What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-24 compared with 2024-04-24 · 131 added, 70 removed, 211 unchanged (49% of the section changed)

28 unchanged sentences

• personal injury litigation related to injuries occurring at our racetracks;

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

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

• compliance with the Foreign Corrupt Practices Act or other similar laws and regulations, or applicable anti-money laundering regulations;

14 unchanged sentences

This report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023, including Part I - Item 1A, "Risk Factors" of our Form 10-K for a discussion regarding some of the reasons that actual results may be materially different from those we anticipate.

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

Churchill Downs Incorporated ("CDI" or the "Company") has been creating extraordinary entertainment experiences for nearly 150 years, beginning with the Company’s most iconic and enduring asset, the Kentucky Derby.

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

Churchill Downs Incorporated ("CDI" or the "Company") has been creating extraordinary entertainment experiences for over 150 years, beginning with the Company’s most iconic and enduring asset, the Kentucky Derby.

Headquartered in Louisville, Kentucky, CDI has expanded through the development of live and historical racing entertainment venues, the growth of the TwinSpires horse racing online wagering business, expanded pari-mutuel content and technology services to B2C platforms, and the operation and development of regional casino gaming properties.

1 unchanged sentence

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.

Key Indicators to Evaluate Business Results and Financial Condition

9 unchanged sentences

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, adjusted for the following:

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.

Adjusted EBITDA excludes:

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See the Reconciliation of Comprehensive Income to Adjusted EBITDA included in this section for additional information.

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

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

Governmental Regulations and Legislative Changes

14 unchanged sentences

The Company intends to vigorously defend the constitutionality of the HHR Act.

As of March 31, 2024, the Company had approximately 500 HRMs in OTBs in Louisiana.

As of June 30, 2024, the Company had approximately 500 HRMs in OTBs in Louisiana.

If the 2021 HHR Act is determined to be unconstitutional it could have an adverse impact on our Louisiana HRM results which are reported in our Gaming segment.

Consolidated Financial Results

The following table reflects our net revenue, operating income, net income, Adjusted EBITDA, and certain other financial information:

Three Months Ended March 31,

(in millions) 2024 2023 Change

The following table reflects our net revenue, operating income, net income attributable to Churchill Downs Incorporated, Adjusted EBITDA, and certain other financial information:

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

(in millions) 2024 2023 Change 2024 2023 Change

Net revenue $ 890.7 $ 768.5 $ 122.2 $ 1,481.6 $ 1,328.0 $ 153.6

1 unchanged sentence

Operating income margin 37 % 29 % 31 % 26 %

Net income 80.4 155.7 (75.3)

Net income attributable to Churchill Downs Incorporated 209.3 143.0 66.3 289.7 298.7 (9.0)

Adjusted EBITDA 444.8 363.7 81.1 687.3 586.6 100.7

Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023

• Net revenue increased $31.4 million driven by a $30.7 million increase from the Live and Historical Racing segment primarily due to the opening of our Rosie's Emporia property in September 2023 and growth at our other HRM properties and an $11.8 million increase from the TwinSpires segment primarily due the Exacta Transaction.

Partially offsetting these increases was an $11.1 million decrease primarily from the Gaming segment driven by our decision not to renew the management agreement at Lady Luck in June 2023 and inclement weather in January 2024 across many of our Gaming properties.

• Operating income increased $6.4 million due to a $16.8 million increase in the Live and Historical Racing segment primarily due to savings as a result of the Exacta Transaction, the opening of our Rosie's Emporia property in September 2023, and growth at our other HRM properties, a $9.6 million increase in the TwinSpires segment primarily due to the Exacta Transaction, and decreased All Other net operating expenses of $2.6 million primarily related to

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

Arlington exit costs in 2023.

Partially offsetting these increases to operating income was a $15.8 million decrease in the Gaming segment primarily due to inclement weather at many of our Gaming properties in January 2024, a $4.3 million increase in transaction expenses, and a $2.5 million increase in selling, general and administrative expenses.

• Net income decreased $75.3 million.

The following impacted the comparability of the Company's net income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023:

an $86.2 million after-tax gain on the sale of the Arlington property in the prior year quarter and a $4.4 million after-tax net increase in adjustments related to transaction, pre-opening and other expenses, partially offset by a $5.2 million after-tax increase of other recoveries, net related to non-recurring insurance claim recoveries.

Three Months Ended June 30, 2024, Compared to Three Months Ended June 30, 2023

• Net revenue increased $122.2 million driven by a $79.7 million increase from the Live and Historical Racing segment primarily due to a record-breaking Derby Week at Churchill Downs Racetrack, the opening of the Rosie's Emporia property in September 2023, and growth at our other HRM properties;

a $28.3 million increase from the Gaming segment primarily driven by the opening of the Terre Haute Casino Resort in April 2024, partially offset by our decision not to renew the management agreement at Lady Luck at the end of June 2023, and inclement weather in April 2024;

and a $14.3 million increase from the TwinSpires segment primarily due to Exacta.

All Other net revenue decreased $0.1 million.

• Operating income increased $104.4 million driven by a $62.5 million increase from the Live and Historical Racing segment primarily due to a record-breaking Derby Week at Churchill Downs Racetrack, Exacta savings, the opening of the Rosie's Emporia property in September 2023, and growth at our other HRM properties;

an increase attributable

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

to the $24.5 million non-cash impairment of Presque Isle intangible assets in the second quarter of 2023 that did not recur;

a $19.1 million increase from the Gaming segment primarily due to opening of the Terre Haute Casino Resort in April 2024, partially offset by inclement weather in April 2024;

a $5.7 million increase in the TwinSpires segment primarily due to Exacta;

and an increase in All Other income of $2.0 million primarily related to Arlington exit costs in 2023 that did not recur.

Partially offsetting these increases to operating income was a $9.3 million increase in selling, general and administrative expenses and a $0.1 million increase in transaction expenses.

• Net income attributable to Churchill Downs Incorporated increased $66.3 million.

The following impacted the comparability of the Company's net income for the three months ended June 30, 2024 compared to the three months ended June 30, 2023:

an $18.5 million decrease in after-tax non-cash impairment costs, a $5.8 million after-tax decrease in transaction, pre-open, and other expenses primarily related to Arlington exit costs in 2023, partially offset by a $1.0 million increase of other items.

Excluding these items, net income increased $43.0 million due to a $49.1 million after-tax increase primarily driven by the results of our operations, partially offset by a $6.1 million after-tax increase in interest expense associated with higher outstanding debt balances and higher interest rates.

• Adjusted EBITDA increased $81.1 million driven by a $55.7 million increase from the Live and Historical Racing segment primarily due to a record-breaking Derby Week at Churchill Downs Racetrack and growth at our HRM properties;

a $17.3 million increase from the Gaming segment primarily driven by the opening of the Terre Haute Casino Resort in April 2024, partially offset by inclement weather in April 2024;

and a $12.3 million increase from the TwinSpires segment primarily due to Exacta.

These increases were partially offset by a decrease of All Other adjusted EBITDA of $4.2 million.

Six Months Ended June 30, 2024, Compared to Six Months Ended June 30, 2023

• Net revenue increased $153.6 million driven by a $110.4 million increase from the Live and Historical Racing segment primarily due to a record-breaking Derby Week at Churchill Downs Racetrack, the opening of the Rosie's Emporia property in September 2023, and growth at our other HRM properties;

a $26.1 million increase from the TwinSpires segment primarily due to Exacta;

and a $17.5 million increase from the Gaming segment primarily driven by the opening of the Terre Haute Casino Resort in April 2024, partially offset by our decision not to renew the management agreement at Lady Luck at the end of June 2023, and inclement weather in January and April 2024.

All Other net revenue decreased $0.4 million.

• Operating income increased $110.8 million driven by a $79.3 million increase from the Live and Historical Racing segment primarily due to a record-breaking Derby Week at Churchill Downs Racetrack, Exacta savings, the opening of the Rosie's Emporia property in September 2023, and growth at our other HRM properties;

an increase attributable to the $24.5 million non-cash impairment of Presque Isle intangible assets in the second quarter of 2023 that did not recur;

a $15.3 million increase in the TwinSpires segment primarily due to Exacta;

an increase in All Other income of $4.6 million primarily related to Arlington exit costs in 2023 that did not recur;

and a $3.3 million increase from the Gaming segment primarily due to opening of the Terre Haute Casino Resort in April 2024, partially offset by inclement weather in January and April 2024.

Partially offsetting these increases to operating income was an $11.8 million increase in selling, general and administrative expenses and a $4.4 million increase in transaction expenses.

• Net income attributable to Churchill Downs Incorporated decreased $9.0 million.

The following impacted the comparability of the Company's net income for the six months ended June 30, 2024 compared to the six months ended June 30, 2023:

an $86.2 million after-tax gain on the sale of the Arlington property in the prior year, partially offset by an $18.5 million decrease in after-tax non-cash impairment costs, a $4.2 million after-tax increase of other recoveries, net related to non-recurring insurance claim recoveries, and a $1.3 million decrease of other items.

Excluding these items, net income increased $53.2 million primarily due to a $63.6 million after-tax increase primarily driven by the results of our operations, partially offset by a $10.4 million after-tax increase in interest expense associated with higher outstanding debt balances and higher interest rates.

• Adjusted EBITDA increased $19.6 million driven by an $18.7 million increase from the Live and Historical Racing segment primarily due to $5.8 million of savings as a result of the Exacta Transaction and a $12.9 million increase due to the growth at our HRM properties and the opening of our Rosie's Emporia property in September 2023, and a $10.2 million increase from the TwinSpires segment primarily attributable to the Exacta Transaction.

Partially offsetting these increases was a $6.7 million decrease from the Gaming segment primarily due to inclement weather in January 2024 at many of our Gaming properties and a decrease in All Other adjusted EBITDA of $2.6 million driven by increased corporate compensation expenses and administrative fees.

• Adjusted EBITDA increased $100.7 million driven by a $74.4 million increase from the Live and Historical Racing segment primarily due to a record-breaking Derby Week at Churchill Downs Racetrack and growth at our HRM properties;

a $22.5 million increase from the TwinSpires segment primarily due to Exacta;

and a $10.6 million increase from the Gaming segment driven by the opening of the Terre Haute Casino Resort in April 2024, partially offset by inclement weather in January and April 2024.

These increases were partially offset by a decrease of All Other adjusted EBITDA of $6.8 million.

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

Revenue by Segment

The following table presents net revenue for our segments, including intercompany revenue:

Three Months Ended March 31, Change

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

(in millions) 2024 2023 2024 2023

5 unchanged sentences

Net Revenue $ 890.7 $ 768.5 $ 122.2 $ 1,481.6 $ 1,328.0 $ 153.6

Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023

• Live and Historical Racing revenue increased $33.1 million due to an $18.3 million increase attributable to growth at our Kentucky HRM properties, a $13.5 million increase attributable to growth at our Virginia properties and the opening of our Rosie's Emporia property in September 2023, and a $1.3 million increase at our other Live and Historical Racing properties.

• TwinSpires revenue increased $17.8 million due to a $14.3 million increase attributable to the Exacta Transaction, a $2.3 million increase attributable to our retail and online sports betting business, and a $1.2 million increase in Horse Racing revenue.

• Gaming revenue decreased $8.4 million due to a $6.3 million decrease in Pennsylvania primarily due to our decision not to renew the management agreement at Lady Luck in June 2023 and a $2.1 million net decrease at our other gaming properties primarily due to inclement weather in January 2024.

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

Three Months Ended June 30, 2024, Compared to Three Months Ended June 30, 2023

• Live and Historical Racing revenue increased $82.2 million due to a $53.8 million increase at Churchill Downs Racetrack, which includes a $37.6 million increase due to a record-breaking Derby Week;

a $17.4 million increase attributable to growth at our Virginia properties and the opening of the Rosie's Emporia property in September 2023;

a $10.3 million increase attributable to growth at our Kentucky HRM properties;

and a $0.7 million increase at our other Live and Historical Racing properties.

• TwinSpires revenue increased $20.8 million due to a $14.7 million increase attributable to Exacta, a $4.3 million net increase in Horse Racing revenue primarily due to increased affiliate wagering handle partially offset by a decline in TwinSpires retail horse racing handle due to shifts in race days at other tracks and market access, and a $1.8 million increase attributable to our online sports betting market access agreements and our retail sports betting business.

• Gaming revenue increased $26.5 million due to a $33.9 million increase attributable to the opening of the Terre Haute Casino Resort in April 2024, and a $1.9 million increase in New York, partially offset by a $5.4 million decrease in Pennsylvania primarily due to our decision not to renew the management agreement at Lady Luck at the end of June 2023, a $2.7 million decrease in Maine primarily due to inclement weather in April 2024, and a $1.2 million net decrease at our other Gaming properties.

• All Other revenue increased due to intercompany revenue related to the captive insurance company that was established in April 2024.

All captive revenue is eliminated in consolidation.

Six Months Ended June 30, 2024, Compared to Six Months Ended June 30, 2023

• Live and Historical Racing revenue increased $115.3 million due to a $54.5 million increase at Churchill Downs Racetrack, which includes a $38.0 million increase due to a record-breaking Derby Week;

a $30.9 million increase attributable to growth at our Virginia properties and the opening of the Rosie's Emporia property in September 2023;

a $28.5 million increase attributable to growth at our Kentucky HRM properties;

and a $1.4 million increase at our other Live and Historical Racing properties.

• TwinSpires revenue increased $38.5 million due to a $29.0 million increase attributable to Exacta, a $5.5 million net increase in Horse Racing revenue primarily due to increased affiliate wagering handle partially offset by a decline in TwinSpires retail horse racing handle due to shifts in race days at other tracks and market access, and a $4.0 million increase attributable to our online sports betting market access agreements and our retail sports betting business.

• Gaming revenue increased $18.1 million due to a $33.9 million increase attributable to the opening of the Terre Haute Casino Resort in April 2024, partially offset by an $11.7 million decrease in Pennsylvania primarily due to our decision not to renew the management agreement at Lady Luck at the end of June 2023, and a $4.1 million net decrease primarily due to inclement weather in January 2024 across several of our other Gaming properties and in Maine in April 2024.

• All Other revenue increased due to intercompany revenue related to the captive insurance company that was established in April 2024.

All captive revenue is eliminated in consolidation.

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

Consolidated Operating Expense

The following table is a summary of our consolidated operating expense:

Three Months Ended March 31, Change

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

(in millions) 2024 2023 2024 2023

8 unchanged sentences

Transaction expense, net 0.6 24.5 (23.9) 4.7 24.5 (19.8)

Asset impairments — 0.5 (0.5) — 0.3 (0.3)

Other operating expense 71.3 73.1 (1.8) 120.1 126.2 (6.1)

Total expense $ 560.7 $ 542.9 $ 17.8 $ 1,025.3 $ 982.5 $ 42.8

Three Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023

Increased gaming taxes and purses, salaries and benefits, selling, general and administrative, marketing and advertising, and depreciation and amortization increased primarily due to the Exacta Transaction in August 2023, the opening of our Rosie's Emporia property in late September 2023 and our Derby City Gaming Downtown property in December 2023, and added costs related to Terre Haute Casino in Indiana that opened on April 5, 2024 and The Rose HRM entertainment facility that is scheduled to open in late September 2024.

Three and Six Months Ended June 30, 2024, Compared to Three and Six Months Ended June 30, 2023

Operating expenses increased $17.8 million and $42.8 million for the three and six months ended June 30, 2024 compared to June 30, 2023 primarily due to the Exacta Transaction in August 2023, the opening of Rosie's Emporia in September 2023, Derby City Gaming Downtown in December 2023, and Terre Haute Casino Resort in Indiana on April 5, 2024 and the hotel on May 15, 2024;

and the planned opening of The Rose Gaming Resort in Virginia in late September 2024.

These increases were offset by the $24.5 million non-cash impairment of Presque Isle intangible assets in the second quarter of 2023 that did not recur.

Adjusted EBITDA

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Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure provided in accordance with GAAP.

Three Months Ended March 31, Change

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

(in millions) 2024 2023 2024 2023

5 unchanged sentences

Total Adjusted EBITDA $ 444.8 $ 363.7 $ 81.1 $ 687.3 $ 586.6 $ 100.7

Thre e Months Ended March 31, 2024, Compared to Three Months Ended March 31, 2023

• Live and Historical Racing Adjusted EBITDA increased $18.7 million due to a $12.9 million increase attributable to growth at our Virginia properties which includes $5.8 million of savings related to the Exacta Transaction, and an $8.5 million increase from our Kentucky HRM properties.

These increases were offset by a $2.7 million decrease at Churchill Downs Racetrack driven by increased maintenance and promotional expenses in preparation for the 150th Kentucky Oaks and Derby.

• TwinSpires Adjusted EBITDA increased $10.2 million due to a $9.4 million increase attributable to the Exacta Transaction and a $1.4 million increase attributable to our retail and online sports betting business, partially offset by a $0.6 million decrease in Horse Racing primarily driven by lower retail volume.

• Gaming Adjusted EBITDA decreased $6.7 million primarily due to inclement weather in January 2024 at many of our gaming properties.

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

Three Months Ended June 30, 2024, Compared to Three Months Ended June 30, 2023

• Live and Historical Racing Adjusted EBITDA increased $55.7 million due to a $38.1 million increase at Churchill Downs Racetrack, which includes a $32.2 million increase due to a record-breaking Derby Week;

a $16.1 million increase attributable to growth at our Virginia properties, which includes $5.6 million related to Exacta savings;

and a $1.5 million increase from growth at our other HRM properties.

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

• TwinSpires Adjusted EBITDA increased $12.3 million due to a $10.1 million increase attributable to Exacta, a $1.9 million increase attributable to our online sports betting market access agreements and our retail sports betting business, and a $0.3 million increase in Horse Racing from increased revenue that was mostly offset by higher content and related expenses.

• Gaming Adjusted EBITDA increased $17.3 million due to a $19.9 million increase attributable to the opening of the Terre Haute Casino Resort in April 2024 and a $3.5 million increase in New York primarily due to union-related payments in 2023 that did not recur.

The increase was partially offset by a $2.2 million decrease in Maine primarily due to inclement weather in April 2024, a $0.9 million decrease in Pennsylvania primarily due to our decision not to renew the management agreement at Lady Luck at the end of June 2023, and a $3.0 million net decrease at our other Gaming properties primarily driven by Louisiana, Maryland, and Mississippi.

• All Other Adjusted EBITDA decreased $4.2 million driven primarily by increased corporate compensation related expenses and other corporate administrative expenses.

Six Months Ended June 30, 2024, Compared to Six Months Ended June 30, 2023

• Live and Historical Racing Adjusted EBITDA increased $74.4 million due to a $35.3 million increase at Churchill Downs Racetrack, which includes a $31.4 million increase due to a record-breaking Derby Week;

a $28.9 million increase attributable to growth at our Virginia properties, which includes $11.3 million related to Exacta savings;

and a $10.2 million increase from growth at our other HRM properties.

• TwinSpires Adjusted EBITDA increased $22.5 million due to a $19.5 million increase attributable to Exacta, and a $3.4 million increase attributable to our online sports betting market access agreements and our retail sports betting business, partially offset by a $0.4 million decrease in Horse Racing primarily from higher content and related expenses.

• Gaming Adjusted EBITDA increased $10.6 million due to a $20.7 million increase attributable to the opening of the Terre Haute Casino Resort in April 2024, partially offset by a $10.1 million decrease across many of our Gaming properties due to inclement weather in January 2024 and in Maine in April 2024.

• All Other Adjusted EBITDA decreased $6.8 million driven primarily by increased corporate compensation related expenses and other corporate administrative expenses.

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

Reconciliation of Comprehensive Income to Adjusted EBITDA

Three Months Ended March 31, Change

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

(in millions) 2024 2023 2024 2023

Net income attributable to Churchill Downs Incorporated $ 209.3 $ 143.0 $ 66.3 $ 289.7 $ 298.7 $ (9.0)

Net income attributable to noncontrolling interest 0.9 — 0.9 0.9 — 0.9

Net income and comprehensive income 210.2 143.0 67.2 290.6 298.7 (8.1)

6 unchanged sentences

Pre-opening expense 7.5 3.2 4.3 15.8 6.4 9.4

Arlington exit costs — 5.9 (5.9) — 9.3 (9.3)

Other expense, net 0.1 6.6 (6.5) 0.3 6.9 (6.6)

Asset impairments — 24.5 (24.5) — 24.5 (24.5)

Transaction expense, net 0.6 0.5 0.1 4.7 0.3 4.4

1 unchanged sentence

Interest, depreciation and amortization expense related to equity investments 10.5 9.9 0.6 20.8 19.7 1.1

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

Other charges and recoveries, net (0.1) (1.2) 1.1 (6.8) (0.9) (5.9)

4 unchanged sentences

The following is a summary of our overall financial position:

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

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

Total assets $ 7,170.1 $ 6,955.5 $ 214.6

Total liabilities 6,123.1 6,061.9 61.2

Total shareholders' equity 826.9 893.6 (66.7)

Total equity 1,047.0 893.6 153.4

Significant items affecting the comparability of our Condensed Consolidated Balance Sheets include:

• Total assets increased $111.3 million driven by increased capital expenditures primarily at the Terre Haute Casino Resort, Churchill Downs Racetrack, and The Rose Gaming Resort in Dumfries, Virginia.

• Total liabilities increased $178.0 million driven by increased long-term debt and deferred revenue primarily due to increased advanced ticket sales related to the 150th Kentucky Derby.

• Total shareholders’ equity decreased $66.7 million driven by current year share repurchases, partially offset by net income.

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

• Total assets increased $214.6 million driven by increased capital expenditures primarily at the Terre Haute Casino Resort, Churchill Downs Racetrack, and The Rose Gaming Resort in Virginia.

• Total liabilities increased $61.2 million driven primarily by increased accounts payable and taxes payable, partially offset by decreased current deferred revenue due to the recognition of revenue related to the 150th Kentucky Derby and the payment of dividends.

• Total equity increased $153.4 million driven by net income and the addition of a redeemable noncontrolling interest, partially offset by share repurchases.

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

Liquidity and Capital Resources

The following table is a summary of our liquidity and cash flows:

(in millions) Three Months Ended March 31, Change

(in millions) Six Months Ended June 30, Change

Cash flows from:

2 unchanged sentences

Financing activities (173.5) (47.7) (125.8)

Three Months Ended March 31, 2024, Compared to the Three Months Ended March 31, 2023

• Cash flows provided by operating activities increased $38.8 million driven primarily by a decrease in cash used for working capital, an increase in operating income, and decreased interest paid in 2024.

Six Months Ended June 30, 2024, Compared to the Six Months Ended June 30, 2023

• Cash flows provided by operating activities increased $69.1 million driven primarily by an increase in operating income, partially offset by increased interest paid in 2024 and decreased distributions from our unconsolidated affiliates.

We anticipate that cash flows from operations and availability of borrowings under our credit facility over the next twelve months will be adequate to fund our business operations and capital expenditures.

• Cash flows used in investing activities increased $207.9 million driven by $195.7 million proceeds from the Arlington sale in 2023 and an increase in capital project expenditures in 2024 primarily at the Terre Haute Casino Resort, Churchill Downs Racetrack, and The Rose Gaming Resort in Dumfries, Virginia.

• Cash flows used in financing activities decreased $136.6 million primarily driven by a net paydown of debt in the first quarter of 2023, partially offset by share repurchases in the first quarter of 2024.

• Cash flows used in investing activities increased $171.1 million primarily driven by $195.7 million proceeds from the Arlington sale received in 2023 that did not recur in 2024.

• Cash flows used in financing activities increased $125.8 million primarily driven by share repurchases in 2024.

We have announced several project capital investments, including the following:

Churchill Downs Racetrack Paddock Project, Owensboro Racing & Gaming in Owensboro, Kentucky, a New Hampshire HRM facility, and The Rose Gaming Resort in Dumfries, Virginia.

Grandstand Club and Pavilion Renovation at Churchill Downs Racetrack, The Rose Gaming Resort in Northern Virginia, Owensboro Racing and Gaming in Western Kentucky, an Oak Grove HRM annex in Southwestern Kentucky, and a Salem HRM entertainment venue in New Hampshire.

We currently expect our project capital to be approximately $450.0 to $550.0 million in 2024, although this amount may vary significantly based on the timing of work completed, unanticipated delays, and timing of payments to third parties.

4 unchanged sentences

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

During the first quarter of 2024, we repurchased 184,821 shares of the Company's common stock under the 2021 Stock Repurchase Program for a total cost of $22.0 million.

We had approximately $192.9 million of repurchase authority remaining under this program on March 31, 2024.

During the second quarter of 2024, we repurchased 93,874 shares of the Company's common stock under the 2021 Stock Repurchase Program for a total cost of approximately $13.0 million.

We had approximately $179.9 million of repurchase authority remaining under this program on 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.

2 unchanged sentences

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

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

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

Credit Facilities and Indebtedness

The following table presents our debt outstanding:

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

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

Revolver $ 300.4 $ 247.2 $ 53.2

11 unchanged sentences

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 and (ii) amend certain other provisions to 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.

1 unchanged sentence

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%.

The estimated contractual payments, including interest, under the Credit Agreement for the next twelve months are estimated to be $198.5 million assuming no change in the weighted average borrowing rate of 7.01%, which was in place as of March 31, 2024.

During the three months ended March 31, 2024, we had repayments of principal and interest on the Revolver of $136.2 million.

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

The estimated contractual payments, including interest, under the Credit Agreement for the next twelve months are estimated to be $209.4 million assuming no change in the weighted average borrowing rate of 7.04%, which was in place as of June 30, 2024.

During the six months ended June 30, 2024, we had repayments of principal and interest on the Revolver of $577.7 million.

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.

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

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

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

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").

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.

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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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Certain of our lease agreements include lease payments based on a percentage of net gaming revenue and others include rental payment adjustments periodically for inflation.

As of March 31, 2024, minimum rent payable under operating leases was $24.4 million, with $5.9 million due in the next twelve months.

As of March 31, 2024, minimum rent payable accounted for as financing obligations was $58.7 million, with $4.9 million due in the next twelve months.

As of June 30, 2024, minimum rent payable under operating leases was $29.6 million, with $5.9 million due in the next twelve months.

As of June 30, 2024, minimum rent payable accounted for as financing obligations was $57.5 million, with $5.0 million due in the next twelve months.

Other Contractual Obligations

The Company has other contractual obligations that consist primarily of minimum guarantees with commitments of $14.0 million, $1.5 million of which is due within the next twelve months.

The Company has other contractual obligations with commitments of $12.4 million, $1.6 million of which is due within the next twelve months.

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 2. Management’s Discussion and Analysis