertising revenue and $ 15.5 million in retail revenue and $ 57.1 million in advertising revenue and $ 23.8 million in retail revenue for the six months ending June 30, 2023. (2) Primarily represents the elimination of intersegment revenues associated with our retail sportsbooks, which are operated by PENN Interactive. 15 Table of Contents Note 5— Acquisitions and Dispositions Barstool Acquisition and Disposition On February 17, 2023, we acquired the remaining 64 % of the outstanding shares of Barstool common stock not already owned by us for consideration of approximately $ 405.5 million, which is inclusive of cash and common stock issuance, repayment of Barstool indebtedness of $ 23.8 million, transaction expenses, and other purchase price adjustments in accordance with GAAP (the “Barstool Acquisition”). We issued 2,442,809 shares of our common stock and utilized $ 315.3 million of cash to complete the Barstool Acquisition. The Company held 36 % of the outstanding shares of Barstool common stock prior to the Barstool Acquisition and, as such, the acquisition date estimated fair value of this previously held equity method investment was a component of the purchase consideration. Based on the acquisition date fair value of Barstool of $ 660.0 million and the carrying amount of this investment of $ 171.1 million, the Company recorded a gain of $ 66.5 million related to remeasurement of the equity investment immediately prior to the acquisition date, which is included in “Gain on Barstool Acquisition, net” within our unaudited Consolidated Statements of Operations. The Company also recorded a gain of $ 16.9 million related to the acquisition of the remaining 64 % of Barstool common stock, which is included in “Gain on Barstool Acquisition, net” within our unaudited Consolidated Statements of Operations. Barstool’s revenue and net loss for the three months ended June 30, 2023, included in the unaudited Consolidated Statements of Operations, were $ 52.7 million and $ 12.8 million, respectively. Barstool’s revenue and net loss for the period beginning February 17, 2023 through June 30, 2023, included in the unaudited Consolidated Statements of Operations, were $ 80.9 million and $ 16.1 million, respectively. On August 8, 2023, PENN entered into a Sportsbook Agreement with ESPN, which provides for a long-term strategic relationship between PENN and ESPN relating to online sports betting in the United States. Pursuant to the Sportsbook Agreement, PENN rebranded the existing Barstool Sportsbook across all online platforms in the United States as ESPN BET (the “Sportsbook”) and oversees daily operations of the Sportsbook. See Note 11, “Commitments and Contingencies” for more information related to the Sportsbook Agreement. In connection with PENN’s decision to rebrand our online sports betting business from Barstool Sportsbook to ESPN BET pursuant to the Sportsbook Agreement as discussed above, PENN entered into the Barstool SPA with David Portnoy and sold 100 % of the outstanding shares of Barstool to David Portnoy in exchange for nominal cash consideration and certain non-compete and other restrictive covenants. Additionally , PENN has the right to receive 50 % of the gross proceeds received by David Portnoy in any subsequent sale or other monetization event of Barstool. Upon the disposal of Barstool in the third quarter of 2023, PENN recognized a pre-tax loss of $ 923.2 million (inclusive of $ 714.8 million in goodwill and intangible assets write offs and a $ 70.0 million indemnification liability discussed below). See Note 14, “Fair Value Measurements” for more information related to the indemnification liability. For information on the tax-related impacts from the Barstool transactions, see Note 10, “Income Taxes.” P ursuant to the Barstool SPA, PEN N will indemnify Barstool and its subsidiaries and David Portnoy for certain tax matters. The indemnity provisions generally provide for the Company’s control of defense and settlement of claims, as well as certain other costs, associated with potential tax matters related to Barstool and its subsidiaries and David Portnoy. 16 Table of Contents Note 6— Goodwill and Other Intangible Assets A reconciliation of goodwill and accumulated goodwill impairment losses, by reportable segment, is as follows: (in millions) Northeast South West Midwest Interactive Other Total Balance as of December 31, 2023 Goodwill, gross $ 923.5 $ 236.6 $ 216.8 $ 1,116.7 $ 1,664.0 $ 87.7 $ 4,245.3 Accumulated goodwill impairment losses ( 828.8 ) ( 61.0 ) ( 16.6 ) ( 556.1 ) — ( 87.7 ) ( 1,550.2 ) Goodwill, net $ 94.7 $ 175.6 $ 200.2 $ 560.6 $ 1,664.0 $ — $ 2,695.1 Effect of foreign currency exchange rates — — — — ( 46.9 ) — ( 46.9 ) Balance as of June 30, 2024 Goodwill, gross $ 923.5 $ 236.6 $ 216.8 $ 1,116.7 $ 1,617.1 $ 87.7 $ 4,198.4 Accumulated goodwill impairment losses ( 828.8 ) ( 61.0 ) ( 16.6 ) ( 556.1 ) — ( 87.7 ) ( 1,550.2 ) Goodwill, net $ 94.7 $ 175.6 $ 200.2 $ 560.6 $ 1,617.1 $ — $ 2,648.2 There were no impairment charges recorded to goodwill during the three and six months ended June 30, 2024 and 2023. The table below presents the gross carrying amount, accumulated amortization, and net carrying amount of each major class of other intangible assets: June 30, 2024 December 31, 2023 (in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Indefinite-lived intangible assets Gaming licenses $ 1,107.3 $ — $ 1,107.3 $ 1,107.2 $ — $ 1,107.2 Trademarks 331.5 — 331.5 334.4 — 334.4 Other 0.7 — 0.7 0.7 — 0.7 Amortizing intangible assets Customer relationships 111.9 ( 105.3 ) 6.6 112.1 ( 103.7 ) 8.4 Technology 296.0 ( 158.6 ) 137.4 286.0 ( 132.3 ) 153.7 Other 39.8 ( 17.2 ) 22.6 29.0 ( 15.2 ) 13.8 Total other intangible assets, net $ 1,887.2 $ ( 281.1 ) $ 1,606.1 $ 1,869.4 $ ( 251.2 ) $ 1,618.2 There were no impairment charges recorded to other intangible assets, net during the three and six months ended June 30, 2024 and 2023. 17 Table of Contents Amortization expense related to our amortizing intangible assets was $ 12.6 million and $ 17.9 million for the three months ended June 30, 2024 and 2023, respectively, and $ 25.2 million and $ 31.9 million for the six months ended June 30, 2024 and 2023, respectively. The following table presents the estimated amortization expense based on our amortizing intangible assets as of June 30, 2024 (in millions): Years ending December 31, 2024 (excluding the six months ended June 30, 2024) $ 32.9 2025 48.4 2026 30.1 2027 24.0 2028 19.5 Thereafter 11.7 Total $ 166.6 Note 7— Long-term Debt The table below presents long-term debt, net of current maturities, debt discounts and issuance costs: (in millions) June 30, 2024 December 31, 2023 Senior Secured Credit Facilities: Amended Revolving Credit Facility due 2027 $ — $ — Amended Term Loan A Facility due 2027 495.0 508.8 Amended Term Loan B Facility due 2029 980.0 985.0 5.625 % Notes due 2027 400.0 400.0 4.125 % Notes due 2029 400.0 400.0 2.75 % Convertible Notes due 2026 330.5 330.5 Other long-term obligations 185.4 173.5 2,790.9 2,797.8 Less: Current maturities of long-term debt ( 38.2 ) ( 47.6 ) Less: Debt discounts ( 3.6 ) ( 3.9 ) Less: Debt issuance costs ( 26.9 ) ( 28.3 ) $ 2,722.2 $ 2,718.0 The following is a schedule of future minimum repayments of long-term debt as of June 30, 2024 (in millions): Years ending December 31: 2024 (excluding the six months ended June 30, 2024) $ 18.8 2025 38.2 2026 544.7 2027 837.0 2028 10.8 Thereafter 1,341.4 Total minimum payments $ 2,790.9 18 Table of Contents Senior Secured Credit Facilities In January 2017, the Company entered into an agreement to amend and restate its previous credit agreement, dated October 30, 2013, as amended (the “Credit Agreement”), which provided for: (i) a five-year $ 700 million revolving credit facility (the “Revolving Facility”); (ii) a five-year $ 300 million Term Loan A facility (the “Term Loan A Facility”); and (iii) a seven-year $ 500 million Term Loan B facility (the “Term Loan B Facility” and collectively with the Revolving Facility and the Term Loan A Facility, the “Senior Secured Credit Facilities”). On October 15, 2018, in connection with the acquisition of Pinnacle Entertainment, Inc. (“Pinnacle”), the Company entered into an incremental joinder agreement (the “Incremental Joinder”), which amended the Credit Agreement (the “Amended Credit Agreement”). The Incremental Joinder provided for an additional $ 430.2 million of incremental loans having the same terms as the existing Term Loan A Facility, with the exception of extending the maturity date, and an additional $ 1.1 billion of loans as a new tranche having new terms (the “Term Loan B-1 Facility”). With the exception of extending the maturity date, the Incremental Joinder did not impact the Revolving Facility. On May 3, 2022, the Company entered into a Second Amended and Restated Credit Agreement with its various lenders (the “Second Amended and Restated Credit Agreement”). The Second Amended and Restated Credit Agreement provides for a $ 1.0 billion revolving credit facility, undrawn at close, (the “Amended Revolving Credit Facility”), a five-year $ 550.0 million term loan A facility (the “Amended Term Loan A Facility”) and a seven-year $ 1.0 billion term loan B facility (the “Amended Term Loan B Facility”) (together, the “Amended Credit Facilities”). The proceeds from the Amended Credit Facilities were used to repay the existing Term Loan A Facility and Term Loan B-1 Facility balances. The interest rates per annum applicable to loans under the Amended Credit Facilities are, at the Company’s option, equal to either an adjusted secured overnight financing rate (“Term SOFR”) or a base rate, plus an applicable margin. The applicable margin for each of the Amended Revolving Credit Facility and the Amended Term Loan A Facility was initially 1.75 % for Term SOFR loans and 0.75 % for base rate loans until the Company provided financial reports for the first full fiscal quarter following closing and, thereafter, ranges from 2.25 % to 1.50 % per annum for Term SOFR loans and 1.25 % to 0.50 % per annum for base rate loans, in each case depending on the Company’s total net leverage ratio (as defined within the Second Amended and Restated Credit Agreement). The applicable margin for the Amended Term Loan B Facility is 2.75 % per annum for Term SOFR loans and 1.75 % per annum for base rate loans. The Amended Term Loan B Facility is subject to a Term SOFR “floor” of 0.50 % per annum and a base rate “floor” of 1.50 % per annum. In addition, the Company pays a commitment fee on the unused portion of the commitments under the Amended Revolving Credit Facility at a rate that was initially 0.25 % per annum, until the Company provided financial reports for the first full fiscal quarter following closing, and thereafter, ranges from 0.35 % to 0.20 % per annum, depending on the Company’s total net leverage ratio (as defined within the Second Amended and Restated Credit Agreement). The Amended Credit Facilities contain customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and certain of its subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, pay dividends and make other restricted payments and prepay certain indebtedness that is subordinated in right of payment to the obligations under the Amended Credit Facilities. The Amended Credit Facilities contain two financial covenants: a maximum total net leverage ratio (as defined within the Second Amended and Restated Credit Agreement) of 4.50 to 1.00, which is subject to a step up to 5.00 to 1.00 in the case of certain significant acquisitions, and a minimum interest coverage ratio (as defined within the Second Amended and Restated Credit Agreement) of 2.00 to 1.00. The Amended Credit Facilities also contain certain customary affirmative covenants and events of default, including the occurrence of a change of control (as defined in the documents governing the Second Amended and Restated Credit Agreement), termination and certain defaults under the Master Leases (which are defined in Note 8, “Leases” ). On February 15, 2024 (the “ Amendment Effective Date ”), PENN entered into a First Amendment (the “Amendment Agreement”) with its various lenders amending its Amended Credit Facilities (as amended, amended and restated, supplemented, or otherwise modified from time to time prior to the Amendment Effective Date , the “Existing Credit Agreement”). The Amendment Agreement amends the Existing Credit Agreement to provide that, during the period beginning on the Amendment Effective Date and ending on the earlier of (i) the date that is two business days after the date on which the Company delivers a covenant relief period termination notice to the administrative agent and (ii) the date on which the administrative agent receives a compliance certificate for the quarter ending December 31, 2024 (the “Covenant Relief Period”), the Company will make an adjustment to exclude specified amounts of Interactive segment Adjusted EBITDAR (as defined in Note 15, “Segment Information” ) in its calculations to comply with the maximum total net leverage ratio or minimum interest coverage ratio (as such terms are defined in the Second Amended and Restated Credit Agreement). We will continue to be required to maintain specified financial ratios and to satisfy certain financial tests when our Covenant Relief Period terminates after December 31, 2024. 19 Table of Contents As of June 30, 2024 and December 31, 2023, the Company had conditional obligations under letters of credit issued pursuant to the Amended Credit Facilities with face amounts aggregating to $ 20.9 million and $ 21.7 million, respectively, resulting in $ 979.1 million and $ 978.3 million of available borrowing capacity under the Amended Revolving Credit Facility, respectively. 2.75 % Unsecured Convertible Notes In May 2020, the Company completed a public offering of $ 330.5 million aggregate principal amount of 2.75 % unsecured convertible notes (the “Convertible Notes”) that mature, unless earlier converted, redeemed, or repurchased, on May 15, 2026 at a price of par. As of June 30, 2024 and December 31, 2023, no Convertible Notes have been converted into the Company’s common stock. The maximum number of shares that could be issued to satisfy the conversion feature of the Convertible Notes was 18,360,815 and the amount by which the Convertible Notes if-converted value exceeded its principal amount was $ 25.0 million as of June 30, 2024. The Convertible Notes consisted of the following components: (in millions) June 30, 2024 December 31, 2023 Liability: Principal $ 330.5 $ 330.5 Unamortized debt issuance costs ( 3.5 ) ( 4.4 ) Net carrying amount $ 327.0 $ 326.1 Interest expense, net The table below presents interest expense, net: For the three months ended June 30, For the six months ended June 30, (in millions) 2024 2023 2024 2023 Interest expense $ 122.3 $ 117.1 $ 242.9 $ 230.9 Capitalized interest ( 2.9 ) ( 1.5 ) ( 4.4 ) ( 2.3 ) Interest expense, net $ 119.4 $ 115.6 $ 238.5 $ 228.6 The table below presents interest expense related to the Convertible Notes: For the three months ended June 30, For the six months ended June 30, (in millions) 2024 2023 2024 2023 Coupon interest $ 2.2 $ 2.2 $ 4.5 $ 4.5 Amortization of debt issuance costs 0.5 0.4 0.9 0.9 Convertible Notes interest expense $ 2.7 $ 2.6 $ 5.4 $ 5.4 Debt issuance costs are amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 3.329 %. The remaining term of the Convertible Notes was 1.9 years as of June 30, 2024. Covenants Our Amended Credit Facilities, 5.625 % Notes due 2027 (the “ 5.625 % Notes”) and 4.125 % Notes due 2029 (the “ 4.125 % Notes”), require us, among other obligations, to maintain specified financial ratios and to satisfy certain financial tests. In addition, our Amended Credit Facilities, 5.625 % Notes and 4.125 % Notes, restrict, among other things, our ability to incur additional indebtedness, incur guarantee obligations, amend debt instruments, pay dividends, create liens on assets, make investments, engage in mergers or consolidations, and otherwise restrict corporate activities. Our debt agreements also contain customary events of default, including cross-default provisions that require us to meet certain requirements under the Master Leases (which are defined in Note 8, “Leases” ), each with GLPI. If we are unable to meet our financial covenants or in the event of a cross-default, it could trigger an acceleration of payment terms. 20 Table of Contents As of June 30, 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. Other Long-Term Obligations Other Long-term Obligation In February 2021, we entered into a financing arrangement providing the Company with upfront cash proceeds while permitting us to participate in future proceeds on certain claims. The financing obligation has been classified as a non-current liability, which is expected to be settled in a future period of which the principal is contingent and predicated on other events. Consistent with an obligor’s accounting under a debt instrument, period interest will be accreted using an effective interest rate of 27.0 % and until such time that the claims and related obligation is settled. The amount included in “Interest expense, net” within the unaudited Consolidated Statements of Operations related to this obligation was $ 11.4 million and $ 8.7 million for the three months ended June 30, 2024 and 2023, respectively, and $ 22.0 million and $ 16.8 million for the six months ended June 30, 2024 and 2023, respectively. Ohio Relocation Fees In the second quarter of 2024, the Company made the final payments related to the relocation fees for Hollywood Gaming at Dayton Raceway (“Dayton”) and Hollywood Gaming at Mahoning Valley Race Course (“Mahoning Valley”), which opened in August 2014 and September 2014, respectively. As of June 30, 2024, we have no outstanding liabilities related to the Ohio Relocation Fees as compared to $ 9.4 million as of December 31, 2023 included in “Current maturities of long-term debt” within our unaudited Consolidated Balance Sheets. Event Center As of June 30, 2024 and December 31, 2023, other long-term obligations included $ 9.3 million and $ 10.0 million, respectively, related to the repayment obligation of a hotel and event center located less than a mile away from Hollywood Casino Lawrenceburg, which was constructed by the City of Lawrenceburg Department of Redevelopment. Effective in January 2015, by contractual agreement, we assumed a repayment obligation for the hotel and event center in the amount of $ 15.3 million, which was financed through a loan with the City of Lawrenceburg Department of Redevelopment, in exchange for conveyance of the property. Beginning in January 2016, the Company was obligated to make annual payments on the loan of $ 1.0 million for 20 years. This obligation is accreted to interest expense at its effective yield of 3.0 %. Note 8— Leases Master Leases The components contained within the Master Leases are accounted for as either (i) operating leases, (ii) finance leases, or (iii) financing obligations. Changes to future lease payments that are not fixed within the Master Leases (i.e., when future escalators become known or future variable rent resets occur), which are discussed below, require the Company to either (i) increase both the right-of-use (“ROU”) assets and corresponding lease liabilities with respect to operating and finance leases or (ii) record the incremental variable payment associated with the financing obligation to interest expense. AR PENN Master Lease On February 21, 2023, the Company and GLPI entered into an agreement to amend and restate the triple net master lease dated November 1, 2013 (the “AR PENN Master Lease”), effective January 1, 2023, to (i) remove the land and buildings for Hollywood Casino Aurora (“Aurora”), Hollywood Casino Joliet (“Joliet”), Hollywood Casino Columbus (“Columbus”), Hollywood Casino Toledo (“Toledo”) and the M Resort Spa Casino (“M Resort”), and (ii) make associated adjustments to the rent after which the initial rent in the AR PENN Master Lease was reset to $ 284.1 million, consisting of $ 208.2 million of building base rent, $ 43.0 million of land base rent, and $ 32.9 million of percentage rent (as such terms are defined in the AR PENN Master Lease). Subsequent to the execution of the AR PENN Master Lease, the lease contains real estate assets associated with 14 of the Company’s gaming facilities used in its operations. The current term of the AR PENN Master Lease expires on October 31, 2033 and thereafter contains three renewal terms of five years each on the same terms and conditions, exercisable at the Company’s option. The AR PENN Master Lease along with the 2023 Master Lease (as defined and discussed below) are cross-defaulted, cross-collateralized, and coterminous, and subject to a parent guarantee. The payment structure under the AR PENN Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2 %, depending on the Adjusted Revenue to Rent Ratio (as defined in the AR PENN Master Lease) 21 Table of Contents of 1.8 :1, and a component that is based on performance, which is prospectively adjusted every five years by an amount equal to 4 % of the average change in net revenues of all properties associated with the AR PENN Master Lease compared to a contractual baseline during the preceding five years (“PENN Percentage Rent”). As a result of the annual escalator, effective November 1, 2023, the fixed component of rent increased by $ 4.2 million. The next annual escalator test date is scheduled to occur on November 1, 2024. The November 1, 2023 PENN Percentage Rent reset resulted in an annual rent reduction of $ 4.4 million, which will be in effect until the next PENN Percentage Rent reset, scheduled to occur on November 1, 2028. As a result of the January 1, 2023 lease modification event, we concluded (i) the land components contained within the AR PENN Master Lease, which were previously primarily classified as finance leases, to be classified as operating leases, and (ii) control of the building assets have transferred from the Company to the lessor allowing for sale recognition in accordance with ASC Topic 842, “Leases,” (“ASC 842”) which results in the building components to be classified as operating leases. Prior to the January 1, 2023 lease modification event, control of substantially all of the building components were concluded not to have passed from the Company to the lessor in accordance with ASC 842 which required recognition of a financing obligation in accordance with ASC Topic 470, “Debt,” (“ASC 470”), and continued recognition of the underlying asset in “Property and equipment, net” within our unaudited Consolidated Balance Sheets. In conjunction with the sale recognition on the building components, we (i) derecognized $ 1.6 billion of financing obligations within our unaudited Consolidated Balance Sheets, offset to “Gain on REIT transactions, net” within our unaudited Statements of Operations; and (ii) derecognized $ 1.1 billion of “Property and equipment, net” associated with the building assets within our unaudited Consolidated Balance Sheets, offset to “Gain on REIT transactions, net” within our unaudited Consolidated Statements of Operations. As a result of our measurement of the associated operating lease liabilities, we recognized a reduction of the ROU assets and corresponding lease liabilities of $ 1.2 billion within our unaudited Consolidated Balance Sheets as of January 1, 2023. Lease components classified as an operating lease are recorded to “General and administrative” within our unaudited Consolidated Statements of Operations. 2023 Master Lease Concurrent with the execution of the AR PENN Master Lease, the Company and GLPI entered into a new triple net master lease (the “2023 Master Lease”), effective January 1, 2023, specific to the property associated with Aurora, Joliet, Columbus, Toledo, M Resort, Hollywood Casino at The Meadows (“Meadows”), and Hollywood Casino Perryville (“Perryville”) and a master development agreement (the “Master Development Agreement”). The 2023 Master Lease has an initial term through October 31, 2033 with three subsequent five-year renewal periods on the same terms and conditions, exercisable at the Company’s option. The 2023 Master Lease and AR PENN Master Lease are cross-defaulted, cross-collateralized, and coterminous, and subject to a parent guarantee. As a result of our lease classification assessment, we concluded all land and building components contained within the 2023 Master Lease to be operating leases. As a result of our measurement of the operating lease liabilities, we recognized ROU assets and corresponding lease liabilities of $ 1.8 billion. Additionally, the 2023 Master Lease terminated the individual triple net leases associated with Meadows and Perryville, as such we (i) derecognized $ 171.9 million in ROU assets within our unaudited Consolidated Balance Sheets; (ii) derecognized $ 165.5 million in lease liabilities within our unaudited Consolidated Balance Sheets; and (iii) recognized a $ 6.5 million loss on the termination which is recorded in “Gain on REIT transactions, net” within our unaudited Consolidated Statements of Operations. Lease components classified as an operating lease are recorded to “General and administrative” within our unaudited Consolidated Statements of Operations. The 2023 Master Lease includes a base rent (the “2023 Master Lease Base Rent”) equal to $ 232.2 million and the Master Development Agreement contains additional rent (together with the 2023 Master Lease Base Rent, the “2023 Master Lease Rent”) equal to (i) 7.75 % of any project funding received by PENN from GLPI for an anticipated relocation of PENN’s riverboat casino and related developments with respect to Aurora (the “Aurora Project”) and (ii) a percentage, based on the then-current GLPI stock price, of any project funding received by PENN from GLPI for certain anticipated development projects with respect to Joliet, Columbus and M Resort (the “Other Development Projects” and together with the Aurora Project, the “PENN Development Projects”). The Master Development Agreement provides that GLPI will fund up to $ 225.0 million for the Aurora Project and, upon PENN’s request, up to $ 350.0 million in the aggregate for the Other Development Projects, in accordance with certain terms and conditions set forth in the Master Development Agreement. 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 is subject to an annual fixed escalator rent increase of 1.5 % which began on November 1, 2023. 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 PENN Development Projects are all subject to necessary regulatory and other government approvals. 22 Table of Contents Pinnacle Master Lease In connection with the acquisition of Pinnacle on October 15, 2018, the Company assumed a triple net master lease with GLPI (the “Pinnacle Master Lease”), originally effective April 28, 2016, pursuant to which the Company leases real estate assets associated with 12 of the gaming facilities used in its operations. Upon assumption of the Pinnacle Master Lease, as amended, there were 7.5 years remaining of the initial ten-year term, with five subsequent, five-year renewal periods, on the same terms and conditions, exercisable at the Company’s option. The Company has determined that the lease term is 32.5 years. The payment structure under the Pinnacle Master Lease includes a fixed component, a portion of which is subject to an annual escalator of up to 2 %, depending on the Adjusted Revenue to Rent Ratio (as defined in the Pinnacle Master Lease) of 1.8 :1, and a component that is based on performance of the properties, which is prospectively adjusted every two years by an amount equal to 4 % of the average change in net revenues compared to a contractual baseline during the preceding two years (“Pinnacle Percentage Rent”). As a result of the annual escalator, effective May 1, 2024 for the lease year ended April 30, 2024, the fixed component of rent increased by $ 4.8 million and an additional ROU asset and corresponding lease liability of $ 33.4 million were recognized associated with the finance lease components. The next annual escalator test date is scheduled to occur on May 1, 2025. Additionally, on May 1, 2024, the Pinnacle Percentage Rent reset resulted in an annual rent increase of $ 3.8 million which will be in effect until the next Pinnacle Percentage Rent reset, scheduled to occur on May 1, 2026. Upon reset of the Pinnacle Percentage Rent, effective May 1, 2024, we recognized an additional ROU asset and corresponding lease liability of $ 29.6 million associated with the finance lease components. Other Triple Net Leases with REIT Landlords Morgantown Lease On October 1, 2020, the Company entered into an individual triple net lease with a subsidiary of GLPI for the land underlying our development project in Morgantown, Pennsylvania (“Morgantown Lease”) in exchange for $ 30.0 million. The initial term of the Morgantown Lease is 20 years with six subsequent, five-year renewal periods, exercisable at the Company’s option. Initial annual rent under the Morgantown Lease is $ 3.0 million, subject to a 1.50 % fixed annual escalation in each of the first three years subsequent to the facility opening, which occurred on December 22, 2021. Thereafter, the lease will be subject to an annual escalator consisting of either (i) 1.25 %, if the consumer price index increase is greater than 0.50 %, or (ii) zero , if the consumer price index increase is less than 0.50 %. All improvements made on the land, including the constructed building, will be owned by the Company while the lease is in effect, however, on the expiration or termination of the Morgantown Lease, ownership of all tenant improvements on the land will transfer to GLPI. We concluded control of the land underlying the Morgantown facility was not passed from the Company to the lessor in accordance with ASC 842. As such we recognized a financing obligation in accordance with ASC 470 and continue to recognize the underlying land asset in “Property and equipment, net” within our unaudited Consolidated Balance Sheets. The Company recognizes interest expense on the lease payments related to the financing obligation under the effective yield method. Margaritaville Lease On January 1, 2019, the Company entered into an individual triple net lease with VICI Properties Inc. (NYSE: VICI) (“VICI”) for the real estate assets used in the operations of Margaritaville Resort Casino (the “Margaritaville Lease”). The Margaritaville Lease has an initial term of 15 years, with four subsequent five-year renewal options on the same terms and conditions, exercisable at the Company’s option. The payment structure under the Margaritaville Lease includes a fixed component, a portion that is subject to an annual escalator of up to 2 % depending on a minimum coverage floor ratio of Net Revenue to Rent of 6.1 :1, and a component that is based on performance, which is prospectively adjusted every two years by an amount equal to 4 % of the average change in net revenues of the property compared to a contractual baseline during the preceding two years (“Margaritaville Percentage Rent”). On February 1, 2024, the Margaritaville Lease annual escalator test resulted in an annual rent increase of $ 0.4 million and the recognition of an additional operating lease ROU asset and corresponding lease liability of $ 2.7 million. The next annual escalator test date and the next Margaritaville Percentage Rent reset are both scheduled to occur on February 1, 2025. 23 Table of Contents The land and building components contained within the Margaritaville Lease are classified as operating leases. Lease components classified as an operating lease are recorded to “General and administrative” within our unaudited Consolidated Statements of Operations. Greektown Lease On May 23, 2019, the Company entered into an individual triple net lease with VICI for the real estate assets used in the operations of Hollywood Casino at Greektown (the “Greektown Lease”). The Greektown Lease has an initial term of 15 years, with four subsequent five-year renewal options on the same terms and conditions, exercisable at the Company’s option. The payment structure under the Greektown Lease includes a fixed component, a portion subject to an annual escalator of up to 2 % initially determined based on an Adjusted Revenue to Rent ratio, as defined in the Greektown Lease, and subsequently amended to be determined based on an agreed upon minimum coverage floor ratio of Net Revenue to Rent, and a component that is based on performance, which is prospectively adjusted every two years by an amount equal to 4 % of the average change in net revenues of the property compared to a contractual baseline during the preceding two years (“Greektown Percentage Rent”). In April 2024, the lease was amended to provide for a Net Revenue to Rent minimum coverage floor to be mutually agreed upon prior to the commencement of the ninth lease year (June 1, 2027). We did not incur an annual escalator for the lease year ended May 31, 2024. The next annual escalator test date and Greektown Percentage Rent reset are both scheduled to occur on June 1, 2025. The land and building components contained within the Greektown Lease are classified as operating leases. Lease components classified as an operating lease are recorded to “General and administrative” within our unaudited Consolidated Statements of Operations. Non-REIT Operating Leases In addition to any operating lease components contained within the Master Leases, Margaritaville Lease, and Greektown Lease (collectively referred to as “triple net operating leases”), the Company’s operating leases consist of (i) ground and levee leases to landlords which were not assumed by our REIT Landlords and remain an obligation of the Company, and (ii) buildings and equipment not associated with our REIT Landlords. Certain of our lease agreements include rental payments based on a percentage of sales over specified contractual amounts, rental payments adjusted periodically for inflation, and rental payments based on usage. The Company’s leases include options to extend the lease terms. The Company’s operating lease agreements do not contain any material residual value guarantees or material restrictive covenants. The following is a maturity analysis of our operating leases, finance leases and financing obligations as of June 30, 2024: (in millions) Operating Leases Finance Leases Financing Obligations Year ended December 31, 2024 (excluding the six months ended June 30, 2024) $ 309.6 $ 81.3 $ 83.2 2025 611.8 162.6 166.5 2026 612.3 152.2 166.6 2027 615.0 146.9 166.5 2028 614.0 146.9 166.6 Thereafter 3,320.5 3,273.9 3,829.5 Total lease payments 6,083.2 3,963.8 4,578.9 Less: Imputed interest ( 1,980.3 ) ( 1,822.8 ) ( 2,171.6 ) Present value of future lease payments 4,102.9 2,141.0 2,407.3 Less: Current portion of lease obligations ( 311.6 ) ( 51.8 ) ( 42.4 ) Long-term portion of lease obligations $ 3,791.3 $ 2,089.2 $ 2,364.9 The Company modified the presentation of its December 31, 2023 balance sheet to separately reflect assets and liabilities associated with our operating and finance leases. 24 Table of Contents Total payments made under the Triple Net Leases were as follows: For the three months ended June 30, For the six months ended June 30, (in millions) 2024 2023 2024 2023 AR PENN Master Lease $ 70.9 $ 70.9 $ 141.9 $ 142.0 2023 Master Lease 58.9 58.1 117.8 116.1 Pinnacle Master Lease 86.7 84.8 171.9 168.9 Margaritaville Lease 6.7 6.6 13.4 13.0 Greektown Lease 13.2 13.0 26.4 25.8 Morgantown Lease 0.8 0.8 1.6 1.6 Total $ 237.2 $ 234.2 $ 473.0 $ 467.4 Information related to lease term and discount rate was as follows: June 30, 2024 December 31, 2023 Weighted-Average Remaining Lease Term Operating leases 10.7 years 11.2 years Finance leases 26.8 years 27.3 years Financing obligations 27.1 years 27.6 years Weighted-Average Discount Rate Operating leases 7.7 % 7.7 % Finance leases 5.2 % 5.2 % Financing obligations 5.2 % 5.2 % The components of lease expense were as follows: Location on unaudited Consolidated Statements of Operations For the three months ended June 30, For the six months ended June 30, (in millions) 2024 2023 2024 2023 Operating Lease Costs Rent expense associated with triple net operating leases General and administrative $ 154.9 $ 146.4 $ 309.7 $ 292.4 Operating lease cost (1) Primarily General and administrative 5.0 6.5 10.3 11.3 Short-term lease cost Primarily Gaming expenses 23.0 19.9 45.8 38.9 Variable lease cost (1) Primarily Gaming expenses 0.9 0.9 1.9 1.9 Total $ 183.8 $ 173.7 $ 367.7 $ 344.5 Finance Lease Costs Interest on lease liabilities (2) Interest expense, net $ 27.6 $ 27.7 $ 55.1 $ 55.3 Amortization of ROU assets (2) Depreciation and amortization 22.5 21.9 44.4 43.6 Total $ 50.1 $ 49.6 $ 99.5 $ 98.9 Financing Obligation Costs Interest on financing obligations (3) Interest expense, net $ 37.1 $ 36.8 $ 73.7 $ 73.2 (1) Excludes the operating lease costs and variable lease costs pertaining to our triple net leases with our REIT landlords classified as operating leases. (2) Pertains to finance lease components associated with the Pinnacle Master Lease (primarily land). (3) Pertains to the components contained within the Pinnacle Master Lease (buildings) and the Morgantown Lease. 25 Table of Contents Supplemental cash flow information related to leases was as follows: For the six months ended June 30, (in millions) 2024 2023 Non-cash lease activities: Commencement of operating leases $ 2.7 $ 3,673.5 Derecognition of operating lease liabilities $ — $ 307.7 Commencement of finance leases $ 63.0 $ 33.3 Derecognition of finance lease liabilities $ — $ 2,933.6 Derecognition of financing obligations $ — $ 1,567.8 Note 9— Investments in and Advances to Unconsolidated Affiliates As of June 30, 2024, investments in and advances to unconsolidated affiliates primarily consisted of the Company’s 50 % investment in Kansas Entertainment, the joint venture with NASCAR that owns Hollywood Casino at Kansas Speedway. Kansas Entertainment Joint Venture As of June 30, 2024 and December 31, 2023, our investment in Kansas Entertainment was $ 81.7 million and $ 80.8 million, respectively. During the three months ended June 30, 2024 and 2023, the Company received distributions from Kansas Entertainment totaling $ 8.7 million and $ 8.3 million, respectively, and $ 16.0 million and $ 16.8 million for the six months ended June 30, 2024 and 2023, respectively. The Company deems these distributions to be returns on its investment based on the source of those cash flows from the normal business operations of Kansas Entertainment. The Company has determined that Kansas Entertainment does not qualify as a VIE. Using the guidance for entities that are not VIEs, the Company determined that it did not have a controlling financial interest in the joint venture, primarily as it did not have the ability to direct the activities of the joint venture that most significantly impacted the joint venture’s economic performance without the input of NASCAR. Therefore, the Company did not consolidate the financial position of Kansas Entertainment as of June 30, 2024 and December 31, 2023, nor the results of operations for the three and six months ended June 30, 2024 and 2023. Note 10— Income Taxes The Company calculates the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate to its year-to-date pre-tax book income or loss. The tax effects of discrete items, including but not limited to, excess tax benefits associated with stock-based compensation, are reported in the interim period in which they occur. The effective tax rate (income taxes as a percentage of income from operations before income taxes) including discrete items was ( 91.0 )% and 19.4 % for the three and six months ended June 30, 2024. We excluded certain foreign losses from our worldwide effective tax rate calculation due to a year-to-date ordinary loss for which no benefit may be recognized. Our effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings and changes to our valuation allowance assessment. Certain of these and other factors, including our history and projections of pre-tax earnings, are considered in assessing our ability to realize our net deferred tax assets. As of each reporting date, the Company considers all available positive and negative evidence that could affect its view of the future realization of deferred tax assets pursuant to ASC Topic 740, “Income Taxes.” As of June 30, 2024, we intend to continue maintaining a valuation allowance on our deferred tax assets not more than likely than not to be realized until there is sufficient positive evidence to support the reversal of all or some portion of these allowances. A reduction in the valuation allowance could result in a significant decrease to income tax expense in the period the release is recorded. Although the exact timing and valuation reversal amount are estimated, the actual determination is contingent upon the earnings level we achieve in 2024 as well as our projected income levels in future periods. During the six months ended June 30, 2024, the Company increased its valuation allowance in the amount of $ 4.0 million primarily due to overall lower level of earnings. During the three months ended March 31, 2023, the Company recorded a net deferred tax liability of $ 115.9 million with respect to the Barstool stock acquisition on February 17, 2023. These temporary differences were primarily related to existing carryover tax basis, acquired federal and state net operating losses, and other acquired intangible assets excluding goodwill. The net deferred tax liability was subsequently written off as part of the Barstool disposition discussed in Note 5, “Acquisitions and Dispositions.” 26 Table of Contents As of June 30, 2024 and December 31, 2023, the Company had prepaid income taxes of $ 38.9 million and $ 65.3 million, respectively, which were included in “Prepaid expenses” within our unaudited Consolidated Balance Sheets. Note 11— Commitments and Contingencies The Company is subject to various legal and administrative proceedings relating to personal injuries, employment matters, commercial transactions, development agreements and other matters arising in the ordinary course of business. Although the Company maintains what it believes to be adequate insurance coverage to mitigate the risk of loss pertaining to covered matters, legal and administrative proceedings can be costly, time-consuming, and unpredictable. The Company does not believe that the final outcome of these matters will have a material adverse effect on its financial position, results of operations, or cash flows. ESPN Sportsbook and Investment Agreements On August 8, 2023, PENN entered into the Sportsbook Agreement with ESPN which provides for a long-term strategic relationship between PENN and ESPN relating to online sports betting in the United States. The Sportsbook Agreement has an initial 10-year term and may be extended for an additional ten years upon mutual agreement of PENN and ESPN. In consideration for the media marketing services and brand and other rights provided by ESPN, PENN will pay $ 150.0 million per year in cash pursuant to the Sportsbook Agreement for the initial 10-year term and issue warrants pursuant to the Investment Agreement (as defined and described in more detail below). The Sportsbook Agreement may be terminated by either party if at the end of year three of the term the Sportsbook has not achieved a specified level of market share based on gross gaming revenue in the states in which the Sportsbook operates while branded ESPN BET, and other terms pursuant to the agreement. In connection with the Sportsbook Agreement, PENN and ESPN, Inc. entered into an Investment Agreement (the “Investment Agreement”) on August 8, 2023. The Investment Agreement provides for the issuance to ESPN, Inc. of certain warrants to purchase shares of PENN common stock, par value $ 0.01 per share, and setting forth certain other governance rights of ESPN, Inc. Pursuant to the Investment Agreement PENN issued to ESPN, Inc. warrants to purchase approximately 31.8 million shares of PENN common stock. The warrants are classified as equity and contain three separate tranches which vest quarterly over ten years from the date of the Investment Agreement, provided that any remaining unvested portion of the first tranche of warrants will vest on August 8, 2032. At the grant date, the $ 550.4 million fair value of the awards was determined using the Black-Scholes pricing model with contractual terms ranging from 9.5 to 11.5 years, and strike prices ranging from $ 26.08 to $ 32.60 . During the three and six months ended June 30, 2024 , the Company recognized $ 18.8 million and $ 37.5 million , respectively, related to the Investment Agreement warrants. Expenses related to these warrants are recorded within “Gaming” expenses on the unaudited Consolidated Statements of Operations and recognized when services are received. Additionally, if after February 29, 2024 and during the term of the Sportsbook Agreement PENN achieves specified performance conditions based on an average market share based on gross gaming revenue in the states in which the Sportsbook operates (as defined within the Investment Agreement), PENN could issue to ESPN, Inc. warrants to purchase up to an additional 6.4 million shares of PENN common stock. The additional warrants will be fully vested upon issuance, have an exercise price of $ 28.95 , and will be exercisable for 10.5 years from the date of issuance. Note 12— Stockholders’ Equity and Stock-Based Compensation Common and Preferred Stock On May 11, 2021, the Company acquired HitPoint Inc. and Lucky Point Inc. (collectively, “Hitpoint”). On both June 29, 2023 and June 26, 2024, the Company issued 4,055 shares in connection with the achievement of the second and final annual mutual goals established by the Company and Hitpoint for a total of $ 0.1 million, respectively. In conjunction with the February 20, 2020 stock purchase agreement between PENN and Barstool, the Company issued 883 shares of Series D Preferred Stock, par value $ 0.01 (the “Series D Preferred Stock”) to certain individual stockholders affiliated with Barstool. 1/1,000th of a share of Series D Preferred Stock is convertible into one share of PENN common stock. Pursuant to the Barstool SPA, on August 11, 2023, all remaining outstanding shares of Series D Preferred Stock were converted to common stock. See Note 5, “Acquisitions and Dispositions” for additional information related to the Barstool SPA. As of both June 30, 2024 and December 31, 2023, there were 5,000 shares authorized of Series D Preferred Stock and no shares were outstanding. 27 Table of Contents In connection with the acquisition of Score Media and Gaming, Inc. (“theScore”) in October 2021, the Company issued 12,319,340 shares of common stock with a par value of $ 0.01 , and 697,539 exchangeable shares, par value $ 0.01 (“Exchangeable Shares”) through the capital of an indirect wholly-owned subsidiary of PENN, in addition to cash consideration. Each Exchangeable Share is exchangeable into one share of PENN common stock at the option of the holder, subject to certain adjustments. Upon the acquisition of theScore, certain employees of theScore elected to have their outstanding equity awards, which were assumed under theScore plan (as defined below), issued as Exchangeable Shares, once the shares vest or are exercised. In addition, the Company may redeem all outstanding Exchangeable Shares in exchange for shares of PENN common stock at any time following the fifth anniversary of the closing, or earlier under certain circumstances. We did not issue Exchangeable Shares during the three months ended June 30, 2024 and 2023. During the six months ended June 30, 2024 and 2023, we issued 68,048 and 2,854 Exchangeable Shares, respectively. As of both June 30, 2024 and December 31, 2023, there were 768,441 Exchangeable Shares authorized, of which 469,878 shares and 560,267 shares were outstanding, respectively. Share Repurchase 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 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. Share repurchases may be made from time to time through a Rule 10b5-1 trading plan, open market transactions, block trades or in private transactions in accordance with applicable securities laws and regulations and other legal requirements. There is no minimum number of shares that the Company is required to repurchase and the repurchase authorization may be suspended or discontinued at any time without prior notice. No shares of the Company’s common stock were repurchased during the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023 respectively, the Company repurchased 3,791,258 and 5,438,221 shares of its common stock in open market transactions for $ 99.8 million and $ 149.8 million, at an average price of $ 26.31 and $ 27.54 per share under the February 2022 and December 2022 Authorizations. The cost of all repurchased shares is recorded as “Treasury stock” within our unaudited Consolidated Balance Sheets. No shares of the Company’s common stock were repurchased subsequent to the quarter ended June 30, 2024. As of August 7, 2024, the remaining availability under our December 2022 Authorization was $ 749.5 million. 2022 Long Term Incentive Compensation Plan On June 7, 2022, the Company’s shareholders, upon the recommendation of the Company’s Board of Directors, approved the Company’s 2022 Long Term Incentive Compensation Plan (the “2022 Plan”). The 2022 Plan authorizes the Company to issue stock options (incentive and/or non-qualified), stock appreciation rights (“SARs”), restricted stock (shares and/or units), performance awards (shares and/or units), and cash awards to executive officers, non-employee directors, other employees, consultants, and advisors of the Company and its subsidiaries. Non-employee directors and consultants are eligible to receive all such awards, other than incentive stock options. Pursuant to the 2022 Plan, an initial 6,870,000 shares of the Company’s common stock were reserved for issuance, plus any shares of common stock subject to outstanding awards under both the previous 2018 Long Term Incentive Compensation Plan, as amended (“2018 Plan”) and Score Media and Gaming Inc. Second Amended and Restated Stock Option and Restricted Stock Unit Plan (the “theScore Plan”) as of June 7, 2022, and outstanding awards that are forfeited or settled for cash under each of the prior plans. On June 6, 2023, the Company’s shareholders, upon the recommendation of the Company’s Board of Directors, approved an amendment to the 2022 Plan (as amended, the “2022 Amended Plan”), which increased the number of shares reserved for issuance under the plan by 7,000,000 shares to 13,870,000 shares. For purposes of determining the number of shares available for issuance under the 2022 Amended Plan, stock options, restricted stock and all other equity settled awards count against the 13,870,000 share limit as one share of common stock for each share granted. Any awards that are not settled in shares of common stock are not counted against the share limit. As of June 30, 2024, there are 6,328,318 shares available for future grants under the 2022 Amended Plan. Performance Share Program The Company’s performance share programs were adopted to provide our NEOs and certain other key executives with stock-based compensation tied directly to the Company’s performance, which further aligns their interests with our 28 Table of Contents shareholders and provides compensation only if the designated performance goals are met for the applicable performance periods. During the three and six months ended June 30, 2024, the Company granted 1,317,269 restricted units with performance-based vesting conditions, at target, under the 2022 Amended Plan. The restricted performance units granted in 2024 consist of one three-year performance period over a three-year service period. The awards have the potential to be earned at between 0 % and 200 % of the number of shares granted depending on achievement of the performance goals, and remain subject to vesting for the full three-year service period. During the six months ended June 30, 2023, the Company granted 461,747 restricted units with performance-based vesting conditions, at target, under the 2022 Plan. The restricted performance units granted in 2023 consist of three one-year performance periods over a three-year service period. The awards have the potential to be earned at between 0 % and 150 % of the number of shares granted depending on achievement of the performance goals, and remain subject to vesting for the full three-year service period. Stock-based Compensation Expense Stock-based compensation expense pertains to our stock options and restricted stock, including restricted stock with performance conditions. The Company recognized stock-based compensation expense of $ 14.2 million and $ 19.7 million during the three months ended June 30, 2024 and 2023, respectively, and $ 26.1 million and $ 36.2 million for the six months ended June 30, 2024 and 2023, respectively, which is included in “General and administrative” expense within the unaudited Consolidated Statements of Operations. Stock Options The Company granted 19,413 and 2,362 stock options during the three months ended June 30, 2024 and 2023, respectively, and 815,326 and 840,235 stock options during the six months ended June 30, 2024 and 2023, respectively. Cash-settled Phantom Stock Units Our outstanding phantom stock units (“CPUs”), are settled in cash and entitle plan recipients to receive a cash payment based on the fair value of the Company’s common stock which is based on the closing stock price of the trading day preceding the vest date. Our CPUs vest over a period of one to four years . The CPUs are accounted for as liability awards and are re-measured at fair value each reporting period until they become vested with compensation expense being recognized over the requisite service period. The Company’s CPU liability as of June 30, 2024 and December 31, 2023 was $ 0.4 million and $ 1.2 million, respectively, and is included within “Accrued expenses and other current liabilities” within the unaudited Consolidated Balance Sheets. The Company recognized $ 0.2 million and $ 0.9 million of compensation expense associated with these awards for the three months ended June 30, 2024 and 2023, respectively, and $ 0.3 million and $ 1.6 million for the six months ended June 30, 2024 and 2023, respectively. Compensation expense associated with our CPUs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations. As of June 30, 2024, there was a total of $ 1.1 million unrecognized compensation expense related to CPUs that will be recognized over the awards remaining weighted-average vesting period of 1.6 years. Additionally, we paid $ 1.1 million and $ 2.0 million during the six months ended June 30, 2024 and 2023, respectively, pertaining to cash-settled CPUs. Stock Appreciation Rights Our outstanding SARs are settled in cash and are accounted for as liability awards, and generally vest over a period of four years . The fair value of cash-settled SARs is calculated each reporting period and estimated using the Black-Scholes option pricing model. The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Consolidated Balance Sheets, associated with its cash-settled SARs of $ 0.9 million and $ 5.8 million as of June 30, 2024 and December 31, 2023, respectively. For SARs held by employees of the Company, there was $ 0.3 million of total unrecognized compensation cost as of June 30, 2024 that will be recognized over the awards remaining weighted-average vesting period of 1.6 years. The Company recognized a charge to compensation expense of $ 0.1 million and a reduction to compensation expense of $ 3.6 million for the three months ended June 30, 2024 and 2023, respectively, and a reduction to compensation expense of $ 4.5 million and $ 3.7 million for the six months ended June 30, 2024 and 2023, respectively. Compensation expense associated with our SARs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations. We paid $ 0.1 million and $ 0.6 million during the six months ended June 30, 2024 and 2023, respectively, related to cash-settled SARs. 29 Table of Contents Note 13— Earnings per Share For the three and six months ended June 30, 2024, we recorded a net loss attributable to PENN. As such, because the dilution from potential common shares was anti-dilutive, we used basic weighted-average common shares outstanding, rather than diluted weighted-average common shares outstanding when calculating diluted loss per share. Stock options, restricted stock, and convertible debt that could potentially dilute basic EPS in the future, that were not included in the computation of diluted loss per share, were as follows: For the three months ended June 30, For the six months ended June 30, (in millions) 2024 Assumed conversion of dilutive stock options — 0.1 Assumed conversion of dilutive restricted stock 0.2 0.2 Assumed conversion of convertible debt 14.1 14.1 For the three and six months ended June 30, 2023, we recorded net income attributable to PENN. As such, we used diluted weighted-average common shares outstanding when calculating diluted income per share. Stock options, restricted stock, convertible preferred shares, and convertible debt that could potentially dilute basic EPS in the future are included in the computation of diluted income per share. The following table sets forth the allocation of net income for the three and six months ended June 30, 2023 under the two-class method. For the three and six months ended June 30, 2024, we did not utilize the two-class method due to all preferred shares being converted as part of the Barstool SPA during the third quarter of 2023 as discussed in Note 12, “Stockholders’ Equity and Stock-Based Compensation.” For the three months ended June 30, For the six months ended June 30, (in millions) 2023 Net income attributable to PENN Entertainment, Inc. $ 78.4 $ 592.9 Net income applicable to preferred stock 0.2 1.7 Net income applicable to common stock $ 78.2 $ 591.2 The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for the three and six months ended June 30, 2024 and 2023: For the three months ended June 30, For the six months ended June 30, (in millions) 2024 2023 2024 2023 Weighted-average common shares outstanding—basic 152.1 152.8 152.0 153.0 Assumed conversion of: Dilutive stock options — 0.7 — 0.8 Dilutive restricted stock — 0.3 — 0.3 Convertible debt — 14.1 — 14.1 Weighted-average common shares outstanding—diluted 152.1 167.9 152.0 168.2 Restricted stock with performance and market based vesting conditions that have not been met as of June 30, 2024 were excluded from the computation of diluted EPS. Anti-dilutive equity-based awards are excluded from the computation of diluted EPS. Anti-dilutive options and warrants to purchase 36.0 million shares were outstanding during both the three and six months ended June 30, 2024, respectively, compared to anti-dilutive options to purchase 1.8 million and 1.7 million shares outstanding during the three and six months ended June 30, 2023, respectively. Additionally, the assumed conversion of 0.4 million preferred shares were excluded from the computation of diluted EPS for both three and six months ended June 30, 2023, because including them would have been anti-dilutive. 30 Table of Contents The Company’s calculation of weighted-average common shares outstanding includes the Exchangeable Shares discussed within Note 12, “Stockholders’ Equity and Stock-Based Compensation.” The following table presents the calculation of basic and diluted EPS for the Company’s common stock for the three and six months ended June 30, 2024 and 2023: For the three months ended June 30, For the six months ended June 30, (in millions, except per share data) 2024 2023 2024 2023 Calculation of basic earnings (loss) per share: Net income (loss) applicable to common stock $ ( 26.8 ) $ 78.2 $ ( 141.5 ) $ 591.2 Weighted-average shares outstanding — PENN Entertainment, Inc. 151.6 152.2 151.5 152.4 Weighted-average shares outstanding — Exchangeable Shares 0.5 0.6 0.5 0.6 Weighted-average common shares outstanding — basic 152.1 152.8 152.0 153.0 Basic earnings (loss) per share $ ( 0.18 ) $ 0.51 $ ( 0.93 ) $ 3.86 Calculation of diluted earnings (loss) per share: Net income (loss) applicable to common stock $ ( 26.8 ) $ 78.2 $ ( 141.5 ) $ 591.2 Interest expense, net of tax (1) : Convertible Notes — 1.8 — 3.6 Diluted income (loss) applicable to common stock $ ( 26.8 ) $ 80.0 $ ( 141.5 ) $ 594.8 Weighted-average common shares outstanding — diluted 152.1 167.9 152.0 168.2 Diluted earnings (loss) per share $ ( 0.18 ) $ 0.48 $ ( 0.93 ) $ 3.54 (1) The three and six months ended June 30, 2023 were tax-affected at a rate of 21 %. Note 14— Fair Value Measurements ASC Topic 820, “Fair Value Measurements and Disclosures,” establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The levels of the hierarchy are described below: • Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets, such as interest rates and yield curves that are observable at commonly quoted intervals. • Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions, as there is little, if any, related market activity. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy. The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate. The fair value of the Company’s trade accounts receivable and payable approximates the carrying amounts. Cash and Cash Equivalents The fair value of the Company’s cash and cash equivalents approximates their carrying amount, due to the short maturity of the cash equivalents. Equity Securities As of June 30, 2024 and December 31, 2023, we held $ 5.3 million and $ 10.7 million in equity securities of ordinary shares, respectively, which are reported as “Other assets” in our unaudited Consolidated Balance Sheets. These equity securities are the result of PENN Interactive entering into multi-year agreements with third-party online sports betting and/or iCasino operators for online sports betting and iCasino market access across our portfolio. 31 Table of Contents We recognized unrealized holding losses of $ 3.9 million and $ 5.4 million for the three and six months ended June 30, 2024, respectively, and unrealized holding gains of $ 6.3 million and $ 3.1 million for the three and six months ended June 30, 2023, respectively, which are included in “Other,” as reported in “Other income (expenses)” within our unaudited Consolidated Statements of Operations. The fair value of the equity securities was determined using Level 1 inputs, which use market approach valuation techniques. The primary inputs to those techniques include the quoted market price of the equity securities and foreign currency exchange rates. Available-for-Sale Debt Securities The Company acquired 12.0 % secured convertible notes in a technology provider on April 7, 2023 for $ 20.0 million, due on the third-year anniversary of the date of issuance. The terms contain optional and mandatory conversion provisions pursuant to which we will receive common stock upon conversion. As of both periods ended June 30, 2024 and December 31, 2023, the balance of the convertible notes was $ 24.2 million, which are reported in “Other assets” in our unaudited Consolidated Balance Sheets. As of June 30, 2024, the fair value of the convertible notes approximates the carrying value as of December 31, 2023. Therefore, we did not record any unrealized gains or losses to “Other comprehensive income (loss)” within our unaudited Consolidated Statements of Comprehensive Income (Loss). The fair value of the convertible notes was determined using a binomial lattice model and is categorized as a Level 3 measurement. Held-to-Maturity Securities and Promissory Notes We have a management contract with Retama Development Corporation (“RDC”), a local government corporation of the City of Selma, Texas, to manage the day-to-day operations of Retama Park Racetrack, located outside of San Antonio, Texas. In addition, we own 1.0 % of the equity of Retama Nominal Holder, LLC, which holds a nominal interest in the racing license used to operate Retama Park Racetrack, and a 75.5 % interest in Pinnacle Retama Partners, LLC (“PRP”), which owns the contingent gaming rights that may arise if gaming under the existing racing license becomes legal in Texas in the future. As of both periods ended June 30, 2024 and December 31, 2023, PRP held $ 7.9 million in promissory notes issued by RDC and $ 6.7 million in local government corporation bonds issued by RDC, at amortized cost. The promissory notes and the local government corporation bonds are collateralized by the assets of Retama Park Racetrack. As of June 30, 2024 and December 31, 2023, the promissory notes and the local government corporation bonds were included in “Other assets” within our unaudited Consolidated Balance Sheets. The contractual terms of these promissory notes include interest payments due at maturity; however, we have not recorded accrued interest on these promissory notes because uncertainty exists as to RDC’s ability to make interest payments. We have the positive intent and ability to hold the local government corporation bonds until the amortized cost is recovered. The estimated fair values of such investments are principally based on appraised values of the land associated with Retama Park Racetrack, which are classified as Level 2 inputs. Long-term Debt The fair value of our Amended Term Loan A Facility, Amended Term Loan B Facility, 5.625 % Notes, 4.125 % Notes, and the Convertible Notes is estimated based on quoted prices in active markets. During the first quarter of 2024, we reassessed the trading frequency of our previously described long-term debt instruments and reclassified them from a Level 1 measurement to a Level 2 measurement. Other long-term obligations as of June 30, 2024 and December 31, 2023 included a financing arrangement entered in February of 2021 as well as the repayment obligation of the hotel and event center located near Hollywood Casino Lawrenceburg. The fair value of the Lawrenceburg repayment obligation is estimated based on rates consistent with the Company’s credit rating for comparable terms and debt instruments and is classified as a Level 2 measurement. As of December 31, 2023, other long-term obligations also included the relocation fees for Dayton and Mahoning Valley, which were paid off during the second quarter of 2024. The fair values of the Dayton and Mahoning Valley relocation fees were estimated based on rates consistent with the Company’s credit rating for comparable terms and debt instruments and were classified as Level 2 measurements. See Note 7, “Long-term Debt” for details. 32 Table of Contents Additionally, in February 2021, we entered into a third-party financing arrangement providing the Company with upfront cash proceeds while permitting us to participate in future proceeds on certain claims. The financing obligation has been classified as a non-current liability and the fair value of the financing obligation is based on what we expect to be settled in a future period of which the principal is contingent and predicated on other events, plus accreted period non-cash interest using an effective interest rate of 27.0 % until the claims and related obligation is settled. The financing obligation has been classified as a Level 3 measurement and is included within our unaudited Consolidated Balance Sheets in “Long-term debt, net of current maturities, debt discount, and debt issuance costs.” See Note 7, “Long-term Debt.” Other Liabilities Other liabilities as of June 30, 2024 and December 31, 2023 include contingent purchase price liabilities related to Plainridge Park Casino and HitPoint. The Hitpoint contingent purchase price liability is payable in installments up to a maximum of $ 1.0 million in the form of cash and equity, on the first three anniversaries of the acquisition close date and is based on the achievement of mutual goals established by the Company and Hitpoint. The final payment of shares and cash were issued during the second and third quarters of 2024, respectively. See Note 12, “Stockholders’ Equity and Stock-Based Compensation.” As of June 30, 2024, there are no annual achievement periods remaining. The Plainridge Park Casino contingent purchase price liability is calculated based on earnings of the gaming operations over the first ten years of operations, which commenced on June 24, 2015. As of June 30, 2024, we were contractually obligated to make two additional annual payments. The fair value of the Plainridge Park Casino contingent purchase price liability is estimated based on an income approach using a discounted cash flow model. These contingent purchase price liabilities have been classified as a Level 3 measurement and are included within our unaudited Consolidated Balance Sheets in “Accrued expenses and other current liabilities” or “Other long-term liabilities,” depending on the timing of the next payment. Additionally, as of June 30, 2024 and December 31, 2023, Other liabilities include a $ 39.5 million and $ 70.0 million tax indemnification, respectively, as described in Note 2, “Significant Accounting Policies and Basis of Presentation.” Liabilities associated with the indemnification of $ 39.5 million are recorded in “Other long-term liabilities” within our unaudited Consolidated Balance Sheets. The indemnity has been classified as a Level 3 measurement. Key assumptions used to estimate the fair value of the indemnification include the expected tax rate and the probability of potential outcomes based on valuation methods that utilize unobservable inputs that are significant to the overall fair value as of June 30, 2024 and December 31, 2023. The assessment of the significance of a particular input to the fair value measurement requires judgment. 33 Table of Contents The carrying amounts and estimated fair values by input level of the Company’s financial instruments were as follows: June 30, 2024 (in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 877.6 $ 877.6 $ 877.6 $ — $ — Equity securities $ 5.3 $ 5.3 $ 5.3 $ — $ — Available-for-sale debt securities $ 24.2 $ 24.2 $ — $ — $ 24.2 Held-to-maturity securities $ 6.7 $ 6.7 $ — $ 6.7 $ — Promissory notes $ 7.9 $ 7.9 $ — $ 7.9 $ — Financial liabilities: Long-term debt Amended Credit Facilities $ 1,453.2 $ 1,468.8 $ — $ 1,468.8 $ — 5.625 % Notes $ 399.8 $ 387.0 $ — $ 387.0 $ — 4.125 % Notes $ 395.0 $ 344.0 $ — $ 344.0 $ — Convertible Notes $ 327.0 $ 362.7 $ — $ 362.7 $ — Other long-term obligations $ 185.4 $ 184.2 $ — $ 8.1 $ 176.1 Other liabilities $ 48.4 $ 48.3 $ — $ 2.7 $ 45.6 December 31, 2023 (in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Cash and cash equivalents $ 1,071.8 $ 1,071.8 $ 1,071.8 $ — $ — Equity securities $ 10.7 $ 10.7 $ 10.7 $ — $ — Available-for-sale securities $ 24.2 $ 24.2 $ — $ — $ 24.2 Held-to-maturity securities $ 6.7 $ 6.7 $ — $ 6.7 $ — Promissory notes $ 7.9 $ 7.9 $ — $ 7.9 $ — Financial liabilities: Long-term debt Amended Credit Facilities $ 1,471.7 $ 1,483.5 $ 1,483.5 $ — $ — 5.625 % Notes $ 399.7 $ 388.0 $ 388.0 $ — $ — 4.125 % Notes $ 394.6 $ 340.0 $ 340.0 $ — $ — Convertible Notes $ 326.1 $ 427.6 $ 427.6 $ — $ — Other long-term obligations $ 173.5 $ 172.1 $ — $ 18.0 $ 154.1 Other liabilities $ 79.0 $ 78.9 $ — $ 2.7 $ 76.2 The following table summarizes the changes in fair value of our Level 3 assets and liabilities measured on a recurring basis: (in millions) Other Assets and Liabilities Balance as of January 1, 2024 $ 254.5 Interest 22.0 Payment installments ( 30.6 ) Balance as of June 30, 2024 $ 245.9 34 Table of Contents The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 assets and liabilities as of June 30, 2024: Valuation Technique Unobservable Input Discount Rate Available-for-sale debt securities Discounted cash flow Discount rate 35.0 % Other long-term obligation Discounted cash flow Discount rate 27.0 % Contingent purchase price - Plainridge Park Casino Discounted cash flow Discount rate 7.0 % Note 15— Segment Information We have five reportable segments: Northeast, South, West, Midwest, and Interactive. Our gaming and racing properties are grouped by geographic location, and each is viewed as an operating segment with the exception of our two properties in Jackpot, Nevada, which are viewed as one operating segment. We consider our combined VGT operations, by state, to be separate operating segments. Interactive includes all of our online gaming operations, management of retail sports betting, media, and in the prior year, the operating results of Barstool. We owned 36 % of Barstool common stock prior to the February 17, 2023 Barstool Acquisition, pursuant to which we acquired the remaining 64 % of Barstool common stock. On August 8, 2023, we entered into the Barstool SPA, and we sold 100 % of the outstanding shares of Barstool common stock. See Note 5, “Acquisitions and Dispositions” for further information. 35 Table of Contents The Company utilizes Adjusted EBITDAR (as defined below) as its measure of segment profit or loss. The following table highlights our revenues and Adjusted EBITDAR for each reportable segment and reconciles Adjusted EBITDAR on a consolidated basis to net income (loss). For the three months ended June 30, For the six months ended June 30, (in millions) 2024 2023 2024 2023 Revenues: Northeast segment $ 696.3 $ 688.0 $ 1,381.0 $ 1,388.5 South segment 298.2 308.3 596.7 623.1 West segment 135.3 130.0 264.1 259.7 Midwest segment 298.1 293.3 589.3 588.6 Interactive segment 232.6 257.5 440.3 491.0 Other (1) 5.9 6.2 11.9 12.0 Intersegment eliminations (2) ( 3.4 ) ( 8.5 ) ( 13.4 ) ( 14.8 ) Total $ 1,663.0 $ 1,674.8 $ 3,269.9 $ 3,348.1 Adjusted EBITDAR (3) : Northeast segment $ 204.7 $ 217.3 $ 407.3 $ 430.2 South segment 111.4 120.9 224.9 244.5 West segment 50.6 49.6 96.5 98.7 Midwest segment 129.9 127.1 246.9 252.7 Interactive segment ( 102.8 ) ( 12.8 ) ( 298.8 ) ( 18.5 ) Other (1) ( 26.8 ) ( 25.3 ) ( 53.6 ) ( 52.6 ) Total (3) 367.0 476.8 623.2 955.0 Other operating benefits (costs) and other income (expenses): Rent expense associated with triple net operating leases (4) ( 154.9 ) ( 146.4 ) ( 309.7 ) ( 292.4 ) Stock-based compensation ( 14.2 ) ( 19.7 ) ( 26.1 ) ( 36.2 ) Cash-settled stock-based awards variance 3.1 6.2 11.1 9.1 Loss on disposal of assets ( 9.1 ) — ( 8.9 ) — Contingent purchase price — ( 0.2 ) — ( 0.5 ) Depreciation and amortization ( 109.1 ) ( 110.6 ) ( 217.8 ) ( 218.1 ) Insurance recoveries, net of deductible charges 2.7 13.6 2.7 13.6 Non-operating items of equity method investments (5) ( 1.0 ) ( 0.9 ) ( 2.1 ) ( 5.4 ) Interest expense, net ( 119.4 ) ( 115.6 ) ( 238.5 ) ( 228.6 ) Interest income 5.8 9.9 12.9 20.3 Gain on Barstool Acquisition, net (6) — — — 83.4 Gain on REIT transactions, net (7) — — — 500.8 Other (8) ( 1.2 ) ( 0.3 ) ( 4.6 ) ( 5.9 ) Income (loss) before income taxes ( 30.3 ) 112.8 ( 157.8 ) 795.1 Income tax benefit (expense) 3.2 ( 34.7 ) 15.8 ( 202.6 ) Net income (loss) $ ( 27.1 ) $ 78.1 $ ( 142.0 ) $ 592.5 (1) The Other category consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club, Sam Houston and Valley Race Park, the Company’s joint venture interests in Freehold Raceway, and our management contract for Retama Park Racetrack. The Other category also includes corporate overhead costs, which consist of certain expenses, such as: payroll, professional fees, travel expenses, and other general and administrative expenses that do not directly relate or have not otherwise been allocated. Corporate overhead costs were $ 24.5 million and $ 24.8 million for the three months ended June 30, 2024 and 2023, respectively, and $ 49.4 million and $ 51.1 million for the six months ended June 30, 2024 and 2023, respectively. (2) Primarily represents the elimination of intersegment revenues associated with our retail sportsbooks, which are operated by PENN Interactive. 36 Table of Contents (3) We define Adjusted EBITDAR as earnings before interest expense, net, interest income, income taxes, depreciation and amortization, rent expense associated with triple net operating leases (see footnote (4) below), stock-based compensation, debt extinguishment charges, impairment losses, insurance recoveries, net of deductible charges, changes in the estimated fair value of our contingent purchase price obligations, gain or loss on disposal of assets, the difference between budget and actual expense for cash-settled stock-based awards, pre-opening expenses, non-cash gains/losses associated with REIT transactions, loss on disposal of business, non-cash gains/losses associated with partial and step acquisitions as measured in accordance with ASC Topic 805, “Business Combinations”, and other. Adjusted EBITDAR is also inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (see footnote (5) below) added back for Barstool and our Kansas Entertainment joint venture. (4) Amounts pertain to the operating lease components contained within the: (i) AR PENN Master Lease; (ii) 2023 Master Lease; (iii) Margaritaville Lease; and (iv) Greektown Lease. (5) Consists principally of interest expense, net, income taxes, depreciation and amortization, and stock-based compensation expense associated with Barstool prior to us acquiring the remaining 64 % of Barstool common stock (see Note 5, “Acquisitions and Dispositions” ), and our Kansas Entertainment joint venture. (6) Includes a gain of $ 66.5 million associated with Barstool related to remeasurement of the equity investment immediately prior to the acquisition date of February 17, 2023 and a gain of $ 16.9 million related to the acquisition of the remaining 64 % of Barstool common stock (see Note 5, “Acquisitions and Dispositions” ). (7) Upon the execution of the February 21, 2023 AR PENN Master Lease and the 2023 Master Lease, both effective January 1, 2023, we recognized a gain of $ 500.8 million as a result of the reclassification and remeasurement of lease components (see Note 8, “Leases” ). (8) Primarily relates to unrealized holding losses of $ 3.9 million and unrealized holding gains on our equity securities of $ 6.3 million for the three months ended June 30, 2024 and 2023, respectively, and unrealized holding losses of $ 5.4 million and unrealized holding gains of $ 3.1 million for the six months ended June 30, 2024 and 2023, respectively, which are discussed in Note 14, “Fair Value Measurements.” The table below presents capital expenditures by segment: For the three months ended June 30, For the six months ended June 30, (in millions) 2024 2023 2024 2023 Capital expenditures: Northeast segment $ 13.3 $ 24.7 $ 18.9 $ 47.5 South segment 23.6 15.4 35.4 29.1 West segment 11.4 6.5 12.9 10.3 Midwest segment 38.2 16.9 57.4 29.6 Interactive segment 0.3 2.6 1.0 9.7 Other 1.4 3.5 4.0 6.6 Total capital expenditures $ 88.2 $ 69.6 $ 129.6 $ 132.8 The table below presents investment in and advances to unconsolidated affiliates and total assets by segment: (in millions) Northeast South West Midwest Interactive Other (1) Total Balance sheet as of June 30, 2024 Investment in and advances to unconsolidated affiliates $ — $ — $ — $ 81.7 $ — $ 4.8 $ 86.5 Total assets $ 1,831.6 $ 1,278.8 $ 399.6 $ 1,355.0 $ 2,379.0 $ 8,294.0 $ 15,538.0 Balance sheet as of December 31, 2023 Investment in and advances to unconsolidated affiliates $ — $ — $ — $ 80.8 $ — $ 4.1 $ 84.9 Total assets $ 1,827.4 $ 1,244.5 $ 388.6 $ 1,241.1 $ 2,549.9 $ 8,812.7 $ 16,064.2 (1) The real estate assets subject to the Master Leases, which are classified as either property and equipment, net, operating lease ROU assets, or finance lease ROU assets, are included within the Other category. 37 Table of Contents