Penn National Gaming Reports Fourth Quarter Revenues of $1.6 Billion, Net Income of $44.8 Million, Adjusted EBITDAR of $480.5 Million, and Adjusted EBITDA of $369.0 Million

Retail Operations Deliver Strong Results Through Sustainable Margin Improvement, Technology Upgrades and Growing Database

Interactive Segment Exceeded Expectations

Board of Directors Authorizes $750 Million Share Repurchase Program

Company Initiates 2022 Full Year Guidance

WYOMISSING, Pa.–(BUSINESS WIRE)–Penn National Gaming, Inc. (NASDAQ: PENN) (“Penn National” or the “Company”) today reported financial results for the three months and year ended December 31, 2021.

2021 Fourth Quarter Financial Highlights:

• Revenues of $1.6 billion, an increase of $545.1 million year-over-year and $231.3 million versus 2019;
• Net income of $44.8 million and net income margin of 2.8%, as compared to net income of $12.7 million and net income margin of 1.2% in the prior year and net loss of $92.9 million and net loss margin of 6.9% in 2019;
• Adjusted EBITDAR of $480.5 million, an increase of $115.1 million year-over-year and $81.1 million versus 2019;
• Adjusted EBITDA of $369.0 million, an increase of $113.1 million year-over-year and $65.0 million versus 2019; and
• Adjusted EBITDAR margins of 30.6%, as compared to 35.6% in the prior year and 29.8% in 2019.

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

Jay Snowden, President and Chief Executive Officer, commented: “I am pleased to report a strong finish to another transformative year for Penn National. Our fourth quarter revenues of $1.6 billion and Adjusted EBITDAR of $480.5 million exceeded both 2020 and 2019 levels as our best-in-class operating teams continue to deliver impressive results despite the ongoing pandemic. In addition, we accomplished several strategic objectives this quarter that have laid the foundation for future growth, including the completion of our acquisition of Score Media and Gaming Inc. (“theScore”), the continued expansion of Penn Interactive operations, the opening of our fourth casino in Pennsylvania and the roll-out of new technology at many of our casinos. Given our confidence and improved visibility regarding both our retail and interactive segments, as well as our strong financial position, we are pleased to announce that our Board of Directors has authorized a $750 million, three-year share repurchase program, and we are re-initiating guidance. For 2022, we are guiding to a net revenue range of $6.07 billion to $6.39 billion and an Adjusted EBITDAR range of $1.85 billion to $1.95 billion,” said Mr. Snowden.

“Our disciplined marketing approach and increased scale at Penn Interactive set us apart from the competition as we generated a lower-than-expected EBITDA loss in our Interactive segment in the fourth quarter despite launching sports betting operations in two new states (Iowa and West Virginia), iCasino in West Virginia and integrating theScore,” continued Mr. Snowden. “These results were also achieved despite a frenzied competitive environment. With the launch of online sports betting in Louisiana on January 28, Penn National now operates sports betting in 12 states and iCasino in four and looks forward to gaining additional scale in 2022 with anticipated launches in Ontario, Ohio and Maryland. As we expand, we will continue to focus on sustainable growth, organic customer acquisition and targeted marketing and promotional spend. For 2022, we expect the segment to generate lower losses than our previous outlook; we now anticipate an EBITDA loss of approximately $50 million within our Interactive segment this year as we continue to scale our operations and infrastructure in anticipation of bringing our technology in-house and launching in new jurisdictions. Looking ahead, our differentiated sports betting strategy, along with the integration of the Barstool Sportsbook into theScore media app in the U.S. and continued improvements within our iCasino offerings will enable us to generate meaningful EBITDA in 2023 within the Interactive segment especially as we transition to our wholly owned tech stack,” said Mr. Snowden.

“As I think about the future of Penn National, I am immensely excited about our growth trajectory as we continue to execute on our omni-channel and media strategy and realize the benefits of several noteworthy accomplishments,” continued Mr. Snowden. “In the near term, the acquisition of theScore fortifies our position as a leading North American digital sports content, gaming and technology company by widening our customer acquisition funnel and providing a path to full control of our product and technology roadmap. In early 2023, we look towards acquiring the remainder of Barstool Sports, Inc., which will highly complement theScore’s strong media presence, sports brand and loyal audience, accelerating our transformation into a major media and entertainment company. Longer term, our leadership position in traditional gaming, digital and media will create material synergies and cross promotion benefits, and more importantly, provide us with numerous opportunities to be nimble in a rapidly evolving marketplace.”

Retail Operations Benefiting from Expanded Reach and New Demographics

The Company saw strong property level performance across all segments for most of the quarter, with some softness in late December due to Omicron, which abated in late January. Overall, the Company continues to benefit from a rational and stable marketing and promotional environment in the majority of its markets as its company-wide reinvestment rates were lower both sequentially in Q4 2021 and year-over-year compared to 2020 and 2019. Given a variety of structural cost improvements across its portfolio, combined with revenue-enhancing investments in technology, the Company believes the EBITDAR flow-through achieved in the second half of 2021 is sustainable assuming stable revenue levels and a rational competitive environment.

On December 22, Penn National celebrated the opening of Hollywood Casino Morgantown, its fourth casino in the Commonwealth of Pennsylvania and 44th property in North America. Like its sister property in York, this $111 million state-of-the-art casino, located less than an hour outside of Philadelphia, is built for the future with a number of new technologies and customer conveniences, including the “3Cs” cardless, cashless, contactless ‘mywallet’ experience. This new technology removes friction from transactions, reduces wait times and lines, and relieves some of the burden created by the challenging labor market. It also positions Penn National’s properties for the future by aligning with the expectations of younger consumers who are accustomed to cashless options in all aspects of their day-to-day lives. The property features the latest evolution of the Barstool Sportsbook, Tony Luke’s famous cheesesteaks and additional F&B and entertainment amenities. “We are encouraged with the early results as we were able to reach into a new market with approximately 80% of our rated business being driven by new members to our active mychoice database,” said Mr. Snowden.

Penn National’s investment in technology is digitally transforming its retail operations and enhancing the customer experience. The Company is improving its marketing capabilities through its mychoice app, which allows the Company to communicate with its customers more efficiently, as downloads increased 23% year-over-year in Q4 2021. In addition, the 3Cs are now live at all eight of Penn National’s properties in Pennsylvania and Ohio, and the Company will continue to introduce this technology across all of its regions throughout 2022 pending regulatory approval.

“We remain encouraged by the ongoing visitation from younger demographics and are focused on reimagining our properties and offerings to enhance the entertainment appeal to this steadily growing segment of consumers,” said Mr. Snowden. In November, the Company launched live sports betting at temporary locations in its five Louisiana properties while it builds out its market leading Barstool sportsbook concept at its signature properties in Lake Charles, Baton Rouge and Bossier City. Additionally, Penn National’s omni-channel approach drove overall database growth over 7% in 2021, with contributions from both its online and traditional properties, leading to enhanced marketing opportunities and 23.5% year-over-year growth in our VIP segment compared to Q4 2019.

Barstool Sportsbook and Casino Continued Momentum and Future Growth

The Barstool Sportsbook mobile app experienced sizable growth in the fourth quarter while maintaining a disciplined approach to marketing spend. “We saw increased traction across the board during football season and quickly became one of the leading operators in the crowded New Jersey market despite launching years after most of our peers. Our growth has been fueled by organic customer acquisition from both the Barstool Sports audience and mychoice database, leading to what we believe are the lowest customer acquisition costs and best return on investment timelines in the industry. In addition, our casino footprint has provided us with direct market access in several key states as well as a source of recurring and meaningful third-party skin revenue,” said Mr. Snowden.

The Company continues to see sizable contributions from its Barstool-branded retail sportsbooks as they are a powerful example of its omni-channel strength. The recent launches of temporary sportsbooks at Penn National’s Louisiana properties led to a combined market share of 58% in handle and 53% in gross gaming revenues in December 2021, and the Company estimates that its total national share of the retail sports betting market outside of Nevada is approximately 12%. “Penn Interactive is the leading operator of retail sportsbooks in West Virginia, Indiana, Iowa, Michigan, Colorado, and Louisiana, and we believe we are similarly well positioned for success in Ohio, where we operate a portfolio of market leading properties, providing a significant competitive advantage for both our retail and interactive operations,” said Mr. Snowden.

“Our iCasino product received a number of upgrades during the fourth quarter, including the introduction of our first in-house developed games,” continued Mr. Snowden. “These improvements drove steady month-over-month growth this past fall in both handle and gross gaming revenue for the Barstool Casino. We are particularly pleased with the performance of our in-house games, which have contributed over 20% of our handle in New Jersey since their launch. Our ability to leverage Penn Game Studios in developing titles such as Barstool Blackjack and Barstool Slots allows us to introduce bespoke on-line casino entertainment to the loyal Barstool audience who engages with us in our online sports betting offerings, while also reducing third party content fees,” said Mr. Snowden.

“Looking ahead, we anticipate achieving a number of milestones in 2022, including mobile launches in several new jurisdictions: Louisiana (which launched January 28th), Ontario, where theScore is the number one app for sports content, Maryland and Ohio, where we have a large database of mychoice customers. Further, the integration of the Barstool Sportsbook into theScore media app, which is anticipated to occur in the second half of 2022, will provide us with another organic customer acquisition funnel in addition to the tools to offer real time, highly customized bets to our customers,” said Mr. Snowden.

On December 20, theScore became one of the first mobile gaming operators to secure certification from Gaming Laboratories International (“GLI”) for the launch of theScore Bet sports betting and iGaming app in the Province of Ontario, an important prerequisite for theScore Bet to begin operations in the province, on April 4. “We expect this market will be a sizable opportunity for us given the strong brand awareness and audience reach of theScore and Barstool Sports. From a technology standpoint, we anticipate theScore Bet will migrate to its own proprietary trading platform in Ontario in Q3 2022, pending regulatory approvals, and we expect the Barstool Sportsbook app to complete migration in Q3 2023. Following this migration, we will begin to realize the immense benefits of a wholly owned and integrated technology stack as we roll off our current third-party platforms, in addition to capital expense reductions as our technology spending rationalizes post-migration,” said Mr. Snowden.

theScore Media Growth

During the fourth quarter, theScore generated record revenue, which increased 32% year-over-year as reported, reflecting the tremendous value of its broad and active audience. Overall, theScore grew media revenue 76% for the year compared to 2020 as reported. In addition, theScore experienced continued user growth and engagement, with the average monthly active users on the media app growing 7% year-over-year. “We see opportunities to further increase the value of our media business in 2022, including cross-promotion and collaboration between theScore and Barstool Sports as well as promoting theScore Bet app to our 25 million mychoice members,” said Mr. Snowden.

Barstool Sports Continues to Grow its Audience

Barstool Sports, Inc. experienced another record year from both an audience and financial standpoint as it continues to redefine the digital media landscape. Barstool’s social media reach across all accounts and platforms (including Twitter, Instagram, TikTok, Facebook and YouTube) now exceeds 144 million, representing a year-over-year increase of 25%. Meanwhile, Barstool Sports, Inc. continues to drive strong revenue growth across all categories, including new verticals such as the One Bite frozen pizza and “Would” line of men’s grooming products. In addition, the first Barstool-branded sports bar opened in the River North area of Chicago this January to strong initial demand. “We look forward to supplementing our omni-channel strategy with additional Barstool Sports bars in the future, including the upcoming opening of a second location in Philadelphia. Both locations will provide us with an opportunity to grow our database outside of the traditional channels,” said Mr. Snowden.

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

Mr. Snowden continued, “Regarding Penn National’s ongoing ESG initiatives, during the fourth quarter, we proudly launched a new Science, Technology, Engineering and Mathematics (“STEM”) Scholarship Program in partnership with Historically Black Colleges and Universities (“HBCUs”) in states in which we operate. Through this initiative, Penn National is dedicating more than $4 million over five years to fund STEM scholarships and internship opportunities. The initial participating HBCUs include Norfolk State University in Norfolk, Virginia, Bowie State University in Bowie, Maryland, and Wilberforce University in Wilberforce, Ohio.

“Penn National’s commitment to fund STEM scholarships is an extension of our company’s established partnerships with 33 HBCUs across the country,” continued Mr. Snowden. “The ongoing collaboration with HBCUs facilitates career opportunities at Penn National’s properties while increasing participation in our Leadership Excellence at Penn National Gaming (“LEAP”) Program, which provides hands-on training, mentoring, and real-world experience to new or recent college graduates who are interested in building a long-term career in the gaming and entertainment industry.

“In December, our Diversity Committee launched an Emerging Leaders Development Program which focuses on hourly and early career team members who want to grow into leadership positions at our company. The program will be rolled out companywide by the end of the year. In addition, we kicked off our annual $1 Million Diversity Scholarship Program for the children of team members and are currently reviewing applications for the upcoming school year. In our inaugural year, we awarded $1,050,000 in scholarships to 58 students.

“Meanwhile our support for our nation’s heroes continues. We are approaching 100,000 customers enrolled in our myheroes loyalty program, which provides special benefits for veterans, active duty and first responders. In conjunction with this year’s Army vs. Navy college football game, Barstool Sportsbook ran a special ‘Viva La Troops’ promotion, matching certain first-time deposits, raising $200,000 to support the Fisher House Foundation and Semper Fi & America’s Fund veterans organizations.”

Mr. Snowden added, “Finally, we are continuing to expand upon our ongoing sustainability efforts. Last year we reduced annual Kwh consumption at our properties by 10%, equaling 42,000 tons of greenhouse gas elimination. We have also been prioritizing sustainable food production and supply chains through fair trade, hormone-free and reduced-antibiotic F&B procurement, and we have installed EV charging stations at a quarter of our properties, with an additional one-third scheduled for roll-out later this year.”

Share Repurchase Authorization

On February 1, 2022, the Company’s Board of Directors authorized a new $750 million share repurchase program which matures on January 31, 2025. The program reflects our confidence in our long-term prospects and enables us to make both opportunistic share repurchases and offset dilution from stock-based compensation and other equity grants.

Strong Balance Sheet, Liquidity, and Record Low Leverage

The Company ended 2021 with the strongest balance sheet in our history. Total liquidity of $2.5 billion, inclusive of $1.9 billion in cash, positions us well to be opportunistic in an extremely dynamic marketplace. Traditional net debt as of year-end was $886.2 million, an increase of $841.0 million compared to $45.2 million as of September 30, 2021, principally due to a cash payment of approximately $922.8 million for the acquisition of theScore. Traditional net debt as of December 31, 2020 was $577.8 million. Our lease adjusted net leverage as of December 31, 2021 was at a record low of 4.1x compared to 7.0x as of December 31, 2020 and 5.5x as of December 31, 2019.

Additional information on Penn National’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 adjustments that can be impacted by rent expense and interest expense associated with our triple net leases, re-measurement of cash-settled stock-based awards, 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 Fourth Quarter Results

PENN NATIONAL GAMING, INC. AND SUBSIDIARIES

Segment Information

During the fourth quarter of 2021, the Company evaluated its reportable segments and changed them to: Northeast, South, West, Midwest, and Interactive. This change reflects management’s belief that the operating results of our Interactive segment represent a strategic and high growth component of our overall operations. The Interactive segment, which was previously reported within Other, includes the operating results of theScore, Penn Interactive, and the Company’s proportionate share of earnings attributable to its equity method investment in Barstool Sports, Inc. Corporate expense will continue to be reported in Other in addition to stand-alone racing operations, other joint ventures, management contracts, and the Heartland Poker Tour.

As a result of the change in reportable segments described above, the Company has recast previously reported segment information to conform to the current management view for all prior periods. The changes to the reportable segments had no impact to the Company’s consolidated financial statements.

Contacts

Felicia Hendrix

Chief Financial Officer

610-373-2400

Joseph N. Jaffoni, Richard Land

JCIR

212-835-8500 or penn@jcir.com

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