PENN Entertainment Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
PENN$17.43+0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0000921738-24-000021
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations“Segment comparison of the three months ended March 31, 2024 and 2023”“Liquidity and Capital Resources,”Current report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000921738-24-000029
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations“Segment comparison of the three and six months ended June 30, 2024 and 2023”“Liquidity and Capital Resources,”The baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 133 previous paragraphs and 141 current paragraphs.
78 unchanged; 52 reworded; 11 added; 2 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 13 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
Gaming revenuesfor the three months ended June 30, 2024 increased by$39.5 million compared to the corresponding prior year period, primarily due to an increase in gaming revenues at our Interactive segment, an increase in slot revenues at our Northeast, Midwest, and West segments, partially offset by a decrease in gaming revenues at our South segment. In our Interactive segment, top-of-funnel growth, improved risk and trading execution, refined promotional strategies, and a favorable sportsbook hold contributed to the increase in gaming revenues.
Current report
Food, beverage, hotel, and other revenues for thethree and six months ended June 30, 2024 decreased by$51.3 million and$51.4 million, respectively, compared to the corresponding prior year periods. The decrease for both periods primarily relates to the inclusion of 100% of the operating results of Barstool subsequent to the Barstool Acquisition on February 17, 2023 in the prior year periods. Due to the August 2023 Barstool disposal, the current year periods do not include any Barstool revenues. For thesix months ended June 30, 2024, this was offset by an increase in gaming taxamounts related tothird-party online sports betting and/or iCasino partners for online sports betting and iCasino market access of$17.9 million compared to the prior year period.
Current report
Segment comparison of the three and six months ended June 30, 2024 and 2023
Current report
The Northeast segment’s revenues for the three months ended June 30, 2024 increased $8.3 million, primarily due to an increase in gaming revenues, particularly slot revenues.
Current report
For the three months ended June 30, 2024, the Northeast segment’s Adjusted EBITDAR decreased $12.6 million, and Adjusted EBITDAR margin decreased to 29.4%, primarily due to the reversal of certain accrued gaming taxes in the prior year quarter and increased labor and marketing costs in the current year quarter.
Current report
The West segment’s revenues for the three months ended June 30, 2024 increased by $5.3 million, compared to the prior year period, primarily due to increased visitation at our West segment properties.
Current report
For the three months ended June 30, 2024, the West segment’s Adjusted EBITDAR increased$1.0 million due to the increase in hotel and food and beverage revenues, while Adjusted EBITDAR margin decreased to 37.4%, primarily due to increased labor costs.
Current report
The Midwest segment’s revenues for the six months ended June 30, 2024 increased by $0.7 million, compared to the prior year period, primarily due to an increase in hotel and food and beverage revenues in the current year period, partially offset by a decrease in gaming revenues during the first quarter of 2024 as severe weather events negatively impacted visitation.
Current report
For the three months ended June 30, 2024, the Midwest segment’s Adjusted EBITDAR increased $2.8 million and Adjusted EBITDAR margin increased to 43.6%, primarilydue to the increase in revenues discussed above.
Current report
N/M - Not meaningful
Current report
The Interactive segment’s revenues for the three and six months ended June 30, 2024 decreased by $24.9 million and $50.7 million, respectively, compared to the corresponding prior year periods, primarily due to decreases in food, beverage, hotel, and other revenues, partially offset by increases ingaming revenues. Gaming revenues, particularly during thethree months ended June 30, 2024, were positively impacted by top-of-funnel growth, improved risk and trading execution, refined promotional strategies, and favorable sports betting hold rates. The decreases in food, beverage, hotel, and other revenues, primarily relate to$52.7 million and$80.9 million of Barstool revenues subsequent to the Barstool Acquisition on February 17, 2023 being included in thethree and six months ended June 30, 2023, respectively. Due to the August 2023 Barstool disposal, the current year periods do not include any Barstool operating results. Furthermore, food, beverage, hotel, and other revenues are inclusive of gaming taxamounts related tothird-party online sports betting and/or iCasino partners for online sports betting and iCasino market accessof $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.
Removed paragraphs (2)
Previous report
Food, beverage, hotel, and other revenues for thethree months ended March 31, 2024 remained flat compared to the corresponding prior year period. Increases in hotel and other revenue were offset by decreases in advertising and retail revenue.
Previous report
The Interactive segment’s revenues for the three months ended March 31, 2024 decreased by $25.8 million, compared to the prior year period, primarily due to a decreasein online gaming revenue, driven by increased promotional expense related to customer acquisitions for ESPN BET and lower sportsbook hold rates. Food, beverage, hotel, and other revenues are inclusive of a tax gross-up of $116.6 million for the three months ended March 31, 2024, compared to $92.3 million for the three months ended March 31, 2023. Additionally, in the prior year quarter food, beverage, hotel, and other revenues included $28.2 million of Barstool revenues subsequent to the Barstool Acquisition on February 17, 2023. Due to the August 2023 Barstool disposal, the current year quarter does not include any Barstool operating results.
Reworded paragraphs (52)
Previous wording
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 March 31, 2024, PENN operated 43 properties in 20 states, online sports betting in 19 jurisdictions and iCasino in five jurisdictions, under a portfolio of well-recognized brands including Hollywood Casino®, L’Auberge®, ESPN BET™, and theScore BET Sportsbook and Casino®. In August 2023, PENN entered into a transformative, exclusive long-term strategic alliance with ESPN, Inc. 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 over 30 million members a unique set of rewards and experiences across business channels.
Current wording
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 customer loyalty program, which offers our approximately 31 million members a unique set of rewards and experiences across business channels.
Previous wording
On February 17, 2023, we acquired the remaining 64% of the outstanding shares of Barstool Sports, Inc. (“Barstool”) common stock not already owned by us for a consideration of approximately $405.5 million, which is inclusive of cash and common stock issuance, repayment of Barstool indebtedness of $23.8 million, transaction expenses and other purchase price adjustments in accordance with GAAP (the “Barstool Acquisition”). Prior to the acquisition, we held a 36% ownership interest, which was accounted for under the equity method.
Current wording
On February 17, 2023, we acquired the remaining 64% of the outstanding shares of Barstool Sports, Inc. (“Barstool”) common stock not already owned by us for a consideration of approximately $405.5 million, which is inclusive of cash and common stock issuance, repayment of Barstool indebtedness of $23.8 million, transaction expenses and other purchase price adjustments in accordance with GAAP (the “Barstool Acquisition”). Prior to the Barstool Acquisition, we held a 36% ownership interest, which was accounted for under the equity method.
Previous wording
In connection with PENN’s decision to rebrand to ESPN BET as discussed above, PENN concurrently entered into a stock purchase agreement with David Portnoy (the “Barstool SPA”) pursuant to which PENN sold 100% of the outstanding shares of Barstool to David Portnoy in exchange for nominal cash consideration (one dollar) and certain non-compete and other restrictive covenants. Pursuant to the Barstool SPA, PENN has the right to receive 50% of the gross proceeds received by David Portnoy in any subsequent sale or other monetization event of Barstool. As a result of the Barstool SPA, we recognized a pre-tax loss on disposal of $923.2 million (inclusive of $714.8 million in goodwill and intangible assets write offs and a $70.0 million indemnification liability) incurred in the third quarter of 2023. See Note 5, “Acquisitions and Dispositions” and Note 14, “Fair Value Measurements” in the notes to our unaudited Consolidated Financial Statements.
Current wording
On August 8, 2023, we entered into the Barstool SPA, and we sold 100% of the outstanding shares of Barstool common stock. As a result of the Barstool SPA, we recognized a pre-tax loss on disposal of $923.2 million (inclusive of $714.8 million in goodwill and intangible assets write offs and a $70.0 million indemnification liability) incurred in the third quarter of 2023. See Note 5, “Acquisitions and Dispositions” and Note 14, “Fair Value Measurements” in the notes to our unaudited Consolidated Financial Statements.
Previous wording
Concurrent with the execution of the AR PENN Master Lease, the Company and GLPI entered into a new master lease (the “2023 Master Lease”), effective January 1, 2023, specific to the properties associated with Aurora, Joliet, Columbus, Toledo, M Resort, Hollywood Casino at The Meadows (“Meadows”) and Hollywood Casino Perryville (“Perryville”) and a master development agreement (the “Master Development Agreement”). The 2023 Master Lease terminated the individual triple net leases associated with Meadows and Perryville. The 2023 Master Lease incurs a 1.5% fixed escalator on November 1 each year, and is also subject to a one-time increase of $1.4 million effective November 1, 2027. The 2023 Master Lease and AR PENN Master Lease are cross-defaulted, cross-collateralized, and coterminous, and subject to a parent guarantee.
Current wording
Concurrent with the execution of the AR PENN Master Lease, the Company and GLPI entered into a new master lease (the “2023 Master Lease”), effective January 1, 2023, specific to the properties associated with Aurora, Joliet, Columbus, Toledo, M Resort, Hollywood Casino at The Meadows (“Meadows”) and Hollywood Casino Perryville (“Perryville”) and a master development agreement (the “Master Development Agreement”). The 2023 Master Lease terminated the individual triple net leases associated with Meadows and Perryville. The 2023 Master Lease incurs a 1.5% fixed escalator on November 1 of each year, and is also subject to a one-time increase of $1.4 million effective November 1, 2027. The 2023 Master Lease and AR PENN Master Lease are cross-defaulted, cross-collateralized, and coterminous, and subject to a parent guarantee.
Previous wording
The 2023 Master Lease includes a base rent (the “2023 Master Lease Base Rent”) equal to $232.2 million and the Master Development Agreement contains additional rent (together with the 2023 Master Lease Base Rent, the “2023 Master Lease Rent”) equal to (i) 7.75% of any project funding received by PENN from GLPI for an anticipated relocation of PENN’s riverboat casino and related developments with respect to Aurora (the “Aurora Project”) and (ii) a percentage, based on the then-current GLPI stock price, of any project funding received by PENN from GLPI for certain anticipated development projects with respect to Joliet, Columbus, and M Resort (the “Other Development Projects”). The Master Development Agreement provides that GLPI will fund up to $225 million for the Aurora Project and, upon PENN’s request, up to $350 million in the aggregate for the Other Development Projects, in accordance with certain terms and conditions set forth in the Master Development Agreement. These funding obligations of GLPI expire on January 1, 2026. The Aurora Project and the Other Development Projects have all commenced and are anticipated to open in late 2025 to early 2026.
Current wording
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 our 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 million for the Aurora Project and, upon our request, up to $350 million in the aggregate for the Other Development Projects, in accordance with certain terms and conditions set forth in the Master Development Agreement. These funding obligations of GLPI expire on January 1, 2026. The PENN Development Projects have all commenced and are anticipated to open by the first half of 2026.
Previous wording
We believe that our portfolio of assets provides us with the benefit of geographically-diversified cash flow from operations. We expect to continue to expand our gaming operations through the implementation and execution of a disciplined capital expenditure program at our existing properties, the pursuit of strategic acquisitions and investments, and the development of new gaming properties. In addition, the acquisition of theScore and our Sportsbook Agreement with ESPN reflects our strategy to continue evolving from the nation’s largest regional gaming operator to a best-in-class omni-channel provider of retail gaming, iCasino, and sports betting entertainment.
Current wording
We believe that our portfolio of assets provides us with the benefit of geographically-diversified cash flow from operations. We expect to continue to expand our gaming operations through the implementation and execution of a disciplined capital expenditure program at our existing properties, the pursuit of strategic acquisitions and investments, and the development of new gaming properties. In addition, the acquisition of theScore Media and Gaming, Inc. (“theScore”) and our Sportsbook Agreement with ESPN reflects our strategy to continue evolving from the nation’s largest regional gaming operator to a best-in-class omni-channel provider of retail gaming, iCasino, and sports betting entertainment.
Previous wording
Most of our properties operate in mature, competitive markets. We expect the majority of our future growth to come from our online sports betting and iCasino businesses; improvements, expansions, or relocations of our existing properties; entrance into new jurisdictions; expansions of gaming in existing jurisdictions; and strategic investments and acquisitions; and cross-sell opportunities between our retail gaming, online sports betting, and iCasino businesses. Our portfolio is comprised largely of well-maintained regional gaming facilities, which has allowed us to develop what we believe to be a solid base for future growth opportunities.
Current wording
Most of our properties operate in mature, competitive markets. We expect the majority of our future growth to come from our online sports betting and iCasino businesses; improvements, expansions, or relocations of our existing properties; entrance into new jurisdictions; expansions of gaming in existing jurisdictions; strategic investments and acquisitions; and cross-sell opportunities between our retail gaming, online sports betting, and iCasino businesses. Our portfolio is comprised largely of well-maintained regional gaming facilities, which has allowed us to develop what we believe to be a solid base for future growth opportunities.
Previous wording
We continuously adjust operations, offerings, and cost structures to reflect changing economic conditions, as well as consumer demand and behaviors. We also continue to focus on revenue and cost synergies from recent acquisitions, technology enhancements, and providing customers with additional gaming and entertainment experiences through our differentiated omni-channel strategy. We seek to grow our customer database and PENN Play TMloyalty program through our online sports betting and iCasino businesses, the development of new properties, the expansion of existing properties and other business lines, and through partnerships with third-party partners, such as Norwegian Cruise Line Holdings Ltd., Live Nation Entertainment, Inc., and Choice Hotels International, Inc. In addition, strategic acquisitions (e.g. theScore) and strategic relationships (e.g. our Sportsbook Agreement with ESPN), allow us to acquire new customers, expand our player database, and provide additional revenue streams, all in furtherance of our omnichannel strategy.
Current wording
We continuously adjust operations, offerings, and cost structures to reflect changing economic conditions, as well as consumer demand and behaviors. We also continue to focus on revenue and cost synergies from recent acquisitions, technology enhancements, and providing customers with additional gaming and entertainment experiences through our differentiated omni-channel strategy. We seek to grow our customer database and PENN Play loyalty program through our online sports betting and iCasino businesses, the development of new properties, the expansion of existing properties and other business lines, and through partnerships with third-party partners, such as Ticketmaster Entertainment, LLC, Norwegian Cruise Line Holdings Ltd., Live Nation Entertainment, Inc., and Choice Hotels International, Inc. In addition, strategic acquisitions (e.g. theScore) and strategic relationships (e.g. our Sportsbook Agreement with ESPN), allow us to acquire new customers, expand our player database, and provide additional revenue streams, all in furtherance of our omnichannel strategy.
Previous wording
The gaming, media, and entertainment industries are characterized by an increasingly high degree of competition among a large number of participants. We compete with a variety of gaming operations, including casinos and hotel casinos of varying quality and size and other gaming options such as state and province-sponsored internet lotteries, sweepstakes, charitable gaming, video gaming terminals at bars, restaurants, taverns and truck stops, illegal slot machines and skill games, fantasy sports and third-party internet or mobile-based gaming platforms, including both legal and illegal iCasino and sports betting operations. See the“Segment comparison of the three months ended March 31, 2024 and 2023” section below for discussions on our results of operations by reportable segment.
Current wording
The gaming, media, and entertainment industries are characterized by an increasingly high degree of competition among a large number of participants. We compete with a variety of gaming operations, including casinos and hotel casinos of varying quality and size and other gaming options such as state and province-sponsored internet lotteries, sweepstakes, charitable gaming, video gaming terminals at bars, restaurants, taverns and truck stops, illegal slot machines and skill games, fantasy sports and third-party internet or mobile-based gaming platforms, including both legal and illegal iCasino and sports betting operations. See the“Segment comparison of the three and six months ended June 30, 2024 and 2023” section below for discussions on our results of operations by reportable segment.
Previous wording
The vast majority of our revenues is gaming revenue, which is highly dependent upon the volume and spending levels of customers at our properties. Our gaming revenue is derived primarily from slot machines (which represented approximately 85% and 84% of our gaming revenue for the three months ended March 31, 2024 and 2023, respectively) and, to a lesser extent, table games, online sports betting, and iCasino. Aside from gaming revenue, our revenues are primarily derived from our hotel, dining, retail, commissions, program sales, admissions, concessions and certain other ancillary activities, and our racing operations.
Current wording
The vast majority of our revenues is gaming revenue, which is highly dependent upon the volume and spending levels of customers at our properties. Our gaming revenue is derived primarily from slot machines (which represented approximately 85% of our gaming revenue for each of the six months ended June 30, 2024 and 2023) and, to a lesser extent, table games, online sports betting, and iCasino. Aside from gaming revenue, our revenues are primarily derived from our hotel, dining, retail, commissions, program sales, admissions, concessions and certain other ancillary activities, and our racing operations.
Previous wording
We have aggregated our operating segments into five reportable segments. Retail operating segments are based on the similar characteristics within the regions in which they operate: Northeast, South, West, and Midwest. The Interactive segment includes all of our online sports betting, online casino/iCasino, and social gaming (collectively referred to as “online gaming”) operations, management of retail sports betting, media, and in the prior year, the operating results of Barstool subsequent to the Barstool Acquisition on February 17, 2023 and prior to the Barstool divestiture on August 8, 2023 (as defined and discussed in Note 5, “Acquisitions and Dispositions”). We view each of our gaming and racing properties as an operating segment with the exception of our two properties in Jackpot, Nevada, which we view as one operating segment. We consider our combined Video Gaming Terminal (“VGT”) operations, by state, to be separate operating segments. For a listing of our gaming properties and VGT operations included in each reportable segment, see Note 2, “Significant Accounting Policies” in the notes to our unaudited Consolidated Financial Statements.
Current wording
We have aggregated our operating segments into five reportable segments. Retail operating segments are based on the similar characteristics within the regions in which they operate: Northeast, South, West, and Midwest. The Interactive segment includes all of our online sports betting, online casino/iCasino, and social gaming (collectively referred to as “online gaming”) operations, management of retail sports betting, media, and in the prior year, the operating results of Barstool subsequent to the Barstool Acquisition on February 17, 2023 and prior to the Barstool divestiture on August 8, 2023 (as defined and discussed in Note 5, “Acquisitions and Dispositions”). We view each of our gaming and racing properties as an operating segment with the exception of our two properties in Jackpot, Nevada, which we view as one operating segment. We consider our combined Video Gaming Terminal (“VGT”) operations, by state, to be separate operating segments. For a listing of our gaming properties and VGT operations included in each reportable segment, see Note 2, “Significant Accounting Policies and Basis of Presentation” in the notes to our unaudited Consolidated Financial Statements.
Previous wording
(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. Expenses incurred for corporate and shared services activities that are directly attributable to a property or are otherwise incurred to support a property are allocated to each property. The Other category also includes corporate overhead costs, which consist of certain expenses, such as: payroll, 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 $24.9 million and $26.3 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
(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. Expenses incurred for corporate and shared services activities that are directly attributable to a property or are otherwise incurred to support a property are allocated to each property. The Other category also includes corporate overhead costs, which consist of certain expenses, such as: payroll, 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.
Previous wording
Consolidated comparison of the three months ended March 31, 2024 and 2023
Current wording
Consolidated comparison of the three and six months ended June 30, 2024 and 2023
Previous wording
Gaming revenuesfor the three months ended March 31, 2024 decreased by $66.3 million compared to the corresponding prior year period, primarily due to a decrease in slots and table games revenues within our South and Northeast segments and a decrease in online gaming revenue at our Interactive segment. In the current year quarter, severe weather affected weekends and holidays across all our regional property segments negatively impacting our operations. Additionally, retail gaming revenues decreased as newsupply continues to impact visitation in certain retail property segments. The decrease in online gaming revenues within our Interactive segment was due to unfavorable sports betting hold rates and increased promotional expense related to ESPN BET.
Current wording
Gaming revenues for the six months ended June 30, 2024 decreased by $26.8 million compared to the corresponding prior year period, primarily due to a decrease in slots and table games revenues within our South segment partially offset by an increase in gaming revenues at our Interactive segment. In the first quarter of 2024, severe weather affected weekends and holidays across all our regional property segments negatively impacting our operations. Additionally, retail gaming revenues decreased as newsupply continues to impact visitation in certain retail property segments.
Previous wording
See“Segment comparison of the three months ended March 31, 2024 and 2023” below for more detailed explanations of the fluctuations in revenues.
Current wording
See“Segment comparison of the three and six months ended June 30, 2024 and 2023” below for more detailed explanations of the fluctuations in revenues.
Previous wording
Gaming expenses consist primarily of gaming taxes, payroll, marketing and promotional, and other expenses associated with our gaming operations. Gaming expenses for thethree months ended March 31, 2024 increased $150.0 million compared to the corresponding prior year period, primarily due to increased marketing expense within our Interactive segment related to ESPN and higher labor and other gaming costs driven by increased ESPN BET volumes. Gaming expenses at our retail properties decreased due to the decrease in gaming revenues described above.
Current wording
Gaming expenses consist primarily of gaming taxes, payroll, marketing and promotional, and other expenses associated with our gaming operations. Gaming expenses for thethree and six months ended June 30, 2024 increased by $160.5 million and$310.5 million, respectively, compared to the corresponding prior year periods, primarily due to increased marketing expense within our Interactive segment related to ESPN and increased gaming costs driven by increased ESPN BET volumes.
Previous wording
Food, beverage, hotel, and other expenses consist primarily of payroll expenses, costs of goods sold, and other costs associated with our food, beverage, hotel, retail, racing, and Interactive operations. Food, beverage, hotel, and other expenses for the three months ended March 31, 2024 increased$6.9 million, compared to the corresponding prior year period, primarily due to increases in gaming tax reimbursement amounts related tothird-party online sports betting and/or iCasino partners for online sports betting and iCasino market access, partially offset by the inclusion of Barstool operating expenses in the prior year quarter subsequent to the Barstool Acquisition on February 17, 2023. Due to the August 2023 Barstool disposal, the current year quarter does not include any Barstool operating expenses.
Current wording
Food, beverage, hotel, and other expenses consist primarily of payroll expenses, costs of goods sold, and other costs associated with our food, beverage, hotel, retail, racing, and Interactive operations. Food, beverage, hotel, and other expenses for the three and six months ended June 30, 2024 decreased$48.2 million and $41.3 million, respectively, compared to the corresponding prior year periods, primarily due to the inclusion of Barstool operating expenses in the prior year periods subsequent to the Barstool Acquisition on February 17, 2023. Due to the August 2023 Barstool disposal, the current year periods do not include any Barstool operating expenses. The decrease for the six months ended June 30, 2024 was partially offset by anincrease in gaming tax reimbursement amounts related tothird-party online sports betting and/or iCasino partners for online sports betting and iCasino market access.
Previous wording
For thethree months ended March 31, 2024, general and administrative expenses decreased by$4.0 million, compared to the corresponding prior year period, primarily due to decreases in stock-based compensation, cash-settled stock-based awards, and legal settlements, partially offset by an increase in payroll expense and an increase in rent expense associated with triple net operating leases of $8.8 million, stemming, primarily, from annual escalators on our triple net operating leases.
Current wording
For thethree and six months ended June 30, 2024, general and administrative expenses increased by$8.4 million and$4.4 million, respectively, compared to the corresponding prior year periods, primarily due to increases in rent expense associated with triple net operating leases of $8.5 million and $17.3 million, respectively, stemming primarily from annual escalators on our triple net operating leases. For thesix months ended June 30, 2024, the increase was offset by a decrease in stock-based compensation.
Previous wording
Depreciation and amortizationfor thethree months ended March 31, 2024 increased $1.2 million compared to the corresponding prior year period.
Current wording
Depreciation and amortizationfor thethree and six months ended June 30, 2024 decreased$1.5 million and $0.3 million, respectively, compared to the corresponding prior year periods.
Previous wording
Interest expense, net increased by $6.1 million for thethree months ended March 31, 2024, compared to the corresponding prior year period, primarily due to an increase in interest expense on our Senior Secured Credit Facilities related to an overall increase in interest rates.
Current wording
Interest expense, net increased by $3.8 million and $9.9 million for thethree and six months ended June 30, 2024, respectively, compared to the corresponding prior year periods, primarily due to an increase in interest expense on our Senior Secured Credit Facilities related to an overall increase in interest rates.
Previous wording
Interest income decreased by $3.3 million for thethree months ended March 31, 2024, compared to the corresponding prior year period, primarily due to a decrease in the amount invested in money market funds, which we use for short term investing.
Current wording
Interest income decreased by $4.1 million and $7.4 million for thethree and six months ended June 30, 2024, respectively, compared to the corresponding prior year periods, primarily due to a decrease in the amount invested in money market funds, which we use for short term investing.
Previous wording
Income from unconsolidated affiliates relates principally to our investment in Kansas Entertainment and Freehold Raceway joint ventures. The increase of $4.6 million for thethree months ended March 31, 2024, compared to the corresponding prior year period, is due to the three months ended March 31, 2023 including a $5.1 million loss for Barstool prior to the Barstool Acquisition on February 17, 2023.
Current wording
Income from unconsolidated affiliates relates principally to our investment in Kansas Entertainment and Freehold Raceway joint ventures. The increase of $0.6 million for the three months ended June 30, 2024, compared to the corresponding prior year period, is due to higher income earned from our investments in unconsolidated affiliates. The increase of $5.2 million for thesix months ended June 30, 2024, compared to the corresponding prior year period, is due to thesix months ended June 30, 2023 including a $5.1 million loss for Barstool prior to the Barstool Acquisition on February 17, 2023.
Previous wording
Gain on Barstool Acquisition, net for the three months ended March 31, 2023 relates to the gain on our acquisition of all the outstanding shares of Barstool common stock not already owned by us on February 17, 2023 as described in Note 5, “Acquisitions and Dispositions” in the notes to our unaudited Consolidated Financial Statements. The gain consisted of $66.5 million related to the remeasurement of our equity investment immediately prior to the acquisition date and $16.9 million related to the acquisition of the remaining 64% of Barstool common stock.
Current wording
Gain on Barstool Acquisition, net for the six months ended June 30, 2023 relates to the gain on our acquisition of all the outstanding shares of Barstool common stock not already owned by us on February 17, 2023 as described in Note 5, “Acquisitions and Dispositions” in the notes to our unaudited Consolidated Financial Statements. The gain consisted of $66.5 million related to the remeasurement of our equity investment immediately prior to the acquisition date and $16.9 million related to the acquisition of the remaining 64% of Barstool common stock.
Previous wording
Gain on REIT transactions, net for the three months ended March 31, 2023 relates to the execution of both the AR PENN Master Lease and 2023 Master Lease on February 21, 2023, which resulted in the (i) derecognition of $1.6 billion of financing obligations and (ii) derecognition of $1.1 billion of Property and Equipment, net. In conjunction with entering into the 2023 Master Lease, the individual triple net leases associated with Meadows and Perryville were terminated which resulted in a $6.5 million loss from the derecognition of right-of-use assets and lease liabilities. See Note 8, “Leases” to our unaudited Consolidated Financial Statements for additional details on both of these transactions.
Current wording
Gain on REIT transactions, net for the six months ended June 30, 2023 relates to the execution of both the AR PENN Master Lease and 2023 Master Lease on February 21, 2023, which resulted in the (i) derecognition of $1.6 billion of financing obligations and (ii) derecognition of $1.1 billion of Property and Equipment, net. In conjunction with entering into the 2023 Master Lease, the individual triple net leases associated with Meadows and Perryville were terminated which resulted in a $6.5 million loss from the derecognition of right-of-use assets and lease liabilities. See Note 8, “Leases” to our unaudited Consolidated Financial Statements for additional details on both of these transactions.
Previous wording
Other primarily relates to realized and unrealized gains and losses on equity securities, held by PENN Interactive, unrealized gains and losses related to certain Barstool shares (prior to the Barstool Acquisition on February 17, 2023) as well as miscellaneous income and expense items. Equity securities were provided to the Company in conjunction with entering into multi-year agreements with sports betting operators for online sports betting and iCasino market access across our portfolio. For the three months ended March 31, 2024, other income primarily consisted of an unrealized holding loss of $1.5 million, compared to an unrealized holding loss of $3.2 million for the three months ended March 31, 2023. The prior year quarter included a $3.1 million gain related to remeasurement and settlement of Barstool put/call options prior to the Barstool Acquisition.
Current wording
Other primarily relates to realized and unrealized gains and losses on equity securities, held by PENN Interactive, unrealized gains and losses related to certain Barstool shares (prior to the Barstool Acquisition on February 17, 2023) as well as miscellaneous income and expense items. Equity securities were provided to the Company in conjunction with entering into multi-year agreements with sports betting operators for online sports betting and iCasino market access across our portfolio. For thethree and six months ended June 30, 2024, other income primarily consisted of dividend income received, partially offset by unrealized holding losses of $3.9 million and $5.4 million, respectively. For thethree and six months ended June 30, 2023, other income primarily consisted of unrealized holding gains of $6.3 million and $3.1 million, respectively. Additionally, thesix months ended June 30, 2023 included a $3.1 million gain related to remeasurement and settlement of Barstool put/call options prior to the Barstool Acquisition.
Previous wording
Income tax benefitwas $12.6 million for the three months ended March 31, 2024, compared to income tax expense of $167.9 million for thethree months ended March 31, 2023. Our effective tax rate (income taxes as a percentage of income or loss from operations before income taxes) including discrete items was 14.8% for the three months ended March 31, 2024, as compared to 23.8% for the three months ended March 31, 2023. The effective tax rate for thethree months ended March 31, 2024, was lower than the statutory federal tax rate of 21%, primarily due to non-deductible executive compensation, tax credit utilization, and the decrease in our valuation allowance. See Note 10, “Income Taxes” to our unaudited Consolidated Financial Statements for additional details.
Current wording
Income tax benefit (expense)was a benefit of $3.2 million as compared to an expense of $34.7 million for the three months ended June 30, 2024 and 2023, respectively, and a benefit of $15.8 million as compared to an expense of $202.6 million for the six months ended June 30, 2024 and 2023, respectively. 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. The effective tax rate for thethree and six months ended June 30, 2024, was lower than the corresponding prior year period and the statutory federal tax rate of 21%, primarily due to (i) non-deductible permanent items offset against tax credit utilization, (ii) excluding certain foreign losses from our worldwide effective tax rate calculation for which no tax benefit may be recognized, (iii) state taxes, and (iv) changes to certain state valuation allowances. See Note 10, “Income Taxes” to our unaudited Consolidated Financial Statements for additional details.
Previous wording
The Northeast segment’s revenues for the three months ended March 31, 2024 decreased $15.8 million, primarily due to severe weather events negatively impacting our operations and decreases in gaming revenues at several of our properties due to increased competition. Food and beverage revenues for the three months ended March 31, 2024 decreased as weather events resulted in a decline in visitation compared to the prior year period.
Current wording
The Northeast segment’s revenues for the six months ended June 30, 2024 decreased $7.5 million, primarily due to severe weather events during the first quarter negatively impacting our operations as well as decreases in gaming revenues at several of our properties due to increased competition, partially offset by increased slot revenues in the second quarter. Food and beverage revenues for the six months ended June 30, 2024 decreased as weather events during the first quarter resulted in a decline in visitation compared to the prior year period.
Previous wording
For the three months ended March 31, 2024, the Northeast segment’s Adjusted EBITDAR decreased $10.3 million, primarily due to decreased gaming and non-gaming revenues. Adjusted EBITDAR margin decreased to 29.6% primarily due to higher labor costs.
Current wording
For the six months ended June 30, 2024, the Northeast segment’s Adjusted EBITDAR decreased $22.9 million, primarily due to decreased gaming and non-gaming revenues. Adjusted EBITDAR margin decreased to 29.5% primarily due to the reversal of certain accrued gaming taxes in the prior year period and increased labor and marketing costs in the current year period.
Previous wording
The South segment’s revenues for the three months ended March 31, 2024 decreased by $16.3 million, compared to the prior year period, primarily due to a decrease in gaming revenues as severe weather events negatively impacted our operations and increased competition negatively impacted visitation at several of our properties.
Current wording
The South segment’s revenues for the three and six months ended June 30, 2024 decreased by $10.1 million and $26.4 million, respectively, compared to the corresponding prior year periods, primarily due to a decrease in gaming revenues as increased competition negatively impacted visitation at several of our properties and severe weather events in the first quarter of 2024 negatively impacted our operations.
Previous wording
For the three months ended March 31, 2024, the South segment’s Adjusted EBITDAR decreased$10.1 million, and Adjusted EBITDAR margin decreased to 38.0%, primarily due to the decrease in revenues as described above.
Current wording
For the three and six months ended June 30, 2024, the South segment’s Adjusted EBITDAR decreased$9.5 million and$19.6 million, respectively, and Adjusted EBITDAR margin decreased to 37.4% and 37.7%, respectively, primarily due to the decrease in revenues as described above.
Previous wording
The West segment’s revenues for the three months ended March 31, 2024 decreased by $0.9 million, compared to the prior year period, primarilydue to a decrease in gaming revenues as isolated weather events negatively impacted visitation, partially offset by an increase in hotel and food and beverage revenues.
Current wording
The West segment’s revenues for the six months ended June 30, 2024 increased by $4.4 million, compared to the prior year period, primarily due to an increase in hotel and food and beverage revenues, partially offset by a decrease ingaming revenues as isolated weather events negatively impacted visitation during the first quarter of 2024.
Previous wording
For the three months ended March 31, 2024, the West segment’s Adjusted EBITDAR decreased $3.2 million and Adjusted EBITDAR margin decreased to 35.6%, primarily due to the decrease in gaming revenues discussed above and higher labor costs.
Current wording
For the six months ended June 30, 2024, the West segment’s Adjusted EBITDAR decreased $2.2 million and Adjusted EBITDAR margin decreased to 36.5%, primarily due to the decrease in gaming revenues discussed above and increased labor costs.
Previous wording
The Midwest segment’s revenues for the three months ended March 31, 2024 decreased by $4.1 million, compared to the prior year period, where severe weather events negatively impacted visitation at our Midwest segment properties.
Current wording
The Midwest segment’s revenues for the three months ended June 30, 2024 increased by $4.8 million, compared to the prior year period, due to increased visitationat our Midwest segment properties.
Previous wording
For the three months ended March 31, 2024, the Midwest segment’s Adjusted EBITDAR decreased $8.6 million and Adjusted EBITDAR margin decreased to 40.2%, primarilydue to the decrease in gaming revenues discussed above, higher labor costs, and an increase in general and administrative costs.
Current wording
For the six months ended June 30, 2024, the Midwest segment’s Adjusted EBITDAR decreased $5.8 million and Adjusted EBITDAR margin decreased to 41.9%, primarilydue to the decrease in gaming revenues discussed above, increased labor costs and an increase in general and administrative costs.
Previous wording
For the three months ended March 31, 2024, the Interactive segment’s Adjusted EBITDAR and Adjusted EBITDAR margin decreased primarily due to the decrease in gaming revenues as discussed above as well as an increase in marketing expense due to the continued promotion of ESPN BET.
Current wording
For the three and six months ended June 30, 2024, the Interactive segment’s Adjusted EBITDAR and Adjusted EBITDAR margin decreased primarily due to the decrease in food, beverage, hotel, and other revenues as discussed above as well as an increase in marketing expense due to the continued promotion of ESPN BET.
Previous wording
Other consists of the Company’s stand-alone racing operations, as well as corporate overhead costs, which primarily includes certain expenses such as payroll, professional fees, travel expenses, and other general and administrative expenses that do not directly relate to or have not otherwise been allocated. Revenuesfor thethree months ended March 31, 2024 have increased compared to the prior year period, primarily due to fluctuations in racing revenues. Corporate overhead costs were $24.9 million and $26.3 million for the three months ended March 31, 2024 and 2023, respectively.
Current wording
Other consists of the Company’s stand-alone racing operations, as well as corporate overhead costs, which primarily includes certain expenses such as payroll, professional fees, travel expenses, and other general and administrative expenses that do not directly relate to or have not otherwise been allocated. Revenuesfor thethree and six months ended June 30, 2024 decreased slightly compared to the prior year periods, primarily due to fluctuations in racing revenues. Corporate overhead costs were $24.5 million and $24.8 million for the three months ended June 30, 2024 and 2023, respectively, as compared to $49.4 million and $51.1 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Changes in Adjusted EBITDAR for thethree months ended March 31, 2024 primarily relate to a decrease in general and administrative costs, slightly offset by higher labor costs.
Current wording
Changes in Adjusted EBITDAR for thethree and six months ended June 30, 2024 primarily relate to higher labor costs, slightly offset by a decrease in general and administrative costs.
Previous wording
Trends in our operating cash flows tend to follow trends in operating income, excluding non-cash charges, but can be affected by changes in working capital, the timing of significant interest payments, tax payments or refunds, and distributions from unconsolidated affiliates. Net cash provided by (used in) operating activities decreased by $216.4 million for the three months ended March 31, 2024, primarily due to a decrease in earnings and a negative impact in changes in working capital related to the timing of advanced deposits.
Current wording
Trends in our operating cash flows tend to follow trends in operating income, excluding non-cash charges, but can be affected by changes in working capital, the timing of significant interest payments, tax payments or refunds, and distributions from unconsolidated affiliates. Net cash provided by operating activities decreased by $242.0 million for the six months ended June 30, 2024, primarily due to a decrease in earnings.
Previous wording
Cash used in investing activities for the three months ended March 31, 2024, of $47.3 million, primarily relates to capital expenditures of $41.4 million. For the three months ended March 31, 2023, cash used in investing activities of $378.2 million was primarily related to consideration paid for the Barstool Acquisition, net of cash acquired, of $314.6 million and capital expenditures of $63.2 million.
Current wording
Cash used in investing activities for the six months ended June 30, 2024, of $146.1 million, primarily relates to capital expenditures of $129.6 million. For the six months ended June 30, 2023, cash used in investing activities of $462.9 million was primarily related to consideration paid for the Barstool Acquisition, net of cash acquired, of $314.6 million and capital expenditures of $132.8 million.
Previous wording
Capital expenditures are accounted for as either project capital (new facilities or expansions) or maintenance (replacement) which is inclusive of projects such as our retail sportsbooks, our cashless, cardless and contactless technology and hotel renovations. Cash provided by operating activities, as well as cash available under our Amended Revolving Credit Facility, was available to fund our capital expenditures for the three months ended March 31, 2024 and 2023, as applicable.
Current wording
Capital expenditures are accounted for as either project capital (new facilities or expansions) or maintenance (replacement) which is inclusive of projects such as our retail sportsbooks, our cashless, cardless and contactless technology and hotel renovations. Cash provided by operating activities, as well as cash available under our Amended Revolving Credit Facility, was available to fund our capital expenditures for the six months ended June 30, 2024 and 2023, as applicable.
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Segment comparison of the three months ended March 31, 2024 and 2023