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Item 1. Financial Statements

2023-04-26 compared with 2022-10-26 · 353 added, 430 removed, 423 unchanged (65% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in millions, except per common share data) 2023 2022

17 unchanged sentences

Equity in income of unconsolidated affiliates 38.3 32.5

Gain on Calder land sale — — 274.6 —

Gain on sale of Arlington 114.0 —

Miscellaneous, net 1.4 —

10 unchanged sentences

The accompanying notes are an integral part of the condensed consolidated financial statements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions) September 30, 2022 December 31, 2021

(in millions) March 31, 2023 December 31, 2022

Current assets:

10 unchanged sentences

Other intangible assets, net

2,390.6 2,391.8

Long-term assets held for sale — 82.0

11 unchanged sentences

Long-term debt, net of current maturities and loan origination fees

1,872.8 2,081.6

Notes payable, net of debt issuance costs

14 unchanged sentences

The accompanying notes are an integral part of the condensed consolidated financial statements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

CHURCHILL DOWNS INCORPORATED

2 unchanged sentences

Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity

(in millions, except per common share data) Shares Amount

(in millions) Shares Amount

Balance, December 31, 2022 37.4 $ — $ 552.4 $ ( 0.9 ) $ 551.5

Net income 155.7 155.7

Issuance of common stock 0.1 —

Repurchase of common stock ( 3.9 ) 3.9 —

1 unchanged sentence

Stock-based compensation 8.6 — 8.6

Other ( 0.3 ) ( 0.3 )

Balance, March 31, 2023 37.4 $ 4.7 $ 700.4 $ ( 0.9 ) $ 704.2

Net income 339.3 339.3

Repurchase of common stock ( 0.3 ) ( 7.4 ) ( 54.1 ) ( 61.5 )

Taxes paid related to net share settlement of stock awards — ( 0.1 ) ( 0.1 )

Stock-based compensation 7.4 7.4

Balance, June 30, 2022 37.7 — 603.8 ( 0.9 ) 602.9

Net income 57.0 57.0

Issuance of common stock — 2.7 2.7

Repurchase of common stock ( 0.3 ) ( 11.8 ) ( 47.2 ) ( 59.0 )

Stock-based compensation 9.1 9.1

Balance, September 30, 2022 37.4 $ — $ 613.6 $ ( 0.9 ) $ 612.7

Common Stock Retained

Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity

(in millions, except per common share data) Shares Amount

(in millions) Shares Amount

Balance, December 31, 2021 38.1 $ — $ 307.7 $ ( 0.9 ) $ 306.8

5 unchanged sentences

Balance, March 31, 2022 38.0 $ — $ 318.7 $ ( 0.9 ) $ 317.8

Net income 108.3 108.3

Stock-based compensation 7.1 7.1

Other ( 0.2 ) ( 0.2 )

Balance, June 30, 2021 38.5 8.8 309.5 ( 0.9 ) 317.4

Net income 61.4 61.4

Issuance of common stock 2.5 2.5

Repurchase of common stock ( 0.2 ) ( 19.1 ) ( 30.9 ) ( 50.0 )

Taxes paid related to net share settlement of stock awards ( 0.3 ) ( 0.3 )

Stock-based compensation 7.8 7.8

Balance, September 30, 2021 38.3 $ — $ 339.7 $ ( 0.9 ) $ 338.8

The accompanying notes are an integral part of the condensed consolidated financial statements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2023 2022

9 unchanged sentences

Amortization of operating lease assets 2.2 1.3

Gain on Calder land sale ( 274.6 ) —

Gain on sale of Arlington ( 114.0 ) —

Other 0.8 1.2

7 unchanged sentences

Capital project expenditures ( 122.9 ) ( 45.5 )

Acquisition of businesses, net of cash acquired ( 81.7 ) —

Acquisition of gaming rights, net of cash acquired ( 33.3 ) —

Proceeds from Calder land sale 279.0 —

Proceeds from sale of Arlington 195.7 —

Other ( 6.5 ) ( 7.3 )

Net cash used in investing activities ( 107.0 ) ( 55.2 )

Net cash provided by (used in) investing activities 54.5 ( 62.8 )

Cash flows from financing activities:

7 unchanged sentences

Other ( 0.5 ) ( 0.1 )

Net cash provided by financing activities 1,020.1 53.5

Cash flows from discontinued operations:

Operating activities of discontinued operations — ( 124.0 )

Net cash used in financing activities ( 237.7 ) ( 68.0 )

Net increase in cash, cash equivalents and restricted cash 32.7 4.4

2 unchanged sentences

The accompanying notes are an integral part of the condensed consolidated financial statements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2023 2022

4 unchanged sentences

Schedule of non-cash operating, investing and financing activities:

Deferred payment on gaming rights included in other liabilities $ 50.0 $ —

Property and equipment additions included in accounts payable and accrued expenses $ 54.2 $ 29.9

Debt issuance costs included in accrued expense and other current liabilities 0.7 3.2

Right-of-use assets obtained in exchange for lease obligations in operating leases 0.5 0.9

2 unchanged sentences

The accompanying notes are an integral part of the condensed consolidated financial statements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

2 unchanged sentences

Basis of Presentation

Churchill Downs Incorporated (the "Company") financial statements are presented in conformity with the requirements of this Quarterly Report on Form 10-Q and consequently do not include all of the disclosures normally required by U.S.

Churchill Downs Incorporated (the "Company", "we", "our") financial statements are presented in conformity with the requirements of this Quarterly Report on Form 10-Q and consequently do not include all of the disclosures normally required by U.S.

generally accepted accounting principles ("GAAP") or those normally made in our Annual Report on Form 10-K.

8 unchanged sentences

We report net revenue and operating expense associated with these reportable segments in the accompanying Condensed Consolidated Statements of Comprehensive Income.

During the first quarter of 2022, we updated our operating segments to reflect the internal management reporting used by our chief operating decision maker to evaluate results of operations and to assess performance and allocate resources.

Our chief operating decision maker decided to include the results of our United Tote business in the TwinSpires segment as we evolve our strategy to integrate the United Tote offering with TwinSpires Horse Racing, which we believe will create additional business to business revenue opportunities.

Results of our United Tote business were previously included in our All Other segment.

The prior year results were reclassified to conform to this presentation.

Calder Land Sale

On June 17, 2022, the Company closed on the previously announced sale of 115.7 acres of excess land near Calder Casino for $ 291.0 million (or approximately $ 2.5 million per acre) to Link Logistics, a Blackstone portfolio company.

The Company received cash proceeds of $ 279.0 million, which was net of $ 12.0 million of transaction costs.

Refer to Note 5, Calder Land Sale, for further information on the sale.

Arlington sale

On February 15, 2023, we closed on the sale of the Arlington International Racecourse property ("Arlington") located in Arlington Heights, Illinois.

We sold 326 -acres to the Chicago Bears for $ 197.2 million.

For more information, refer to Note 4, Dispositions.

Acquisition of Peninsula Pacific Entertainment

On November 1, 2022, the Company completed the acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC ("P2E") with a base purchase price of $ 2.75 billion ("P2E Transaction") subject to working capital and other purchase price adjustments.

The P2E assets acquired included Colonial Downs Racetrack ("Colonial Downs") and six Historical Racing Machine ("HRM") entertainment venues in Virginia, del Lago Resort & Casino in New York ("del Lago"), and Hard Rock Hotel & Casino in Iowa ("Hard Rock Sioux City"), as well as the development rights for the Dumfries and Emporia HRM facilities in Virginia, up to five additional HRM entertainment venues in Virginia, and the potential for ONE Casino and Resort in Virginia in collaboration with Urban One.

Refer to Note 3, Acquisitions for further information on the transaction.

Acquisitions of Chasers Poker Room and Ellis Park

On September 2, 2022, we completed the previously announced acquisition of Chasers Poker Room ("Chasers") in Salem, New Hampshire (the "Chasers Transaction").

As part of the acquisition, we made an initial payment to the sellers for rights to operate the poker room and to build a historical racing facility.

Additional payments will be made once all necessary permits are obtained and the planned historical racing facility is opened.

On September 2, 2022, the Company completed the acquisition of Chasers Poker Room ("Chasers") in Salem, New Hampshire (the "Chasers Transaction").

As part of the transaction, we made an initial payment to the sellers for rights to operate the poker room and to build an HRM venue.

Additional payments will be made once all necessary permits are obtained, and the planned historical racing entertainment venue is opened.

The Company plans to develop an expanded charitable gaming facility in Salem to accommodate HRMs and table games.

On September 26, 2022, we completed the acquisition of Ellis Park Racing and Gaming ("Ellis Park") in Henderson, Kentucky, from Enchantment Holdings, LLC, an affiliate of Laguna Development Corporation, for total consideration of $ 79.0 million in cash, subject to certain working capital and other purchase price adjustments (the "Ellis Park Transaction").

Refer to Note 3, Acquisitions, for further information on the transactions.

Refer to Note 3, Acquisitions for further information on the transaction.

Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic.

The COVID-19 global pandemic has resulted in travel limitations and business and government shutdowns which have had significant negative economic impacts in the United States and in relation to our business.

Although vaccines are now available, we cannot predict the duration of the COVID-19 global pandemic.

The extent to which the COVID-19 pandemic, including the emergence of variant strains, will continue to impact the Company remains uncertain and will depend on many factors that are not within our control.

We will continue to monitor for new developments related to the pandemic and assess these developments to maintain continuity in our operations.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

Exit of the Direct Online Sports and Casino Business

The Company has exited the direct online Sports and Casino business in every state except for Arizona.

The Company plans to maintain its retail Sports operations and has monetized two of its online market access licenses.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Exit of the Direct Online Sports and Casino Business

On February 24, 2022 the Company announced plans to exit the direct online sports and casino business.

The Company will maintain its retail Sports operations and pursue monetization of its online market access licenses.

RECENT ACCOUNTING PRONOUNCEMENTS

1 unchanged sentence

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, and simplifies the accounting for transitioning from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.

The guidance was effective upon issuance and if elected, will be applied prospectively through December 31, 2022.

We are currently evaluating the effect the adoption of this new accounting standard will have on our results of operations, financial condition, and cash flows.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, and to simplify the accounting for transitioning from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates.

The guidance was effective upon issuance.

In December 2022, the FASB deferred the date for which this guidance can be applied from December 31, 2022 to December 31, 2024.

The use of LIBOR was phased out at the end of 2021, although the phase-out of U.S.

dollar LIBOR for existing agreements has been delayed until June 2023.

The Company will complete the transition of its financing from LIBOR to the Secured Overnight Financing Rate ("SOFR") by June 30, 2023.

These transition activities will not have a material impact on the Company’s financial statements.

Chasers Poker Room

On September 2, 2022, the Company completed the Chasers Transaction which was treated as an asset acquisition.

The Company made an initial payment at closing and recorded a liability for the remaining due at a future date.

On September 2, 2022, the Company completed the Chasers Transaction which was treated as an asset acquisition because substantially all the value of the gross assets acquired was concentrated in the gaming rights.

The Company made an initial payment at closing and recorded a liability for the remaining payments due on a future date.

In conjunction with the acquisition, the Company recorded an $ 82.2 million gaming rights intangible asset which represented its fair value at the date of acquisition.

The fair value of the gaming rights acquired in the Chasers Transaction was determined using the Greenfield Method, which is an income approach methodology that calculates the present value of the gaming rights intangible asset based on a projected cash flow stream.

This method assumes that the gaming rights intangible asset provides the opportunity to develop a gaming facility in a specified region, and that the present value of the projected cash flows is a result of the realization of advantages contained in these rights.

This method assumes that the gaming rights intangible asset provides the opportunity to develop a gaming or historical racing facility in a specified region, and that the present value of the projected cash flows is a result of the realization of advantages contained in these rights.

Under this methodology, the acquirer is expected to absorb all start-up costs, as well as incur all expenses pertaining to the acquisition and/or the creation of all tangible and intangible assets.

4 unchanged sentences

Estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period up to one year from the acquisition date.

The areas of the preliminary valuations that are not yet finalized relate to the amounts for income taxes, intangible assets, working capital adjustments, and the final amount of residual goodwill.

The Company expects to continue to obtain information to assist in determining the fair values of the net assets acquired at the acquisition date during the measurement period.

The areas of the preliminary valuations that are not yet finalized relate to the amounts for income taxes, working capital adjustments and the final amount of residual goodwill.

The Company expects to continue to obtain information to assist in determining fair values of net assets acquired at the acquisition date during the measurement period.

The preliminary fair values of the assets acquired and liabilities assumed, net of cash acquired of $ 1.4 million, at the date of acquisition were as follows:

property and equipment of $ 19.3 million, indefinite-lived gaming rights of $ 47.4 million, indefinite-lived trademark of $ 3.6 million, goodwill of $ 8.9 million, right-of-use assets and liabilities of $ 6.0 million and net working capital of $ 2.5 million.

The Company has not included other disclosures regarding the Chasers Transaction or Ellis Park Transaction because the acquisitions are immaterial to our business.

NATURAL DISASTER

In August 2021, Hurricane Ida caused damage to portions of Louisiana, including Fair Grounds Race Course & Slots, and 15 off-track betting facilities ("OTBs") owned by Video Services, LLC ("VSI") (collectively, "Fair Grounds and VSI").

Two OTBs remain closed.

The Company carries property and casualty insurance, as well as business interruption insurance subject to certain deductibles.

During the nine months ended September 30, 2022, the Company incurred $ 2.3 million of operating expenses related to ongoing recovery and maintenance efforts and received $ 8.0 million from our insurance carriers.

The Company has also recorded an insurance recovery receivable of $ 1.0 million.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

property and equipment of $ 19.3 million, indefinite-lived gaming rights of $ 47.4 million, indefinite-lived trademark of $ 3.6 million, goodwill of $ 9.5 million, and net working capital of $ 1.3 million.

The Company has not included other disclosures regarding the Chasers or Ellis Park Transactions as these transactions are immaterial to our business.

P2E Transaction

On November 1, 2022, the Company completed the acquisition of substantially all the ass ets of P2E for preliminary purchase consideration of $ 2,835.9 million, net of cash acquired.

The P2E assets acquired included Colonial Downs and six HRM entertainment venues in Virginia, del Lago in New York, and Hard Rock Sioux City in Iowa, as well as the development rights for Dumfries and Emporia HRM facilities in Virginia, up to five additional HRM entertainment venues in Virginia, and the potential for ONE Casino & Resort in Virginia in collaboration with Urban One.

The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed, net of cash acquired of $ 126.4 million, as of November 1, 2022:

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

In total, the Company has received $ 10.7 million from our insurance carriers which includes $ 4.1 million related to business interruption claims.

The proceeds from the business interruption claims are included in other income in the Condensed Consolidated Statement of Comprehensive Income.

The Company is currently working with its insurance carriers to finalize its claim and we currently do not expect our losses to exceed the applicable insurance recoveries.

CALDER LAND SALE

The Company received cash proceeds of $ 279.0 million which was net of $ 12.0 million of transaction costs.

We recognized a gain of $ 274.6 million on the sale of the land, which is included in other income in the accompanying Condensed Consolidated Statements of Comprehensive Income.

The gain consisted of cash proceeds of $ 279.0 million offset by the carrying value of the assets sold of $ 4.4 million.

The Company is planning on using certain proceeds of the sale to purchase property as part of the previously announced acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC (the "P2E Transaction") and to invest in other replacement properties that qualify as Internal Revenue Code §1031 transactions to defer the federal income tax on the gain on the Calder land sale.

The Company has identified two reverse like-kind transactions for property acquired prior to the sale of the Calder land and a forward like-kind exchange transaction to acquire additional property for the Internal Revenue Code §1031 transactions.

The Company is utilizing a qualified intermediary to facilitate these transactions.

The proceeds from the sale have been transferred to the qualified intermediary and are classified as restricted cash on the Condensed Consolidated Balance Sheet.

The funds will remain with the qualified intermediary and will be released:

(i) if the funds are utilized as part of a like-kind exchange agreement, (ii) if the Company does not identify a suitable replacement property within 45 days after the agreement date, or (iii) when a like-kind exchange agreement is not completed within the allowable time period.

The Company has completed one reverse like-kind exchange in June 2022 involving our $ 9.9 million investment in real property for the Derby City Gaming Downtown facility in Louisville, Kentucky.

The second reverse like-kind exchange will involve our investment in real property for the Queen of Terre Haute Casino Resort ("Queen of Terre Haute") property in Terre Haute, Indiana.

An exchange accommodation titleholder (“EAT”), a type of variable interest entity, was used to facilitate this reverse like-kind exchange.

As of September 30, 2022, $ 22.1 million had been invested in real property for the Queen of Terre Haute which will be held by the EAT until the exchange transaction is complete.

The Company determined that it is the primary beneficiary of the EAT, thus the property held by the EAT has been consolidated and recorded in property and equipment, net on the Condensed Consolidated Balance Sheet.

The Company plans to make additional investments in real property for the Queen of Terre Haute and expects to complete this reverse like-kind exchange in the fourth quarter of 2022.

The Company is planning on utilizing the remainder of the proceeds from the Calder land sale to execute a forward like-kind exchange transaction by purchasing property as part of the previously announced P2E Transaction.

The Company anticipates closing the P2E Transaction prior to the end of 2022.

If the acquisition of replacement property is not completed within 180 days of the Calder land sale, the proceeds will be distributed to the Company by the qualified intermediary and reclassified as available cash, and all applicable income taxes will be assessed on the remaining gain that was not deferred by acquiring replacement property.

As of September 30, 2022, the Company recorded $ 78.0 million in current income taxes payable related to the Calder land sale.

Upon completion of the P2E Transaction, the current tax liability will be reclassified as a deferred tax liability on the Condensed Consolidated Balance Sheet.

As of December 31, 2021, the assets sold as part of the Calder land sale were classified as held for sale on the accompanying Condensed Consolidated Balance Sheets.

Calder's operations and assets are included in the Gaming segment in our consolidated results.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

(in millions) Total

Accounts receivable, net $ 9.8

Other current assets 7.2

Property and equipment 611.2

Goodwill 347.8

Other intangible assets 1,941.5

Deferred taxes 20.8

Other assets 16.0

Total assets acquired $ 2,954.3

Accounts payable 4.0

Accrued expenses and other current liabilities 96.9

Other liabilities assumed 17.5

Total liabilities assumed $ 118.4

Net assets acquired (net of cash) $ 2,835.9

The fair value of the intangible assets consists of the following:

(in millions) Fair Value Recognized

Gaming rights $ 1,865.6

Trademark 75.9

Total intangible assets $ 1,941.5

Current assets and current liabilities were valued at the existing carrying values, as these items are short term in nature and represent management's estimated fair value of the respective items at November 1, 2022.

The property and equipment acquired primarily relates to land, buildings, equipment, and furniture and fixtures.

The fair value of the land was determined using the market approach and the fair values of the remaining property and equipment were primarily determined using the cost replacement method which is based on replacement or reproduction costs of the assets.

The fair value of the gaming rights was determined using the Greenfield Method, which is an income approach methodology that calculates the present value of the overall business enterprise based on a projected cash flow stream.

This method assumes that the gaming rights intangible assets provide the opportunity to develop a casino or historical racing facility in a specified region, and that the present value of the projected cash flows are a result of the realization of advantages contained in these rights.

Under this methodology, the acquirer is expected to absorb all start-up costs, as well as incur all expenses pertaining to the acquisition and/or the creation of all tangible and intangible assets.

The estimated future revenue and operating expenses, start-up costs, and discount rates were the primary assumptions and estimates in the valuation of the gaming rights.

The gaming rights intangible assets were assigned an indefinite useful life based on the Company's expected use of the assets and determination that no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of the gaming rights.

The trademark intangible assets were valued using the relief-from-royalty method of the income approach, which estimates the fair value of the intangible assets by discounting the fair value of the hypothetical royalty payments a market participant would be willing to pay to enjoy the benefits of the assets.

The estimated future revenue, royalty rates, and discount rates were the primary assumptions and estimates in the valuation of the trademarks.

The trademarks were assigned an indefinite useful life based on the Company’s intention to keep the trademarks for an indefinite period of time.

Goodwill of $ 347.8 million was recognized due to the expected contribution of P2E to the Company's overall business strategy.

The goodwill was assigned to the Gaming segment in the amount of $ 129.1 million and to the Live and Historical Racing segment in the amount of $ 218.7 million and is mostly deductible for tax purposes.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Discontinued Operations

On January 9, 2018, the Company completed the sale of its mobile gaming subsidiary, Big Fish Games, Inc.

("Big Fish Games").

The Big Fish Games business met the criteria for discontinued operation presentation.

The Condensed Consolidated Statements of Cash Flows reflect Big Fish Games as discontinued operations for all periods presented.

The Company previously reported combined continuing and discontinued operations in our Condensed Consolidated Statement of Cash Flows.

The Company now separates continuing from discontinued operations in our Condensed Consolidated Statement of Cash Flows.

The prior year results were reclassified to conform to the current period presentation.

On May 22, 2020, we entered into an agreement in principle to settle Cheryl Kater v.

Churchill Downs Incorporated and Manasa Thimmegowda v.

Big Fish Games, Inc.

The $ 124.0 million settlement was paid on March 25, 2021.

Assets Held for Sale

On September 29, 2021, the Company announced an agreement to sell the 326 -acre property in Arlington Heights, Illinois (the "Arlington Property"), to the Chicago Bears for $ 197.2 million.

The closing of the sale of the Arlington Property is subject to the satisfaction of various closing conditions and the Company anticipates closing the sale of the Arlington Property in the first quarter of 2023.

The Company has classified certain assets of Arlington International Racecourse ("Arlington") as held for sale totaling $ 82.0 million as of September 30, 2022 and $ 81.5 million as of December 31, 2021, on the accompanying Condensed Consolidated Balance Sheets.

Estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period up to one year from the acquisition date.

The preliminary purchase consideration is subject to adjustment upon finalization of customary post-closing adjustments related to working capital.

The primary areas of the preliminary valuation that are not yet finalized relate to the fair values of amounts for income taxes, property and equipment, intangible assets, adjustments to working capital, and the final amount of residual goodwill.

The Company expects to continue to obtain information to assist in determining fair values of net assets acquired at the acquisition date during the measurement period.

The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the P2E Transaction had occurred as of January 1, 2021.

The unaudited pro forma financial information is not necessarily indicative of either future results of operations or results of operations that might have been achieved had the acquisition been consummated as of January 1, 2021.

(in millions) Three months ended March 31, 2022

Net revenue $ 512.9

Net income $ 41.3

2023 Disposition

On February 15, 2023, we closed on the sale of the Arlington property in Arlington Heights, Illinois, to the Chicago Bears for $ 197.2 million.

We received net proceeds of $ 195.7 million for the 326 -acres and recognized a gain of $ 114.0 million on the sale, which is included in other income in the accompanying Condensed Consolidated Statements of Comprehensive Income.

The Company has classified certain assets of Arlington totaling $ 82.0 million as held for sale as of December 31, 2022 on the accompanying Condensed Consolidated Balance Sheets.

Arlington’s operations and assets are included in All Other in our consolidated results.

The Company executed a forward like-kind exchange transaction by purchasing certain property as part of the P2E Transaction for $ 197.2 million, which qualified as an Internal Revenue Code §1031 transaction.

An exchange accommodation titleholder ("EAT"), a type of variable interest entity, was used to facilitate this reverse like-kind exchange.

The Company determined that it is the primary beneficiary of the EAT, thus the property held by the EAT has been consolidated and recorded in Property and equipment, net on the Condensed Consolidated Balance Sheets.

As of March 31, 2023, the Company recorded a $ 27.8 million deferred tax liability related to the Arlington sale on the Condensed Consolidated Balance Sheets.

GOODWILL AND OTHER INTANGIBLE ASSETS

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Balances as of December 31, 2022 $ 280.3 $ 152.2 $ 290.3 $ 1.0 $ 723.8

Additions 8.9 — — — 8.9

Balances as of September 30, 2022 $ 61.4 $ 152.2 $ 161.1 $ 1.0 $ 375.7

We established goodwill of $ 8.9 million related to the Ellis Park Transaction.

We performed our annual goodwill impairment analysis as of April 1, 2022, and no adjustment to the carrying value of goodwill was required.

We assessed goodwill for impairment by performing qualitative or quantitative analyses for each reporting unit.

We concluded that the fair values of our reporting units exceeded their carrying values, and therefore no impairments were identified.

Adjustments 0.3 — — — 0.3

Balances as of March 31, 2023 $ 280.6 $ 152.2 $ 290.3 $ 1.0 $ 724.1

Other intangible assets are comprised of the following:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

2 unchanged sentences

Total $ 2,390.6 $ 2,391.8

During the third quarter of 2022 we established indefinite-lived intangible assets of $ 82.2 million for the gaming rights related to the Chasers Transaction and $ 47.4 million for gaming rights and $ 3.6 million for trademarks related to the Ellis Park Transaction.

We also recorded $ 5.0 million for gaming rights in Indiana associated with the planned development of the Queen of Terre Haute Casino Resort during the second quarter of 2022.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

We performed our annual indefinite-lived intangible assets impairment analysis as of April 1, 2022.

We assessed our indefinite-lived intangible assets for impairment by performing qualitative or quantitative analyses for each asset.

Based on the results of these analyses, no indefinite-lived intangible asset impairments were identified in connection with our annual impairment testing.

The Company continues to monitor the current economic conditions and the impacts on the results of operations.

Future economic conditions could have a negative impact on the estimates and assumptions utilized in our indefinite-lived intangible asset impairment assessments.

These potential impacts could increase the risk of a future impairment of indefinite-lived intangible assets at Presque Isle Downs and Casin o.

ASSET IMPAIRMENTS

On February 24, 2022, the Company announced plans to exit the direct online sports and casino business.

The Company will maintain its retail Sports operations and pursue monetization of its online market access licenses.

During the quarter ended March 31, 2022, the Company evaluated whether this planned exit would indicate it is more likely than not that any of the Company’s intangible assets, long-lived assets, current assets or property and equipment, were impaired (“Trigger Event”).

Based on the Company’s evaluation, the Company concluded that a Trigger Event occurred related to certain TwinSpires assets.

As a result, the Company recorded a $ 4.9 million non-cash impairment charge related to certain assets in the TwinSpires segment.

During the quarter ended June 30, 2021, the Company recorded an $ 11.2 million non-cash impairment charge related to certain assets at Churchill Downs Racetrack included in our Live and Historical Racing segment.

The impairment was due to a change in the Churchill Downs Racetrack capital plans and the Company's planned usage of these assets.

The Company’s effective income tax rate for the three months ended September 30, 2022 was higher than the U.S.

federal statutory rate of 21.0% primarily resulting from state income taxes and non-deductible officer’s compensation, partially offset by tax benefits resulting from certain tax credits and incentives.

The Company's effective income tax rate for the nine months ended September 30, 2022 was higher than the U.S.

The Company’s effective income tax rate for the three months ended March 31, 2023 was higher than the U.S.

federal statutory rate of 21.0% primarily resulting from state income taxes and non-deductible officer’s compensation.

The Company's effective income tax rate for the three and nine months ended September 30, 2021 was higher than the U.S.

The Company’s effective income tax rate for the three months ended March 31, 2022 was higher than the U.S.

federal statutory rate of 21.0% primarily resulting from state income taxes and non-deductible officer’s compensation.

This expense was partially offset by tax benefits resulting from year-to-date tax deductions from vesting of restricted stock compensation in excess of book deductions.

SHAREHOLDERS’ EQUITY

6 unchanged sentences

The repurchase program has no time limit and may be suspended or discontinued at any time.

We had approximately $ 300.2 million of repurchase authority remaining under the 2021 Stock Repurchase Program at September 30, 2022, based on trade date.

We repurchased the following shares under the 2018 and 2021 Stock Repurchase Programs:

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Three Months Ended September 30, Nine Months Ended September 30,

We had approximately $ 270.2 million of repurchase authority remaining under the 2021 Stock Repurchase Program at March 31, 2023, based on trade date.

We repurchased the following shares under the 2021 Stock Repurchase Program:

Three Months Ended March 31,

(in millions, except share data) 2023 2022

Repurchase Program Shares Aggregate Purchase Price Shares Aggregate Purchase Price Shares Aggregate Purchase Price Shares Aggregate Purchase Price

2021 Stock Repurchase Program 288,781 $ 59.0 3,178 $ 0.8 727,198 $ 145.5 3,178 $ 0.8

Repurchase Program Shares Aggregate Purchase Price Shares Aggregate Purchase Price

2021 Stock Repurchase Program — $ — 116,863 $ 25.0

Total 288,781 $ 59.0 248,310 $ 50.0 727,198 $ 145.5 248,310 $ 50.0

As of September 30, 2022, we had $ 2.0 million accrued for the future cash settlement of executed repurchases of our common stock and a $ 1.5 million accrual as of September 30, 2021.

The Duchossois Group Share Repurchase

On February 1, 2021, the Company entered into an agreement (the "Stock Repurchase Agreement") with an affiliate of The Duchossois Group, Inc.

("TDG") to repurchase 1,000,000 shares of the Company’s common stock for $ 193.94 per share in a privately negotiated transaction for an aggregate purchase price of $ 193.9 million.

The repurchase of shares of common stock from TDG pursuant to the Stock Repurchase Agreement was approved by the Company's Board of Directors separately from, and did not reduce the authorized amount remaining under, the existing common stock repurchase program.

STOCK-BASED COMPENSATION PLANS

We have stock-based employee compensation plans with awards outstanding under the Churchill Downs Incorporated 2016 Omnibus Stock Incentive Plan (the "2016 Plan") and the Executive Long-Term Incentive Compensation Plan, which was adopted pursuant to the 2016 Plan.

Our total stock-based compensation expense, which includes expenses related to restricted stock awards, restricted stock unit awards ("RSUs"), performance share unit awards, and stock options associated with our employee stock purchase plan was $ 9.1 million for the three months ended September 30, 2022 and $ 7.8 million for the three months ended September 30, 2021.

Stock-based compensation was $ 23.5 million for the nine months ended September 30, 2022 and $ 20.4 million for the nine months ended September 30, 2021.

During the nine months ended September 30, 2022, the Company awarded RSUs to employees, RSUs and PSUs to certain named executive officers ("NEOs"), and RSUs to directors.

Our total stock-based compensation expense, which includes expenses related to restricted stock awards, restricted stock unit awards ("RSUs"), performance share unit awards ("PSUs"), and stock options associated with our employee stock purchase plan was $ 8.6 million for the three months ended March 31, 2023 and $ 7.0 million for the three months ended March 31, 2022.

During the three months ended March 31, 2023, the Company awarded RSUs to employees, RSUs and PSUs to certain named executive officers ("NEOs"), and RSUs to directors.

The vesting criteria for the PSU awards granted in 2023 were based on a three-year service period with two performance conditions and a market condition related to relative total shareholder return ("TSR") consistent with prior year grants.

2 unchanged sentences

The PSUs are converted into shares of our common stock at the time the PSU award value is finalized.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

A summary of the RSUs and PSUs granted during 2023 is presented below (units in thousands):

3 unchanged sentences

2023 PSU 31 Three -year performance and service period ending in 2025

2022 RSU 5 One year service period ending in 2023

(1) PSUs reflect the target number of units for the original PSU grant.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

The following table presents our total debt outstanding:

(in millions) March 31, 2023 December 31, 2022

Term Loan B due 2024 $ 379.0 $ 380.0

Term Loan B-1 due 2028 294.0 294.7

Term Loan A due 2027 1,283.8 800.0

Revolver — 664.1

2027 Senior Notes 600.0 600.0

2028 Senior Notes 700.0 700.0

2030 Senior Notes 1,200.0 1,200.0

Total debt 4,456.8 4,638.8

Current maturities of long-term debt ( 72.0 ) ( 47.0 )

Unamortized premium and deferred finance charges ( 34.1 ) ( 33.1 )

Total debt, net of current maturities and costs $ 4,350.7 $ 4,558.7

Credit Agreement

On December 27, 2017, we entered into a senior secured credit agreement (as amended, the "Credit Agreement") with a syndicate of lenders.

The Credit Agreement provided for a $ 700.0 million senior secured revolving credit facility due 2024 (the "Revolver") and a $ 400.0 million senior secured term loan B due 2024 (the "Term Loan B").

Included in the maximum borrowing of $ 700.0 million under the Revolver was a letter of credit sub facility not to exceed $ 50.0 million and a swing line commitment up to a maximum principal amount of $ 50.0 million.

The Credit Agreement is collateralized by substantially all of the wholly-owned assets of the Company.

On April 28, 2020, the Company entered into the Second Amendment to the Credit Agreement, which (i) provided for a financial covenant relief period through the date on which the Company delivered the Company's quarterly financial statements and compliance certificate for the fiscal quarter ended June 30, 2021, subject to certain exceptions (the "Financial Covenant Relief Period"), (ii) amended the definition of "Consolidated EBITDA" in the Credit Agreement with respect to the calculation of Consolidated EBITDA for the first two fiscal quarters after the termination of the Financial Covenant Relief Period, (iii) extended certain deadlines and made certain other amendments to the Company’s financial reporting obligations, (iv) placed certain restrictions on restricted payments during the Financial Covenant Relief Period, and (v) amended the definitions of "Material Adverse Effect" and "License Revocation" in the Credit Agreement to take into consideration COVID-19.

On February 1, 2021, the Company entered into the Third Amendment to the Credit Agreement to increase the restricted payments capacity during the Financial Covenant Relief Period from $ 26.0 million to $ 226.0 million to accommodate a share repurchase from an affiliate of TDG.

Refer to Note 10, Shareholders' Equity, for information regarding this transaction.

On March 17, 2021, the Company entered into the Incremental Joinder Agreement No.

1 (the "Joinder") to its Credit Agreement which provided $ 300.0 million in New Term Loan Commitments ("Term Loan B-1") as a new tranche of term loans under the existing Credit Agreement (as conformed to recognize the new loan), and carries a maturity date of March 17, 2028.

The Term Loan B-1 bears interest at LIBOR plus 200 basis points and requires quarterly payments of 0.25 % of the original $ 300.0 million balance.

The Term Loan B-1 may be subject to additional mandatory prepayment from excess cash flow on an annual basis per the provisions of the Credit Agreement.

The Company capitalized $ 3.5 million of debt issuance costs associated with the Joinder which are being amortized as interest expense over the 7-year term of the Term Loan B-1.

On April 13, 2022, the Company entered into the Fourth Amendment to the Credit Agreement (the "Fourth Amendment") to extend the maturity date of its existing revolving credit facility to April 13, 2027, to increase the commitments under the existing revolving credit facility from $ 700.0 million to $ 1.2 billion, and to increase the swing line commitment from $ 50.0 million to $ 100.0 million.

The Fourth Amendment also provides for a senior secured Delayed Draw Term Loan A credit facility due April 13, 2027 in the amount of $ 800.0 million which is part of the financing for the P2E Transaction.

The Company capitalized $ 2.8 million of debt issuance costs associated with the Revolver commitment increase and $ 5.8 million of debt issuance costs associated with the Delayed Draw Term Loan A which are being amortized as interest expense over the 5-year term.

The Revolver and Delayed Draw Term Loan A bear interest at SOFR plus 10 basis points, plus a variable applicable margin which is determined by the Company's net leverage ratio.

As of September 30, 2022, that applicable margin was 137.5 basis points which was based on the pricing grid in the Fourth Amendment to the Credit Agreement.

At March 31, 2023, the Company’s senior secured credit facility (as amended from time to time, the “Credit Agreement") consisted of a $ 1.2 billion revolving credit facility (the "Revolver"), $ 400.0 million senior secured term loan B due 2024 (the "Term Loan B"), $ 300.0 million senior secured term loan B-1 due 2028 (the "Term Loan B-1"), $ 1.3 billion senior secured term loan A due 2027 (the "Term Loan A"), and $ 100.0 million swing line commitment.

Certain amendments to the Credit Agreement entered into during 2022 and 2023, respectively, are described below.

On April 13, 2022, we amended the Credit Agreement to extend the maturity date of its Revolver to April 13, 2027, to increase the commitments under the existing revolving credit facility from $ 700.0 million to $ 1.2 billion, and to increase the swing line commitment from $ 50.0 million to $ 100.0 million.

This amendment also provided for the senior secured Term Loan A due April 13, 2027 in the amount of $ 800.0 million, which was drawn on November 1, 2022 as part of the financing for the P2E Transaction.

Refer to Note 3, Acquisitions for more information regarding the P2E Transaction.

The Company capitalized $ 3.2 million of debt issuance costs associated with the Revolver commitment increase and $ 6.4 million of debt issuance costs associated with the Term Loan A which are being amortized as interest expense over the 5-year term.

On February 24, 2023, we amended our Credit Agreement to increase the loans under the existing Term Loan A due 2027 from $ 800.0 million to $ 1.3 billion and made certain other changes to the existing credit agreement.

The Company used the net proceeds from the borrowings under the increased Term Loan A to repay outstanding loans under its Revolver, pay related transaction fees and expenses and for general corporate purposes.

The Company capitalized $ 2.5 million of debt issuance costs associated with the increased Term Loan A which are being amortized as interest expense over the remainder of the 5-year term.

The Company is required to pay a commitment fee on the unused portion of the Revolver as determined by a pricing grid based on the consolidated total net secured leverage ratio of the Company.

For the period ended March 31, 2023, the Company's commitment fee rate was 0.25 %.

The Revolver and Term Loan A bear interest at SOFR plus 10 basis points, plus a variable applicable margin which is determined by the Company's net leverage ratio.

As of March 31, 2023, that applicable margin was 150 basis points.

The Term Loan B and Term Loan B-1 bear interest at LIBOR plus 200 basis points.

On September 26, 2022, we borrowed $ 20.0 million on our Revolver to provide the Company with financing for the Chasers Transaction and the Ellis Park Transaction.

The Company was compliant with all applicable covenants on September 30, 2022.

2028 Senior Notes Second Supplemental Indenture

On March 17, 2021, the Company completed an offering of $ 200.0 million in aggregate principal amount of 4.75 % Senior Unsecured Notes that mature on January 15, 2028 (the "Additional 2028 Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S.

persons in accordance with Regulation S under the Securities Act.

The Additional 2028 Notes were offered under the indenture dated as of December 27, 2017, governing the $ 500.0 million aggregate principal amount of 4.75 % Senior Unsecured Notes due 2028 ("Existing 2028 Notes") and form a part of the same series for purposes of the indenture.

In connection with the offering, we capitalized $ 3.4 million of debt issuance costs which are being amortized as interest expense over the term of the Additional

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Upon completion of this offering, the aggregate principal amount outstanding of the Existing 2028 Notes, together with the Additional 2028 Notes (collectively the "2028 Senior Notes"), is $ 700.0 million.

The Additional 2028 Notes were issued at 103.25 % of the principal amount, plus interest deemed to have accrued from January 15, 2021, with interest payable on January 15 th and July 15 th of each year, commencing on July 15, 2021.

The 2028 Senior Notes will vote as one class under the indenture governing the 2028 Senior Notes.

The 3.25 % premium will be amortized through interest expense, net over the term of the Additional 2028 Notes.

The Company used the net proceeds from the Additional 2028 Notes and the Term Loan B-1 (i) to repay indebtedness outstanding under our Revolving Credit Facility, (ii) to fund related transaction fees and expenses and (iii) for working capital and other general corporate purposes.

The Company may redeem some or all of the Additional 2028 Notes at any time at redemption prices set forth in the 2028 Offering Memorandum.

In connection with the issuance of the Additional 2028 Notes, the Company and the 2028 Guarantors entered into a Registration Rights Agreement to register any 2028 Senior Notes under the Securities Act for resale that are not freely tradable 366 days from March 17, 2021.

The phase-out of LIBOR in existing debt agreements is set for June 30, 2023.

The Credit Agreement includes a general process for establishing an alternative reference rate to the extent LIBOR is phased out.

The Company will complete the transition of its financing from LIBOR to SOFR by June 30, 2023.

These transition activities will not have a material impact on the Company’s financial statements.

2027 Senior Notes

On April 13, 2022, CDI Escrow Issuer, Inc.

(the "Escrow Issuer"), a wholly-owned subsidiary of the Company, completed an offering of $ 1.2 billion in aggregate principal amount of 5.75 % Senior Unsecured Notes that mature on April 13, 2030 (the "2030 Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S.

persons in accordance with Regulation S under the Securities Act.

The offering of the 2030 Notes is part of the financing for the P2E Transaction.

The proceeds of the offering were placed in escrow pending satisfaction of certain conditions, including, without limitation, the consummation of the P2E Transaction.

In connection with the offering, we capitalized $ 4.3 million of debt issuance costs which are being amortized as interest expense over the term of the 2030 Notes.

Upon completion of this offering, the aggregate principal amount outstanding in escrow of the 2030 Notes is $ 1.2 billion.

The cash held in escrow is invested in money market accounts and included in restricted cash in the Condensed Consolidated Balance Sheet.

The 2030 Notes were issued at 100% of the principal amount, plus interest deemed to have accrued from April 13, 2022, with interest payable in arrears on April 1 and October 1 of each year, commencing on October 1, 2022.

The 2030 Notes will vote as one class under the indenture governing the 2030 Senior Notes.

The Escrow Issuer may redeem some or all of the 2030 Notes at any time prior to April 1, 2025, at redemption prices set forth in the 2030 Offering Memorandum.

In connection with the issuance of the 2030 Notes, the Escrow Issuer and the guarantors of the 2030 Notes entered into a Registration Rights Agreement to register any 2030 Notes under the Securities Act for resale that are not freely tradable 366 days from April 13, 2022.

As of March 31, 2023, we had $ 600.0 million in aggregate principal amount of 5.500 % senior unsecured notes that mature on April 1, 2027 (the "2027 Senior Notes").

The 2027 Senior Notes were issued at par in a private offering to qualified institutional buyers, with interest payable in arrears on April 1st and October 1st of each year, commencing on October 1, 2019.

The Company may redeem some or all of the 2027 Senior Notes at redemption prices set forth in the 2027 Indenture.

2028 Senior Notes

As of March 31, 2023, we had a total of $ 700.0 million in aggregate principal amount of 4.750 % senior unsecured notes (collectively, the “2028 Senior Notes”) maturing on January 15, 2028.

The 2028 Senior Notes consist of $ 500.0 million notes issued at par and $ 200.0 million notes issued at 103.25 %.

The 2028 Senior Notes were issued in a private offering to qualified institutional buyers, with interest payable in arrears on January 15th and July 15th of each year, commencing on July 15, 2018.

The 3.25 % premium is being amortized through interest expense, net over the term of the notes.

The Company may redeem some or all the 2028 Senior Notes at redemption prices set forth in the 2028 Indenture.

2030 Senior Notes

As of March 31, 2023, we had $ 1.2 billion in aggregate principal amount of 5.750 % senior unsecured notes that mature on April 13, 2030 (the "2030 Senior Notes").

The 2030 Senior Notes were issued at par in a private offering to qualified institutional buyers, with interest payable in arrears on April 1st and October 1st of each year, commencing on October 1, 2022.

In connection with the offering, we capitalized $ 18.3 million of debt issuance costs which are being amortized as interest expense over the term of the 2030 Senior Notes.

The Company held the net proceeds of this transaction of $ 1.2 billion in escrow until the proceeds were utilized to complete the P2E Transaction on November 1, 2022.

The Company may redeem some or all the 2030 Senior Notes at redemption prices set forth in the 2030 Indenture.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Performance Obligations

As of September 30, 2022, our Live and Historical Racing segment had remaining performance obligations on contracts with a duration greater than one year relating to television rights, sponsorships, personal seat licenses, and admissions, with an aggregate transaction price of $ 79.1 million.

As of March 31, 2023, our Live and Historical Racing segment had remaining performance obligations on contracts with a duration greater than one year relating to television rights, sponsorships, personal seat licenses, and admissions, with an aggregate transaction price of $ 172.7 million.

The revenue we expect to recognize on these remaining performance obligations is $ 50.2 million for the remainder of 2023, $ 47.5 million in 2024, $ 36.8 million in 2025, and the remainder thereafter.

As of September 30, 2022, our remaining performance obligations on contracts with a duration greater than one year in segments other than Live and Historical Racing were not material.

As of March 31, 2023, our remaining performance obligations on contracts with a duration greater than one year in segments other than Live and Historical Racing were not material.

Contract Assets and Contract Liabilities

As of September 30, 2022 and December 31, 2021, contract assets were not material.

As of September 30, 2022 and December 31, 2021, contract liabilities were $ 30.4 million and $ 64.9 million, respectively, which are included in current deferred revenue, non-current deferred revenue, and accrued expense in the accompanying Condensed Consolidated Balance Sheets.

Contract liabilities primarily relate to the Live and Historical Racing segment and the decrease was primarily due to revenue recognized for fulfilled performance obligations.

We recognized $ 1.3 million of revenue during the three months ended September 30, 2022 and $ 48.1 million of revenue during the nine months ended September 30,

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

2022, which was included in the contract liabilities balance at December 31, 2021.

We recognized $ 1.2 million of revenue during the three months ended September 30, 2021 and $ 32.6 million of revenue during the nine months ended September 30, 2021, which was included in the contract liabilities balance at December 31, 2020.

As of March 31, 2023 and December 31, 2022, contract assets were not material.

As of March 31, 2023 and December 31, 2022, contract liabilities were $ 140.7 million and $ 58.7 million, respectively, which are included in current deferred revenue, non-current deferred revenue, and accrued expense in the accompanying Condensed Consolidated Balance Sheets.

Contract liabilities primarily relate to the Live and Historical Racing segment and the increase was primarily due to cash payments received for unfulfilled performance obligations.

We recognized $ 3.6 million of revenue during the three months ended March 31, 2023, which was included in the contract liabilities balance at December 31, 2022.

We recognized $ 3.2 million of revenue during the three months ended March 31, 2022, which was included in the contract liabilities balance at December 31, 2021.

Disaggregation of Revenue

In Note 19, Segment Information, the Company has included its disaggregated revenue disclosures as follows:

• For the Live and Historical Racing segment, revenue is disaggregated between racing facilities and HRM facilities given that our racing facilities revenues primarily revolve around live racing events while our HRM facilities revenues primarily revolve around historical racing events.

The Company has included its disaggregated revenue disclosures as follows:

• For the Live and Historical Racing segment, revenue is disaggregated between Churchill Downs Racetrack and historical racing properties given that our racing facilities revenues primarily revolve around live racing events while our historical racing properties revenues primarily revolve around historical racing.

This segment is also disaggregated by location given the geographic economic factors that affect the revenue of service offerings.

Within the Live and Historical racing segment, revenue is further disaggregated between live and simulcast racing, historical racing, racing event-related services, and other services.

• For the TwinSpires segment, revenue is disaggregated between Horse Racing and Sports and Casino given that Horse Racing revenue is primarily related to online pari-mutuel wagering on live race events while Sports and Casino revenue relates to casino gaming service offerings.

Within the TwinSpires segment, revenue is further disaggregated between live and simulcast racing, gaming, and other services.

Within the Live and

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Historical racing segment, revenue is further disaggregated between live and simulcast racing, historical racing, racing event-related services, and other services.

• For the TwinSpires segment, revenue is disaggregated between live and simulcast racing, gaming, and other services.

• For the Gaming segment, revenue is disaggregated by location given the geographic economic factors that affect the revenue of gaming service offerings.

Within the Gaming segment, revenue is further disaggregated between live and simulcast racing, historical racing, racing event-related services, gaming, and other services.

Within the Gaming segment, revenue is further disaggregated between live and simulcast racing, racing event-related services, gaming, and other services.

We believe that these disclosures depict how the amount, nature, timing, and uncertainty of cash flows are affected by economic factors.

The tables below present net revenue from external customers and intercompany revenue from each of our segments:

Three Months Ended March 31,

(in millions) 2023 2022

Net revenue from external customers:

Live and Historical Racing:

Churchill Downs Racetrack $ 2.4 $ 2.0

Louisville 44.0 42.8

Northern Kentucky 26.3 10.8

Southwestern Kentucky 36.5 30.4

Western Kentucky 4.8 —

Virginia 97.7 —

New Hampshire 2.7 —

Total Live and Historical Racing $ 214.4 $ 86.0

$ 94.8 $ 100.3

Florida $ 26.1 $ 27.0

Louisiana 44.1 41.5

Maine 27.7 26.8

Maryland 23.3 21.3

Mississippi 27.5 27.5

New York 44.5 —

Pennsylvania 32.3 33.2

Total Gaming $ 250.0 $ 177.3

All Other 0.3 0.5

Net revenue from external customers $ 559.5 $ 364.1

Intercompany net revenues:

Live and Historical Racing $ 1.4 $ 1.2

TwinSpires 1.6 1.1

Gaming 1.5 1.9

All Other 0.2 —

Eliminations ( 4.7 ) ( 4.2 )

Intercompany net revenue $ — $ —

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Three Months Ended March 31, 2023

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

Net revenue from external customers

Live and simulcast racing $ 11.0 $ 79.4 $ 11.6 $ 102.0 $ — $ 102.0

Historical racing (a)

185.3 — 6.0 191.3 — 191.3

Racing event-related services 1.0 — 1.9 2.9 — 2.9

2.6 4.4 205.5 212.5 — 212.5

14.5 11.0 25.0 50.5 0.3 50.8

Total $ 214.4 $ 94.8 $ 250.0 $ 559.2 $ 0.3 $ 559.5

Three Months Ended March 31, 2022

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

Net revenue from external customers

Live and simulcast racing $ 5.6 $ 81.5 $ 12.9 $ 100.0 $ — $ 100.0

Historical racing (a)

73.6 — — 73.6 — 73.6

Racing event-related services 0.5 — 0.4 0.9 — 0.9

— 10.3 150.9 161.2 — 161.2

6.3 8.5 13.1 27.9 0.5 28.4

Total $ 86.0 $ 100.3 $ 177.3 $ 363.6 $ 0.5 $ 364.1

(a) Food and beverage, hotel, and other services furnished to customers for free as an inducement to wager or through the redemption of our customers' loyalty points are recorded at the estimated standalone selling prices in Other revenue with a corresponding offset recorded as a reduction in historical racing pari-mutuel revenue for HRMs or gaming revenue for our casino properties.

These amounts were $ 12.1 million for the three months ended March 31, 2023 and $ 7.0 million for the three months ended March 31, 2022.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

OTHER BALANCE SHEET ITEMS

Accounts receivable, net

Accounts receivable is comprised of the following:

(in millions) March 31, 2023 December 31, 2022

Trade receivables $ 13.2 $ 12.5

Simulcast and online wagering receivables 45.0 54.1

Other receivables 20.7 20.6

Allowance for doubtful accounts ( 4.9 ) ( 5.7 )

Total $ 74.0 $ 81.5

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:

(in millions) September 30, 2022 December 31, 2021

(in millions) March 31, 2023 December 31, 2022

Account wagering deposits liability $ 50.7 $ 57.8

Purses payable 41.7 28.6

Accrued salaries and related benefits 18.8 39.6

Purses payable 41.3 46.1

Accrued interest 58.3 47.8

Accrued fixed assets 43.6 39.5

Accrued gaming liabilities 26.5 26.3

Other 109.0 103.9

1 unchanged sentence

INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Investments in and advances to unconsolidated affiliates as of September 30, 2022 and December 31, 2021 primarily consisted of a 61.3 % interest in Rivers Casino Des Plaines ("Rivers Des Plaines"), a 50 % interest in Miami Valley Gaming and Racing ("MVG"), and other immaterial joint ventures.

Investments in and advances to unconsolidated affiliates as of March 31, 2023 and December 31, 2022 primarily consisted of a 61.3 % interest in Rivers Casino Des Plaines ("Rivers Des Plaines"), a 50 % interest in Miami Valley Gaming and Racing ("MVG"), and other immaterial joint ventures.

Rivers Des Plaines

3 unchanged sentences

As a result, we account for Rivers Des Plaines using the equity method.

As of September 30, 2022, the net aggregate basis difference between the Company’s investment in Rivers Des Plaines and the amounts of the underlying equity in net assets was $ 831.5 million.

Our investment in Rivers Des Plaines was $ 547.5 million and $ 554.8 million as of September 30, 2022 and December 31, 2021, respectively.

The Company received distributions from Rivers Des Plaines of $ 92.8 million and $ 44.5 million for the nine months ended September 30, 2022 and 2021, respectively.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

As of March 31, 2023 , the net aggregate basis difference between the Company’s investment in Rivers Des Plaines and the amounts of the underlying equity in net assets was $ 832.4 million.

Our investment in Rivers Des Plaines was $ 537.9 million and $ 544.9 million as of March 31, 2023 and December 31, 2022, respectively.

The Company received distributions from Rivers Des Plaines of $ 33.8 million and $ 30.5 million for the three months ended March 31, 2023 and 2022, respectively.

Miami Valley Gaming

1 unchanged sentence

("DNC") owns the remaining 50 % interest in MVG.

Since both we and DNC have participating rights over MVG, and both must consent to MVG's operating, investing and financing decisions, we account for MVG using the equity method.

Our investment in MVG was $ 113.4 million and $ 108.7 million as of September 30, 2022 and December 31, 2021, respectively.

The Company received distributions from MVG of $ 25.0 million and $ 33.0 million for the nine months ended September 30, 2022 and 2021, respectively.

Since both the Company and DNC have participating rights over MVG, and both must consent to MVG's operating, investing and financing decisions, we account for MVG using the equity method.

Our investment in MVG was $ 113.9 million and $ 114.4 million as of March 31, 2023 and December 31, 2022, respectively.

The Company received distributions from MVG of $ 12.0 million and $ 10.0 million for the three months ended March 31, 2023 and 2022, respectively.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Summarized Financial Results for our Unconsolidated Affiliates

Summarized below are the financial results for our unconsolidated affiliates.

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2023 2022

6 unchanged sentences

Net income $ 66.8 $ 57.8

(in millions) September 30, 2022 December 31, 2021

(in millions) March 31, 2023 December 31, 2022

Current assets $ 103.2 $ 91.0

14 unchanged sentences

Our restricted cash accounts held in money market and interest-bearing accounts qualify for Level 1 in the fair value hierarchy, which includes unadjusted quoted market prices in active markets for identical assets.

The fair value of the Company’s 2030 Senior Notes, 2028 Senior Notes, and 5.50 % Senior Notes due 2027 (the "2027 Senior Notes") are estimated based on unadjusted quoted prices for identical or similar liabilities in markets that are not active and as such are Level 2 measurements.

The fair values of the Company's Term Loan B, Term Loan B-1, and Revolver under the Credit Agreement approximate the gross carrying value of the variable rate debt and as such are Level 2 measurements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

The fair value of the Company’s 2030 Senior Notes, 2028 Senior Notes, and 2027 Senior Notes are estimated based on unadjusted quoted prices for identical or similar liabilities in markets that are not active and as such are Level 2 measurements.

The fair values of the Company's Term Loan B, Term Loan B-1, Term Loan A, and Revolver under the Credit Agreement approximate the gross carrying value of the variable rate debt and as such are Level 2 measurements.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

1 unchanged sentence

The carrying amounts and estimated fair values by input level of the Company's financial instruments are as follows:

September 30, 2022

March 31, 2023

(in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3

4 unchanged sentences

Term Loan B-1 291.0 294.0 — 294.0 —

Term Loan A 1,276.1 1,283.8 — 1,283.8 —

Revolver — — — — —

9 unchanged sentences

Term Loan B-1 291.6 294.8 — 294.8 —

Term Loan A 794.5 800.0 — 800.0 —

Revolver 664.1 664.1 — 664.1 —

2027 Senior Notes 595.3 574.5 — 574.5 —

2028 Senior Notes 698.4 626.5 — 626.5 —

2030 Senior Notes 1,183.4 1,079.4 — 1,079.4 —

CONTINGENCIES

9 unchanged sentences

Legal fees are expensed as incurred.

If the loss contingency in question is not both probable and reasonably estimable, we do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable.

In the event that a legal proceeding results in a substantial judgment against us, or settlement by us, there can be no assurance that any resulting liability or financial commitment would not have a material adverse impact on our business.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

NET INCOME PER COMMON SHARE COMPUTATIONS

The following is a reconciliation of the numerator and denominator of the net income per common share computations:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions, except per share data) 2023 2022

10 unchanged sentences

We manage our operations through three reportable segments:

Live and Historical Racing, TwinSpires, and Gaming.

Our operating segments reflect the internal management reporting used by our chief operating decision maker to evaluate results of operations and to assess performance and allocate resources.

• Live and Historical Racing

The Live and Historical Racing segment includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs Racetrack, Derby City Gaming, Oak Grove, Turfway Park, Newport, Ellis Park, and Chasers.

Churchill Downs Racetrack is the home of the Kentucky Derby and conducts live racing during the year.

Derby City Gaming is an historical racing machine ("HRM") facility that operates under the Churchill Downs pari-mutuel racing license at its ancillary training facility in Louisville, Kentucky.

Oak Grove conducts live harness racing during the year and operates a HRM facility under its pari-mutuel racing license.

Turfway Park conducts live racing during the year and opened a HRM facility in September 2022, and Newport is an ancillary HRM facility that operates under the Turfway Park pari-mutuel racing license.

Ellis Park conducts live racing during the year and operates a gaming facility venue with HRMs.

Chasers is a charitable gaming facility offering poker and a variety of table games.

We plan to construct an expanded charitable gaming facility with up to 800 gaming positions including HRMs and table games.

The Live and Historical Racing segment includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs Racetrack and our historical racing properties in Kentucky, Virginia, and New Hampshire.

Our Live and Historical Racing properties earn commissions primarily from pari-mutuel wagering on live and historical races;

simulcast fees earned from other wagering sites;

admissions, personal seat licenses, sponsorships, television rights, and other miscellaneous services (collectively "racing event-related services"), as well as food and beverage services.

The TwinSpires segment includes the revenue and expenses for the online horse racing and the retail and online Sports and Casino business.

TwinSpires Horse Racing operates online horse racing wagering for TwinSpires.com, BetAmerica.com, and other white-label platforms;

facilitates high dollar wagering by international customers (through Velocity);

simulcast fees earned from other wagering sites, fees from racing event-related services including admissions, personal seat licenses, sponsorships, television rights, and other miscellaneous services, and revenue from food and beverage services.

The TwinSpires segment includes the revenue and expenses for TwinSpires Horse Racing, TwinSpires Sports and Casino and United Tote businesses and these businesses are headquartered in Louisville, Kentucky.

TwinSpires Horse Racing operates the online horse racing wagering business for TwinSpires.com, BetAmerica.com, and other white-label platforms;

facilitates high dollar wagering by international customers;

and provides the Bloodstock Research Information Services platform for horse racing statistical data.

Also included in TwinSpires Horse Racing is our United Tote business which provides totalisator services to patrons who wager on horse races.

Our TwinSpires Sports and Casino business includes the retail and online sports and casino gaming operations.

Our TwinSpires Sports and Casino business operates our sports betting and casino platform in multiple states.

The TwinSpires Sports and Casino business includes the mobile and online sports betting and casino results and the results of seven of our retail sportsbooks, which include our wholly-owned properties at Harlow’s Casino Resort and Spa ("Harlow’s"), Presque Isle, Riverwalk Casino Hotel (“Riverwalk”), Ocean Downs Casino and Racetrack ("Ocean

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TwinSpires Sports and Casino includes retail and online sports betting and online casino operations.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Downs"), Fair Grounds Racecourse and Slots, as well as in Arizona and Michigan which utilize a third party's casino license.

On February 24, 2022 the Company announced its plans to exit the direct online sports and casino business and pursue monetization of its online market access licenses.

The Gaming segment includes revenue and expenses for the casino properties and associated racetrack facilities which support the casino license.

The Gaming segment has approximately 11,800 slot machines and video lottery terminals ("VLTs") and 250 table games located in eight states.

The Gaming segment revenue and Adjusted EBITDA includes the following properties:

◦ Fair Grounds and VSI

Our TwinSpires Sports and Casino business includes the results of our nine retail sportsbooks at our wholly-owned properties and our casino platform in Pennsylvania.

Rivers Des Plaines retail and online BetRivers sportsbook and MVG sportsbook results are included in the Gaming segment.

The Company exited the direct online Sports and Casino business in every state except Arizona.

United Tote manufactures and operates pari-mutuel wagering systems for racetracks, off-track betting facilities ("OTBs") and other pari-mutuel wagering businesses.

United Tote provides totalisator services which accumulate wagers, calculate payoffs and displays wagering data to patrons who wager on horse races.

United Tote has contracts to provide totalisator services to third-party racetracks, OTBs and other pari-mutuel wagering businesses and also provides these services at our facilities.

The Gaming segment includes revenue and expenses for the casino properties and associated racetrack facilities which support the casino license as applicable.

The Gaming segment has approximately 13,980 slot machines and video lottery terminals ("VLTs") and 358 table games located in ten states.

The Gaming segment revenue and expenses includes the following properties:

• Florida - Calder Casino ("Calder")

▪ Iowa - Hard Rock Hotel & Casino ("Hard Rock Sioux City")

▪ Louisiana - Fair Grounds Slots, Fair Grounds Race Course, and Video Services, LLC ("VSI") (collectively, "Fair Grounds and VSI")

▪ Maryland - Ocean Downs Casino & Racetrack ("Ocean Downs")

▪ Maine - Oxford Casino & Hotel ("Oxford")

▪ Mississippi

• Harlow’s Casino Resort and Spa ("Harlow's")

• Riverwalk Casino Hotel ("Riverwalk")

▪ New York - del Lago Resort & Casino ("del Lago")

▪ Pennsylvania

• Presque Isle Downs & Casino ("Presque Isle")

• Lady Luck Casino Nemacolin ("Lady Luck Nemacolin") management agreement

◦ Ocean Downs

◦ Oxford Casino and Hotel ("Oxford")

◦ Presque Isle

The Gaming segment Adjusted EBITDA also includes the Adjusted EBITDA related to the Company’s equity investments in the following:

◦ 61.3 % equity investment in Rivers Des Plaines

◦ 50 % equity investment in MVG

The Gaming segment generates revenue and expenses from slot machines, table games, VLTs, video poker, retail sports betting, ancillary food and beverage services, hotel services, commission on pari-mutuel wagering, racing event-related services, historical racing, and / or other miscellaneous operations.

We have aggregated the following businesses as well as certain corporate operations, and other immaterial joint ventures in "All Other" to reconcile to consolidated results:

We conduct our business through these reportable segments and report net revenue and operating expense associated with these reportable segments in the accompanying condensed Consolidated Statements of Comprehensive Income.

The Gaming segment also includes net income for our ownership portion of the Company’s equity investments in the following:

• Illinois - 61.3 % equity investment in Midwest Gaming, the parent company of Rivers Des Plaines

• Ohio - 50 % equity investment in MVG

The Gaming segment generates revenue and expenses from slot machines, table games, VLTs, video poker, HRMs, ancillary food and beverage services, hotel services, commission on pari-mutuel wagering, racing event-related services, and other miscellaneous operations.

We have aggregated Arlington as well as certain corporate operations, and other immaterial joint ventures in All Other to reconcile to consolidated results.

Eliminations include the elimination of intersegment transactions.

5 unchanged sentences

• Transaction expense, net which includes:

– Acquisition, disposition, and land sale related charges;

– Direct online Sports and Casino business costs;

– Acquisition, disposition, and property sale related charges;

– Direct online Sports and Casino business exit costs;

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

– Other transaction expense, including legal, accounting, and other deal-related expense;

4 unchanged sentences

• Asset impairments;

• Gain on Calder land sale;

• Gain on property sales;

• Legal reserves;

1 unchanged sentence

• Other charges, recoveries, and expenses

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

As of December 31, 2021, Arlington ceased racing and simulcast operations given the pending sale of the property to the Chicago Bears.

Arlington's operating loss in the current quarter and year is treated as an adjustment to EBITDA and is included in Other expenses, net in the Reconciliation of Comprehensive Income to Adjusted EBITDA.

As of December 31, 2021, Arlington ceased racing and simulcast operations and the property was sold on February 15, 2023 to the Chicago Bears.

Arlington's results in 2022 and 2023 are treated as an adjustment to EBITDA and are included in other expenses, net in the Reconciliation of Comprehensive Income to Adjusted EBITDA .

We utilize the Adjusted EBITDA metric to provide a more accurate measure of our core operating results and enable management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner.

1 unchanged sentence

Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.

For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the accompanying Condensed Consolidated Statements of Comprehensive Income.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

The tables below present net revenue from external customers and intercompany revenue from each of our segments, net revenue from external customers for each group of similar services, Adjusted EBITDA by segment, and a reconciliation of comprehensive income to Adjusted EBITDA:

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2022 2021 2022 2021

Net revenue from external customers:

Live and Historical Racing:

Churchill Downs Racetrack $ 6.4 $ 7.4 $ 182.6 $ 114.6

Derby City Gaming 41.5 40.2 128.5 113.0

Oak Grove 33.3 27.1 97.8 72.1

Turfway Park 3.1 0.7 8.6 5.9

Newport 6.9 4.3 20.6 13.2

Chasers 0.9 — 0.9 —

Ellis Park 0.2 — 0.2 —

Total Live and Historical Racing 92.3 79.7 439.2 318.8

Horse Racing 100.9 98.8 321.5 327.7

Sports and Casino 5.3 8.7 21.8 24.1

Total TwinSpires 106.2 107.5 343.3 351.8

Fair Grounds and VSI 28.5 24.8 107.2 98.2

Presque Isle 33.2 35.9 90.7 90.2

Ocean Downs 33.3 31.7 82.0 78.7

Calder 26.3 25.9 81.2 74.2

Oxford 31.6 31.8 87.8 72.1

Riverwalk 12.6 14.5 41.0 47.3

Harlow’s 11.9 13.3 37.0 43.9

Lady Luck Nemacolin 6.0 7.4 18.1 18.7

Total Gaming 183.4 185.3 545.0 523.3

All Other 1.2 20.5 2.2 38.5

Net revenue from external customers $ 383.1 $ 393.0 $ 1,329.7 $ 1,232.4

Three Months Ended September 30, Nine Months Ended September 30,

For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the accompanying Consolidated Statements of Comprehensive Income (Loss).

The tables below present net revenue from external customers, Adjusted EBITDA by segment and reconciles comprehensive income to Adjusted EBITDA:

Net revenue by segment is comprised of the following:

Three Months Ended March 31,

(in millions) 2023 2022

Intercompany net revenue:

Live and Historical Racing $ 214.4 $ 86.0

2 unchanged sentences

All Other 0.3 0.5

Eliminations ( 13.8 ) ( 6.1 ) ( 34.9 ) ( 31.5 )

Intercompany net revenue $ — $ — $ — $ —

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Three Months Ended September 30, 2022

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

Net revenue from external customers

Live and simulcast racing $ 1.8 $ 91.0 $ 3.6 $ 96.4 $ — $ 96.4

Historical racing (a)

78.7 — 3.5 82.2 — 82.2

Racing event-related services 3.0 — 0.1 3.1 — 3.1

0.9 5.3 160.6 166.8 — 166.8

7.9 9.9 15.6 33.4 1.2 34.6

Total $ 92.3 $ 106.2 $ 183.4 $ 381.9 $ 1.2 $ 383.1

Three Months Ended September 30, 2021

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

Net revenue from external customers

Live and simulcast racing $ 5.4 $ 89.4 $ 4.9 $ 99.7 $ 12.6 $ 112.3

Historical racing (a)

66.2 — — 66.2 — 66.2

Racing event-related services 1.8 — 0.1 1.9 5.0 6.9

— 8.7 166.6 175.3 — 175.3

6.3 9.4 13.7 29.4 2.9 32.3

Total $ 79.7 $ 107.5 $ 185.3 $ 372.5 $ 20.5 $ 393.0

(a) Food and beverage, hotel, and other services furnished to customers for free as an inducement to wager or through the redemption of our customers' loyalty points are recorded at the estimated standalone selling prices in Other revenue with a corresponding offset recorded as a reduction in historical Pari-mutuel revenue for HRMs or Gaming revenue for our casino properties.

These amounts were $ 8.4 million for the three months ended September 30, 2022 and $ 6.1 million for the three months ended September 30, 2021.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2022

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

Net revenue from external customers

Live and simulcast racing $ 53.9 $ 290.9 $ 22.0 $ 366.8 $ — $ 366.8

Historical racing (a)

230.7 — 4.8 235.5 — 235.5

Racing event-related services 125.4 — 0.7 126.1 — 126.1

0.9 21.8 469.6 492.3 — 492.3

28.3 30.6 47.9 106.8 2.2 109.0

Total $ 439.2 $ 343.3 $ 545.0 $ 1,327.5 $ 2.2 $ 1,329.7

Nine Months Ended September 30, 2021

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

Net revenue from external customers

Live and simulcast racing $ 50.9 $ 300.2 $ 21.0 $ 372.1 $ 27.2 $ 399.3

Historical racing (a)

184.0 — — 184.0 — 184.0

Racing event-related services 65.3 — 1.0 66.3 6.9 73.2

— 24.1 469.3 493.4 — 493.4

18.6 27.5 32.0 78.1 4.4 82.5

Total $ 318.8 $ 351.8 $ 523.3 $ 1,193.9 $ 38.5 $ 1,232.4

(a) Food and beverage, hotel, and other services furnished to customers for free as an inducement to wager or through the redemption of our customers' loyalty points are recorded at the estimated standalone selling prices in Other revenue with a corresponding offset recorded as a reduction in historical Pari-mutuel revenue for HRMs or Gaming revenue for our casino properties.

These amounts were $ 23.2 million for the nine months ended September 30, 2022 and $ 15.0 million for the nine months ended September 30, 2021.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Adjusted EBITDA by segment is comprised of the following:

Three Months Ended September 30, 2022

(in millions) Live and Historical Racing TwinSpires Gaming

Net Revenue $ 559.5 $ 364.1

Taxes and purses ( 31.6 ) ( 6.6 ) ( 70.6 )

Marketing and advertising ( 3.6 ) ( 1.3 ) ( 4.1 )

Salaries and benefits ( 13.3 ) ( 6.3 ) ( 24.6 )

Content expense ( 0.6 ) ( 49.3 ) ( 2.7 )

Selling, general and administrative expense ( 3.4 ) ( 2.7 ) ( 7.1 )

Other operating expense ( 15.6 ) ( 10.1 ) ( 21.7 )

Other income 0.2 — 56.5

Adjusted EBITDA $ 34.5 $ 31.1 $ 111.6

Three Months Ended September 30, 2021

(in millions) Live and Historical Racing TwinSpires Gaming

Net revenue $ 81.5 $ 109.0 $ 185.6

Taxes and purses ( 24.6 ) ( 8.0 ) ( 71.8 )

Marketing and advertising ( 2.9 ) ( 10.6 ) ( 3.6 )

Salaries and benefits ( 10.9 ) ( 7.0 ) ( 22.5 )

Content expense ( 0.5 ) ( 47.1 ) ( 1.2 )

Selling, general and administrative expense ( 3.1 ) ( 2.6 ) ( 7.1 )

Other operating expense ( 11.8 ) ( 11.6 ) ( 19.7 )

Other income — — 51.0

Adjusted EBITDA $ 27.7 $ 22.1 $ 110.7

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

1 unchanged sentence

Adjusted EBITDA by segment is comprised of the following:

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

(in millions) Live and Historical Racing TwinSpires Gaming

Net revenue $ 465.5 $ 347.3 $ 549.6

Revenues $ 215.8 $ 96.3 $ 251.6

Taxes and purses ( 56.5 ) ( 5.0 ) ( 83.6 )

6 unchanged sentences

Adjusted EBITDA $ 82.1 $ 29.4 $ 129.5

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

(in millions) Live and Historical Racing TwinSpires Gaming

Net revenue $ 336.7 $ 356.6 $ 525.6

Revenues $ 87.2 $ 101.4 $ 179.2

Taxes and purses ( 26.8 ) ( 7.5 ) ( 67.3 )

6 unchanged sentences

Adjusted EBITDA $ 27.9 $ 24.1 $ 91.1

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Three Months Ended September 30, Nine Months Ended September 30,

Adjusted EBITDA by segment is comprised of the following:

Three Months Ended March 31,

(in millions) 2023 2022

7 unchanged sentences

Stock-based compensation expense $ 8.6 $ 7.0

Legal reserve — — 3.2 —

Pre-opening expense 3.2 2.1

6 unchanged sentences

Rivers Des Plaines' legal reserves and transaction costs — 0.3

Other charges — — 1.0 —

Gain on Calder land sale — — ( 274.6 ) —

Other charges and recoveries, net 0.3 1.0

Gain on sale of Arlington ( 114.0 ) —

Total adjustments to EBITDA ( 88.6 ) 23.5

7 unchanged sentences

Total Adjusted EBITDA $ 222.9 $ 128.5

The table below presents information about equity in income of unconsolidated affiliates included in our reported segments:

Three Months Ended September 30, Nine Months Ended September 30,

(in millions) 2022 2021 2022 2021

Gaming $ 42.3 $ 41.6 $ 115.3 $ 102.9

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Churchill Downs Incorporated

1 unchanged sentence

The table below presents total asset information for each of our segments:

(in millions) September 30, 2022 December 31, 2021

(in millions) March 31, 2023 December 31, 2022

Total assets:

6 unchanged sentences

The table below presents total capital expenditures for each of our segments:

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2023 2022

Capital expenditures, net:

Capital expenditures:

Live and Historical Racing $ 108.4 $ 44.5

4 unchanged sentences

Total capital expenditures $ 134.7 $ 55.5

SUBSEQUENT EVENT

At its regularly scheduled meeting held on October 25, 2022, the Board of Directors of the Company declared an annual cash

dividend of $ 0.714 per share, to be paid on January 6, 2023, to all shareholders of record on December 2, 2022.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

SUBSEQUENT EVENTS

2031 Senior Notes

On April 25, 2023, the Company completed an offering of $ 600.0 million in aggregate principal amount of 6.750 % senior unsecured notes that mature on April 25, 2031 ("2031 Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S.

persons in accordance with Regulation S under the Securities Act.

The Company used a portion of the net proceeds from the offering to repay indebtedness outstanding under its Term Loan B Facility due 2024 and to fund related transaction fees and expenses, and intends to use the remainder of the proceeds for working capital and other general corporate purposes.

The 2031 Notes were issued at 100 % of the principal amount, plus interest deemed to have accrued from April 25, 2023, with interest payable in arrears on May 1 and November 1 of each year, commencing on November 1, 2023.

The 2031 Notes will vote as one class under the indenture governing the 2031 Senior Notes.

The Company may redeem some or all of the 2031 Notes at any time prior to April 25, 2025, at redemption prices set forth in the 2031 Offering Memorandum.

In connection with the issuance of the 2031 Notes, the Company and the guarantors of the 2031 Notes entered into a Registration Rights Agreement to register any 2031 Notes under the Securities Act for resale that are not freely tradable 366 days from April 25, 2023.

Two for One Stock Split

At its regularly scheduled meeting held April 25, 2023, the Board of Directors of the Company approved a two -for-one stock split of the Company's common stock and a proportionate increase in the number of its authorized shares of common.

The Company expects the additional shares to be distributed on May 19, 2023, and the stock to begin trading at the split-adjusted price starting on May 22, 2023.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements