What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-23 compared with 2024-07-24 · 84 added, 107 removed, 235 unchanged (45% of the section changed)

11 unchanged sentences

• additional or increased taxes and fees;

• the impact of any pandemics, epidemics, or outbreaks of infectious diseases, including possible new variants of COVID-19, and related economic matters on our results of operations, financial conditions, and prospects;

• the impact of any pandemics, epidemics, or outbreaks of infectious diseases, and related economic matters on our results of operations, financial conditions, and prospects;

• lack of confidence in the integrity of our core businesses or any deterioration in our reputation;

14 unchanged sentences

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

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

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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.

26 unchanged sentences

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 .

Arlington's results and exit costs in 2023 are treated as an adjustment to EBITDA .

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

2 unchanged sentences

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

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

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

Governmental Regulations and Legislative Changes

13 unchanged sentences

The suspensive appeal allows the continued operation of HHR during the pendency of the appeal before the Louisiana Supreme Court.

The case was lodged in the Louisiana Supreme Court on August 7, 2024 and the Company, and other appellants, including the Louisiana Attorney General on behalf of the Louisiana Racing Commission, filed opening briefs on October 9, 2024.

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

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

As of September 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.

1 unchanged sentence

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,

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

(in millions) 2024 2023 Change 2024 2023 Change

4 unchanged sentences

Adjusted EBITDA 235.3 218.2 17.1 922.6 804.8 117.8

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.

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

• Net revenue increased $56.0 million driven by a $28.0 million increase from the Live and Historical Racing segment primarily due to the opening of the Rosie's Emporia property in September 2023 and growth at our other HRM properties, a $25.4 million increase from the Gaming segment primarily driven by the opening of the Terre Haute Casino Resort in April 2024, and a $2.8 million increase from the TwinSpires segment primarily due to Exacta.

All Other net revenue decreased $0.2 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.

• Operating income increased $13.6 million driven by a $14.9 million increase from the Live and Historical Racing segment primarily due to the opening of the Rosie's Emporia property in September 2023 and growth at our other HRM properties, a $6.2 million increase from the Gaming segment primarily due to opening of the Terre Haute Casino

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

Resort in April 2024 that was partially offset by regional gaming softness and increased competition, a $5.5 million decrease in transaction costs primarily driven by the settlement of certain liabilities recorded at the time of the Company's acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC in 2022, and a $3.9 million increase in the TwinSpires segment primarily due to Exacta.

Partially offsetting these increases to operating income was a $9.6 million increase in selling, general and administrative expenses, a $3.9 million write-off of HRMs in Virginia that are no longer in use, and a $3.4 million decrease in All Other operating income.

• Net income attributable to Churchill Downs Incorporated increased $4.4 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.

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

a $3.0 million increase in after-tax non-cash impairment costs, partially offset by a $1.7 million after-tax net decrease in transaction, pre-open and other expenses, and a $0.6 million after-tax decrease of other items.

Excluding these items, net income increased $5.1 million due to a $10.5 million after-tax increase primarily driven by the results of our operations, partially offset by a $5.4 million after-tax increase in interest expense associated primarily with higher outstanding debt balances.

• Adjusted EBITDA increased $17.1 million driven by a $12.1 million increase from the Live and Historical Racing segment primarily due to growth at our Virginia HRM properties, an $8.6 million increase from the TwinSpires segment primarily due to Exacta, and a $1.0 million increase from the Gaming segment driven by the opening of the Terre Haute Casino Resort in April 2024 that was partially offset by regional gaming softness and increased competition.

These increases were partially offset by a decrease of All Other adjusted EBITDA of $4.6 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.

Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023

• Net revenue increased $209.6 million driven by a $138.4 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 $42.9 million increase from the Gaming segment primarily driven by the opening of the Terre Haute Casino Resort in April 2024, and a $28.9 million increase from the TwinSpires segment primarily due to Exacta.

All Other net revenue decreased $0.6 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.

• Operating income increased $124.4 million driven by a $94.2 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, a $20.6 million increase attributable to a $24.5 million non-cash impairment of Presque Isle intangible assets in the second quarter of 2023 compared to a $3.9 million write-off of HRMs in Virginia that are no longer in use in the third quarter of 2024, a $19.2 million increase in the TwinSpires segment primarily due to Exacta, a $9.5 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, regional gaming softness, and increased competition, a $1.2 million increase in All Other operating income, and a $1.1 million decrease in transaction costs.

Partially offsetting these increases to operating income was a $21.4 million increase in selling, general and administrative expenses.

• Net income attributable to Churchill Downs Incorporated decreased $4.6 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.

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

an $86.2 million after-tax gain on the sale of the Arlington property in the prior year, partially offset by a $15.7 million decrease in after-tax non-cash impairment costs, a $4.8 million after-tax increase of other recoveries, net related to non-recurring insurance claim recoveries, and a $3.2 million decrease of other items.

Excluding these items, net income increased $57.9 million primarily due to a $72.0 million after-tax increase primarily driven by the results of our operations, partially offset by a $14.1 million after-tax increase in interest expense associated with higher outstanding debt balances and higher interest rates.

• 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.

• Adjusted EBITDA increased $117.8 million driven by an $86.5 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 $31.1 million increase from the TwinSpires segment primarily due to Exacta, and an $11.6 million increase from the Gaming segment driven by the opening of the Terre Haute Casino Resort in April 2024 that was partially offset by inclement weather in January 2024, regional gaming softness, and increased competition.

These increases were partially offset by a decrease of All Other adjusted EBITDA of $11.4 million.

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

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

Revenue by Segment

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

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

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

(in millions) 2024 2023 2024 2023

5 unchanged sentences

Net Revenue $ 628.5 $ 572.5 $ 56.0 $ 2,110.1 $ 1,900.5 $ 209.6

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.

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

• Live and Historical Racing revenue increased $26.9 million due to a $21.6 million increase attributable to growth at our Virginia properties and the opening of the Rosie's Emporia property in September 2023, a $3.8 million increase attributable to growth at our Northern Kentucky properties, and a $1.5 million net increase at our other Live and Historical Racing properties.

• TwinSpires revenue increased $6.3 million due to a $9.6 million increase attributable to Exacta and a $1.3 million increase attributable to our online sports betting market access agreements and our retail sports betting business.

These increases were partially offset by a $4.6 million decrease primarily attributable to a decline in TwinSpires Horse Racing handle due to market access and shifts in race days at other tracks.

• Gaming revenue increased $25.4 million due to a $32.5 million increase attributable to the opening of the Terre Haute Casino Resort in April 2024, partially offset by a $7.1 million decrease primarily due to regional gaming softness and increased competition.

• 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.

Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023

• Live and Historical Racing revenue increased $142.2 million due to a $54.5 million increase at Churchill Downs Racetrack, which includes a $38.6 million increase due to a record-breaking Derby Week, a $52.5 million increase attributable to growth at our Virginia properties and the opening of the Rosie's Emporia property in September 2023, a $34.0 million increase attributable to growth at our Kentucky HRM properties, and a $1.2 million increase at our New Hampshire property.

• TwinSpires revenue increased $44.9 million due to a $38.6 million increase attributable to Exacta, a $5.5 million increase attributable to our online sports betting market access agreements and our retail sports betting business, and a $0.8 million increase attributable to TwinSpires Horse Racing.

• Gaming revenue increased $43.5 million due to a $66.3 million increase attributable to the opening of the Terre Haute Casino Resort in April 2024, partially offset by a $12.5 million decrease primarily due to inclement weather in January 2024, regional gaming softness, and increased competition, and a $10.3 million decrease due to our decision not to renew the management agreement at Lady Luck at the end of June 2023.

• 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

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

Consolidated Operating Expense

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

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

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

(in millions) 2024 2023 2024 2023

11 unchanged sentences

Total expense $ 502.6 $ 460.2 $ 42.4 $ 1,527.9 $ 1,442.7 $ 85.2

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.

Three and Nine Months Ended September 30, 2024, Compared to Three and Nine Months Ended September 30, 2023

Operating expenses increased $42.4 million and $85.2 million for the three and nine months ended September 30, 2024 compared to September 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 Rose Gaming Resort in Virginia.

Transaction expenses, net for the three months ended September 30, 2024, includes the settlement of certain liabilities recorded at the time of the Company's acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC in 2022 which resulted in a reduction in transaction expenses of $5.1 million.

Asset impairments for the nine months ended September 30, 2024 include a $3.9 million write-off in the third quarter of 2024 of HRMs in Virginia that are no longer in use.

Asset impairments for the nine months ended September 30, 2024 include the $24.5 million non-cash impairment of Presque Isle intangible assets in the second quarter of 2023.

Adjusted EBITDA

2 unchanged sentences

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 June 30, Change Six Months Ended June 30, Change

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

(in millions) 2024 2023 2024 2023

5 unchanged sentences

Total Adjusted EBITDA $ 235.3 $ 218.2 $ 17.1 $ 922.6 $ 804.8 $ 117.8

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.

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

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

• Live and Historical Racing Adjusted EBITDA increased $12.1 million due to a $15.2 million increase attributable to growth at our Virginia properties, which includes $3.9 million related to Exacta savings, and a $3.2 million increase attributable primarily to growth at our Northern Kentucky and Southwestern Kentucky HRM properties.

These increases were partially offset by a $4.1 million decrease attributable to our Louisville and Western Kentucky HRM properties, a $1.4 million decrease attributable to Churchill Downs Racetrack, and a $0.8 million decrease attributable to proceeds for business interruption insurance claims in the third quarter 2023 that did not reoccur.

• TwinSpires Adjusted EBITDA increased $8.6 million due to a $7.5 million increase attributable to Exacta and a $1.1 million increase primarily attributable to our online sports betting market access agreements and our retail sports betting business.

• Gaming Adjusted EBITDA increased $1.0 million due to a $12.4 million increase attributable to the opening of the Terre Haute Casino Resort in April 2024, partially offset by a $10.2 million decrease primarily due to regional gaming softness, increased competition, and higher labor and benefit expense, and a $1.2 million decrease attributable to proceeds for business interruption insurance claims in the third quarter 2023 that did not reoccur.

• All Other Adjusted EBITDA decreased $4.6 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.

Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023

• Live and Historical Racing Adjusted EBITDA increased $86.5 million due to a $44.1 million increase attributable to growth at our Virginia properties, which includes $15.3 million related to Exacta savings, a $33.9 million increase at Churchill Downs Racetrack, which includes a $31.3 million increase due to a record-breaking Derby Week, and an $8.5 million increase from growth at our other HRM properties.

• TwinSpires Adjusted EBITDA increased $31.1 million due to a $27.0 million increase attributable to Exacta and a $4.9 million increase attributable to our online sports betting market access agreements and our retail sports betting business, partially offset by a $0.8 million decrease attributable to TwinSpires Horse Racing.

• Gaming Adjusted EBITDA increased $11.6 million due to a $33.1 million increase attributable to the opening of the Terre Haute Casino Resort in April 2024, partially offset by a $20.3 million decrease primarily due to inclement weather in January 2024, regional gaming softness, and increased competition, and a $1.2 million decrease attributable to proceeds for business interruption insurance claims in the third quarter 2023 that did not reoccur.

• All Other Adjusted EBITDA decreased $11.4 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

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

Reconciliation of Comprehensive Income to Adjusted EBITDA

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

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

(in millions) 2024 2023 2024 2023

22 unchanged sentences

The following is a summary of our overall financial position:

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

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

Total assets $ 7,172.5 $ 6,955.5 $ 217.0

2 unchanged sentences

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

• 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 assets increased $217.0 million driven by increased capital expenditures primarily at the Terre Haute Casino Resort, Churchill Downs Racetrack, Owensboro Racing and Gaming in Western Kentucky, and The Rose Gaming Resort in Virginia.

• Total liabilities decreased $4.3 million driven primarily by decreased deferred revenue due to the recognition of revenue related to the 150th Kentucky Derby and the payment of dividends, partially offset by increased accounts payables.

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

• Total equity increased $221.3 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) Six Months Ended June 30, Change

(in millions) Nine Months Ended September 30, Change

Cash flows from:

2 unchanged sentences

Financing activities (216.7) 38.7 (255.4)

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.

Nine Months Ended September 30, 2024, Compared to the Nine Months Ended September 30, 2023

• Cash flows provided by operating activities increased $142.3 million driven primarily a decrease in cash used for working capital and an increase in operating income, partially offset by increased interest paid and decreased distributions from our unconsolidated affiliates in 2024.

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 $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.

• Cash flows used in investing activities decreased $133.7 million primarily driven by decreased funds used in acquisitions and capital expenditures in 2024, partially offset by proceeds from the Arlington sale received in 2023.

• Cash flows used in financing activities increased $255.4 million primarily driven by share repurchases in 2024 and decreased net proceeds from long-term debt in 2024 compared to 2023.

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

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.

Starting Gate Pavilion and Courtyard at Churchill Downs Racetrack, The Rose Gaming Resort in Northern Virginia, Owensboro Racing and Gaming in Western Kentucky, and a Calvert City HRM Venue in Southwestern Kentucky.

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.

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

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.

During the third quarter of 2024, we repurchased 67,139 shares of the Company's common stock under the 2021 Stock Repurchase Program for a total cost of approximately $9.0 million.

We had approximately $170.9 million of repurchase authority remaining under this program on September 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.

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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 JUNE 30, 2024

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

Credit Facilities and Indebtedness

The following table presents our debt outstanding:

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

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

Revolver $ 290.0 $ 247.2 $ 42.8

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Credit Agreement

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.

At September 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"), $289.5 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.

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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 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.

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

The Company had $902.4 million available borrowing capacity, after consideration of $7.6 million in outstanding letters of credit, under the Revolver as of September 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 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.

For the period ended September 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 $178.5 million assuming no change in the weighted average borrowing rate of 6.5%, which was in place as of September 30, 2024.

During the nine months ended September 30, 2024, we had repayments of principal and interest on the Credit Agreement of $858.2 million.

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").

As of September 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 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.

As of September 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 JUNE 30, 2024

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

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").

As of September 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 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").

As of September 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.

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.

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

The Company leases certain real estate and other property.

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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 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.

As of September 30, 2024, minimum rent payable under operating leases was $26.9 million, with $6.0 million due in the next twelve months.

As of September 30, 2024, minimum rent payable accounted for as financing obligations was $56.3 million, with $5.0 million due in the next twelve months.

Other Contractual Obligations

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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