PENN Entertainment, Inc. (“PENN” or the “Company”) (Nasdaq: PENN) today reported financial results for the three months ended March 31, 2023.

2023 First Quarter Highlights:

• Revenues of $1.67 billion, an increase of 7.0% year-over-year;
• Net income of $514.4 million and net income margin of 30.7%, as compared to net income of $51.6 million and net income margin of 3.3% in the prior year;
• Adjusted EBITDAR of $478.2 million, a decrease of 3.3% year-over-year;
• Adjusted EBITDA of $332.2 million a decrease of 23.6% year-over-year; and
• Adjusted EBITDAR margins of 28.6%, a decline of 300 bps year-over-year.
• Retail Operations Driven by Growth in Older Demographics and Strong VIP Play
• Launched Online Sports Betting in Ohio and Massachusetts; Proprietary Technology Platform Continues to Propel Impressive Ontario Performance
• Repurchased $50.0 million of Common Stock at an Average Price of $30.36 Under the February 2022 Share Repurchase Authorization
• Reiterating Full Year Adjusted EBITDAR Range

For further information, the Company has posted a presentation to its website regarding first quarter highlights and accomplishments, which can be found here.

Jay Snowden, Chief Executive Officer and President, announced: “We are pleased to report that PENN delivered another solid quarter in what remains an uncertain macroeconomic environment. PENN generated first quarter revenues of $1.67 billion and Adjusted EBITDAR of $478.2 million as strong performance in the Northeast mostly offset softer year-over-year results in the South. In addition, our proprietary sports betting and iCasino technology platform, which is live in Ontario, continues to drive compelling results and market share. As previously announced, on February 17th we completed our acquisition of the remainder of Barstool Sports Inc. (“Barstool Sports” or “Barstool”). Accordingly, we are raising our prior 2023 revenue guidance range to $6.37 billion ‒ $6.81 billion to reflect the Barstool acquisition, which is neutral to Adjusted EBITDAR. As such, our prior 2023 Adjusted EBITDAR guidance range of $1.875 billion ‒ $2.0 billion remains unchanged.

Retail Performance Driven by Growth in Older Demographics and Strong VIP Play

Property level highlights¹:

• Revenues of $1.44 billion;
• Adjusted EBITDAR of $511.2 million; and
• Adjusted EBITDAR margins of 35.5%.

¹Property level consists of retail operating segments which are composed of our Northeast, South, West, and Midwest reportable segments.

“Growth in our older demographics and VIP play led to largely consistent performance across the majority of our retail properties,” said Mr. Snowden. “However, the regional shift in our gaming revenues year-over-year to higher taxed jurisdictions, and to a lesser extent, the settlement of certain property litigation matters, negatively impacted retail EBITDAR margins by approximately 100 basis points.

“Operationally, our broader portfolio benefited in the first quarter from improvement of our older demographic’s retail theoretical while we experienced consistent engagement from our younger 21-44 year-old demographic. Our properties also proved to be more resilient than initially anticipated given the increased supply in a few of our markets. Additionally, VIP play remained strong across our properties, driven by both guest count increases and frequency of visitation. Our database grew by over 350,000 members in the first quarter, representing a 13% increase year-over-year, with 63% of the database growth coming from our online offerings. Coordinated marketing efforts combined with enhanced amenities and positive customer experiences also led to strong growth in the number of customers that engage with us across multiple channels. In April, we unveiled our enhanced and rebranded customer loyalty program, PENN Play™, which is designed to better align all of our brands under the PENN Entertainment umbrella and create a more seamless omni-channel experience for our approximately 27 million members.

Launched Online Sports Betting in Ohio and Massachusetts; Proprietary Technology Platform Continues to Propel Impressive Ontario Performance

Interactive Segment highlights:

• Revenues of $233.5 million (including tax gross up of $92.3 million); and
• Adjusted EBITDA loss of $5.7 million.

“The Interactive Segment generated year-over-year revenue improvement this quarter driven in part by our acquisition of Barstool Sports, while our EBITDA results reflect our investment in two state launches and low hold in January and February. Our mobile launches on January 1st in Ohio and March 10th in Massachusetts highlight the advantages of our organic, omni-channel customer acquisition strategy, as we leveraged our PENN Play™ database and the Barstool Sports audience to drive incremental revenue both online and at our retail properties. Additionally, during March Madness, top Barstool personalities performed live streams from our market leading retail sportsbooks in Ohio and Louisiana, leading to increased brand awareness and digital engagement.

“In Ontario, we are seeing the benefits of our proprietary technology stack, which has led to our sustained market share in one of the most competitive markets in North America. Having full control of our product roadmap in the U.S., which remains on track for July, will enable us to connect with our customers on a more personalized level and quickly add new features and betting markets to the Barstool Sportsbook, while also enhancing our iCasino product with new content and bonus mechanics. In addition, with an improved guest experience post-migration, we will be well positioned to drive stronger loyalty and retention, while offering seamless cross-play in our omni-channel ecosystem.

“On February 17th, we completed the full acquisition of Barstool Sports. Barstool has more than doubled its annual revenues since our initial investment in February of 2020 by providing relevant and entertaining content to their growing, loyal audience. Looking forward, we expect to unlock even greater value from the Barstool audience as we refine our cross-sell strategies and pursue new growth channels.

“Likewise, theScore’s media business is delivering strong results in both revenue and engagement metrics, with total user sessions up 22% year-over-year. theScore’s award winning digital sports media app provides its highly engaged audience with up-to-date scores, news, community chat features, and betting lines, which has proven to be a perfect ‘second screen’ for watching live sports and another acquisition funnel for PENN’s retail and digital offerings.

ESG – Caring for our People, our Communities and our Planet

“On April 25th, we issued our 2022 Corporate Social Responsibility Report, which details the significant progress PENN has made in advancing our Environmental, Social and Governance (“ESG”) priorities over the last year.

“More recently, we celebrated Black History Month in February by holding numerous events to drive open and meaningful conversation around Diversity, Equity & Inclusion. We also celebrated women’s achievements during the month of March, including hosting a virtual panel discussion on International Women’s Day for Team Members with two of PENN’s female Board members: Jane Scaccetti and Marla Kaplowitz. Additionally, following the devastating tornados in the Rolling Fork area of Mississippi, our Ameristar Casino Vicksburg and Hollywood Casino Tunica teams donated water, food and essential items to those in need, in addition to providing temporary housing to displaced team members.

“Finally, in April, Barstool launched a mental health awareness initiative on college campuses as part of its Viceroy and Chicks Ambassador Program, reaching over 500 universities, 1,200 unique social media channels, and 20 million cross-platform followers.”

Share Repurchase Authorization Update

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

Subsequent to the quarter ended March 31, 2023, the Company repurchased 647,319 shares of its common stock at an average price of $29.21 per share for an aggregate amount of $18.9 million. The remaining availability under our February 2022 authorization was $80.4 million and $750.0 million under our December 2022 authorization as of May 3, 2023.

Liquidity Remains Strong

Total liquidity as of March 31, 2023 was $2.3 billion inclusive of $1.3 billion in cash and cash equivalents. Traditional net debt as of the end of the quarter was $1.4 billion, an increase of $302.6 million from December 31, 2022 due to a lower cash balance reflecting a net cash payment of approximately $315.3 million for the acquisition of Barstool and recent activity under our share repurchase program. Lease-adjusted net leverage as of March 31, 2023 was 4.6x compared to 4.4x as of December 31, 2022.

Additional information on PENN’s reported results, including a reconciliation of the non-GAAP results to their most comparable GAAP measures, is included in the financial tables below. The Company does not provide a reconciliation of projected Adjusted EBITDA and Adjusted EBITDAR because it is unable to predict with reasonable accuracy the value of certain adjustments that may significantly impact the Company’s results, including realized and unrealized gains and losses on equity securities, re-measurement of cash-settled stock-based awards, contingent purchase payments associated with prior acquisitions, and income tax (benefit) expense, which are dependent on future events that are out of the Company’s control or that may not be reasonably predicted.

Summary of First Quarter Results

PENN ENTERTAINMENT, INC. AND SUBSIDIARIES

Segment Information

The Company aggregates its operations into five reportable segments: Northeast, South, West, Midwest, and Interactive.

Selected Financial Information

Balance Sheet Data

Cash Flow Data

The table below summarizes certain cash expenditures incurred by the Company.

Non-GAAP Financial Measures

The Non-GAAP Financial Measures used in this press release include Adjusted EBITDA, Adjusted EBITDAR, and Adjusted EBITDAR margin. These non-GAAP financial measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP.

We define Adjusted EBITDA as earnings before interest expense, net; interest income; income taxes; depreciation and amortization; stock-based compensation; debt extinguishment charges; impairment losses; insurance recoveries, net of deductible charges; changes in the estimated fair value of our contingent purchase price obligations; gain or loss on disposal of assets; the difference between budget and actual expense for cash-settled stock-based awards; pre-opening expenses; and other. Adjusted EBITDA excludes (i) non-cash gains/losses associated with REIT transactions (including our transactions with GLPI entered into on February 21, 2023); and (ii) non-cash gains/losses associated with partial and step acquisitions as measured in accordance with ASC 805 “Business Combinations” (including the Barstool Acquisition). Adjusted EBITDA is inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (such as interest expense, net; income taxes; depreciation and amortization; and stock-based compensation expense) added back for Barstool (prior to our acquisition of Barstool on February 17, 2023) and our Kansas Entertainment, LLC joint venture. Adjusted EBITDA is inclusive of rent expense associated with our triple net operating leases with our REIT landlords. Although Adjusted EBITDA includes rent expense associated with our triple net operating leases, we believe Adjusted EBITDA is useful as a supplemental measure in evaluating the performance of our consolidated results of operations.

Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business, and is especially relevant in evaluating large, long-lived casino-hotel projects because it provides a perspective on the current effects of operating decisions separated from the substantial non-operational depreciation charges and financing costs of such projects. We present Adjusted EBITDA because it is used by some investors and creditors as an indicator of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations. These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare operating performance and value companies within our industry. In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including us, have historically excluded from their Adjusted EBITDA calculations certain corporate expenses that do not relate to the management of specific casino properties. However, Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with GAAP. Adjusted EBITDA information is presented as a supplemental disclosure, as management believes that it is a commonly used measure of performance in the gaming industry and that it is considered by many to be a key indicator of the Company’s operating results.

We define Adjusted EBITDAR as Adjusted EBITDA (as defined above) plus rent expense associated with triple net operating leases (which is a normal, recurring cash operating expense necessary to operate our business). Adjusted EBITDAR is presented on a consolidated basis outside the financial statements solely as a valuation metric. Management believes that Adjusted EBITDAR is an additional metric traditionally used by analysts in valuing gaming companies subject to triple net leases since it eliminates the effects of variability in leasing methods and capital structures. This metric is included as a supplemental disclosure because (i) we believe Adjusted EBITDAR is traditionally used by gaming operator analysts and investors to determine the equity value of gaming operators and (ii) Adjusted EBITDAR is one of the metrics used by other financial analysts in valuing our business. We believe Adjusted EBITDAR is useful for equity valuation purposes because (i) its calculation isolates the effects of financing real estate; and (ii) using a multiple of Adjusted EBITDAR to calculate enterprise value allows for an adjustment to the balance sheet to recognize estimated liabilities arising from operating leases related to real estate. However, Adjusted EBITDAR when presented on a consolidated basis is not a financial measure in accordance with GAAP, and should not be viewed as a measure of overall operating performance or considered in isolation or as an alternative to net income because it excludes the rent expense associated with our triple net operating leases and is provided for the limited purposes referenced herein. Adjusted EBITDAR margin is defined as Adjusted EBITDAR on a consolidated basis (as defined above) divided by revenues on a consolidated basis. Adjusted EBITDAR margin is presented on a consolidated basis outside the financial statements solely as a valuation metric.

Each of these non-GAAP financial measures is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure of comparing performance among different companies. See the table above, which presents reconciliations of these measures to the GAAP equivalent financial measures.

Management Presentation, Conference Call, Webcast and Replay Details

PENN is hosting a conference call and simultaneous webcast at 9:00 am ET today, both of which are open to the general public. During the call, management will review an earnings presentation that can be accessed at https://investors.pennentertainment.com/events-and-presentations/presentations.

The conference call number is 212-231-2932; please call five minutes in advance to ensure that you are connected prior to the presentation. Interested parties may also access the live call at www.pennentertainment.com; allow 15 minutes to register and download and install any necessary software. Questions and answers will be reserved for call-in analysts and investors. A replay of the call can be accessed for thirty days at www.pennentertainment.com.

This press release, which includes financial information to be discussed by management during the conference call and disclosure and reconciliation of non-GAAP financial measures, is available on the Company’s web site, www.pennentertainment.com, in the “Investors” section (select link for “Press Releases”).

About PENN Entertainment

PENN Entertainment, Inc. (Nasdaq: PENN) is North America’s leading provider of integrated entertainment, sports content and casino gaming experiences. PENN operates 43 properties in 20 states, online sports betting in 17 jurisdictions and iCasino in five jurisdictions under a portfolio of well-recognized brands, including Hollywood Casino^®, L’Auberge^®, Barstool Sportsbook and Casino™ and theScore Bet Sportsbook and Casino^®. In 2023, PENN completed its acquisition of Barstool Sports, Inc. (“Barstool”). Barstool’s vast audience, combined with the reach and highly engaged user base of Score Media and Gaming Inc. (“theScore”), provide us with a significant digital footprint and growing customer ecosystem. PENN’s highly differentiated strategy, which is focused on organic cross-sell opportunities, is reinforced by its investments in market-leading retail casinos, sports media assets and technology, including a state-of-the-art, fully integrated digital sports and online casino betting platform and an in-house iCasino content studio. The Company’s portfolio is further bolstered by its industry-leading PENN Play™ customer loyalty program, which offers its approximately 27 million members a unique set of rewards and experiences across our various channels. PENN is deeply committed to fostering a culture that welcomes a diverse set of customers and dedicated team members. The Company has been consistently ranked in the top two as “Employer of First Choice” over the last nine years in the Bristol Associates-Spectrum Gaming’s Executive Satisfaction Survey. In addition, as a long-standing good corporate citizen, PENN is also committed to creating a culture of responsible gaming, being a trusted and valued member of its communities and acting as a responsible steward of our finite natural resources.

Forward Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as “expects,” “believes,” “estimates,” “projects,” “intends,” “plans,” “goal,” “seeks,” “may,” “will,” “should,” or “anticipates” or the negative or other variations of these or similar words, or by discussions of future events, strategies or risks and uncertainties. Specifically, forward-looking statements include, but are not limited to, statements regarding: future revenue and Adjusted EBITDAR; the Company’s anticipated share repurchases; the Company’s expectations of future results of operations and financial condition, the assumptions provided regarding the guidance, including the scale and timing of the Company’s product and technology investments; the Company’s expectations regarding results, and the impact of competition, in retail/mobile/online sportsbooks, iCasino, social gaming, and retail operations; the Company’s development and launch of its Interactive segment’s products in new jurisdictions and enhancements to existing Interactive segment products, including the content for the Barstool Sportsbook and Casino and theScore Bet Sportsbook and Casino apps and the migration of the Barstool Sportsbook into both our proprietary player account management system and risk and trading platforms; the Company’s expectations regarding its acquisition of Barstool Sports and the future success of its products; the Company’s expectations with respect to the integration and synergies related to the Company’s integration of theScore and Barstool Sports; the continued growth and monetization of the Company’s media business; the Company’s expectations with respect to the ongoing introduction and the potential benefits of the cashless, cardless and contactless (3C’s) technology; the Company’s development projects, including the prospective development projects at Hollywood Casinos Aurora, Joliet, Columbus, and the M Resort Spa Casino; our ability to obtain financing for our development projects on attractive terms; and the timing, cost and expected impact of planned capital expenditures on the Company’s results of operations; the actions of regulatory, legislative, executive or judicial decisions at the federal, state, provincial or local level with regard to our business and the impact of any such actions.

Such statements are all subject to risks, uncertainties and changes in circumstances that could significantly affect the Company’s future financial results and business. Accordingly, the Company cautions that the forward-looking statements contained herein are qualified by important factors that could cause actual results to differ materially from those reflected by such statements. Such factors include: the effects of economic and market conditions in the markets in which the Company operates; competition with other entertainment, sports content, and casino gaming experiences; the timing, cost and expected impact of product and technology investments; risks relating to international operations, permits, licenses, financings, approvals and other contingencies in connection with growth in new or existing jurisdictions; and additional risks and uncertainties described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each as filed with the U.S. Securities and Exchange Commission. The Company does not intend to update publicly any forward-looking statements except as required by law. Considering these risks, uncertainties and assumptions, the forward-looking events discussed in this press release may not occur.

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