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Item 1. Financial Statements

2024-04-24 compared with 2023-10-25 · 172 added, 418 removed, 477 unchanged (55% 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) 2024 2023

10 unchanged sentences

Selling, general and administrative expense 54.8 52.3

Asset impairments — — 24.5 4.9

Transaction expense, net 4.1 ( 0.2 )

4 unchanged sentences

Equity in income of unconsolidated affiliates 37.8 38.3

Gain on sale of assets — — 114.0 274.6

Gain on sale of Arlington — 114.0

Miscellaneous, net 8.1 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, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions) September 30, 2023 December 31, 2022

(in millions) March 31, 2024 December 31, 2023

Current assets:

11 unchanged sentences

2,415.0 2,418.4

Long-term assets held for sale — 82.0

Total assets $ 7,066.8 $ 6,955.5

4 unchanged sentences

Accrued expenses and other current liabilities 423.3 426.8

Income taxes payable 4.1 —

Current deferred revenue

20 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, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

CHURCHILL DOWNS INCORPORATED

6 unchanged sentences

Issuance of common stock 0.3 —

Repurchase of common stock ( 1.2 ) ( 7.2 ) ( 138.5 ) ( 145.7 )

Taxes paid related to net share settlement of stock awards ( 0.1 ) ( 7.6 ) ( 7.6 )

2 unchanged sentences

Balance, March 31, 2024 73.5 $ — $ 827.8 $ ( 0.9 ) $ 826.9

Net income 143.0 143.0

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

Stock-based compensation 8.1 8.1

Other ( 1.4 ) ( 1.4 )

Balance, June 30, 2023 74.9 8.0 846.7 ( 0.9 ) 853.8

Net income 61.0 61.0

Issuance of common stock 3.1 3.1

Repurchase of common stock ( 0.3 ) ( 19.2 ) ( 18.1 ) ( 37.3 )

Stock-based compensation 8.1 8.1

Balance, September 30, 2023 74.6 $ — $ 889.6 $ ( 0.9 ) $ 888.7

Common Stock Retained

4 unchanged sentences

Issuance of common stock 0.2 —

Repurchase of common stock ( 0.2 ) ( 7.0 ) ( 18.0 ) ( 25.0 )

Taxes paid related to net share settlement of stock awards ( 0.1 ) ( 8.6 ) ( 2.7 ) ( 11.3 )

Stock-based compensation 8.6 8.6

Other ( 0.3 ) ( 0.3 )

Balance, March 31, 2023 74.9 $ — $ 705.1 $ ( 0.9 ) $ 704.2

Net income 339.3 339.3

Repurchase of common stock ( 0.6 ) ( 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 75.4 — 603.8 ( 0.9 ) 602.9

Net income 57.0 57.0

Issuance of common stock 2.7 2.7

Repurchase of common stock ( 0.6 ) ( 11.8 ) ( 47.2 ) ( 59.0 )

Stock-based compensation 9.1 9.1

Balance, September 30, 2022 74.8 $ — $ 613.6 $ ( 0.9 ) $ 612.7

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2024 2023

7 unchanged sentences

Deferred income taxes 4.9 33.2

Asset impairments 24.5 4.9

Amortization of operating lease assets 1.4 2.2

Gain on sale of assets ( 114.0 ) ( 274.6 )

Gain on sale of Arlington — ( 114.0 )

Other 1.7 0.8

7 unchanged sentences

Capital project expenditures ( 142.6 ) ( 122.9 )

Acquisition of businesses, net of cash acquired ( 241.3 ) ( 81.7 )

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

Proceeds from sale of assets 195.7 279.0

Proceeds from sale of Arlington — 195.7

Other 1.6 ( 6.5 )

Net cash used in investing activities ( 549.5 ) ( 107.0 )

Net cash (used in) provided by investing activities ( 153.4 ) 54.5

Cash flows from financing activities:

7 unchanged sentences

Other ( 0.6 ) ( 0.5 )

Net cash provided by financing activities 38.7 1,020.1

Cash flows from discontinued operations:

Operating activities of discontinued operations 0.5 —

Net (decrease) increase in cash, cash equivalents and restricted cash ( 11.5 ) 1,337.6

Net cash used in financing activities ( 101.1 ) ( 237.7 )

Net increase in cash, cash equivalents and restricted cash 0.2 32.7

Cash, cash equivalents and restricted cash, beginning of period 221.8 204.7

1 unchanged sentence

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2024 2023

4 unchanged sentences

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

Deferred payment on gaming rights incurred during the period $ — $ 50.0

Property and equipment additions included in accounts payable and accrued expenses $ 83.9 $ 54.2

Deferred payments for acquisition of business included in other liabilities 6.9 —

Right-of-use assets obtained in exchange for lease obligations in operating leases 0.1 0.5

Right-of-use assets obtained in exchange for lease obligations in finance leases 3.6 23.6

Repurchase of common stock included in accrued expense and other current liabilities 4.0 —

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

2 unchanged sentences

Basis of Presentation

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.

Churchill Downs Incorporated (the "Company" or "CDI") 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.

Acquisition of Exacta Systems

On August 22, 2023, the Company completed its previously-announced acquisition of Exacta Systems, LLC ("Exacta").

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

Effective May 22, 2023, the Company's common stock was split two -for-one (the "Stock Split") with a proportionate increase in the number of its authorized shares of common stock.

All share and per-share amounts have been retroactively adjusted to reflect the effects of the Stock Split.

Refer to Note 8, Shareholders' Equity for further information on the Stock Split.

Presque Isle Impairment

During the second quarter, we evaluated economic conditions subsequent to the date of our annual impairment assessment on April 1, 2023, including competition in the market and inflationary pressures, which increased during the second quarter of 2023, and impacted the performance and outlook of Presque Isle Downs and Casino ("Presque Isle").

As a result, the Company concluded that a trigger event for impairment testing occurred related to the Presque Isle gaming rights, trademark, and the reporting unit's goodwill at the end of the second quarter.

Based on the 2023 trigger event, the Company evaluated and subsequently updated the projected cash flows and discount rate to reflect the current environment.

As a result, the Company recognized a non-cash impairment charge of $ 24.5 million in the second quarter of 2023 for the Presque Isle gaming rights and trademark.

Refer to Note 5, Asset Impairments for further information on the impairment.

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.

Refer to Note 4, Dispositions for further information on the transaction.

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, Inc.

("Urban One").

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Acquisitions of Ellis Park and Chasers Poker Room

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").

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 New Hampshire to accommodate HRMs and table games.

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

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

The Company continues to operate retail sports betting at certain of its racetracks and HRM and gaming facilities.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements - effective in 2024 or thereafter

In March 2020, the Financial Accounting Standards Board ("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 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 was delayed until June 2023.

During the second quarter of 2023, the Company completed the transition of its financing from LIBOR to the Secured Overnight Financing Rate ("SOFR").

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

In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-06, Disclosure Improvements:

Codification Amendments in Response to the Securities and Exchange Commission’s ("SEC") Disclosure Update and Simplification Initiative, to amend certain disclosure and presentation requirements for a variety of topics within FASB's Accounting Standards Codification ("ASC").

These amendments align the requirements in the ASC regarding the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC.

The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date.

Early adoption is prohibited.

The Company is currently evaluating the impact of this standard on the consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements.

The amendments are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption of the amendment is permitted, including adoption in any interim periods for which financial statements have not been issued.

The Company is currently evaluating the impact of this standard on the consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information.

Early adoption is permitted.

The amendments are expected to be applied prospectively to all annual periods beginning after December 15, 2024.

The Company is currently evaluating the impact of this standard on the consolidated financial statements and related disclosures.

Exacta Systems

On August 22, 2023, the Company completed its previously-announced acquisition of Exacta for preliminary purchase consideration of $ 248.2 million, net of cash acquired, consisting of a $ 241.3 million cash payment and $ 6.9 million of deferred payments, which is payable over two years (the "Exacta Transaction").

The preliminary purchase consideration is subject to working capital and other purchase price adjustments.

Exacta is a leading provider of technology to support historical horse racing (“HHR”) operations across the country.

The Exacta Transaction is expected to enable the Company to realize significant and immediate synergies related to the Company’s Virginia operations.

The Company also expects to realize additional operational improvements over time through the diversification of games available at its HRM facilities.

Exacta will operate within the Company’s TwinSpires segment and will continue to service its growing portfolio of third-party HHR operators in Kentucky, Wyoming, and New Hampshire.

The Company recorded the fair values of the assets of the Exacta Transaction as of August 22, 2023 based upon preliminary valuations.

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, property and equipment, inventory, intangible assets, adjustments to working capital, the final amount of residual goodwill, and final allocation of goodwill between segments.

The residual goodwill will be allocated between the TwinSpires and the Live and Historical Racing segments based upon the projected future benefits to be realized as a result of the Exacta Transaction.

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 table summarizes the preliminary fair value of the assets acquired and liabilities assumed, net of cash acquired of $ 1.8 million, as of August 22, 2023:

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

On August 22, 2023, the Company completed its acquisition of Exacta Systems, LLC ("Exacta") for a purchase consideration of $ 248.2 million, net of cash acquired, which consisted of a $ 241.3 million cash payment and $ 6.9 million of deferred payments, which are payable over two years from acquisition (the "Exacta Transaction").

As of March 31, 2024, there were $ 4.9 million deferred payments remaining.

Exacta is a leading provider of central determinate system technology in Historical Racing Machines ("HRMs") across the country.

The Exacta Transaction is enabling the Company to realize significant synergies related to the Company’s HRM operations.

Exacta operates within the Company’s TwinSpires segment and will continue to service its growing portfolio of third-party HRM operators in Kentucky, Wyoming, and New Hampshire.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

(in millions) Total

Accounts receivable $ 9.0

Other current assets 3.0

Property and equipment 9.0

Goodwill 177.1

Other intangible assets 54.3

Other assets 0.9

Total assets acquired $ 253.3

Accounts payable 2.7

Accrued expenses and other current liabilities 1.8

Other liabilities assumed 0.6

Total liabilities assumed 5.1

Net assets acquired (net of cash) $ 248.2

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

(in millions) Fair Value Recognized Weighted-Average Useful Life

Technology asset $ 23.9 7.0 years

Customer relationships 21.3 15.0 years

Trademark 8.7 10.0 years

Other 0.4 5.0 years

Total intangible assets $ 54.3

Goodwill of $ 177.1 million related to the Exacta Transaction was recognized as of September 30, 2023, of which $ 95.9 million was preliminarily allocated to the Live and Historical Racing segment and $ 81.2 million was preliminarily allocated to the TwinSpires segment.

Goodwill of $ 177.4 million related to the Exacta Transaction was recognized, of which $ 96.0 million was allocated to the Live and Historical Racing segment and $ 81.4 million was allocated to the TwinSpires segment.

The goodwill related to the Exacta Transaction is deductible for tax purposes.

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 SEPTEMBER 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

(in millions) Total

Accounts receivable $ 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

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.

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

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.

The primary areas of the preliminary valuation that are not yet finalized relate to the 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 September 30, 2022 Nine months ended September 30, 2022

Net revenue $ 552.9 $ 1,811.7

Net income $ 70.0 $ 471.4

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

On September 26, 2022, the Company completed the Ellis Park Transaction for total consideration of $ 79.0 million in cash, plus $ 3.5 million in working capital and other purchase price adjustments.

The fair values as of September 30, 2023 for the assets acquired and liabilities assumed, net of cash acquired of $ 1.4 million, at the date of acquisition are 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 $ 9.3 million, and net working capital of $ 1.5 million.

Chasers Poker Room

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 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 indefinite-lived gaming rights intangible asset which represented its fair value at the date of acquisition.

Valuation Techniques

For these transactions any 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.

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 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.

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

Lady Luck Casino Nemacolin

On June 26, 2023, the Company's management agreement for Lady Luck Casino Nemacolin ("Lady Luck") in Farmington, Pennsylvania expired and was not renewed.

The Company completed the sale of substantially all its assets at Lady Luck for an immaterial amount.

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.

Certain assets of Arlington totaling $ 82.0 million were classified 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.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

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 September 30, 2023, the Company has a $ 27.8 million deferred tax liability related to the Arlington sale on the Condensed Consolidated Balance Sheets.

ASSET IMPAIRMENTS

Presque Isle Impairment

We performed our annual goodwill and indefinite-lived intangible assets impairment analysis for Presque Isle as of April 1, 2023.

Based on the results of this analysis, no impairments for Presque Isle were identified.

Subsequent to the annual test, we continued to evaluate economic conditions, including competition in the market and inflationary pressures, which increased during the second quarter of 2023, and impacted the performance and outlook of Presque Isle.

Based on the 2023 trigger event, the Company evaluated and subsequently updated the projected cash flows and discount rate to reflect the current environment.

As a result, the Company recognized a non-cash impairment charge of $ 24.5 million in the second quarter of 2023 for the Presque Isle gaming rights and trademark, which are included in the Gaming segment.

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

The fair value of the trademark was determined by using the relief-from-royalty method of the income approach.

The fair value of the Presque Isle reporting unit's goodwill was determined under the market and income valuation approaches using inputs primarily related to discounted projected cash flows and price multiples of comparable publicly traded companies.

No impairment was recognized for the Presque Isle goodwill in 2023.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill, by segment, is composed of the following:

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

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

Balances as of December 31, 2023 $ 376.2 $ 233.4 $ 290.3 $ — $ 899.9

Additions 95.9 81.2 — — 177.1

Adjustments 0.1 0.2 — — 0.3

Balances as of September 30, 2023 $ 376.2 $ 233.4 $ 290.3 $ — $ 899.9

Goodwill of $ 177.1 million related to the Exacta Transaction was recognized as of September 30, 2023, of which $ 95.9 million was allocated to the Live and Historical Racing segment and $ 81.2 million was allocated to the TwinSpires segment.

The goodwill related to the Exacta Transaction is deductible for tax purposes.

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

We performed our annual goodwill impairment analysis as of April 1, 2023, 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.

Balances as of March 31, 2024 $ 376.3 $ 233.6 $ 290.3 $ — $ 900.2

Other intangible assets are comprised of the following:

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

2 unchanged sentences

Total $ 2,415.0 $ 2,418.4

We established definite-lived intangible assets of $ 54.3 million for the technology asset, customer relationships, trademark and other intangibles related to the Exacta Transaction.

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

We performed our annual indefinite-lived intangible assets impairment analysis as of April 1, 2023.

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.

Refer to Note 5, Asset Impairments, for information regarding the intangible asset impairment recognized during the second quarter of 2023.

The Company’s effective income tax rate for the three months ended September 30, 2023 was higher than the U.S.

federal statutory rate of 21.0% primarily resulting from state income taxes.

The Company’s effective income tax rate for the nine months ended September 30, 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 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.

In the second quarter of 2023, the Company recognized a $ 24.5 million non-cash impairment charge for the Presque Isle Downs and Casino ("Presque Isle") gaming rights and trademark.

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

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

These potential impacts could increase the risk of a future impairment of assets at Presque Isle.

The Company’s effective income tax rate for the three months ended March 31, 2024 was equal to the U.S.

federal statutory rate of 21.0%.

The Company's income tax rate for the three months ended March 31, 2024 includes an unfavorable impact from state income taxes and non-deductible officer’s compensation, that was offset by a $ 5.6 million benefit from the remeasurement of deferred income tax liabilities as a result of certain entity classification elections that were made in the first quarter of 2024 decreasing income attributable to states with higher tax rates compared to prior year.

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.

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Stock Repurchase Programs

On September 29, 2021, the Board of Directors of the Company approved a common stock repurchase program of up to $ 500.0 million ("2021 Stock Repurchase Program").

On September 29, 2021, the Board of Directors of the Company approved a common stock repurchase program of up to $ 500.0 million (the "2021 Stock Repurchase Program").

The 2021 Stock Repurchase Program includes and is not in addition to any unspent amount remaining under the prior program authorization.

Repurchases may be made at management’s discretion from time to time on the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions.

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

The Company repurchased $ 37.3 million of its common stock during the three months ended September 30, 2023 and had approximately $ 232.9 million of repurchase authority remaining under the 2021 Stock Repurchase Program at September 30, 2023, based on trade date.

We had approximately $ 192.9 million of repurchase authority remaining under the 2021 Stock Repurchase Program at March 31, 2024, based on trade date.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

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

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

Three Months Ended March 31,

(in millions, except share data) 2024 2023

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

Repurchase Program Shares Aggregate Purchase Price Shares Aggregate Purchase Price

2021 Stock Repurchase Program 184,821 $ 22.0 — $ —

310,367 $ 37.3 577,562 $ 59.0 310,367 $ 37.3 1,454,396 $ 145.5

(1) Number of shares have been adjusted for the Stock Split.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

On April 25, 2023, the Company’s Board of Directors approved a two -for-one Stock Split and an amendment to the Company’s Articles of Incorporation to increase the number of shares of common stock the Company is authorized to issue from 150,000,000 shares, no par value, to 300,000,000 shares, no par value.

This amendment to the Company’s Articles of Incorporation became effective on May 19, 2023 and our common stock began trading at the split-adjusted price on May 22, 2023.

All share and per-share amounts in the Company’s consolidated financial statements and related notes have been retroactively adjusted to reflect the effects of the Stock Split.

On January 2, 2024, the Company closed on an agreement, dated December 18, 2023, with an affiliate of The Duchossois Group ("TDG") to repurchase 1,000,000 shares of the Company’s common stock, for $ 123.75 per share in a privately negotiated transaction for an aggregate purchase price of $ 123.8 million.

This represented a discount of 4.03 % to the closing price on December 15, 2023 of $ 128.95 .

The repurchase of shares of common stock from TDG was approved by the Company's Board of Directors separately from and did not reduce the authorized amount remaining under any existing common stock repurchase programs.

The repurchase of the shares was funded using available cash and borrowings under the Company’s senior secured credit facility.

Two for One Stock Split

Effective May 22, 2023, the Company's common stock was split two -for-one with a proportionate increase in the number of its authorized shares of common stock.

All share and per-share amounts in the Company’s condensed consolidated financial statements and related notes have been retroactively adjusted to reflect the effects of the stock split.

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 ("RSAs"), restricted stock unit awards ("RSUs"), performance share unit awards ("PSUs"), and stock options associated with our employee stock purchase plan was $ 8.1 million and $ 24.8 million for the three and nine months ended September 30, 2023, and $ 9.1 million and $ 23.5 million for the three and nine months ended September 30, 2022, respectively.

During the nine months ended September 30, 2023, the Company awarded RSUs to employees, RSUs and PSUs to certain named executive officers ("NEOs"), and RSAs 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 $ 7.2 million for the three months ended March 31, 2024 and $ 8.6 million for the three months ended March 31, 2023.

During the three months ended March 31, 2024, 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 2024 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.

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

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

A summary of the RSUs and PSUs granted during 2024 is presented below (units in thousands):

Grant Year Award Type Number of Units Awarded (1)

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2024 PSU 63 Three -year performance and service period ending in 2026

2023 RSU 10 Three year service period ending in 2026

2023 RSU 6 One year service period ending in 2024

2023 RSA 4 One year service period ending in 2024

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

(2) Number of units awarded have been adjusted for the Stock Split.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

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The following table presents our total debt outstanding:

(in millions) September 30, 2023 December 31, 2022

Term Loan B due 2024 $ — $ 380.0

(in millions) March 31, 2024 December 31, 2023

Term Loan B-1 due 2028 $ 291.0 $ 291.8

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Credit Agreement

At September 30, 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"), $ 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 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 $ 3.5 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 $ 2.6 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 September 30, 2023, the Company's commitment fee rate was 0.25 %.

At March 31, 2024, 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"), $ 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.

Term Loan B-1 bears interest at the Secured Overnight Financing Rate ("SOFR") plus 210 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 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 September 30, 2023, that applicable margin was 150 basis points.

The Term Loan B-1 bears interest at SOFR plus 210 basis points.

The Company completed the transition of its financing from LIBOR to SOFR during the second quarter of 2023.

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

As of March 31, 2024, that applicable margin was 150 basis points which was based on the pricing grid in the Credit Agreement.

The Company had $ 841.9 million available borrowing capacity, after consideration of $ 5.1 million in outstanding letters of credit, under the Revolver as of March 31, 2024.

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, 2024, the Company's commitment fee rate was 0.25 %.

2027 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 (the "2031 Senior Notes") in a private offering to qualified institutional buyers

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

As of March 31, 2024, 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 1st, 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, 2024, we had a total of $ 700.0 million in aggregate principal amount of 4.750 % senior unsecured notes (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 15th, 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, 2024, 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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

pursuant to Rule 144A that is exempt from registration under the Securities Act of 1933, as amended (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, working capital and other general corporate purposes.

The Company recognized a loss on extinguishment on Term Loan B of $ 1.3 million, which is included in miscellaneous, net in the accompanying Condensed Consolidated Statements of Comprehensive Income.

The Company capitalized $ 10.7 million of debt issuance costs associated with the 2031 Senior Notes which are being amortized as interest expense over the remainder of the 8-year term.

The 2031 Senior 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 1st and November 1st of each year, commencing on November 1, 2023.

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

The 2031 Senior Notes were issued pursuant to an indenture, entered into on April 25, 2023 (the "2031 Indenture"), among the Company, certain subsidiaries of the Company as guarantors, and U.S.

Bank National Association, as trustee.

The Company may redeem some or all of the 2031 Senior Notes at any time at redemption prices set forth in the 2031 Indenture.

The terms of the 2031 Indenture, among other things, limit the ability of the Company to:

(i) incur additional debt and issue preferred stock, (ii) pay dividends or make other restricted payments, (iii) make certain investments, (iv) create liens, (v) allow restrictions on the ability of certain of our subsidiaries to pay dividends or make other payments, (vi) sell assets, (vii) merge or consolidate with other entities, and (viii) enter into transactions with affiliates.

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

institutional buyers, with interest payable in arrears on April 1st and October 1st of each year, commencing on October 1st, 2022.

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

2031 Senior Notes

As of March 31, 2024, we had $ 600.0 million in aggregate principal amount of 6.750 % senior unsecured notes that mature on April 25, 2031 (the "2031 Senior Notes").

The 2031 Senior Notes were issued at par in a private offering to qualified institutional buyers, with interest payable in arrears on May 1st and November 1st of each year, commencing on November 1st, 2023.

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.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Performance Obligations

As of September 30, 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 $ 138.5 million.

As of March 31, 2024, 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 $ 157.6 million.

The revenue we expect to recognize on these remaining performance obligations is $ 61.2 million for the remainder of 2024, $ 47.4 million in 2025, $ 23.3 million in 2026, and the remainder thereafter.

As of September 30, 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.

As of March 31, 2024, 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, 2023 and December 31, 2022, contract assets were not material.

As of September 30, 2023 and December 31, 2022, contract liabilities were $ 48.1 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 decrease was primarily due to revenue recognized for fulfilled performance obligations.

We recognized $ 1.2 million and $ 43.6 million of revenue during the three months and nine months ended September 30, 2023, respectively, which was included in the contract liabilities balance at December 31, 2022.

We recognized $ 1.3 million and $ 48.1 million of revenue during the three months and nine months ended September 30, 2022, respectively, which was included in the contract liabilities balance at December 31, 2021.

As of March 31, 2024 and December 31, 2023, contract assets were not material.

As of March 31, 2024 and December 31, 2023, contract liabilities were $ 172.3 million and $ 92.3 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 deferred revenue related to the 150th Kentucky Derby.

We recognized $ 5.8 million of revenue during the three months ended March 31, 2024, which was included in the contract liabilities balance at December 31, 2023.

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.

Disaggregation of Revenue

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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.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

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

3 unchanged sentences

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

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Three Months Ended March 31,

(in millions) 2024 2023

28 unchanged sentences

Intercompany net revenue $ — $ —

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Three Months Ended September 30, 2023

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

Net revenue from external customers

Live and simulcast racing $ 16.0 $ 86.3 $ 5.1 $ 107.4 $ — $ 107.4

Historical racing (a)

179.9 — 7.5 187.4 — 187.4

Racing event-related services 3.3 — 1.4 4.7 — 4.7

3.1 5.3 203.0 211.4 — 211.4

17.2 16.9 27.3 61.4 0.2 61.6

Total $ 219.5 $ 108.5 $ 244.3 $ 572.3 $ 0.2 $ 572.5

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

(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 $ 13.3 million for the three months ended September 30, 2023 and $ 8.4 million for the three months ended September 30, 2022.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

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

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Total $ 245.1 $ 106.6 $ 239.2 $ 590.9 $ — $ 590.9

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

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

8 unchanged sentences

These amounts were $ 37.8 million for the nine months ended September 30, 2023 and $ 23.2 million for the nine months ended September 30, 2022.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

These amounts were $ 13.4 million for the three months ended March 31, 2024 and $ 12.1 million for the three months ended March 31, 2023.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

2 unchanged sentences

Accounts receivable, net

Accounts receivable, net is comprised of the following:

(in millions) September 30, 2023 December 31, 2022

Accounts receivable is comprised of the following:

(in millions) March 31, 2024 December 31, 2023

Trade receivables $ 35.2 $ 42.6

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Accrued expenses and other current liabilities consisted of the following:

(in millions) September 30, 2023 December 31, 2022

(in millions) March 31, 2024 December 31, 2023

Account wagering deposits liability $ 53.3 $ 58.7

7 unchanged sentences

INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Investments in and advances to unconsolidated affiliates as of September 30, 2023 primarily consisted of an interest in Rivers Casino Des Plaines ("Rivers Des Plaines"), an interest in Miami Valley Gaming and Racing ("MVG"), and an interest in RVA Entertainment Holdings, LLC ("RVA").

Rivers Des Plaines

Investments in and advances to unconsolidated affiliates as of March 31, 2024 and December 31, 2023 primarily consisted of interests in Rivers Casino Des Plaines ("Rivers Des Plaines") and Miami Valley Gaming and Racing ("MVG").

Rivers Casino Des Plaines

The ownership of Rivers Des Plaines is comprised of the following:

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

As of September 30, 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 $ 832.6 million.

Our investment in Rivers Des Plaines was $ 531.6 million and $ 544.9 million as of September 30, 2023 and December 31, 2022, respectively.

The Company received distributions from Rivers Des Plaines of $ 93.1 million and $ 92.8 million for the nine months ended September 30, 2023 and 2022, respectively.

Miami Valley Gaming

As of March 31, 2024 , 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 $ 832.7 million.

Our investment in Rivers Des Plaines was $ 532.6 million and $ 541.2 million as of March 31, 2024 and December 31, 2023, respectively.

The Company received distributions from Rivers Des Plaines of $ 34.5 million and $ 33.8 million for the three months ended March 31, 2024 and 2023, respectively.

Miami Valley Gaming and Racing

The Company owns a 50 % interest in MVG and Delaware North Companies Gaming & Entertainment Inc.

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

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

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

Our investment in MVG was $ 114.2 million and $ 114.4 million as of September 30, 2023 and December 31, 2022, respectively.

The Company received distributions from MVG of $ 33.5 million and $ 25.0 million for the nine months ended September 30, 2023 and 2022, respectively.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Our investment in MVG was $ 115.2 million and $ 114.6 million as of March 31, 2024 and December 31, 2023, respectively.

The Company received distributions from MVG of $ 10.5 million and $ 12.0 million for the three months ended March 31, 2024 and 2023, respectively.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

The Company owns a 50 % interest in RVA and Urban One owns the remaining 50 % interest.

Since both the Company and Urban One have participating rights over RVA, and both must consent to certain operating, investing and financing decisions, we account for RVA using the equity method.

Our investment in RVA was $ 14.2 million as of September 30, 2023.

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) 2024 2023

6 unchanged sentences

Net income $ 64.7 $ 66.8

(in millions) September 30, 2023 December 31, 2022

(in millions) March 31, 2024 December 31, 2023

Current assets $ 99.2 $ 104.8

15 unchanged sentences

The fair value of the Company’s 2031 Senior Notes, 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 SEPTEMBER 30, 2023

The fair values of the Company's 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, 2024

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, 2023

March 31, 2024

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

15 unchanged sentences

Term Loan B-1 289.2 291.8 — 291.8 —

Term Loan B-1 291.6 294.8 — 294.8 —

Term Loan A 1,228.7 1,235.0 — 1,235.0 —

3 unchanged sentences

2030 Senior Notes 1,185.6 1,171.5 — 1,171.5 —

2031 Senior Notes 590.4 611.2 — 611.2 —

CONTINGENCIES

We may be involved in litigation arising in the ordinary course of conducting business.

We are involved in litigation arising in the ordinary course of conducting business.

We carry insurance for workers' compensation claims from our employees and general liability for claims from independent contractors, customers, and guests.

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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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

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 MARCH 31, 2024

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) 2024 2023

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Diluted net income $ 1.08 $ 2.05

All share and per-share amounts have been retroactively adjusted to reflect the effects of the Stock Split.

Refer to Note 8, Shareholders' Equity for further information on the Stock Split.

SEGMENT INFORMATION

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Our retail and online sports betting business is included in the TwinSpires segment.

We have aggregated Arlington as well as certain corporate operations in All Other to reconcile to consolidated results.

Eliminations include the elimination of intersegment transactions.

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– Acquisition, disposition, and property sale related charges;

– Direct online Sports and Casino business exit costs;

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

• Stock-based compensation expense;

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

• Rivers Des Plaines' impact on our investments in unconsolidated affiliates from:

– The impact of changes in fair value of interest rate swaps;

– Legal reserves and transaction costs;

• Asset impairments;

• Gain on property and asset sales;

• Gain on property sales;

• Legal reserves;

1 unchanged sentence

• Other charges, recoveries, and expenses

On June 26, 2023, the Company's management agreement for Lady Luck expired and was not renewed.

As of December 31, 2021, our property in Arlington Heights, Illinois ("Arlington") ceased racing and simulcast operations and the property was sold on February 15, 2023 to the Chicago Bears.

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

On June 26, 2023, the Company's management agreement for Lady Luck Casino Nemacolin ("Lady Luck") in Farmington, Pennsylvania expired and was not renewed.

The Company completed the sale of substantially all its assets at Lady Luck for an immaterial amount.

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 and exit costs in 2022 and 2023 are treated as an adjustment to 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.

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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 Consolidated Statements of Comprehensive Income.

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

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2024 2023

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Net Revenue $ 590.9 $ 559.5

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

1 unchanged sentence

Adjusted EBITDA by segment is comprised of the following:

Three Months Ended September 30, 2023

(in millions) Live and Historical Racing TwinSpires Gaming

Revenues $ 225.5 $ 112.4 $ 244.9

Taxes and purses ( 62.0 ) ( 5.8 ) ( 81.4 )

Marketing and advertising ( 7.6 ) ( 1.3 ) ( 8.9 )

Salaries and benefits ( 27.9 ) ( 7.0 ) ( 35.2 )

Content expense ( 1.6 ) ( 49.4 ) ( 2.4 )

Selling, general and administrative expense ( 7.4 ) ( 3.0 ) ( 9.9 )

Other operating expense ( 39.0 ) ( 12.0 ) ( 32.1 )

Other income 0.9 — 47.3

Adjusted EBITDA $ 80.9 $ 33.9 $ 122.3

Three Months Ended September 30, 2022

(in millions) Live and Historical Racing TwinSpires Gaming

Revenues $ 102.4 $ 107.4 $ 185.9

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

(in millions) Live and Historical Racing TwinSpires Gaming

Revenues $ 248.9 $ 114.1 $ 243.2

Taxes and purses ( 203.9 ) ( 17.8 ) ( 246.7 )

Gaming taxes and purses ( 65.0 ) ( 4.9 ) ( 80.5 )

Marketing and advertising ( 9.3 ) ( 1.2 ) ( 7.8 )

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Selling, general and administrative expense ( 8.8 ) ( 4.5 ) ( 10.2 )

Maintenance, insurance and utilities ( 10.3 ) ( 1.0 ) ( 9.6 )

Property and other taxes ( 2.7 ) ( 0.1 ) ( 3.4 )

Other operating expense ( 23.9 ) ( 10.9 ) ( 18.3 )

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Adjusted EBITDA $ 100.8 $ 39.6 $ 122.8

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

(in millions) Live and Historical Racing TwinSpires Gaming

Revenues $ 215.8 $ 96.3 $ 251.6

Taxes and purses ( 118.0 ) ( 21.3 ) ( 206.1 )

Gaming taxes and purses ( 56.5 ) ( 5.0 ) ( 83.6 )

Marketing and advertising ( 8.2 ) ( 1.4 ) ( 8.6 )

2 unchanged sentences

Selling, general and administrative expense ( 8.7 ) ( 2.3 ) ( 12.2 )

Maintenance, insurance and utilities ( 9.3 ) ( 0.9 ) ( 9.8 )

Property and other taxes ( 1.2 ) — ( 3.3 )

Other operating expense ( 26.5 ) ( 9.1 ) ( 16.9 )

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Adjusted EBITDA $ 82.1 $ 29.4 $ 129.5

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

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Adjusted EBITDA by segment is comprised of the following:

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

Three Months Ended March 31,

(in millions) 2024 2023

2 unchanged sentences

Depreciation and amortization 46.9 37.9

Interest expense, net 67.9 36.2 197.8 92.6

Interest expense 70.4 64.7

Income tax provision 21.4 53.2

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Stock-based compensation expense $ 7.2 $ 8.6

Legal reserve — — — 3.2

Pre-opening expense 8.3 3.2

Arlington exit costs 0.1 1.4 9.4 5.7

Other expenses, net 0.2 3.7

Transaction expense, net 4.1 ( 0.2 )

Asset impairments — — 24.5 4.9

Other income, expense:

Interest, depreciation and amortization expense related to equity investments 10.3 9.8

Changes in fair value of Rivers Des Plaines' interest rate swaps — — — ( 12.6 )

Rivers Des Plaines' legal reserves and transaction costs — 0.1 — 0.6

Other charges and recoveries, net ( 6.7 ) 0.3

Gain on sale of assets — — ( 114.0 ) ( 274.6 )

Gain on sale of Arlington — ( 114.0 )

Total adjustments to EBITDA 23.4 ( 88.6 )

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Total Adjusted EBITDA $ 242.5 $ 222.9

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

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

(in millions) September 30, 2023 December 31, 2022

(in millions) March 31, 2024 December 31, 2023

Total assets:

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Total assets $ 7,066.8 $ 6,955.5

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

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

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2024 2023

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SUBSEQUENT EVENTS

At its regularly scheduled meeting held on October 24, 2023, the Board of Directors of the Company declared an annual cash dividend on the Company's common stock of $ 0.382 per outstanding share, to be paid on January 5, 2024, to shareholders of record as of the close of business on December 1, 2023, with aggregate cash dividend paid to each shareholder rounded to the nearest whole cent.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

On April 8, 2024, the Company closed on the sale of 49 % of the United Tote Company (“United Tote”), a wholly-owned subsidiary of CDI, to NYRA Content Management Solutions, LLC, a subsidiary of the New York Racing Association, Inc.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

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