Churchill Downs Inc 10-Q

ITEM 1. FINANCIAL STATEMENTS CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in millions, except per common share data) 2024 2023 2024 2023 Net revenue: Live and Historical Racing $ 247.5 $ 219.5 $ 957.3 $ 818.9 TwinSpires 111.3 108.5 369.6 340.7 Gaming 269.7 244.3 783.1 740.2 All Other — 0.2 0.1 0.7 Total net revenue 628.5 572.5 2,110.1 1,900.5 Operating expense: Live and Historical Racing 171.3 158.2 549.9 505.7 TwinSpires 72.3 73.4 229.5 219.8 Gaming 194.8 175.6 561.7 528.3 All Other 4.5 1.3 10.2 12.0 Selling, general and administrative expense 59.8 50.2 172.0 150.6 Asset impairments 3.9 — 3.9 24.5 Transaction expense, net ( 4.0 ) 1.5 0.7 1.8 Total operating expense 502.6 460.2 1,527.9 1,442.7 Operating income 125.9 112.3 582.2 457.8 Other (expense) income: Interest expense, net ( 73.1 ) ( 67.9 ) ( 217.0 ) ( 197.8 ) Equity in income of unconsolidated affiliates 33.4 33.3 108.9 110.4 Gain on sale of Arlington — — — 114.0 Miscellaneous, net ( 0.1 ) 4.1 8.1 5.5 Total other (expense) income ( 39.8 ) ( 30.5 ) ( 100.0 ) 32.1 Income from operations before provision for income taxes 86.1 81.8 482.2 489.9 Income tax provision ( 19.9 ) ( 20.8 ) ( 125.4 ) ( 130.2 ) Net income 66.2 61.0 356.8 359.7 Net income attributable to noncontrolling interest 0.8 — 1.7 — Net income attributable to Churchill Downs Incorporated $ 65.4 $ 61.0 $ 355.1 $ 359.7 Net income attributable to Churchill Downs Incorporated per common share data: Basic net income $ 0.87 $ 0.81 $ 4.78 $ 4.78 Diluted net income $ 0.86 $ 0.79 $ 4.73 $ 4.69 Weighted average shares outstanding: Basic 73.9 75.2 74.0 75.3 Diluted 74.6 77.1 74.6 76.7 The accompanying notes are an integral part of the condensed consolidated financial statements. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 3 CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions) September 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 152.7 $ 144.5 Restricted cash 78.7 77.3 Accounts receivable, net 93.2 106.9 Income taxes receivable — 12.6 Other current assets 62.8 59.5 Total current assets 387.4 400.8 Property and equipment, net 2,805.5 2,561.2 Investment in and advances to unconsolidated affiliates 650.2 655.9 Goodwill 900.2 899.9 Other intangible assets, net 2,411.7 2,418.4 Other assets 17.5 19.3 Total assets $ 7,172.5 $ 6,955.5 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 182.4 $ 158.5 Accrued expenses and other current liabilities 430.1 426.8 Income taxes payable 7.1 — Current deferred revenue 26.8 73.2 Current maturities of long-term debt 63.1 68.0 Dividends payable 0.6 29.3 Total current liabilities 710.1 755.8 Long-term debt, net of current maturities and loan origination fees 1,695.7 1,697.1 Notes payable, net of debt issuance costs 3,074.9 3,071.2 Non-current deferred revenue 20.1 11.8 Deferred income taxes 417.8 388.2 Other liabilities 139.0 137.8 Total liabilities 6,057.6 6,061.9 Commitments and contingencies Redeemable noncontrolling interest 17.9 — Shareholders' equity: Preferred stock — — Common stock 1.7 — Retained earnings 1,096.3 894.5 Accumulated other comprehensive loss ( 1.0 ) ( 0.9 ) Total Churchill Downs Incorporated shareholders' equity 1,097.0 893.6 Total liabilities and shareholders' equity $ 7,172.5 $ 6,955.5 The accompanying notes are an integral part of the condensed consolidated financial statements. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 4 CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity (in millions) Shares Amount Balance, December 31, 2023 74.5 $ — $ 894.5 $ ( 0.9 ) $ 893.6 Net income attributable to Churchill Downs Incorporated 80.4 80.4 Issuance of common stock 0.3 — Repurchase of common stock ( 1.2 ) ( 7.2 ) ( 138.5 ) ( 145.7 ) Taxes paid related to net share settlement of stock awards ( 0.1 ) ( 7.6 ) ( 7.6 ) Stock-based compensation 7.2 7.2 Other ( 1.0 ) ( 1.0 ) 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 Net income attributable to Churchill Downs Incorporated 65.4 65.4 Issuance of common stock 0.2 4.2 4.2 Repurchase of common stock ( 0.1 ) ( 9.0 ) ( 9.0 ) Taxes paid related to net share settlement of stock awards ( 0.1 ) ( 0.1 ) Stock-based compensation 7.1 7.1 Other ( 0.5 ) ( 1.0 ) ( 1.5 ) Balance, September 30, 2024 73.5 $ 1.7 $ 1,096.3 $ ( 1.0 ) $ 1,097.0 The accompanying notes are an integral part of the condensed consolidated financial statements. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 5 CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity (in millions) Shares Amount Balance, December 31, 2022 74.8 $ — $ 552.4 $ ( 0.9 ) $ 551.5 Net income 155.7 155.7 Issuance of common stock 0.2 — Taxes paid related to net share settlement of stock awards ( 0.1 ) ( 8.6 ) ( 2.7 ) ( 11.3 ) Stock-based compensation 8.6 8.6 Other ( 0.3 ) ( 0.3 ) Balance, March 31, 2023 74.9 — 705.1 ( 0.9 ) 704.2 Net income 143.0 143.0 Taxes paid related to net share settlement of stock awards ( 0.1 ) ( 0.1 ) Stock-based compensation 8.1 8.1 Other ( 1.4 ) ( 1.4 ) Balance, June 30, 2023 74.9 8.0 846.7 ( 0.9 ) 853.8 Net income 61.0 61.0 Issuance of common stock 3.1 3.1 Repurchase of common stock ( 0.3 ) ( 19.2 ) ( 18.1 ) ( 37.3 ) Stock-based compensation 8.1 8.1 Balance, September 30, 2023 74.6 $ — $ 889.6 $ ( 0.9 ) $ 888.7 The accompanying notes are an integral part of the condensed consolidated financial statements. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 6 CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, (in millions) 2024 2023 Cash flows from operating activities: Net income $ 356.8 $ 359.7 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 145.7 121.8 Distributions from unconsolidated affiliates 113.8 126.6 Equity in income of unconsolidated affiliates ( 108.9 ) ( 110.4 ) Stock-based compensation 23.2 24.8 Deferred income taxes 29.6 45.3 Asset impairments 3.9 24.5 Amortization of operating lease assets 4.1 4.8 Gain on sale of Arlington — ( 114.0 ) Other 9.1 6.5 Changes in operating assets and liabilities: Income taxes 17.1 6.0 Deferred revenue ( 38.1 ) ( 10.8 ) Other assets and liabilities 84.8 14.0 Net cash provided by operating activities 641.1 498.8 Cash flows from investing activities: Capital maintenance expenditures ( 49.8 ) ( 52.4 ) Capital project expenditures ( 367.8 ) ( 445.7 ) Acquisition of businesses, net of cash acquired — ( 241.3 ) Proceeds from sale of Arlington — 195.7 Other 1.8 ( 5.8 ) Net cash used in investing activities ( 415.8 ) ( 549.5 ) Cash flows from financing activities: Proceeds from borrowings under long-term debt obligations 750.4 1,420.8 Repayments of borrowings under long-term debt obligations ( 757.5 ) ( 1,297.1 ) Payment of dividends ( 28.7 ) ( 26.8 ) Repurchase of common stock ( 158.7 ) ( 35.8 ) Taxes paid related to net share settlement of stock awards ( 10.6 ) ( 13.2 ) Debt issuance costs ( 2.5 ) ( 12.3 ) Change in bank overdraft ( 7.5 ) 1.4 Other ( 1.6 ) 1.7 Net cash (used in) provided by financing activities ( 216.7 ) 38.7 Cash flows from discontinued operations: Operating activities of discontinued operations 1.0 0.5 Net increase (decrease) in cash, cash equivalents and restricted cash 9.6 ( 11.5 ) Cash, cash equivalents and restricted cash, beginning of period 221.8 204.7 Cash, cash equivalents and restricted cash, end of period $ 231.4 $ 193.2 The accompanying notes are an integral part of the condensed consolidated financial statements. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 7 CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) Nine Months Ended September 30, (in millions) 2024 2023 Supplemental disclosures of cash flow information: Cash paid for interest $ 205.3 $ 180.5 Cash paid for income taxes 81.8 78.9 Cash received from income tax refunds 4.1 0.8 Schedule of non-cash operating, investing and financing activities: Property and equipment additions included in accounts payable and accrued expenses $ 55.2 $ 52.0 Right-of-use assets obtained in exchange for lease obligations in operating leases 4.2 — Right-of-use assets obtained in exchange for lease obligations in finance leases 3.6 33.4 Repurchase of common stock included in accrued expense and other current liabilities 9.0 — Deferred payments for acquisition of business included in other liabilities 1.2 6.9 The accompanying notes are an integral part of the condensed consolidated financial statements. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 8 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) 1. DESCRIPTION OF BUSINESS Basis of Presentation Churchill Downs Incorporated (the "Company" or "CDI") financial statements are presented in conformity with the requirements of this Quarterly Report on Form 10-Q and consequently do not include all of the disclosures normally required by U.S. generally accepted accounting principles ("GAAP") or those normally made in our Annual Report on Form 10-K. The December 31, 2023 Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The following information is unaudited. All per share amounts assume dilution unless otherwise noted. This report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023. 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 in All Other. We report net revenue and operating expense associated with these reportable segments in the accompanying Condensed Consolidated Statements of Comprehensive Income. 2. RECENT ACCOUNTING PRONOUNCEMENTS Recent Accounting Pronouncements - effective in 2024 or thereafter In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-06, Disclosure Improvements: Codification Amendments in Response to the Securities and Exchange Commission’s ("SEC") Disclosure Update and Simplification Initiative, to amend certain disclosure and presentation requirements for a variety of topics within FASB's Accounting Standards Codification ("ASC"). These amendments align the requirements in the ASC regarding the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC. The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. The Company is currently evaluating the impact of this standard on the consolidated financial statements and related disclosures. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements. The amendments are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption of the amendment is permitted, including adoption in any interim periods for which financial statements have not been issued. The Company is currently evaluating the impact of this standard on the consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. Early adoption is permitted. The amendments are expected to be applied prospectively to all annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on the consolidated financial statements and related disclosures. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 9 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) 3. ACQUISITIONS 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 September 30, 2024, there were $ 1.2 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 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. The goodwill related to the Exacta Transaction is deductible for tax purposes. 4. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill, by segment, is composed of the following: (in millions) Live and Historical TwinSpires Gaming All Other Total Balances as of December 31, 2023 $ 376.2 $ 233.4 $ 290.3 $ — $ 899.9 Adjustments 0.1 0.2 — — 0.3 Balances as of September 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: September 30, 2024 December 31, 2023 (in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets $ 96.0 $ ( 31.6 ) $ 64.4 $ 97.5 $ ( 26.4 ) $ 71.1 Indefinite-lived intangible assets 2,347.3 2,347.3 Total $ 2,411.7 $ 2,418.4 In the second quarter of 2023, the Company recognized a $ 24.5 million non-cash impairment charge for the Presque Isle Downs and Casino ("Presque Isle") gaming rights and trademark. The Company continues to monitor the current economic conditions and the impacts on the results of operations of Presque Isle. Future economic conditions could have a negative impact on the estimates and assumptions utilized in our asset impairment assessments. These potential impacts could increase the risk of a future impairment of assets at Presque Isle. 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 SEPTEMBER 30, 2024 10 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) 5. INCOME TAXES The Company’s effective income tax rate for the three months ended September 30, 2024 was higher than the U.S. federal statutory rate of 21.0% primarily resulting from state income taxes, non-deductible officer's compensation, and other non-deductible expense, partially offset by the excess tax benefit from the payment of restricted stock compensation and the tax benefit from the expiration of the statute of limitations for certain unrecognized tax benefits. The Company's effective income tax rate for the nine months ended September 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 three months ended September 30, 2023 was higher than the U.S. federal statutory rate of 21.0% primarily resulting from state income taxes. The Company’s effective income tax rate for the nine months ended September 30, 2023 was higher than the U.S. federal statutory rate of 21.0% primarily resulting from state income taxes and non-deductible officer’s compensation. 6. SHAREHOLDERS' EQUITY Stock Repurchase Programs On September 29, 2021, the Board of Directors of the Company approved a common stock repurchase program of up to $ 500.0 million (the "2021 Stock Repurchase Program"). The 2021 Stock Repurchase Program includes and is not in addition to any unspent amount remaining under the prior program authorization. Repurchases may be made at management’s discretion from time to time on the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions. The repurchase program has no time limit and may be suspended or discontinued at any time. We repurchased the following shares under the 2021 Stock Repurchase Program: Three Months Ended September 30, Nine Months Ended September 30, (in millions, except share data) 2024 2023 2024 2023 Repurchase Program Shares Aggregate Purchase Price Shares Aggregate Purchase Price Shares Aggregate Purchase Price Shares Aggregate Purchase Price 2021 Stock Repurchase Program 67,139 $ 9.0 310,367 $ 37.3 345,834 $ 43.9 310,367 $ 37.3 We had approximately $ 170.9 million of repurchase authority remaining under the 2021 Stock Repurchase Program at 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. This represented a discount of 4.03 % to the closing price on December 15, 2023 of $ 128.95 . The repurchase of shares of common stock from TDG was approved by the Company's Board of Directors separately from and did not reduce the authorized amount remaining under any existing common stock repurchase programs. The repurchase of the shares was funded using available cash and borrowings under the Company’s senior secured credit facility. Two for One Stock Split Effective May 22, 2023, the Company's common stock was split two -for-one with a proportionate increase in the number of its authorized shares of common stock. 7. STOCK-BASED COMPENSATION PLANS We have stock-based employee compensation plans with awards outstanding under the Churchill Downs Incorporated 2016 Omnibus Stock Incentive Plan (the "2016 Plan") and the Executive Long-Term Incentive Compensation Plan, which was adopted pursuant to the 2016 Plan. Our total stock-based compensation expense, which includes expenses related to restricted stock awards ("RSAs"), restricted stock unit awards ("RSUs"), performance share unit awards ("PSUs"), and stock options associated with our employee stock purchase plan was $ 7.1 million and $ 23.2 million for the three months and nine months ended September 30, 2024 and $ 8.1 million and $ 24.8 million for the three months and nine months ended September 30, 2023, respectively. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 11 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) During the nine months ended September 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. 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 RSAs, RSUs and PSUs granted during 2024 is presented below (units in thousands): Grant Year Award Type Number of Units Awarded (1) Vesting Terms 2024 RSU 144 Vest equally over three service periods ending in 2026 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. 8. DEBT The following table presents our total debt outstanding: (in millions) September 30, 2024 December 31, 2023 Term Loan B-1 due 2028 $ 289.5 $ 291.8 Term Loan A due 2029 1,187.4 1,235.0 Revolver 290.0 247.2 2027 Senior Notes 600.0 600.0 2028 Senior Notes 700.0 700.0 2030 Senior Notes 1,200.0 1,200.0 2031 Senior Notes 600.0 600.0 Total debt 4,866.9 4,874.0 Current maturities of long-term debt ( 63.1 ) ( 68.0 ) Unamortized premium and deferred finance charges ( 33.2 ) ( 37.7 ) Total debt, net of current maturities and costs $ 4,770.6 $ 4,768.3 Credit Agreement 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 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. The Term Loan B-1 may be subject to additional mandatory prepayment from excess cash flow on an annual basis per the provisions of the Credit Agreement. The Revolver and Term Loan A bear interest at SOFR plus 10 basis points, plus a variable applicable margin which is determined by the Company's net leverage ratio. As of September 30, 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. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 12 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) The Company is required to pay a commitment fee on the unused portion of the Revolver as determined by a pricing grid based on the consolidated total net secured leverage ratio of the Company. For the period ended September 30, 2024, the Company's commitment fee rate was 0.25 %. 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. The Company may redeem some or all of the 2027 Senior Notes at redemption prices set forth in the 2027 Indenture. 2028 Senior Notes As of 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 %. The 2028 Senior Notes were issued in a private offering to qualified institutional buyers, with interest payable in arrears on January 15th and July 15th of each year, commencing on July 15th, 2018. The 3.25 % premium is being amortized through interest expense, net over the term of the notes. The Company may redeem some or all the 2028 Senior Notes at redemption prices set forth in the 2028 Indenture. 2030 Senior Notes As of 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. 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 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 Senior Notes at any time prior to April 25, 2025, at redemption prices set forth in the 2031 Offering Memorandum. 9. REVENUE FROM CONTRACTS WITH CUSTOMERS Performance Obligations As of September 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 $ 262.3 million. The revenue we expect to recognize on these remaining performance obligations is $ 1.0 million for the remainder of 2024, $ 58.1 million in 2025, $ 57.1 million in 2026, and the remainder thereafter. As of September 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 September 30, 2024 and December 31, 2023, contract assets were not material. As of September 30, 2024 and December 31, 2023, contract liabilities were $ 54.9 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 $ 1.1 million and $ 74.1 million of revenue during the three months and nine months ended September 30, 2024, respectively, which was included in the contract liabilities balance at December 31, 2023. We recognized $ 1.2 million and $ 43.6 million of revenue during the three months and nine months ended September 30, 2023, respectively, which was included in the contract liabilities balance at December 31, 2022. Disaggregation of Revenue The Company has included its disaggregated revenue disclosures as follows: FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 13 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) • 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. This segment is also disaggregated by location given the geographic economic factors that affect the revenue of service offerings. Within the Live and Historical Racing segment, revenue is further disaggregated between live and simulcast racing, historical racing, racing event-related services, and other services. • For the TwinSpires segment, revenue is disaggregated between live and simulcast racing, gaming, and other services. • For the Gaming segment, revenue is disaggregated by location given the geographic economic factors that affect the revenue of Gaming service offerings. Within the Gaming segment, revenue is further disaggregated between live and simulcast racing, racing event-related services, gaming, and other services. We believe that these disclosures depict how the amount, nature, timing, and uncertainty of cash flows are affected by economic factors. The tables below present net revenue from external customers and intercompany revenue from each of our segments: FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 14 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2024 2023 2024 2023 Net revenue from external customers: Live and Historical Racing: Churchill Downs Racetrack $ 11.7 $ 10.6 $ 242.8 $ 191.3 Louisville 50.3 48.9 157.1 138.2 Northern Kentucky 23.4 19.5 73.9 63.1 Southwestern Kentucky 39.3 37.6 118.1 111.7 Western Kentucky 9.8 11.6 22.7 25.8 Virginia 110.0 88.1 333.1 280.4 New Hampshire 3.0 3.2 9.6 8.4 Total Live and Historical Racing $ 247.5 $ 219.5 $ 957.3 $ 818.9 TwinSpires: $ 111.3 $ 108.5 $ 369.6 $ 340.7 Gaming: Florida $ 23.8 $ 24.4 $ 76.4 $ 76.5 Iowa 22.9 24.0 69.8 72.5 Indiana 32.4 — 66.3 — Louisiana 32.0 32.2 113.4 110.1 Maine 27.7 30.9 81.3 88.1 Maryland 31.5 32.0 79.3 82.9 Mississippi 23.6 24.2 74.1 77.5 New York 46.8 46.2 138.3 135.3 Pennsylvania 29.0 30.4 84.2 97.3 Total Gaming 269.7 244.3 783.1 740.2 All Other — 0.2 0.1 0.7 Net revenue from external customers $ 628.5 $ 572.5 $ 2,110.1 $ 1,900.5 Intercompany net revenues: Live and Historical Racing $ 4.9 $ 6.0 $ 34.2 $ 30.4 TwinSpires 7.4 3.9 23.1 7.1 Gaming 0.6 0.6 4.8 4.2 All Other 2.6 — 4.4 — Eliminations ( 15.5 ) ( 10.5 ) ( 66.5 ) ( 41.7 ) Intercompany net revenue $ — $ — $ — $ — FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 15 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) Three Months Ended September 30, 2024 (in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total Net revenue from external customers Pari-mutuel: Live and simulcast racing $ 15.2 $ 82.7 $ 5.0 $ 102.9 $ — $ 102.9 Historical racing (a) 205.9 — 9.3 215.2 — 215.2 Racing event-related services 5.0 — 1.4 6.4 — 6.4 Gaming (a) 3.1 4.4 224.3 231.8 — 231.8 Other (a) 18.3 24.2 29.7 72.2 — 72.2 Total $ 247.5 $ 111.3 $ 269.7 $ 628.5 $ — $ 628.5 Three Months Ended September 30, 2023 (in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total Net revenue from external customers Pari-mutuel: Live and simulcast racing $ 16.0 $ 86.3 $ 5.1 $ 107.4 $ — $ 107.4 Historical racing (a) 179.9 — 7.5 187.4 — 187.4 Racing event-related services 3.3 — 1.4 4.7 — 4.7 Gaming (a) 3.1 5.3 203.0 211.4 — 211.4 Other (a) 17.2 16.9 27.3 61.4 0.2 61.6 Total $ 219.5 $ 108.5 $ 244.3 $ 572.3 $ 0.2 $ 572.5 (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 $ 14.2 million for the three months ended September 30, 2024 and $ 13.3 million for the three months ended September 30, 2023. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 16 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 17 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) Nine Months Ended September 30, 2024 (in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total Net revenue from external customers Pari-mutuel: Live and simulcast racing $ 76.6 $ 277.9 $ 20.1 $ 374.6 $ — $ 374.6 Historical racing (a) 630.1 — 27.4 657.5 — 657.5 Racing event-related services 182.1 — 5.0 187.1 — 187.1 Gaming (a) 9.5 14.4 645.5 669.4 — 669.4 Other (a) 59.0 77.3 85.1 221.4 0.1 221.5 Total $ 957.3 $ 369.6 $ 783.1 $ 2,110.0 $ 0.1 $ 2,110.1 Nine Months Ended September 30, 2023 (in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total Net revenue from external customers Pari-mutuel: Live and simulcast racing $ 67.2 $ 283.2 $ 19.9 $ 370.3 $ — $ 370.3 Historical racing (a) 549.3 — 20.5 569.8 — 569.8 Racing event-related services 141.0 — 4.8 145.8 — 145.8 Gaming (a) 8.2 10.9 615.4 634.5 — 634.5 Other (a) 53.2 46.6 79.6 179.4 0.7 180.1 Total $ 818.9 $ 340.7 $ 740.2 $ 1,899.8 $ 0.7 $ 1,900.5 (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 $ 41.7 million for the nine months ended September 30, 2024 and $ 37.8 million for the nine months ended September 30, 2023. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 18 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) 10. SUPPLEMENTAL BALANCE SHEET INFORMATION Accounts receivable, net Accounts receivable is comprised of the following: (in millions) September 30, 2024 December 31, 2023 Trade receivables $ 36.6 $ 42.6 Simulcast and online wagering receivables 36.1 44.9 Other receivables 27.0 24.4 99.7 111.9 Allowance for credit losses ( 6.5 ) ( 5.0 ) Total $ 93.2 $ 106.9 Accrued expenses and other current liabilities Accrued expenses and other current liabilities consisted of the following: (in millions) September 30, 2024 December 31, 2023 Account wagering deposits liability $ 61.4 $ 58.7 Accrued salaries and related benefits 46.7 45.1 Purses payable 34.3 35.2 Accrued interest 75.6 49.4 Accrued fixed assets 53.7 88.6 Accrued gaming liabilities 34.4 29.5 Other 124.0 120.3 Total $ 430.1 $ 426.8 11. 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 1.7 Redemption value adjustment 1.8 Balance, September 30, 2024 $ 17.9 12. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES Investments in and advances to unconsolidated affiliates as of September 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 SEPTEMBER 30, 2024 19 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) Rivers Casino Des Plaines The ownership of Rivers Des Plaines is comprised of the following: (1) the Company owns 61.3 %, (2) High Plaines Gaming, LLC ("High Plaines"), an affiliate of Rush Street Gaming, LLC, owns 36.0 %, and (3) Casino Investors, LLC owns 2.7 %. Both the Company and High Plaines have participating rights over Rivers Des Plaines, and both must consent to certain operating, investing and financing decisions. As a result, we account for Rivers Des Plaines using the equity method. As of September 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 $ 832.9 million. Our investment in Rivers Des Plaines was $ 537.9 million and $ 541.2 million as of September 30, 2024 and December 31, 2023, respectively. The Company received distributions from Rivers Des Plaines of $ 78.8 million and $ 93.1 million for the nine months ended September 30, 2024 and 2023, respectively. Miami Valley Gaming and Racing The Company owns a 50 % interest in MVG and Delaware North Companies Gaming & Entertainment Inc. ("DNC") owns the remaining 50 % interest in MVG. Since both the Company and DNC have participating rights over MVG, and both must consent to certain operating, investing and financing decisions, we account for MVG using the equity method. Our investment in MVG was $ 112.3 million and $ 114.6 million as of September 30, 2024 and December 31, 2023, respectively. The Company received distributions from MVG of $ 35.0 million and $ 33.5 million for the nine months ended September 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 September 30, Nine Months Ended September 30, (in millions) 2024 2023 2024 2023 Net revenue $ 208.4 $ 208.9 $ 641.2 $ 648.2 Operating and SG&A expense 132.2 135.1 399.3 407.3 Depreciation and amortization 6.8 5.9 20.1 17.5 Total operating expense 139.0 141.0 419.4 424.8 Operating income 69.4 67.9 221.8 223.4 Interest and other, net ( 11.1 ) ( 11.1 ) ( 33.5 ) ( 32.7 ) Net income $ 58.3 $ 56.8 $ 188.3 $ 190.7 (in millions) September 30, 2024 December 31, 2023 Assets Current assets $ 93.9 $ 104.8 Property and equipment, net 330.7 339.4 Other assets, net 270.1 266.1 Total assets $ 694.7 $ 710.3 Liabilities and Members' Deficit Current liabilities $ 105.6 $ 106.2 Long-term debt 844.4 847.2 Other liabilities 0.6 0.7 Members' deficit ( 255.9 ) ( 243.8 ) Total liabilities and members' deficit $ 694.7 $ 710.3 13. FAIR VALUE OF ASSETS AND LIABILITIES We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. 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 SEPTEMBER 30, 2024 20 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) Restricted Cash Our restricted cash accounts held in money market and interest-bearing accounts qualify for Level 1 in the fair value hierarchy, which includes unadjusted quoted market prices in active markets for identical assets. Debt The fair value of the Company’s 2031 Senior Notes, 2030 Senior Notes, 2028 Senior Notes, and 2027 Senior Notes are estimated based on unadjusted quoted prices for identical or similar liabilities in markets that are not active and as such are Level 2 measurements. The fair values of the Company's Term Loan B-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. The carrying amounts and estimated fair values by input level of the Company's financial instruments are as follows: September 30, 2024 (in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Restricted cash $ 78.7 $ 78.7 $ 78.7 $ — $ — Financial liabilities: Term Loan B-1 287.4 289.5 — 289.5 — Term Loan A 1,181.4 1,187.4 — 1,187.4 — Revolver 290.0 290.0 — 290.0 — 2027 Senior Notes 597.3 595.7 — 595.7 — 2028 Senior Notes 698.9 684.7 — 684.7 — 2030 Senior Notes 1,187.3 1,195.2 — 1,195.2 — 2031 Senior Notes 591.4 619.5 619.5 December 31, 2023 (in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Restricted cash $ 77.3 $ 77.3 $ 77.3 $ — $ — Financial liabilities: Term Loan B-1 289.2 291.8 — 291.8 — Term Loan A 1,228.7 1,235.0 — 1,235.0 — Revolver 247.2 247.2 — 247.2 — 2027 Senior Notes 596.5 591.8 — 591.8 — 2028 Senior Notes 698.7 668.6 — 668.6 — 2030 Senior Notes 1,185.6 1,171.5 — 1,171.5 — 2031 Senior Notes 590.4 611.2 — 611.2 — 14. CONTINGENCIES We are involved in litigation arising in the ordinary course of conducting business. We carry insurance for workers' compensation claims from our employees and general liability for claims from independent contractors, customers, and guests. We are self-insured up to an aggregate stop loss for our general liability and workers' compensation coverages. We review all litigation on an ongoing basis when making accrual and disclosure decisions. 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 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 21 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) 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. When no amount within the range of loss is a better estimate than any other amount, we accrue the minimum amount of the estimable loss. To the extent that such litigation against us may have an exposure to a loss in excess of the amount we have accrued, we believe that such excess would not be material to our consolidated financial condition, results of operations, or cash flows. Legal fees are expensed as incurred. If the loss contingency in question is not both probable and reasonably estimable, we do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable. In the event that a legal proceeding results in a substantial judgment against us, or settlement by us, there can be no assurance that any resulting liability or financial commitment would not have a material adverse impact on our business. 15. NET INCOME PER COMMON SHARE COMPUTATIONS The following is a reconciliation of the numerator and denominator of the net income per common share computations: Three Months Ended September 30, Nine Months Ended September 30, (in millions, except per share data) 2024 2023 2024 2023 Numerator for basic and diluted net income per common share: Net income attributable to Churchill Downs Incorporated $ 65.4 $ 61.0 $ 355.1 $ 359.7 Adjustments related to redeemable noncontrolling interest ( 1.0 ) — ( 1.8 ) — Net income attributable to common shareholders $ 64.4 $ 61.0 $ 353.3 $ 359.7 Denominator for net income per common share: Basic 73.9 75.2 74.0 75.3 Plus dilutive effect of stock awards 0.7 1.9 0.6 1.4 Diluted 74.6 77.1 74.6 76.7 Net income per common share data: Basic net income $ 0.87 $ 0.81 $ 4.78 $ 4.78 Diluted net income $ 0.86 $ 0.79 $ 4.73 $ 4.69 16. SEGMENT INFORMATION We manage our operations through three reportable segments: Live and Historical Racing, TwinSpires, and Gaming. Our operating segments reflect the internal management reporting used by our chief operating decision maker to evaluate results of operations and to assess performance and allocate resources. On September 7, 2023, the Company began operating retail sports betting at its racetracks and HRM facilities in Kentucky. In addition to retail sports betting, third-party service providers began operating online sports wagering in partnership with the Company’s racetracks on September 28, 2023. Our retail and online sports betting business is included in the TwinSpires segment. Eliminations include the elimination of intersegment transactions. We utilize non-GAAP measures, including EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA. Our chief operating decision maker utilizes Adjusted EBITDA to evaluate segment performance, develop strategy, and allocate resources. Adjusted EBITDA includes the following adjustments: 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 SEPTEMBER 30, 2024 22 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) Adjusted EBITDA excludes: • Transaction expense, net which includes: – Acquisition, disposition, and property sale related charges; – Other transaction expense, including legal, accounting, and other deal-related expense; • Stock-based compensation expense; • Asset impairments; • Gain on property sales; • Legal reserves; • Pre-opening expense; and • Other charges, recoveries, and expenses 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 . On June 26, 2023, the Company's management agreement for Lady Luck Casino Nemacolin ("Lady Luck") in Farmington, Pennsylvania expired and was not renewed. The Company completed the sale of substantially all its assets at Lady Luck for an immaterial amount. We utilize the Adjusted EBITDA metric to provide a more accurate measure of our core operating results and enable management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. 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. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited. For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the accompanying Condensed Consolidated Statements of Comprehensive Income. The tables below present net revenue from external customers, Adjusted EBITDA by segment and reconciles comprehensive income to Adjusted EBITDA: Net revenue by segment is comprised of the following: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2024 2023 2024 2023 Live and Historical Racing $ 247.5 $ 219.5 $ 957.3 $ 818.9 TwinSpires 111.3 108.5 369.6 340.7 Gaming 269.7 244.3 783.1 740.2 All Other — 0.2 0.1 0.7 Net Revenue $ 628.5 $ 572.5 $ 2,110.1 $ 1,900.5 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 23 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) Adjusted EBITDA by segment is comprised of the following: Three Months Ended September 30, 2024 (in millions) Live and Historical Racing TwinSpires Gaming Revenues $ 252.4 $ 118.7 $ 270.3 Gaming taxes and purses ( 66.7 ) ( 5.5 ) ( 87.8 ) Marketing and advertising ( 9.3 ) ( 1.4 ) ( 9.5 ) Salaries and benefits ( 31.1 ) ( 8.0 ) ( 42.7 ) Content expense ( 1.7 ) ( 45.9 ) ( 2.3 ) Selling, general and administrative expense ( 9.4 ) ( 4.2 ) ( 11.9 ) Maintenance, insurance and utilities ( 12.8 ) ( 1.1 ) ( 11.7 ) Property and other taxes ( 1.9 ) ( 0.1 ) ( 4.0 ) Other operating expense ( 26.6 ) ( 10.0 ) ( 21.1 ) Other income 0.1 — 44.0 Adjusted EBITDA $ 93.0 $ 42.5 $ 123.3 Three Months Ended September 30, 2023 (in millions) Live and Historical Racing TwinSpires Gaming Revenues $ 225.5 $ 112.4 $ 244.9 Gaming taxes and purses ( 62.0 ) ( 5.8 ) ( 81.4 ) Marketing and advertising ( 7.6 ) ( 1.3 ) ( 8.9 ) Salaries and benefits ( 27.9 ) ( 7.0 ) ( 35.2 ) Content expense ( 1.6 ) ( 49.4 ) ( 2.4 ) Selling, general and administrative expense ( 7.4 ) ( 3.0 ) ( 9.9 ) Maintenance, insurance and utilities ( 12.5 ) ( 0.9 ) ( 10.3 ) Property and other taxes ( 1.7 ) ( 0.2 ) ( 3.6 ) Other operating expense ( 24.8 ) ( 10.9 ) ( 18.2 ) Other income 0.9 — 47.3 Adjusted EBITDA $ 80.9 $ 33.9 $ 122.3 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 24 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) Nine Months Ended September 30, 2024 (in millions) Live and Historical Racing TwinSpires Gaming Revenues $ 991.5 $ 392.7 $ 787.9 Gaming taxes and purses ( 231.7 ) ( 17.7 ) ( 251.8 ) Marketing and advertising ( 31.1 ) ( 7.5 ) ( 26.5 ) Salaries and benefits ( 94.4 ) ( 23.9 ) ( 121.0 ) Content expense ( 5.1 ) ( 163.2 ) ( 6.7 ) Selling, general and administrative expense ( 26.7 ) ( 13.0 ) ( 33.9 ) Maintenance, insurance and utilities ( 34.6 ) ( 3.1 ) ( 32.4 ) Property and other taxes ( 6.4 ) ( 0.2 ) ( 10.7 ) Other operating expense ( 88.8 ) ( 35.8 ) ( 59.8 ) Other income 0.3 — 141.7 Adjusted EBITDA $ 473.0 $ 128.3 $ 386.8 Nine Months Ended September 30, 2023 (in millions) Live and Historical Racing TwinSpires Gaming Revenues $ 849.3 $ 347.8 $ 744.4 Gaming taxes and purses ( 203.9 ) ( 17.8 ) ( 246.7 ) Marketing and advertising ( 27.9 ) ( 8.0 ) ( 26.5 ) Salaries and benefits ( 80.0 ) ( 20.7 ) ( 109.2 ) Content expense ( 5.1 ) ( 161.1 ) ( 6.9 ) Selling, general and administrative expense ( 23.4 ) ( 8.1 ) ( 32.4 ) Maintenance, insurance and utilities ( 31.9 ) ( 2.6 ) ( 29.7 ) Property and other taxes ( 4.4 ) ( 0.3 ) ( 9.9 ) Other operating expense ( 87.3 ) ( 33.1 ) ( 52.5 ) Other income 1.1 1.1 144.6 Adjusted EBITDA $ 386.5 $ 97.2 $ 375.2 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 25 Churchill Downs Incorporated Notes to Condensed Consolidated Financial Statements (Unaudited) Adjusted EBITDA by segment is comprised of the following: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2024 2023 2024 2023 Reconciliation of Comprehensive Income to Adjusted EBITDA: Net income attributable to Churchill Downs Incorporated $ 65.4 $ 61.0 $ 355.1 $ 359.7 Net income attributable to noncontrolling interest 0.8 — 1.7 — Net income and comprehensive income 66.2 61.0 356.8 359.7 Additions: Depreciation and amortization 49.6 42.1 145.7 121.8 Interest expense 73.1 67.9 217.0 197.8 Income tax provision 19.9 20.8 125.4 130.2 EBITDA $ 208.8 $ 191.8 $ 844.9 $ 809.5 Adjustments to EBITDA: Stock-based compensation expense $ 7.1 $ 8.1 $ 23.2 $ 24.8 Pre-opening expense 7.8 5.0 23.6 11.4 Arlington exit costs — 0.1 — 9.4 Other expenses, net 1.0 0.7 1.3 7.6 Asset impairments 3.9 — 3.9 24.5 Transaction expense, net ( 4.0 ) 1.5 0.7 1.8 Other income, expense: Interest, depreciation and amortization expense related to equity investments 10.6 10.1 31.4 29.8 Rivers Des Plaines' legal reserves and transaction costs — — 0.3 — Other charges and recoveries, net 0.1 0.9 ( 6.7 ) — Gain on sale of Arlington — — — ( 114.0 ) Total adjustments to EBITDA 26.5 26.4 77.7 ( 4.7 ) Adjusted EBITDA $ 235.3 $ 218.2 $ 922.6 $ 804.8 Adjusted EBITDA by segment: Live and Historical Racing $ 93.0 $ 80.9 $ 473.0 $ 386.5 TwinSpires 42.5 33.9 128.3 97.2 Gaming 123.3 122.3 386.8 375.2 Total segment Adjusted EBITDA 258.8 237.1 988.1 858.9 All Other ( 23.5 ) ( 18.9 ) ( 65.5 ) ( 54.1 ) Total Adjusted EBITDA $ 235.3 $ 218.2 $ 922.6 $ 804.8 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 26 The table below presents total asset information for each of our segments: (in millions) September 30, 2024 December 31, 2023 Total assets: Live and Historical Racing $ 4,068.7 $ 3,872.9 TwinSpires 465.6 473.9 Gaming 1,931.4 1,920.9 Total segment assets 6,465.7 6,267.7 All Other 706.8 687.8 Total assets $ 7,172.5 $ 6,955.5 The table below presents total capital expenditures for each of our segments: Nine Months Ended September 30, (in millions) 2024 2023 Capital expenditures: Live and Historical Racing $ 287.7 $ 358.3 TwinSpires 14.2 12.0 Gaming 105.4 120.5 Total segment capital expenditures 407.3 490.8 All Other 10.3 7.3 Total capital expenditures $ 417.6 $ 498.1 17. SUBSEQUENT EVENTS At its regularly scheduled meeting held on October 22, 2024, the Board of Directors of the Company declared an annual cash dividend on the Company's common stock of $ 0.409 per outstanding share, to be paid on January 3, 2025, to shareholders of record as of the close of business on December 6, 2024, with aggregate cash dividend paid to each shareholder rounded to the nearest whole cent. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 27