Penn National Gaming Reports Second Quarter Revenues of $1,545.8 Million, Net Income of $198.7 Million, Adjusted EBITDAR of $586.6 Million, and Adjusted EBITDA of $470.1 Million

– PENN Generated Second Quarter Net Income Margin of 13% and Second Quarter Adjusted EBITDAR Margin of 38%, Driven by Strong Demand from Core Gaming Business and More Efficient Cost Structure –

– Focus Remains on Sustaining Core Gaming Business Margin Improvement and Driving Profitable Online Gaming Revenue –

– Penn National to Acquire Score Media and Gaming, Creating North America’s Leading Digital Sports Content, Gaming and Technology Company –

WYOMISSING, Pa.–(BUSINESS WIRE)–Penn National Gaming, Inc. (NASDAQ: PENN) (“Penn National” or the “Company”) today reported financial results for the three and six months ended June 30, 2021.

2021 Second Quarter Financial Highlights:

• Revenues of $1,545.8 million, an increase of $1,240 million year over year and $223 million versus 2019;
• Net income of $198.7 million and net income margin of 12.9%, as compared to a net loss of $214.4 million and (70.2)%, respectively, in the prior year and net income of $51.4 million and net margin of 3.9% in 2019;
• Adjusted EBITDA of $470.1 million, an increase of $549.4 million year over year and $153.6 million versus 2019;
• Adjusted EBITDAR of $586.6 million, an increase of $562.1 million year over year and $180.1 million versus 2019; and
• Adjusted EBITDAR margins of 37.9%, up 2,993 basis points year over year and 722 basis points versus 2019.

For further information, we have posted a presentation to our website regarding the second quarter highlights and accomplishments, which can be found here.

Jay Snowden, President and Chief Executive Officer, commented: “Penn National delivered a strong second quarter that exceeded our pre-announced results from June 24, 2021. For the second quarter ended June 30, 2021, Penn National generated revenues of $1.55 billion, at the high end of our pre-announced range of $1.45 billion to $1.56 billion while Adjusted EBITDAR of $586.6 million exceeded the high end of our $540 million to $580 million range. Compared to Q2 2019 pro forma results, revenues increased 13%, Adjusted EBITDAR grew 38% and Adjusted EBITDAR margins increased 694 basis points. The strong results were driven by exceptional performance across our portfolio of core gaming business properties. Contributions from Barstool Sports, the media company, were also positive. Further, we saw strong revenue growth across our Penn Interactive segment, which operated near breakeven for the quarter despite being live in only four states.

“Separately, this morning Penn National announced that we have entered into a definitive agreement to acquire Score Media and Gaming, which is the number one sports app in Canada and the third most popular sports app in North America. When we add theScore’s unique integrated media and betting platform and modern, state-of-the art technology, to the massive audience of Barstool Sports and its wildly popular personalities and content, we’ll be creating North America’s leading digital sports content, gaming and technology company. We anticipate that the acquisition of theScore will provide adjusted EBITDA accretion by Year 2, an incremental $200 million medium term adjusted EBITDA, and $500 million of incremental long term adjusted EBITDA upside.”

More details regarding the transaction may be found in a separate press release issued today. To access the release, please visit here.

Robust Recovery in our Core Gaming Business Continues

Mr. Snowden stated: “Sequentially improved visitation and length of play across all age segments of our player database led to our record results in the second quarter. Spend-per-visit has remained high since reopening last year, and our overall visitation numbers are encouraging as restrictions continue to be lifted. The traditional core gaming customer has reengaged with our properties as vaccines continue to roll out across the country, while the younger demographic’s engagement continued throughout Q2 and into Q3 despite the increased availability of alternative entertainment options. Overall, our unrated play continues to perform well, and we have been pleased with our ability to convert these customers into our mychoice loyalty program. These noteworthy drivers of our revenue growth combined with the changes we have made to our offerings and our expense structure has led to tremendous flow-through and margin improvement. We have seen this strength across all geographic regions, with the South Region leading the way as demonstrated by the segment’s outsized performance in both revenues and EBITDAR.”

Sportsbook Launch Schedule on Track

Mr. Snowden continued, “We are making great strides in the planned rollout of our Barstool Sportsbook. Following our Indiana launch in May, we anticipate more than doubling our footprint by the start of the 2021 NFL season in early September with upcoming launches in Colorado, New Jersey, Tennessee, Virginia, and Arizona. By the end of the year, we plan to be operating in at least 10 states. Additionally, as we gain scale across the country, we will increase our marketing efforts to further widen the funnel into our omnichannel ecosystem while we remain focused on our measured and profit-driven approach. For example, we recently announced an expansion of our NASCAR relationship with a comprehensive sponsorship and marketing partnership with the Phoenix Raceway. Further, we have agreed to act as the official sports betting partner for the upcoming August 29 boxing event between Tyron Woodley and Jake Paul, which will include Barstool Sportsbook branded segments featuring key personalities.

“We anticipate Penn Interactive will generate meaningful EBITDA contributions beginning in 2023, inclusive of significant planned investments in marketing, product and additional state launches. Not only does Barstool Sports’ creative content, exclusive bets, and social media reach provide a competitive advantage for our mobile sportsbook via low-cost customer acquisition, but it also provides us with the brand leverage to drive our omnichannel strategy as the Barstool audience converts to our core gaming businesses.

“With this in mind, we plan to open/rebrand five more Barstool Sports retail sportsbooks by the end of the year. In addition, we are making progress on the build out of stand-alone Barstool-branded sports bars, with the initial locations in Philadelphia and Chicago scheduled to open later this year. We are also continuing to bolster our iCasino offerings, including the addition of more third-party content, the introduction of a Barstool-branded live dealer studio in New Jersey and the launch of our first in-house developed, Barstool-branded online table and slot games by year-end.

Growth on the Horizon

“We launched our cashless, cardless, and contactless (“3Cs”) technology at Hollywood Casino at Penn National Race Course in late June followed by another successful implementation at the Meadows Casino in mid-July. The 3Cs technology will increase safety and provide improved service while delivering additional efficiencies and accountability. This initiative will also bring our property technology in line with other industries which should resonate with our guests of all ages. We will introduce the 3Cs technology across the Penn enterprise over the next 12 to 18 months, pending regulatory approvals.

“We are very excited to open our Hollywood Casino York facility on August 12, which will be our third casino in the Commonwealth of Pennsylvania, pending final regulatory approval. This casino will feature 500 of the most popular slot machines and 24 table games and include a Barstool Sportsbook. The facility will also be the third casino to feature our 3Cs technology. Our second Category 4 Pennsylvania casino project, Hollywood Casino Morgantown, is on track to open before the end of the year.

“We closed the Hollywood Casino Perryville acquisition on July 1, 2021. We are very excited to be operating again in Maryland, which adds a 20th state to our leading nationwide footprint. We expect to add a branded Barstool Sportsbook to the property and introduce our Barstool Sportsbook mobile app to sports bettors across the state, which will continue to expand our omnichannel presence.

“Finally, Barstool Sports, the media company, has continued to show tremendous growth this year both financially and in terms of audience metrics, as it has continued to evolve into a highly diversified media, entertainment and lifestyle brand. Just recently, Barstool was announced as the title sponsor and exclusive broadcast partner for the Barstool Sports Arizona Bowl, a watershed moment for the industry, as Barstool is redefining the way sports programming is produced and delivered in today’s media landscape. The continued growth and diversification of the company’s revenue streams, including advertising, licensing and merchandise, has meaningfully enhanced the value of the media asset, which we believe is still underappreciated and extends well beyond the benefits to our sports betting business.”

Continuing to Care for our People, our Communities and the Planet

Last month, in conjunction with our celebration of Juneteenth, we marked the one-year anniversary of the launch of our Penn Diversity Committee. Comprised of a diverse group of team members at varying levels in our organization from around the country, the goal of our Diversity Committee is to help put our company’s longstanding stance on Diversity, Equity, and Inclusion into action. Earlier this quarter, we awarded the first scholarships from our Penn Diversity Scholarship Program to 58 children of our team members, totaling $1.05 million. More than half of these diverse awardees represent the first generation of their families to pursue higher education, which is significantly above the national average. In addition, we increased our recruitment efforts and support of Historic Black Colleges and Universities, as well as our support for organizations in our communities promoting equality and justice. We also continue to be committed to the growth of minority-owned businesses and are proud to have recently launched the Penn Minority Business Incubator.

Further, in honor of Armed Forces Day, we launched the “myheroes” program on May 15, which provides veterans, active-duty military and first responders access to exclusive discounts and offers at Penn Properties. In less than a month we had more than 25,000 new member sign ups from around the country. On Memorial Day, we announced the Harold Cramer Memorial Scholarship Fund, which will help veterans pursue a law degree at the University of Pennsylvania Law School. And in June, we celebrated Pride Month and shared stories throughout the month with our team members of LGBTQ champions who have helped change our world.

Finally, on the environmental front, we’re proud to have incorporated all the latest energy efficient enhancements into our two new casinos set to open in York and Morgantown, Pennsylvania. In addition, we’re continuing to focus on reducing our energy footprint at our properties, as well as the amount of water and plastics used across our enterprise.

Enviable Balance Sheet and Liquidity Position

Traditional net debt as of June 30, 2021 was $116 million, a decrease of $237 million during the quarter, principally due an increase in operating cash flows and repayments under our senior secured credit facilities. Our lease-adjusted net leverage was 4.0x based on Adjusted EBITDAR through the trailing 12 months ended June 30, 2021. On July 1, 2021, we closed on an eight-year $400 million unsecured notes offering priced at 4.125%. Pro forma for this transaction, cash on the balance sheet stands at $2.7 billion, which combined with our fully undrawn revolver, drives our liquidity to nearly $3.4 billion positioning us well to execute on our long-term growth strategy.

Summary of Second Quarter Results

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Supplemental Information

Given the COVID-19 pandemic and the resulting temporary closure of all of the Company’s gaming and racing properties in first and second quarter in 2020, the Company believes presenting information regarding the Company’s financial results for the three and six months ended June 30, 2019 is useful to investors to evaluate the Company’s performance for the three and six months ended June 30, 2021.

The Company acquired Greektown on May 23, 2019. Although the Company did not own Greektown from January 1, 2019 through May 22, 2019, the Company believes the following supplemental information is useful to investors to assess the value this transaction brings to the Company and its shareholders. Revenues earned by Greektown prior to the acquisition date of May 23, 2019 during the three and six months ended June 30, 2019, were $49.8 million and $133.5 million, respectively. Adjusted EBITDAR earned by Greektown prior to the acquisition date of May 23, 2019 during the three and six months ended June 30, 2019 were $16.3 million and $43.0 million. The operating results of Greektown were derived from historical financial information. Greektown operating results were adjusted to conform to the Company’s methodology of allocating certain corporate expenses to properties. Revenues and Adjusted EBITDAR earned by Greektown do not reflect any cost savings or revenue synergies from potential operating efficiencies or associated costs to achieve such savings or synergies that are expected to result from the transaction.

The Company ceased operations of Resorts Casino Tunica on June 30, 2019. Revenues earned by Resorts Casino Tunica for the three and six months ended June 31, 2019 were $4.0 million and $9.8 million, respectively. Resorts Casino Tunica generated Adjusted EBITDAR losses for the three and six months ended June 30, 2019 of $1.6 million and $1.4 million, respectively.

Contacts

Justin Sebastiano

Senior VP, Finance & Treasurer

610-373-2400

Joseph N. Jaffoni, Richard Land

JCIR

212-835-8500 or penn@jcir.com

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