PENN Entertainment (PENN)

Risks

• The COVID-19 pandemic has significantly impacted the global economy, including the gaming industry, and has had a material adverse effect on our business, financial condition, results of operations, and cash flows, and may continue to do so.
• Intense competition exists in the gaming, media, and entertainment industries, and we expect competition to continue to intensify.
• Our business is sensitive to reductions in discretionary consumer spending as a result of downturns in the economy and other factors outside of our control.
• Our results of operations may fluctuate due to seasonality and other factors and, therefore, our periodic operating results will not be guarantees of future performance.
• Negative events or negative media coverage including relating to, or a declining popularity of, sports betting, the underlying sports, teams or athletes and related talent, online gaming may adversely impact our reputation, which could have an adverse impact on our business.
• Our projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding future legislation and changes in regulations, both inside and outside of the United States. As a result, our projected revenues and profitability may differ materially from our expectations.
• Consolidation among gaming equipment manufacturers, or supply chain delays, could impose additional costs on us.
• We have certain land-based properties that generate a significant percentage of our revenues and our ability to meet our operating and debt service requirements is dependent, in part, upon the continued success of these properties.
• We are required to utilize a significant portion of our cash flow from operations to make our rent payments under our Triple Net Leases, which could adversely affect our ability to fund our operations and growth and limit our ability to react to competitive and economic changes.
• Most of our facilities are leased and could experience risks associated with leased property.
• Our operations could be disrupted if management agreements and/or leases with third parties and local governments are not renewed.
• There can be no assurance that we will be able to compete effectively or generate sufficient returns on our recently expanded sports betting operations, our recent acquisition of theScore and our investment in Barstool Sports.
• Our operations and the success are largely dependent on the skill and experience of management and key personnel.
• Our business could suffer if we cannot attract and retain talented team members.
• Collective bargaining activity and strikes could disrupt our operations, increase our labor costs, and interfere with the ability of our management to focus on executing our business strategies.
• If we fail to detect fraud or theft, including by our users and employees, our reputation may suffer which could harm our brand and reputation and negatively impact our business, financial condition and results of operations and can subject us to investigations and litigation.
• We rely on, among other things, copyrights, trademarks, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property rights and we may be unable to protect or may not be successful in protecting our intellectual property rights.
• Our commercial success depends upon us avoiding the infringement of intellectual property rights owned by others and any such infringements, including those that are inadvertent, may have a material adverse effect on our business.
• Our technology contains third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to provide our offerings.
• We may face disruption and other difficulties in integrating and managing acquired operations or other initiatives we have recently acquired, may develop, or may acquire in the future.
• Our retail casino gaming, online gaming, and sports betting rely heavily on technology services and an uninterrupted supply of electrical power.
• We rely on third-party payment processors to process deposits and withdrawals made by our users, and if we cannot manage our relationships with such third parties and other payment-related risks, our business, financial condition and results of operations could be adversely affected.
• If our third-party mobile application distribution platforms or service providers do not perform adequately or terminate their relationships with us, our costs may increase and our business, financial condition, and results of operations could be adversely affected.
• If Internet and other technology-based service providers experience service interruptions, our ability to conduct our business may be impaired and our business, financial condition and results of operations could be adversely affected.
• We rely on third party cloud infrastructure services to deliver our offerings to users, and any disruption of or interference with our use of these services could adversely affect our business, financial condition, results of operations and prospects.
• We rely on strategic relationships with casinos, tribes and horse-tracks in order to be able to offer our sports betting, and online gaming products in certain jurisdictions. If we cannot establish and manage such relationships with such partners, our business, financial condition and results of operations could be adversely affected.
• We rely on other third-party sports data providers for real-time and accurate data for sporting events, and if such third parties do not perform adequately or terminate their relationships with us, our costs may increase and our business, financial condition and results of operations could be adversely affected.
• Our growth will depend, in part, on the success of our strategic relationships with third parties. Overreliance on certain third parties, or our inability to extend existing relationships or agree to new relationships may cause unanticipated costs for us and impact our financial performance in the future.
• Our information technology and other systems are subject to cyber security risk, including misappropriation of employee information, customer information or other breaches of information security, particularly as our Interactive segment grows.
• Our growth prospects may suffer if we are unable to develop successful offerings or if we fail to pursue additional offerings. In addition, if we fail to make the right investment decisions in our offerings and technology, we may not attract and retain key users and our revenue and results of operations may decline.
• The growth of our Interactive segment will depend on our ability to attract and retain users.
• Participation in the sports betting industry exposes us to trading, liability management and pricing risk. We may experience lower than expected profitability and potentially significant losses as a result of a failure to determine accurately the odds in relation to any particular event and/or any failure of its sports risk management processes.
• We follow the industry practice of restricting and managing betting limits at the individual customer level based on individual customer profiles and risk level to the enterprise; however there is no guarantee that states will allow operators such as us to place limits at the individual customer level.
• We extend credit to a portion of our customers, and we may not be able to collect gaming receivables from our credit customers.
• The success, including win or hold rates, of existing or future sports betting and online gaming products depends on a variety of factors and is not completely controlled by us.
• We face a number of challenges prior to opening new or upgraded gaming properties or launching new online gaming or sports betting channels, which may lead to increased costs and delays in anticipated revenues.
• Our indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under our outstanding indebtedness.
• The lack of availability and cost of financing could have an adverse effect on our business.
• To service our indebtedness, we will require a significant amount of cash, which depends on many factors beyond our control.
• We are or may become involved in legal proceedings that, if adversely adjudicated or settled, could impact our financial condition and results of operations.
• We face extensive regulation from gaming authorities, which could have a material adverse effect on us.
• We are subject to certain federal, state and other regulations, and if we fail to comply with such regulations, it could have a material adverse effect on our financial condition, results of operations, and cash flow.
• State and local smoking restrictions have and may continue to negatively affect our business.
• Changes to consumer privacy laws could adversely affect our ability to market our products effectively and may require us to change our business practices or expend significant amounts on compliance with such laws.
• We are subject to environmental laws and potential exposure to environmental liabilities which could have an adverse effect on us.
• In the event we make another acquisition, we may face risks related to our ability to receive regulatory approvals required to complete, or other delays or impediments to completing, such acquisition.
• Material increases to our taxes or the adoption of new taxes or the authorization of new or increased forms of gaming could have a material adverse effect on our future financial results.