XML 30 R19.htm IDEA: XBRL DOCUMENT v3.24.1.u1
Stockholders’ Equity and Stock-Based Compensation
 3 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Stockholders’ Equity and Stock-Based Compensation Stockholders’ Equity and Stock-Based Compensation
Common and Preferred Stock
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 is convertible into one share of PENN common stock. Pursuant to the Barstool SPA, on August 11, 2023, all remaining outstanding shares of Series D Preferred Stock were converted to common stock. See Note 5, “Acquisitions and Dispositions” for additional information related to the Barstool SPA.
As of both March 31, 2024 and December 31, 2023, there were 5,000 shares authorized of Series D Preferred Stock and no shares were outstanding.
In connection with the acquisition of Score Media and Gaming, Inc. (“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, par value $0.01 (“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.
During the three months ended March 31, 2024 and 2023, we issued 68,048 and 2,854 Exchangeable Shares, respectively. As of both March 31, 2024 and December 31, 2023, there were 768,441 Exchangeable Shares authorized, of which 557,174 shares and 560,267 shares were outstanding, respectively.
Share Repurchase Authorization
On December 6, 2022, the Board of Directors approved a share repurchase authorization for $750.0 million (the “December 2022 Authorization”). The December 2022 Authorization expires on December 31, 2025.
The Company utilized the capacity under the previous 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 March 31, 2024. During the three months ended March 31, 2023, the Company repurchased 1,646,963 shares of its common stock in open market transactions for $50.0 million, at an average price of $30.36 per share under the previous $750.0 million February 2022 authorization.
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 March 31, 2024. As of May 1, 2024, 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 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 March 31, 2024, there are 9,214,702 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.
The Company did not grant any restricted units with performance-based vesting conditions during the three months ended March 31, 2024, as compared to an aggregate of 461,747 restricted units granted at target, during the three months ended March 31, 2023. 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.
Stock-based Compensation Expense
Stock-based compensation expense pertains to our stock options and restricted stock, including restricted stock with performance conditions. The Company recognized $11.9 million and $16.5 million of stock-based compensation expense during the three months ended March 31, 2024 and 2023, respectively, which is included in “General and administrative” expense within the unaudited Consolidated Statements of Operations.
Stock Options
The Company granted 795,913 and 837,873 stock options during the three months ended March 31, 2024 and March 31, 2023, 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 $0.7 million and $1.2 million as of March 31, 2024 and December 31, 2023, respectively.
As of March 31, 2024, there was a total of $1.3 million unrecognized compensation cost related to CPUs that will be recognized over the awards remaining weighted-average vesting period of 1.7 years. During the three months ended March 31, 2024 and 2023, the Company recognized $0.1 million and $0.7 million of compensation expense associated with these awards, respectively. Compensation expense associated with our CPUs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations. We paid $0.5 million and $1.4 million for the three months ended March 31, 2024 and 2023, 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 $0.8 million and $5.8 million as of March 31, 2024 and December 31, 2023, respectively.
For SARs held by employees of the Company, there was $0.4 million of total unrecognized compensation cost as of March 31, 2024 that will be recognized over the awards remaining weighted-average vesting period of 1.8 years. For the three months ended March 31, 2024 and 2023, the Company recognized a reduction to compensation expense of $4.6 million and $0.1 million, respectively. Compensation expense associated with our SARs is recorded in “General and administrative” within the unaudited Consolidated Statements of Operations. We paid $0.1 million and $0.5 million during the three months ended March 31, 2024 and 2023, respectively, related to cash-settled SARs.