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Item 1. Financial Statements

2024-07-24 compared with 2024-04-24 · 219 added, 113 removed, 536 unchanged (38% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in millions, except per common share data) 2024 2023 2024 2023

10 unchanged sentences

Selling, general and administrative expense 57.4 48.1 112.2 100.4

Asset impairments — 24.5 — 24.5

Transaction expense, net 0.6 0.5 4.7 0.3

10 unchanged sentences

Net income 210.2 143.0 290.6 298.7

Net income per common share data:

Net income attributable to noncontrolling interest 0.9 — 0.9 —

Net income attributable to Churchill Downs Incorporated $ 209.3 $ 143.0 $ 289.7 $ 298.7

Net income attributable to Churchill Downs Incorporated per common share data:

Basic net income $ 2.82 $ 1.90 $ 3.90 $ 3.97

4 unchanged sentences

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

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(in millions) June 30, 2024 December 31, 2023

Current assets:

31 unchanged sentences

Commitments and contingencies

Redeemable noncontrolling interest 16.1 —

Shareholders' equity:

2 unchanged sentences

Retained earnings

1,031.9 894.5

Accumulated other comprehensive loss

( 1.0 ) ( 0.9 )

Total shareholders' equity 826.9 893.6

Total Churchill Downs Incorporated shareholders' equity 1,030.9 893.6

Total liabilities and shareholders' equity $ 7,170.1 $ 6,955.5

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

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

CHURCHILL DOWNS INCORPORATED

4 unchanged sentences

Balance, December 31, 2023 74.5 $ — $ 894.5 $ ( 0.9 ) $ 893.6

Net income 80.4 80.4

Net income attributable to Churchill Downs Incorporated 80.4 80.4

Issuance of common stock 0.3 —

4 unchanged sentences

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

Net income attributable to Churchill Downs Incorporated 209.3 209.3

Repurchase of common stock ( 0.1 ) ( 8.9 ) ( 4.1 ) ( 13.0 )

Taxes paid related to net share settlement of stock awards ( 0.2 ) ( 0.2 )

Stock-based compensation 8.9 8.9

Other ( 0.9 ) ( 0.1 ) ( 1.0 )

Balance, June 30, 2024 73.4 $ — $ 1,031.9 $ ( 1.0 ) $ 1,030.9

Common Stock Retained

8 unchanged sentences

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

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

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

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2024 2023

7 unchanged sentences

Deferred income taxes 19.7 32.4

Asset impairments — 24.5

Amortization of operating lease assets 2.7 3.5

11 unchanged sentences

Other 1.9 ( 2.3 )

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

Net cash used in investing activities ( 290.1 ) ( 119.0 )

Cash flows from financing activities:

8 unchanged sentences

Net cash used in financing activities ( 173.5 ) ( 47.7 )

Cash flows from discontinued operations:

Operating activities of discontinued operations 1.0 0.5

Net increase in cash, cash equivalents and restricted cash 9.1 236.4

2 unchanged sentences

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

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2024 2023

9 unchanged sentences

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

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

9 unchanged sentences

In the opinion of management, all adjustments necessary for a fair statement of this information have been made, and all such adjustments are of a normal, recurring nature.

In April 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 ("NYRA"), a subsidiary of the New York Racing Association, Inc.

Refer to Note 11, Redeemable Noncontrolling Interest, for further information on the transaction.

We conduct our business through three reportable segments:

Live and Historical Racing, TwinSpires, and Gaming.

We aggregate our other businesses as well as certain corporate operations, and other immaterial joint ventures, in All Other.

We aggregate our other businesses as well as certain corporate operations in All Other.

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

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Exacta Systems

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.

As of June 30, 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

The Exacta Transaction enables 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 and plans to expand its international presence.

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.

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Adjustments 0.1 0.2 — — 0.3

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

Balances as of June 30, 2024 $ 376.3 $ 233.6 $ 290.3 $ — $ 900.2

We performed our annual goodwill impairment analysis as of April 1, 2024, 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.

Other intangible assets are comprised of the following:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

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

6 unchanged sentences

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.

We performed our annual indefinite-lived intangible assets impairment analysis as of April 1, 2024.

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.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

The Company’s effective income tax rate for the three months ended June 30, 2024 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 six months ended June 30, 2024 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 a benefit from the remeasurement of deferred income tax liabilities, primarily related to certain entity classification elections made in the first quarter of 2024 that decreased income attributable to states with higher tax rates compared to the prior year.

The Company’s effective income tax rate for the three months and six months ended June 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.

SHAREHOLDERS' EQUITY

4 unchanged sentences

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

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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in millions, except share data) 2024 2023 2024 2023

Repurchase Program Shares Aggregate Purchase Price Shares Aggregate Purchase Price

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

2021 Stock Repurchase Program 93,874 $ 13.0 — $ — 278,695 $ 35.0 — $ —

We had approximately $ 179.9 million of repurchase authority remaining under the 2021 Stock Repurchase Program at June 30, 2024, based on trade date.

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.

4 unchanged sentences

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, 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.

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 $ 8.9 million and $ 16.1 million for the three months and six months ended June 30, 2024 and $ 8.1 million and $ 16.7 million for the three months and six months ended June 30, 2023, respectively.

During the six months ended June 30, 2024, the Company awarded RSUs to employees, RSUs and PSUs to certain named executive officers ("NEOs"), and RSAs 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.

The total compensation cost we will recognize under the PSUs is determined using the Monte Carlo valuation methodology, which factors in the value of the TSR market condition when determining the grant date fair value of the PSU.

The total compensation cost we will recognize under the PSUs is

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

determined using the Monte Carlo valuation methodology, which factors in the value of the TSR market condition when determining the grant date fair value of the PSU.

Compensation cost for each PSU is recognized during the performance and service period based on the probable achievement of the two performance criteria.

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

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

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

Grant Year Award Type Number of Units Awarded (1)

2 unchanged sentences

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

2024 RSA 4 One -year service period ending in 2025

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

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

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

The following table presents our total debt outstanding:

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

(in millions) June 30, 2024 December 31, 2023

Term Loan B-1 due 2028 $ 290.2 $ 291.8

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Credit Agreement

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.

At June 30, 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"), $ 290.2 million senior secured term loan B-1 (the "Term Loan B-1"), $ 1.2 billion senior secured term loan A (the "Term Loan A"), and $ 100.0 million swing line commitment.

On July 3, 2024, the Company closed an amendment of the Credit Agreement to (i) extend the maturity date of the Revolver and Term Loan A from 2027 to 2029 subject to an earlier “springing maturity” if certain indebtedness in respect of outstanding notes or other material indebtedness having a maturity date prior to July 3, 2029, is not refinanced or extended to a date after July 3, 2029, at least 91 days prior to such other debt’s stated maturity date, and (ii) amend certain other provisions of the Credit Agreement.

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.

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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, 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.

As of June 30, 2024, that applicable margin was 150 basis points which was based on the pricing grid in the Credit Agreement.

The Company had $ 893.5 million available borrowing capacity, after consideration of $ 6.0 million in outstanding letters of credit, under the Revolver as of June 30, 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 %.

For the period ended June 30, 2024, the Company's commitment fee rate was 0.25 %.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

2027 Senior Notes

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").

As of June 30, 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.

1 unchanged sentence

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.

As of June 30, 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 %.

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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

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

As of June 30, 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 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").

As of June 30, 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.

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Performance Obligations

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.

As of June 30, 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 $ 252.3 million.

The revenue we expect to recognize on these remaining performance obligations is $ 1.6 million for the remainder of 2024, $ 51.9 million in 2025, $ 52.7 million in 2026, and the remainder thereafter.

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.

As of June 30, 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 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.

As of June 30, 2024 and December 31, 2023, contract assets were not material.

As of June 30, 2024 and December 31, 2023, contract liabilities were $ 46.6 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 decrease was primarily due to recognized deferred revenue related to the 150th Kentucky Derby.

We recognized $ 67.2 million and $ 73.0 million of revenue during the three months and six months ended June 30, 2024, respectively, which was included in the contract liabilities balance at December 31, 2023.

We recognized $ 38.8 million and $ 42.4 million of revenue during the three months and six months ended June 30, 2023, respectively, which was included in the contract liabilities balance at December 31, 2022.

Disaggregation of Revenue

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.

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

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.

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

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,

Three Months Ended June 30, Six Months Ended June 30,

(in millions) 2024 2023 2024 2023

12 unchanged sentences

Iowa 23.5 24.0 46.9 48.5

Indiana 33.9 — 33.9 —

Louisiana 37.1 33.8 81.4 77.9

14 unchanged sentences

Intercompany net revenue $ — $ — $ — $ —

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

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

7 unchanged sentences

Total $ 464.7 $ 151.7 $ 274.2 $ 890.6 $ 0.1 $ 890.7

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

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

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(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 $ 13.4 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

These amounts were $ 14.2 million for the three months ended June 30, 2024 and $ 12.3 million for the three months ended June 30, 2023.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

OTHER BALANCE SHEET ITEMS

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Six Months Ended June 30, 2024

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

Net revenue from external customers

Live and simulcast racing $ 61.4 $ 195.2 $ 15.1 $ 271.7 $ — $ 271.7

Historical racing (a)

424.2 — 18.1 442.3 — 442.3

Racing event-related services 177.1 — 3.6 180.7 — 180.7

6.4 10.0 421.2 437.6 — 437.6

40.7 53.1 55.4 149.2 0.1 149.3

Total $ 709.8 $ 258.3 $ 513.4 $ 1,481.5 $ 0.1 $ 1,481.6

Six Months Ended June 30, 2023

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

Net revenue from external customers

Live and simulcast racing $ 51.2 $ 196.9 $ 14.8 $ 262.9 $ — $ 262.9

Historical racing (a)

369.4 — 13.0 382.4 — 382.4

Racing event-related services 137.7 — 3.4 141.1 — 141.1

5.1 5.6 412.4 423.1 — 423.1

36.0 29.7 52.3 118.0 0.5 118.5

Total $ 599.4 $ 232.2 $ 495.9 $ 1,327.5 $ 0.5 $ 1,328.0

These amounts were $ 27.6 million for the six months ended June 30, 2024 and $ 24.5 million for the six months ended June 30, 2023.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

SUPPLEMENTAL BALANCE SHEET INFORMATION

Accounts receivable, net

Accounts receivable is comprised of the following:

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

(in millions) June 30, 2024 December 31, 2023

Trade receivables $ 56.8 $ 42.6

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Accrued expenses and other current liabilities consisted of the following:

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

(in millions) June 30, 2024 December 31, 2023

Account wagering deposits liability $ 74.0 $ 58.7

6 unchanged sentences

Total $ 419.1 $ 426.8

REDEEMABLE NONCONTROLLING INTEREST

In April 2024, the Company closed on the sale of 49 % of United Tote, a wholly-owned subsidiary of CDI, to NYRA.

NYRA's interest includes certain embedded redemption features, such as a put right, that are not exclusively within the Company’s control.

NYRA's interest is treated as redeemable noncontrolling interest and is presented outside of permanent equity on the Company’s Condensed Consolidated Balance Sheets.

The redeemable noncontrolling interest is initially accounted for at fair value and subsequently adjusted to the greater of the redemption value or the carrying value.

Redeemable noncontrolling interest adjustments of carrying value to redemption value are reflected in retained earnings and are also included as an adjustment to income available to the Company’s shareholders in the calculation of earnings per share (See Note 15, Net Income Per Common Share Computations).

The table below depicts changes in the Company’s redeemable noncontrolling interest balance.

(in millions)

Balance, December 31, 2023 $ —

Redeemable noncontrolling interest initial measurement 14.4

Net income attributable to redeemable noncontrolling interest 0.9

Redemption value adjustment 0.8

Balance, June 30, 2024 $ 16.1

INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

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").

Investments in and advances to unconsolidated affiliates as of June 30, 2024 and December 31, 2023 primarily consisted of interests in Rivers Casino Des Plaines ("Rivers Des Plaines") and Miami Valley Gaming and Racing ("MVG").

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Rivers Casino Des Plaines

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

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.

As of June 30, 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 $ 832.8 million.

Our investment in Rivers Des Plaines was $ 535.1 million and $ 541.2 million as of June 30, 2024 and December 31, 2023, respectively.

The Company received distributions from Rivers Des Plaines of $ 58.7 million and $ 68.2 million for the six months ended June 30, 2024 and 2023, respectively.

Miami Valley Gaming and Racing

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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 $ 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

Our investment in MVG was $ 113.7 million and $ 114.6 million as of June 30, 2024 and December 31, 2023, respectively.

The Company received distributions from MVG of $ 23.0 million and $ 23.5 million for the six months ended June 30, 2024 and 2023, respectively.

Summarized Financial Results for our Unconsolidated Affiliates

Summarized below are the financial results for our unconsolidated affiliates.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in millions) 2024 2023 2024 2023

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Net income $ 65.3 $ 67.1 $ 130.0 $ 133.9

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

(in millions) June 30, 2024 December 31, 2023

Current assets $ 91.9 $ 104.8

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The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Restricted Cash

2 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements

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

March 31, 2024

June 30, 2024

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

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For certain legal proceedings, we cannot reasonably estimate losses or a range of loss, if any, particularly for proceedings that are in the early stages of development or where the plaintiffs seek indeterminate damages.

Various factors, including but not limited to, the outcome of potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability can be established or before a loss or range of loss can be reasonably estimated.

Various factors, including but not limited to, the outcome of potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

can be established or before a loss or range of loss can be reasonably estimated.

In accordance with current accounting standards for loss contingencies and based upon information currently known to us, we establish reserves for litigation when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss or range of loss can be reasonably estimated.

4 unchanged sentences

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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in millions, except per share data) 2024 2023 2024 2023

Numerator for basic and diluted net income per common share:

Net income $ 80.4 $ 155.7

Net income attributable to Churchill Downs Incorporated $ 209.3 $ 143.0 $ 289.7 $ 298.7

Adjustments related to redeemable noncontrolling interest ( 0.8 ) — ( 0.8 ) —

Net income attributable to common shareholders $ 208.5 $ 143.0 $ 288.9 $ 298.7

Denominator for net income per common share:

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Adjusted EBITDA includes the following adjustments:

Adjusted EBITDA includes our portion of EBITDA from our equity investments.

Adjusted EBITDA includes our portion of EBITDA from our equity investments and the portion of EBITDA attributable to a noncontrolling interest.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Adjusted EBITDA excludes:

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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.

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Net revenue by segment is comprised of the following:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in millions) 2024 2023 2024 2023

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Net Revenue $ 890.7 $ 768.5 $ 1,481.6 $ 1,328.0

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

1 unchanged sentence

Adjusted EBITDA by segment is comprised of the following:

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

(in millions) Live and Historical Racing TwinSpires Gaming

10 unchanged sentences

Adjusted EBITDA $ 279.2 $ 46.2 $ 140.7

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

(in millions) Live and Historical Racing TwinSpires Gaming

10 unchanged sentences

Adjusted EBITDA $ 223.5 $ 33.9 $ 123.4

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Six Months Ended June 30, 2024

(in millions) Live and Historical Racing TwinSpires Gaming

Revenues $ 739.1 $ 274.0 $ 517.6

Gaming taxes and purses ( 165.0 ) ( 12.2 ) ( 164.0 )

Marketing and advertising ( 21.8 ) ( 6.1 ) ( 17.0 )

Salaries and benefits ( 63.3 ) ( 15.9 ) ( 78.3 )

Content expense ( 3.4 ) ( 117.3 ) ( 4.4 )

Selling, general and administrative expense ( 17.3 ) ( 8.8 ) ( 22.0 )

Maintenance, insurance and utilities ( 21.8 ) ( 2.0 ) ( 20.7 )

Property and other taxes ( 4.5 ) ( 0.1 ) ( 6.7 )

Other operating expense ( 62.2 ) ( 25.8 ) ( 38.5 )

Other income 0.2 — 97.5

Adjusted EBITDA $ 380.0 $ 85.8 $ 263.5

Six Months Ended June 30, 2023

(in millions) Live and Historical Racing TwinSpires Gaming

Revenues $ 623.8 $ 235.5 $ 499.5

Gaming taxes and purses ( 141.9 ) ( 12.0 ) ( 165.3 )

Marketing and advertising ( 20.3 ) ( 6.7 ) ( 17.6 )

Salaries and benefits ( 52.1 ) ( 13.7 ) ( 74.0 )

Content expense ( 3.5 ) ( 111.7 ) ( 4.5 )

Selling, general and administrative expense ( 16.0 ) ( 5.1 ) ( 22.5 )

Maintenance, insurance and utilities ( 19.4 ) ( 1.7 ) ( 19.4 )

Property and other taxes ( 2.7 ) ( 0.1 ) ( 6.3 )

Other operating expense ( 62.5 ) ( 22.2 ) ( 34.3 )

Other income 0.2 1.0 97.3

Adjusted EBITDA $ 305.6 $ 63.3 $ 252.9

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

Churchill Downs Incorporated

Notes to Condensed Consolidated Financial Statements

Adjusted EBITDA by segment is comprised of the following:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in millions) 2024 2023 2024 2023

Reconciliation of Comprehensive Income to Adjusted EBITDA:

Net income attributable to Churchill Downs Incorporated $ 209.3 $ 143.0 $ 289.7 $ 298.7

Net income attributable to noncontrolling interest 0.9 — 0.9 —

Net income and comprehensive income 210.2 143.0 290.6 298.7

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Pre-opening expense 7.5 3.2 15.8 6.4

Arlington exit costs — 5.9 — 9.3

Other expenses, net 0.1 6.6 0.3 6.9

Asset impairments — 24.5 — 24.5

Transaction expense, net 0.6 0.5 4.7 0.3

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Interest, depreciation and amortization expense related to equity investments 10.5 9.9 20.8 19.7

Rivers Des Plaines' legal reserves and transaction costs 0.3 — 0.3 —

Other charges and recoveries, net ( 0.1 ) ( 1.2 ) ( 6.8 ) ( 0.9 )

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Total Adjusted EBITDA $ 444.8 $ 363.7 $ 687.3 $ 586.6

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

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

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

(in millions) June 30, 2024 December 31, 2023

Total assets:

5 unchanged sentences

Total assets $ 7,170.1 $ 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:

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2024 2023

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SUBSEQUENT EVENTS

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

On July 3, 2024, the Company closed an amendment of the Credit Agreement to (i) extend the maturity date of the Revolver and Term Loan A from 2027 to 2029 and (ii) amend certain other provisions of the Credit Agreement.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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