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Stockholders’ Equity and Stock-Based Compensation | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Stockholders’ Equity and Stock-Based Compensation | Stockholders’ Equity and Stock-Based Compensation Common and Preferred Stock On February 17, 2023, as part of the Barstool Acquisition as discussed in Note 6, “Acquisitions and Dispositions,” the Company issued 2,442,809 shares of common stock with a par value of $0.01, to certain former stockholders of Barstool (the “Share Consideration”). The issuance of the Share Consideration was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, because such issuance did not involve a public offering. The Share Consideration was subject to transfer restrictions which were waived on August 11, 2023, pursuant to the Barstool SPA. See Note 6, “Acquisitions and Dispositions” for additional information related to the Barstool SPA. In conjunction with the February 20, 2020 stock purchase agreement between PENN and Barstool, the Company issued 883 shares of Series D Preferred Stock, par value $0.01 (the “Series D Preferred Stock”) to certain individual stockholders affiliated with Barstool. 1/1,000th of a share of Series D Preferred Stock was convertible into one share of PENN common stock. The Series D Preferred stockholders were entitled to participate equally and ratably in all dividends and distributions paid to holders of PENN common stock based on the number of shares of PENN common stock into which such Series D Preferred Stock could convert. Series D Preferred Stock is nonvoting stock. On March 3, 2023, 227 shares of Series D Preferred Stock were converted to common stock. As a result of the conversion, the Company issued 226,800 shares of common stock with a par value of $0.01. Pursuant to the Barstool SPA, on August 11, 2023, all remaining 354 outstanding shares of Series D Preferred Stock became eligible for conversion and were converted to common stock. As a result of the conversion, the Company issued 353,800 shares of common stock with a par value of $0.01. The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act. There are no outstanding shares of Series D Preferred Stock as of September 30, 2023. On June 29, 2023, in connection with the acquisition of HitPoint Inc. and Lucky Point Inc. (collectively, “Hitpoint”) which were acquired in 2021, the Company issued 4,055 shares of common stock with a par value of $0.01, representing the achievement of the second of three annual mutual goals established by the Company and Hitpoint. In connection with the acquisition of theScore in October 2021, the Company issued 12,319,340 of common stock with a par value of $0.01, and 697,539 exchangeable shares (“Exchangeable Shares”) through the capital of an indirect wholly-owned subsidiary of PENN, in addition to cash consideration. Each Exchangeable Share is exchangeable into one share of PENN Common Stock at the option of the holder, subject to certain adjustments. Upon the acquisition of theScore, certain employees of theScore elected to have their outstanding equity awards, which were assumed under theScore plan (as defined below), issued as Exchangeable Shares, once the shares vest or are exercised. In addition, the Company may redeem all outstanding Exchangeable Shares in exchange for shares of PENN common stock at any time following the fifth anniversary of the closing, or earlier under certain circumstances. We issued no Exchangeable Shares during the three months ended September 30, 2023 or 2022. During the nine months ended September 30, 2023, we issued 2,854 Exchangeable Shares. No Exchangeable Shares were issued during the nine months ended September 30, 2022. As of both September 30, 2023 and December 31, 2022, there were 768,441 Exchangeable Shares authorized, of which 560,388 shares and 620,019 shares were outstanding, respectively. Share Repurchase Authorization During the second quarter of 2023, we completed our $750.0 million share repurchase authorization approved by the Board of Directors on February 1, 2022 (the “February 2022 Authorization”). On December 6, 2022, a second share repurchase program was authorized for an additional $750.0 million (the “December 2022 Authorization”). The December 2022 Authorization expires on December 31, 2025. The Company utilized the capacity under the February 2022 Authorization prior to effecting any repurchases under the December 2022 Authorization. Repurchases by the Company are subject to available liquidity, general market and economic conditions, alternate uses for the capital and other factors. Share repurchases may be made from time to time through a Rule 10b5-1 trading plan, open market transactions, block trades or in private transactions in accordance with applicable securities laws and regulations and other legal requirements. There is no minimum number of shares that the Company is required to repurchase and the repurchase authorization may be suspended or discontinued at any time without prior notice. No shares of the Company’s common stock were repurchased during the three months ended September 30, 2023. During the three months ended September 30, 2022, the Company repurchased 5,348,809 shares of its common stock in open market transactions for $168.0 million, at an average price of $31.40 per share under the February 2022 Authorization. During the nine months ended September 30, 2023 and 2022, respectively, the Company repurchased 5,438,221 and 14,690,394 shares of its common stock in open market transactions for $149.8 million and $510.1 million, at an average price of $27.54 and $34.72 per share under the February 2022 and December 2022 Authorizations. The cost of all repurchased shares is recorded as “Treasury stock” within our unaudited Consolidated Balance Sheets. No shares of the Company’s common stock were repurchased subsequent to the quarter ended September 30, 2023. As of November 1, 2023, the remaining availability under our December 2022 Authorization was $749.5 million. 2022 Long Term Incentive Compensation Plan On June 7, 2022, the Company’s shareholders, upon the recommendation of the Company’s Board of Directors, approved the Company’s 2022 Long Term Incentive Compensation Plan (the “2022 Plan”). The 2022 Plan authorizes the Company to issue stock options (incentive and/or non-qualified), stock appreciation rights (“SARs”), restricted stock (shares and/or units), performance awards (shares and/or units), and cash awards to executive officers, non-employee directors, other employees, consultants, and advisors of the Company and its subsidiaries. Non-employee directors and consultants are eligible to receive all such awards, other than incentive stock options. Pursuant to the 2022 Plan, an initial 6,870,000 shares of the Company’s common stock were reserved for issuance, plus any shares of common stock subject to outstanding awards under both the previous 2018 Long Term Incentive Compensation Plan, as amended (“2018 Plan”) and the Score Media and Gaming Inc. Second Amended and Restated Stock Option and Restricted Stock Unit Plan (the “theScore Plan”) as of June 7, 2022, and outstanding awards that are forfeited or settled for cash under each of the prior plans. On June 6, 2023, the Company’s shareholders, upon the recommendation of the Company’s Board of Directors, approved an amendment to the 2022 Plan (as amended, the “2022 Amended Plan”), which increased the number of shares reserved for issuance under the plan by 7,000,000 shares to 13,870,000 shares. For purposes of determining the number of shares available for issuance under the 2022 Amended Plan, stock options, restricted stock and all other equity settled awards count against the 13,870,000 share limit as one share of common stock for each share granted. Any awards that are not settled in shares of common stock are not counted against the share limit. As of September 30, 2023, there are 10,960,721 shares available for future grants under the 2022 Amended Plan. Performance Share Program The Company’s performance share programs were adopted to provide our NEOs and certain other key executives with stock-based compensation tied directly to the Company’s performance, which further aligns their interests with our shareholders and provides compensation only if the designated performance goals are met for the applicable performance periods. An aggregate of 461,747 and 244,955 restricted units with performance-based vesting conditions, at target, were granted during the nine months ended September 30, 2023 and 2022, respectively. Restricted performance units granted prior to the adoption of the 2022 Plan were awarded under a performance share program (“the Performance Share Program II”). Subsequent restricted performance units are governed by the 2022 Plan. Restricted performance units consist of three one-year performance periods over a three-year service period. The awards have the potential to be earned at between 0% and 150% of the number of shares granted, depending on achievement of the annual performance goals, and remain subject to vesting for the full three-year service period. In addition to the above, during the nine months ended September 30, 2023, the Company granted employees of theScore 200,634 restricted units with performance-based vesting conditions that are dependent on the achievement of certain milestones. The awards have the potential to be earned at between 0% and 100% and consist of two, one-year performance periods, each containing an applicable milestone. The awards also contain a one-year vesting requirement and vesting is subject to: (a) the satisfaction of the milestones on or before the applicable expiration date and (b) continued service through the date on which the respective portion of the awards vests. Stock-based Compensation Expense Stock-based compensation expense, which pertains principally to our stock options and restricted stock, including restricted stock with performance conditions, is included within the unaudited Consolidated Statements of Operations under “General and administrative,” and was $35.2 million and $13.6 million for the three months ended September 30, 2023 and 2022, respectively, and $71.4 million and $45.1 million for the nine months ended September 30, 2023 and 2022, respectively. Stock-based compensation expense for the three and nine months ended September 30, 2023 included $14.5 million related to immediate vesting, pursuant to the Barstool SPA, of all unvested restricted shares and stock appreciation rights issued under PENN’s long term incentive compensation plans to Barstool employees. See Note 6, “Acquisitions and Dispositions” for additional information related to the Barstool SPA. Stock Options The Company granted 905 and 1,516 stock options during the three months ended September 30, 2023 and 2022, respectively, and 841,140 and 397,881 during the nine months ended September 30, 2023 and 2022, respectively. Cash-settled Phantom Stock Units Our outstanding phantom stock units (“CPUs”), are settled in cash and entitle plan recipients to receive a cash payment based on the fair value of the Company’s common stock which is based on the closing stock price of the trading day preceding the vest date. Our CPUs vest over a period of one to four years. The CPUs are accounted for as liability awards and are re-measured at fair value each reporting period until they become vested with compensation expense being recognized over the requisite service period. The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Consolidated Balance Sheets, associated with its cash-settled CPUs of $0.8 million and $2.1 million as of September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023, there was a total of $0.8 million unrecognized compensation cost related to CPUs that will be recognized over the awards remaining weighted-average vesting period of 1.5 years. The Company recognized $1.3 million and $1.0 million of compensation expense associated with these awards for the three months ended September 30, 2023 and 2022, respectively, and $2.9 million and $2.4 million for the nine months ended September 30, 2023 and 2022, respectively. Compensation expense associated with our CPUs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations. We paid $4.2 million and $9.9 million during the nine months ended September 30, 2023 and 2022, respectively, pertaining to cash-settled CPUs. Stock Appreciation Rights Our outstanding SARs are settled in cash and are accounted for as liability awards, and generally vest over a period of four years. The fair value of cash-settled SARs is calculated each reporting period and estimated using the Black-Scholes option pricing model. The Company has a liability, which is included in “Accrued expenses and other current liabilities” within the unaudited Consolidated Balance Sheets, associated with its cash-settled SARs of $4.7 million and $9.2 million as of September 30, 2023 and December 31, 2022, respectively. For SARs held by employees of the Company, there was $1.6 million of total unrecognized compensation cost as of September 30, 2023 that will be recognized over the awards remaining weighted-average vesting period of 1.6 years. The Company recognized a reduction to compensation expense of $0.7 million and $1.3 million for the three months ended September 30, 2023 and 2022, respectively, and a reduction to compensation expense of $4.4 million and $8.1 million for the nine months ended September 30, 2023 and 2022, respectively. Compensation expense associated with our SARs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations. We paid $0.6 million and $2.8 million during the nine months ended September 30, 2023 and 2022, respectively, related to cash-settled SARs. Other In the second quarter of 2021, the Company entered into two promissory notes with shareholders for a total of $9.0 million. The promissory notes were unsecured with interest of 2.25%. During the first quarter of 2023, the outstanding loan balance was settled and recorded as an increase of equity within “Additional paid-in capital” in our unaudited Consolidated Balance Sheets.

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- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 505 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//505/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 718 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//718/tableOfContent + Details
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