PENN(US:PENN)2025-05-12 20:15PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The company's unaudited Q1 2025 financial statements show a swing to net income driven by a one-time gain Consolidated Financial Statements PENN Entertainment reported a 4.1% revenue increase to $1.67 billion and a net income of $111.5 million for Q1 2025 Consolidated Statements of Operations Highlights (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $1,672.5 | $1,606.9 | +4.1% | | Operating Income (Loss) | $42.8 | $(21.4) | N/A | | Gain on financing arrangement | $215.1 | $— | N/A | | Net Income (Loss) | $111.5 | $(114.9) | N/A | | Diluted EPS | $0.68 | $(0.76) | N/A | Consolidated Balance Sheet Highlights | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $591.6 | $706.6 | | Total Assets | $15,090.0 | $15,261.7 | | Total Liabilities | $12,120.6 | $12,403.3 | | Total Stockholders' Equity | $2,969.4 | $2,858.4 | Consolidated Statements of Cash Flows Highlights (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $41.9 | $(68.7) | | Net cash used in investing activities | $(135.9) | $(47.3) | | Net cash used in financing activities | $(16.2) | $(50.1) | Notes to the Consolidated Financial Statements The notes detail segment performance, highlighting strong Interactive segment growth and significant commitments like the ESPN agreement - The company operates through five reportable segments: Northeast, South, West, Midwest, and Interactive, with the latter including all online operations3234 Revenue by Segment (Q1 2025 vs Q1 2024) | Segment (in millions) | Q1 2025 Revenue | Q1 2024 Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Northeast | $680.9 | $684.7 | -0.6% | | South | $288.3 | $298.5 | -3.4% | | West | $129.7 | $128.8 | +0.7% | | Midwest | $282.9 | $291.2 | -2.9% | | Interactive | $290.1 | $207.7 | +39.7% | - Under the Sportsbook Agreement, PENN pays ESPN $150.0 million annually and has issued warrants, with related Q1 2025 expenses totaling $51.7 million105109 - During Q1 2025, the company repurchased 1,413,882 shares of its common stock for $25.0 million under its authorized share repurchase program114 Adjusted EBITDAR by Segment (Q1 2025 vs Q1 2024) | Segment (in millions) | Q1 2025 Adj. EBITDAR | Q1 2024 Adj. EBITDAR | Change ($) | | :--- | :--- | :--- | :--- | | Northeast | $194.2 | $202.6 | $(8.4) | | South | $103.3 | $113.5 | $(10.2) | | West | $45.7 | $45.9 | $(0.2) | | Midwest | $113.8 | $117.0 | $(3.2) | | Interactive | $(89.0) | $(196.0) | $107.0 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses a 4.1% revenue increase driven by the Interactive segment, a return to profitability, and ongoing development projects Executive Overview The company's strategy focuses on leveraging its digital assets and retail casinos, supported by major development projects - The company's strategy is centered on leveraging its partnership with ESPN and ownership of theScore to expand its digital footprint and create cross-sell opportunities156 - Major development projects are in progress, including casino relocations and hotel additions, with GLPI committing up to $575 million in funding158 - A new development project was announced to relocate the Ameristar Council Bluffs casino to a land-based property with an estimated cost of $180-$200 million159 Results of Operations Q1 2025 revenue grew 4.1% to $1.67 billion, with a $215.1 million non-cash gain driving net income to $111.5 million Consolidated Revenue and Net Income (Q1 2025 vs Q1 2024) | Metric (in millions) | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,672.5 | $1,606.9 | +$65.6 | +4.1% | | Net Income (Loss) | $111.5 | $(114.9) | +$226.4 | N/A | - The increase in gaming revenue was primarily driven by the Interactive segment, which benefited from iCasino growth and reduced promotional expenses for ESPN BET178 - A non-cash gain of $215.1 million was recognized related to a 2021 financing arrangement for COVID-19 business interruption claims188 - General and administrative expenses increased by $14.1 million, primarily due to $7.7 million of legal and advisory costs related to a proxy campaign184 Liquidity and Capital Resources The company maintains strong liquidity through operating cash flow and credit facilities, funding capital expenditures and share repurchases Cash Flow Summary (Q1 2025 vs Q1 2024) | Cash Flow Activity (in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash from (used in) Operating Activities | $41.9 | $(68.7) | | Net cash used in Investing Activities | $(135.9) | $(47.3) | | Net cash used in Financing Activities | $(16.2) | $(50.1) | - For fiscal year 2025, the company anticipates total capital expenditures of approximately $730 million223 - In Q1 2025, the company repurchased $25.0 million of its common stock, with an additional $10.0 million repurchased post-quarter231 - As of May 9, 2025, the company had $874.6 million in available borrowing capacity under its Amended Revolving Credit Facility66226 Quantitative and Qualitative Disclosure About Market Risk The company's primary market risks stem from interest rate fluctuations on its variable-rate debt and foreign currency translation - The company is exposed to interest rate risk on its $1.5 billion of variable-rate debt outstanding as of March 31, 2025249 - PENN is exposed to foreign currency translation risk from its Canadian subsidiary, theScore, resulting in an unrealized loss of $0.3 million in Q1 2025252 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025253 - No material changes were made during Q1 2025 that affected the company's internal control over financial reporting254 PART II. OTHER INFORMATION Legal Proceedings The company faces a lawsuit from HG Vora Capital Management concerning board reduction and proxy statements, which it deems without merit - On May 7, 2025, HG Vora Capital Management filed a lawsuit against PENN and its board, alleging improper board reduction and misleading proxy statements257 - The lawsuit seeks to invalidate the board reduction and requests injunctive relief and damages; the company believes the claims are without merit257 Risk Factors Key risks include sensitivity to consumer spending, shareholder activism from the HG Vora proxy contest, and associated legal challenges - The company's business is sensitive to reductions in discretionary consumer spending, which can be affected by economic downturns and inflation259 - Shareholder activism, such as the current proxy solicitation by HG Vora, poses a risk of increased costs and business disruption261262 - The company is subject to litigation from HG Vora related to the 2025 annual meeting, which could result in substantial costs and adverse regulatory implications263264 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1.4 million shares for approximately $26.4 million in Q1 2025 under its authorized program Share Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Value (in millions) | | :--- | :--- | :--- | :--- | | Jan 2025 | — | $— | $— | | Feb 2025 | — | $— | $— | | Mar 2025 | 1,497,039 | $17.63 | ~$26.4 | - Of the shares purchased in March, 1,413,882 were part of the publicly announced program, leaving $724.6 million available under the repurchase authorization265266 Other Information No new executive 10b5-1 trading plans were adopted in Q1 2025, and a new employment agreement was executed for the Chief Strategy Officer - No directors or executive officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the first quarter of 2025267 - A new three-year employment agreement was executed with EVP Christopher Rogers, with an annual base salary of $824,000 and a target bonus of 125% of base salary268 Exhibits Filed exhibits include a key executive employment agreement, master lease amendments, and required Sarbanes-Oxley certifications - Key exhibits filed include the Executive Agreement for Christopher Rogers, amendments to the 2023 Master Lease, and CEO/CFO certifications (Sections 302 and 906)271