What changed in this filing

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Item 1A. Risk Factors

2025-02-20 compared with 2024-02-21 · 49 added, 52 removed, 323 unchanged (24% of the section changed)

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Economic and External Risks

Our business could be adversely affected by the occurrence of extraordinary events, such as terrorist attacks, public health threats, civil unrest, and inclement weather, including as a result of climate change

Our business could be adversely affected by the occurrence of extraordinary events, such as terrorist attacks, public health threats, and civil unrest

Our operating results depend, in large part, on revenues derived from customers visiting our casinos and racetracks, which is subject to the occurrence and threat of extraordinary events that may discourage attendance or expose us to substantial liability.

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A major epidemic or pandemic, outbreak of a contagious equine disease, or the threat of such an event, could also adversely affect attendance and could impact the supply chain for our major construction projects resulting in higher costs and delays of the projects.

For example, the COVID-19 global pandemic resulted in the temporary suspension of operations of all of our wholly owned gaming properties, certain wholly owned racing operations, and the two casino properties related to our equity investments.

For example, the COVID-19 global pandemic resulted in the temporary suspension of operations of all of our wholly owned gaming properties, certain wholly owned racing operations, and the two gaming properties related to our equity investments.

While we are constantly evaluating our security precautions in an effort to ensure the safety of the public, no security measures can guarantee safety and there can be no assurances of avoiding potential liabilities.

Since horse racing is conducted outdoors, unfavorable weather conditions, including extremely high and low temperatures, heavy rains, high winds, storms, tornadoes, and hurricanes, could cause events to be canceled and/or attendance to be lower, resulting in reduced wagering.

Our business may be subject to fluctuations due to seasonality and inclement weather, including as a result of climate change, that could result in volatility and have an adverse effect on our operating results

Unfavorable weather conditions, including extremely high and low temperatures, heavy rains, high winds, storms, tornadoes, and hurricanes, have caused and may in the future cause events to be canceled and/or attendance to be lower, resulting in reduced wagering.

Inclement weather conditions may deter or prevent customers from reaching the facilities, including our gaming and HRM venues.

Climate change could have an impact on longer-term natural weather trends.

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Our ability to respond to periods of economic contraction may be limited, as certain of our costs remain fixed or even increase when revenue declines.

We are vulnerable to additional or increased taxes and fees

Due to the nature of our business, we are subject to taxation in a number of jurisdictions and changes in, or new interpretations of, tax laws, tax rulings or their application by tax authorities could result in additional tax liabilities and could materially affect our financial condition and results of operations

We believe that the prospect of raising significant additional revenue through taxes and fees is one of the primary reasons that certain jurisdictions permit legalized gaming.

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From time to time, legislators and officials have proposed changes in tax laws or in the administration of laws affecting the horse racing, online wagering, and casino industries.

Many states and municipalities, including ones in which we operate, are currently experiencing budgetary pressures that may make it more likely they would seek to impose additional taxes and fees on

our operations.

Many states and municipalities, including ones in which we operate, are currently experiencing budgetary pressures that may make it more likely they would seek to impose additional taxes and fees on our operations.

We are subject to tax in multiple U.S.

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Our gaming customers, visitors, and employees may also commit crimes such as theft to obtain chips not belonging to them.

We have taken measures to safeguard our interests including the implementation of systems, processes, and technologies to mitigate against these risks, extensive employee training, surveillance, security, and investigation operations and adoption of appropriate security features on our chips such as embedded radio frequency identification tags.

Despite our efforts, we may not be successful in preventing or detecting such culpable behavior and schemes in a timely manner and the relevant insurance we have obtained may not be sufficient to cover our losses depending on the incident, which could result in losses to our gaming operations and generate negative publicity, both of which could have an adverse effect on our reputation, business, results of operations, and cash flows.

Other factors that could influence our reputation include the quality of the services we offer and our actions with regard to social issues such as diversity, human rights, and support for local communities.

Despite our efforts to safeguard against this risk, we may not be successful in preventing or detecting such culpable behavior and schemes in a timely manner and the relevant insurance we have obtained may not be sufficient to cover our losses depending on the incident, which could result in losses to our gaming operations and generate negative publicity, both of which could have an adverse effect on our reputation, business, results of operations, and cash flows.

Other factors that could influence our reputation include the quality of the services we offer and public perception of our actions with regard to social issues such as diversity, human rights, and support for local communities.

Broad access to social media makes it easy for anyone to provide public feedback that can influence perceptions of us or our properties.

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If we do not successfully hire, develop, motivate, and retain highly qualified and skilled employees, it is likely that we could experience significant disruptions in our operations and our ability to successfully develop, operate, and grow our business could be impacted.

Competition for the type of talent we seek to hire is increasingly intense in the geographic areas in which we operate.

Competition for the type of talent we seek to hire continues to be a challenge in the geographic areas in which we operate.

As a result, we may incur significant costs to attract and retain highly skilled employees.

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Either result could significantly impact our operations.

We have observed an increasingly competitive labor market.

We continue to experience a competitive labor market.

Increased employee turnover, changes in the availability of our workers, or labor shortages in our supply chain could result in increased costs and impact our ability to fully staff our operations, which could negatively affect our financial condition, results of operations, or cash flows.

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and other forms of gaming in the U.S.

Furthermore, competition from internet lotteries, sweepstakes, illegal slot machines and skill

games, fantasy sports and internet, or mobile-based gaming platforms, which allow their customers to wager on a wide variety of sporting events and/or play Las Vegas-style casino games from home or in non-casino settings could divert customers from our properties and thus adversely affect our financial condition, results of operations, and cash flows.

Furthermore, competition from internet lotteries, sweepstakes, illegal slot machines and skill games, fantasy sports and internet, or mobile-based gaming platforms, which allow their customers to wager on a wide variety of sporting events and/or play Las Vegas-style casino games from home or in non-casino settings could divert customers from our properties and thus adversely affect our financial condition, results of operations, and cash flows.

Currently, there are proposals that would legalize internet poker, sports betting, and other varieties of iGaming in a number of states.

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New, relocated, or expanded operations by other persons could increase competition for our operations and could have a material adverse impact on us.

Our operations also face competition from other leisure and entertainment activities, including shopping, athletic events, television and movies, concerts, and travel.

Our operations also face competition from other leisure and entertainment activities.

Our Churchill Downs Racetrack and the Kentucky Derby may be adversely affected by changes in consumer preferences, attendance, wagering, and sponsorships

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We may not be able to respond to rapid technological changes in a timely manner, which may cause customer dissatisfaction

Our TwinSpires segment and gaming and historical racing properties are characterized by the rapid development of new technologies and the continuous introduction of new products.

Our Wagering Services and Solutions segment and gaming and historical racing properties are characterized by the rapid development of new technologies and the continuous introduction of new products.

Our main technological advantage versus potential competitors is our software lead-time in the market and our experience in operating an Internet-based wagering network.

It may be difficult to maintain our competitive technological position against current and potential competitors, especially those with greater financial resources.

It may be difficult to maintain our competitive technological position against current and potential competitors,

especially those with greater financial resources.

The Company's competitors may adopt new technologies and technological advancements, such as using artificial intelligence and machine learning, to pursue new products, services and approaches more quickly, successfully, and effectively than the Company.

Our success depends upon new product development and technological advancements, including the development of new wagering platforms and features.

While we expend resources on research and development and product enhancement, we may not be able to continue to improve and market our existing products or technologies or develop and market new products in a timely manner.

Further technological developments may cause our products or technologies to become obsolete or noncompetitive.

Further technological developments from our competitors may cause our products or technologies to become obsolete or noncompetitive.

The concentration and evolution of the slot machine and HRM manufacturing industry or other technological conditions could impose additional costs on us

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It is important for competitive reasons that we offer the most popular and up-to-date machine games with the latest technology to our guests.

A substantial majority of the slot machines sold in the U.S.

in recent years were manufactured by a few select companies, and there has been extensive consolidation activity within the gaming equipment sector.

Recently, the prices of new machines have escalated faster than the rate of inflation and slot machine manufacturers have occasionally refused to sell slot machines featuring the most popular games, instead requiring participating lease arrangements to acquire the machines.

Participation slot machine leasing arrangements typically require the payment of a fixed daily rental.

Such agreements may also include a percentage payment of coin-in or net win.

Generally, a participating lease is substantially more expensive over the long term than the cost to purchase a new machine.

For competitive reasons, we may be forced to purchase new slot machines or enter into participating lease arrangements that are more expensive than the costs associated with the continued operation of our existing slot machines.

If the newer slot machines do not result in sufficient incremental revenue to offset the increased investment, it could adversely affect our operations and profitability.

A substantial majority of the slot and HRM machines sold in the U.S.

are manufactured by a few select companies.

The prices of new machines may escalate and manufacturers could refuse to sell us machines featuring the most popular games, instead requiring participating lease arrangements to acquire the machines.

Such agreements may be substantially more expensive over the long term than the cost of purchasing a new machine.

We rely on vendors that may use components produced in foreign countries.

Restrictions on international trade, such as tariffs and other controls on imports or exports, could impact the pricing and availability of slot and HRM machines.

Availability of the most popular games may also be limited by the manufacturer.

If we are unable to maintain availability of the most popular games, it could impact our ability to attract and retain customers.

We rely on a variety of hardware and software products to maximize revenue and efficiency in our operations.

Technology in the gaming industry is developing rapidly, and we may need to invest substantial amounts to acquire the most current gaming and hotel technology and equipment in order to remain competitive in the markets in which we operate.

We rely on a limited number of vendors to provide video poker and slot machines and any loss of our equipment suppliers could impact our operations.

We rely on a limited number of vendors to provide video poker, slot, and HRM machines and any loss of equipment suppliers could impact our operations.

Ensuring the successful implementation and maintenance of any new technology acquired is an additional risk.

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The inability to distribute our racing content could have a material adverse impact on our business, results of operations, and financial condition.

We intend to focus on market access and our retail operations for our TwinSpires sports betting business and there can be no assurance that we will be able to compete effectively or that we will generate sufficient returns on our investment

We intend to focus on market access and our retail operations for our sports betting business and there can be no assurance that we will be able to compete effectively or that we will generate sufficient returns on our investment

During the second quarter of 2018, the U.S.

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Sports betting has been authorized and is operational in thirty-eight states and the District of Columbia as of December 31, 2024.

Additional states may legalize sports betting in the future.

Additional states may

legalize sports betting in the future.

Each state has different structures for the number of allowable industry participants, license fees, taxes, and other operational requirements.

The market for sports betting and online gaming is rapidly evolving and highly competitive with an increasing number of competitors.

The success of our retail and online sports books is dependent on several factors that are beyond our control, including:

The success of our retail and online sportsbooks is dependent on several factors that are beyond our control, including:

• the timing of adoption of regulations authorizing betting and gaming activities,

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• the availability and popularity of other forms of entertainment.

There can be no assurance as to the returns that we will receive from TwinSpires sports betting business.

There can be no assurance as to the returns that we will receive from sports betting business.

Operational Risks

Our business is subject to online security risk, including cybersecurity breaches.

Our business is subject to online security risk, including data privacy and cybersecurity breaches.

Loss or misuse of our stored information as a result of such a breach, including customers’ personal information, could lead to government enforcement actions or other litigation, potential liability, or otherwise harm our business

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We have experienced cyber attacks in the past.

While these attacks did not have a significant impact to the Company, we may continue to experience such attacks.

While these attacks have not had a significant impact on the Company to date, we may continue to experience cyber attacks, and such attacks could have an adverse impact on our business in the future.

Our systems and processes that are designed to protect customer information and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach at a third-party vendor or joint venture partner, may not be successful.

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We are also subject to payment card association rules and obligations under each association’s contracts with payment card processors.

Under these rules and obligations, if information is compromised, we could be liable to payment card issuers for the associated expense and penalties.

Under these rules and obligations, if information is compromised, we could be liable to payment card issuers for the associated expense and

If we fail to follow payment card industry security standards, even if no customer information is compromised, we could incur significant fines or experience a significant increase in payment card transaction costs.

Security breaches, computer malware, and computer hacking attacks have become more prevalent in our industry, and hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks.

Many companies, including ours, have been the targets of such attacks.

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Any security breach caused by hacking which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses could harm our business.

Though it is difficult to determine what harm may directly result from any specific interruption or breach, any failure

to maintain performance, reliability, security, and availability of our network infrastructure to the satisfaction of our players may harm our reputation and our ability to retain existing players and attract new players.

Because the techniques used to obtain unauthorized access, disable, or degrade service, or sabotage systems, change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

Though it is difficult to determine what harm may directly result from any specific interruption or breach, any failure to maintain performance, reliability, security, and availability of our network infrastructure to the satisfaction of our players may harm our reputation and our ability to retain existing players and attract new players.

The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cyber incident could be significant.

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This insurance coverage may not be sufficient to cover all possible claims, and we could suffer losses that could have a material adverse effect on our business.

Our operations rely heavily on technology services, and catastrophic events and system failures with respect to these technology services could cause a significant and continued disruption to our operations

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Our online wagering, HRM and brick-and-mortar casino businesses depend upon our communications hardware and our computer hardware.

We have built certain redundancies into our systems to attempt to avoid downtime in the event of outages, system failures or damage.

Our systems also remain vulnerable to damage or interruption from floods, fires, power loss, telecommunication failures, terrorist cyber attacks, hardware or software error, computer viruses, computer denial-of-service attacks and similar events.

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We have completed acquisition transactions in the past, and we may pursue acquisitions from time to time in the future.

The successful integration of newly acquired businesses into our operations has required and will continue to require the expenditure of substantial managerial, operating, financial, and other resources and may also lead to a diversion of our attention from our ongoing business concerns.

from our ongoing business concerns.

We may not be able to successfully integrate new businesses, manage the combined operations or realize projected revenue gains, cost savings, and synergies in connection with those acquisitions on the timetable contemplated, if at all.

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We may decide to develop, construct, and open hotels, casinos, other gaming venues, or racetracks in response to opportunities that may arise.

For example, we've announced multiple major multi-year capital investments to transform key areas of Churchill Downs Racetrack, as well as other capital investments such The Rose Dumfries, Owensboro Racing & Gaming, a charitable gaming facility in New Hampshire, and the Terre Haute Casino Resort.

For example, we've announced multiple major multi-year capital investments to transform key areas of Churchill Downs Racetrack, as well as other capital investments in new venues.

Future development projects may require significant capital commitments and the incurrence of additional debt, which could have a material adverse impact on our business.

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Environmental laws and regulations could hold us responsible for the cost of cleaning up hazardous materials contaminating real property that we own or operate (or previously owned or operated) or properties at which we have disposed of hazardous materials, even if we did not cause the contamination.

Some of our facilities are subject to CAFO regulations.

Some of our facilities

are subject to CAFO regulations.

If we fail to comply with environmental laws or if contamination is discovered, a court or government agency could impose severe penalties or restrictions on our operations or assess us with the costs of taking remedial actions.

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We face risks related to pending or future legal proceedings and other actions

From time to time, we are a party in various lawsuits and judicial and governmental actions.

From time to time, we are a party to various lawsuits and judicial and governmental actions.

No assurance can be provided as to the outcome of these lawsuits and actions, which can be expensive and time consuming.

We may not be successful in the defense or prosecution of these lawsuits or actions, which could result in settlements, costs, or damages that could have a material adverse impact on our business, financial condition, results of operations, and reputation.

Such matters may include investigations or litigation from various parties, including vendors, customers, state, and federal agencies, stockholders, and

employees relating to intellectual property, employment, consumer, personal injury, corporate governance, commercial, or other matters arising in the ordinary course of business.

Such matters may include investigations or litigation from various parties, including vendors, customers, state, and federal agencies, stockholders, and employees relating to intellectual property, employment, consumer, personal injury, corporate governance, commercial, or other matters arising in the ordinary course of business.

We have also been subject to claims in cases concerning or similar to class action allegations.

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Our wagering and racing (including HRM) facilities must meet the licensing requirements of various regulatory authorities.

We have obtained all governmental licenses, registrations, permits, and approvals necessary for operation.

However, we may be unable to maintain our existing licenses.

We may be unable to maintain our existing licenses.

The failure to obtain such licenses in the future or the loss of or material change in our business licenses, registrations, permits, or approvals may materially limit the number of races we conduct or our racing (including HRM) operation.

The loss of a license in one jurisdiction could trigger the loss of a license or affect our eligibility for a license in another jurisdiction.

Regulatory authorities also have input into important aspects of our operations, including hours of operation, location, or relocation of a facility, and numbers and types of HRMs.

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State attorney generals, regulators, and other law enforcement officials may interpret state laws, federal laws, constitutional principles, and the related regulations in a different manner than we do.

States may take affirmative action to make ADW expressly unlawful.

Certain states have taken affirmative action and more may take action in the future to make advance deposit wagering unlawful or to limit the number of ADW licenses.

We may not be successful in lobbying state legislatures or regulatory bodies to obtain or renew required legislation, licenses, registrations, permits, and approvals necessary to facilitate the operation or expansion of our online horse racing wagering business or in any legal challenge to the validity of any restrictions on ADW.

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Many states have considered and are considering interactive and Internet gaming legislation and regulations which may inhibit our ability to do business in such states or increase competition for online wagering.

Anti-gaming conclusions and recommendations of other governmental or quasi-governmental bodies could form the basis for new laws, regulations, and enforcement policies.

Anti-gaming conclusions and

recommendations of other governmental or quasi-governmental bodies could form the basis for new laws, regulations, and enforcement policies.

The extensive regulation by both state and federal authorities of gaming activities also can be significantly affected by changes in the political climate and changes in economic and regulatory policies.

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During inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense of our borrowings.

Primarily in response to concerns about inflation, the U.S.

Federal Reserve has significantly raised its benchmark federal funds rate, which has led to increases in interest rates in the credit markets.

Federal Reserve may continue to raise the federal funds rate, which will likely lead to higher interest rates in the credit markets and the possibility of lower asset values, slowing economic growth and/or possibly leading to a recession.

We are exposed to increases in interest rates on our variable-rate borrowings, which consist of borrowings under our credit facility and our term loans.

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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-K

Item 1A. Risk Factors