PENN Entertainment Inc

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 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.

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 September 30, 2024, PENN operated 43 properties in 20 states, online sports betting in 20 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 31 million members a unique set of rewards and experiences across business channels.

Previous 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.

Current wording

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. 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

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.

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 commenced. Our new Joliet facility is anticipated to open in the second half of 2025 and the new Aurora facility, the M Resort new hotel tower, and the Columbus hotel tower are anticipated to open in the first half of 2026.

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 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.

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, our strategic acquisitions (e.g. theScore) and strategic relationships (e.g. our Sportsbook Agreement with ESPN), are expected to allow us to acquire new customers, expand our player database, and provide additional revenue streams, all in furtherance of our omni-channel 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 and six months ended June 30, 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 nine months ended September 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% 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.

Current wording

The 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 nine months ended September 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

The following table highlights our revenues, net income (loss), and Adjusted EBITDA, on a consolidated basis, as well as our revenues and Adjusted EBITDAR by reportable segment. Such segment reporting is consistent with how we measure our business and allocate resources internally. We consider net income (loss) to be the most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) to Adjusted EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures. Refer to “Non-GAAP Financial Measures” below for the definitions of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDAR, and Adjusted EBITDAR margin; as well as a reconciliation of net income (loss) to Adjusted EBITDA and Adjusted EBITDAR and related margins.

Current wording

The following table highlights our revenues, net loss, and Adjusted EBITDA, on a consolidated basis, as well as our revenues and Adjusted EBITDAR by reportable segment. Such segment reporting is consistent with how we measure our business and allocate resources internally. We consider net loss to be the most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) to Adjusted EBITDA and Adjusted EBITDAR, which are non-GAAP financial measures. Refer to “Non-GAAP Financial Measures” below for the definitions of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDAR, and Adjusted EBITDAR margin; as well as a reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDAR and related margins.

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 $24.5 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.

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 $29.1 million and $27.0 million for the three months ended September 30, 2024 and 2023, respectively, and $78.5 million and $78.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous 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.

Current wording

Gaming revenues for the nine months ended September 30, 2024 increased by $9.1 million compared to the corresponding prior year period, primarily due an increase in gaming revenues at our Interactive segment, partially offset by a decrease in gaming revenues within our South segment. In addition to severe weather events negatively impacting our South segment operations during the current quarter, in the first quarter of 2024, severe weather affected weekends and holidays across all our regional property segments, negatively impacting our operations. Furthermore, retail gaming revenues decreased as newsupply continues to impact visitation in certain retail property segments.

Previous wording

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 wording

Food, beverage, hotel, and other revenues for thethree and nine months ended September 30, 2024 decreased by$16.1 million and$67.5 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 and prior to the Barstool disposal on August 8, 2023 in the prior year periods. Due to the Barstool disposal, the current year periods do not include any Barstool revenues. For thenine months ended September 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$19.4 million compared to the prior year period.

Previous 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.

Current wording

See“Segment comparison of the three and nine months ended September 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 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.

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 nine months ended September 30, 2024 increased by $117.1 million and$427.6 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 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.

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 nine months ended September 30, 2024 decreased$17.0 million and $58.3 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 and prior to the Barstool disposal on August 8, 2023. Due to the Barstool disposal, the current year periods do not include any Barstool operating expenses. The decrease for thenine months ended September 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 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.

Current wording

For thethree and nine months ended September 30, 2024, general and administrative expenses decreased by$13.9 million and$9.5 million, respectively, compared to the corresponding prior year periods, primarily due to a decrease in stock-based compensation. For thethree and nine months ended September 30, 2024, the decrease was offset by increases in rent expense associated with triple net operating leases of $8.3 million and $25.6 million, respectively, stemming primarily from annual escalators on our triple net operating leases.

Previous 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.

Current wording

Depreciation and amortizationfor thethree and nine months ended September 30, 2024 increased$2.9 million and $2.6 million, respectively, compared to the corresponding prior year periods.

Previous 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.

Current wording

Interest expense, net increased by $0.9 million and $10.8 million for thethree and nine months ended September 30, 2024, respectively, compared to the corresponding prior year periods. The increase for the three months ended September 30, 2024 was primarily due to an increase in interest expense for our finance leases related to the Pinnacle Master Lease rent reset and escalator, both of which were effective May 1, 2024, and the increase for thenine months ended September 30, 2024 was due to an increase in interest expense on our Senior Secured Credit Facilities related to an overall increase in interest rates as well as the Pinnacle Master Lease rent escalator effective May 1, 2024.

Previous 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.

Current wording

Interest income decreased by $3.9 million and $11.3 million for thethree and nine months ended September 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 $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.

Current wording

Income from unconsolidated affiliates relates principally to our investment in Kansas Entertainment and Freehold Raceway joint ventures. The increase of $5.1 million for thenine months ended September 30, 2024, compared to the corresponding prior year period, is due to thenine months ended September 30, 2023 including a $4.1 million loss for Barstool prior to the Barstool Acquisition on February 17, 2023.

Previous 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.

Current wording

Gain on Barstool Acquisition, net for the nine months ended September 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 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.

Current wording

Gain on REIT transactions, net for the nine months ended September 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 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.

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 months ended September 30, 2024, other income primarily consisted of an unrealized holding gain of $3.0 million. For the nine months ended September 30, 2024, other income primarily consisted of dividend income received, partially offset by an unrealized holding loss of $2.4 million. For thethree and nine months ended September 30, 2023, other income primarily consisted of unrealized holding losses of $11.6 million and $8.5 million, respectively, which were offset by dividend income received. Additionally, thenine months ended September 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 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.

Current wording

Income tax benefit (expense)was an expense of $2.8 million as compared to a benefit of $161.7 million for the three months ended September 30, 2024 and 2023, respectively, and a benefit of $13.0 million as compared to an expense of $40.9 million for the nine months ended September 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 23.1% and 18.6% for thethree and nine months ended September 30, 2024, as compared to 19.0% and 1,698.9% for thethree and nine months ended September 30, 2023. 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 change in the effective tax rate for thethree and nine months ended September 30, 2024, as compared to the corresponding prior periods was 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, (iv) changes to the valuation allowances, and (v) the Barstool transaction. See Note 5, “Acquisitions and Dispositions” and Note 10, “Income Taxes” to our unaudited Consolidated Financial Statements for additional details.

Previous 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.

Current wording

The Northeast segment’s revenues for the nine months ended September 30, 2024 decreased $9.7 million, primarily due to severe weather events during the first quarter of 2024 negatively impacting our operations, unfavorable hold rates in the third quarter of 2024, and decreases in gaming revenues at several of our properties due to increased competition. Food and beverage revenues for the nine months ended September 30, 2024 decreased primarily due to a decrease in racing revenue as well as the weather events during the first quarter resulting in a decline in visitation compared to the prior year period.

Previous wording

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 wording

For the three months ended September 30, 2024, the Northeast segment’s Adjusted EBITDAR decreased $9.0 million, and Adjusted EBITDAR margin decreased to 29.1%, primarily due to increased labor costs and unfavorable hold rates in the current year quarter.

Previous 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.

Current wording

For the nine months ended September 30, 2024, the Northeast segment’s Adjusted EBITDAR decreased $31.9 million, primarily due to decreased gaming and non-gaming revenues. Adjusted EBITDAR margin decreased to 29.4% 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 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.

Current wording

The South segment’s revenues for the three and nine months ended September 30, 2024 decreased by $20.1 million and $46.5 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 and third quarter of 2024 negatively impacted our operations. Food, beverage, hotel, and other revenues decreased for the three and nine months ended September 30, 2024, primarily due to accelerating our hotel remodeling in the current year quarter and the negative weather impact on operations, as discussed above.

Previous 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.

Current wording

For the three and nine months ended September 30, 2024, the South segment’s Adjusted EBITDAR decreased$30.2 million and$49.8 million, respectively, and Adjusted EBITDAR margin decreased to 36.9% and 37.4%, respectively, primarily due to the decrease in revenues as described above. Additionally, the three and nine months ended September 30, 2023 were positively impacted by the receipt of $14.0 millionin business interruption proceeds related to the loss experienced in 2020 due to Hurricane Laura.

Previous wording

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 wording

The West segment’s revenues for the three months ended September 30, 2024 decreased by $3.3 million, compared to the prior year period, primarily due to a decrease in gaming revenues as road construction and increased competition negatively impacted visitation at our West segment properties, partially offset by an increase in food, beverage, hotel, and other revenues.

Previous 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.

Current wording

The West segment’s revenues for the nine months ended September 30, 2024 increased by $1.1 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 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.

Current wording

For the three and nine months ended September 30, 2024, the West segment’s Adjusted EBITDAR decreased$7.2 million and$9.4 million, respectively, and Adjusted EBITDAR margin decreased to 36.0% and 36.4%, respectively, primarily due tothe decreases in gaming revenues discussed above and increased labor costs.

Previous wording

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 wording

The Midwest segment’s revenues for the three months ended September 30, 2024 were flat compared to the prior year quarter. The Midwest segment’s revenues for the nine months ended September 30, 2024 decreased by $0.5 million, compared to the prior year period, primarily due toa decrease in gaming revenues during the period as severe weather events in the first quarter of 2024 negatively impacted visitation, partially offset byan increase in hotel and food and beverage revenues in the second quarter of 2024.

Previous 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.

Current wording

For the three and nine months ended September 30, 2024, the Midwest segment’s Adjusted EBITDAR decreased $5.3 million and $11.1 million, respectively, and Adjusted EBITDAR margin decreased to 40.6% and 41.5%, respectively, primarilydue to the decreases in gaming revenues discussed above, increased labor costs, and an increase in general and administrative costs.

Previous wording

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.

Current wording

The Interactive segment’s revenues for the nine months ended September 30, 2024 decreased by $2.4 million compared to the corresponding prior year period, primarily due to a decrease in other revenues, partially offset by an increase in gaming revenues. The decrease in other revenues primarily relate to$99.2 million of Barstool revenues subsequent to the Barstool Acquisition on February 17, 2023 and prior to the Barstool disposal on August 8, 2023 being included in thenine months ended September 30, 2023. Due to the Barstool disposal, the current year period does not include any Barstool operating results. Furthermore, 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 $302.8 million and $283.4 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous 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.

Current wording

For the three and nine months ended September 30, 2024, the Interactive segment’s Adjusted EBITDAR and Adjusted EBITDAR margin decreased primarily due to the decrease in 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 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.

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 nine months ended September 30, 2024 decreased slightly compared to the prior year periods, primarily due to fluctuations in racing revenues. Corporate overhead costs were $29.1 million and $27.0 million for the three months ended September 30, 2024 and 2023, respectively, and $78.5 million and $78.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous 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.

Current wording

Changes in Adjusted EBITDAR for the three months ended September 30, 2024 primarily relate to higher general and administrative costs, slightly offset by a decrease in labor costs.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

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 operating activities decreased by $242.0 million for the six months ended June 30, 2024, primarily due to a decrease in earnings.

Current wording

Trends in our operating cash flows tend to follow trends in operating income (loss), 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 $284.3 million for the nine months ended September 30, 2024, primarily due to a decrease in earnings.

Previous 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.

Current wording

Cash used in investing activities for the nine months ended September 30, 2024, of $312.7 million, primarily relates to capital expenditures of $261.7 million. For the nine months ended September 30, 2023, cash used in investing activities of $586.0 million was primarily related to consideration paid for the Barstool Acquisition, net of cash acquired, of $314.6 million and capital expenditures of $207.8 million.