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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-21 · 137 added, 195 removed, 281 unchanged (54% of the section changed)

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Discussion regarding our financial condition and results of operations for 2023 as compared to 2022 is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024.

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

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

For additional information, refer to Note 21, Segment Information to the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

2023 Transactions

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

Headquartered in Louisville, Kentucky, CDI has expanded through the acquisition, development, and operation of live and historical racing entertainment venues, the growth of the online wagering businesses, and the acquisition, development, and operation of regional casino gaming properties.

2024 Transactions and Expansions

The Rose Gaming Resort Opening

In November 2024, the Company opened The Rose Gaming Resort approximately 30 miles south of Washington D.C.

The Company invested approximately $460 million to construct The Rose Gaming Resort with a 102-room hotel, eight food and beverage options, and 1,650 historical racing machines ("HRMs").

The Rose Gaming Resort has the potential to be expanded to up to 1,800 HRMs.

Terre Haute Casino Resort Opening

In April 2024, the Company opened the Terre Haute Casino Resort in Terre Haute, Indiana.

The Company invested approximately $290 million to develop the Terre Haute Casino Resort with a luxury hotel, 1,040 slot machines, 36 tables games, a state-of-the-art sportsbook, and regionally inspired food and beverage amenities.

NYRA Transaction

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.

2023 Transactions and Expansions

Derby City Gaming Downtown Opening

In December 2023, the Company opened Derby City Gaming Downtown in Louisville, Kentucky.

The Company invested approximately $90 million to develop Derby City Gaming Downtown with a gaming area, a main-level sports bar with a stage for live entertainment, retail sports betting, a premium bourbon bar, and an elegant wine lounge for guests, including locals, tourists, and convention attendees.

Exacta Systems, LLC Acquisition

On August 22, 2023, the Company completed its previously announced acquisition of Exacta Systems, LLC ("Exacta Transaction").

Exacta Systems ("Exacta") is a leading provider of central determinate system technology in HRMs across the country.

Exacta’s system architecture supports multiple game vendors and virtually unlimited math modeling capabilities on a single central determinate system enabling Exacta to deliver a diverse gaming library to Company owned and third-party HRM entertainment venues in Kentucky, Virginia, Wyoming, and New Hampshire.

For additional information, refer to Note 3, Acquisitions to the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

On August 22, 2023, the Company completed its acquisition of Exacta Systems, LLC ("Exacta Transaction").

Exacta Systems, LLC ("Exacta") is a leading provider of central determinant system technology in HRMs across the country.

Exacta’s system architecture supports multiple game vendors and virtually unlimited math modeling capabilities on a single central determinant system enabling Exacta to deliver a diverse gaming library to Company owned and third-party HRM entertainment venues in Virginia, Kentucky, Wyoming, New Hampshire, and is expanding internationally.

Lady Luck Casino Nemacolin Agreement

In June 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.

Derby City Gaming & Hotel Expansion

In June 2023, the Company invested approximately $78 million to expand the Derby City Gaming facility in Louisville, Kentucky and build a five-story hotel with 123 rooms including amenities to better serve and attract guests.

The expansion included a VIP gaming area, a new sports bar, a stage for live entertainment, and an upscale-casual restaurant and bar.

Arlington Sale

On February 15, 2023, we closed on the sale of the Arlington property in Arlington Heights, Illinois.

On February 15, 2023, the Company closed on the sale of the Arlington property in Arlington Heights, Illinois.

We sold 326-acres to the Chicago Bears for $197.2 million.

The net proceeds of $195.7 million were used to pay down the outstanding balance amount on our revolving credit facility that was drawn on to fund the acquisition of substantially all the assets of Peninsula Pacific Entertainment ("P2E").

For additional information, refer to Note 4, Dispositions to the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Lady Luck Casino Nemacolin

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.

2022 Transactions

Peninsula Pacific Entertainment Acquisition

On November 1, 2022, the Company completed the acquisition of substantially all the assets of P2E with a base purchase price of $2.75 billion ("P2E Transaction") subject to working capital and other purchase price adjustments.

The Company acquired the following properties as part of the P2E Transaction:

Colonial Downs Racetrack in New Kent, Virginia, six historical racing entertainment venues in Virginia, del Lago Resort & Casino in Waterloo, New York, and the Hard Rock Hotel & Casino in Sioux City, Iowa.

The P2E Transaction also included HRM development rights for two properties in Emporia, Virginia and Dumfries, Virginia.

The Company invested $30.0 million in a seventh Virginia based HRM entertainment venue that opened on September 26, 2023 in Emporia, Virginia.

The Company is also investing approximately $460.0 million to construct The Rose Gaming Resort (“The Rose”) in Dumfries, Virginia with an expected completion late in the third quarter of 2024.

Ellis Park Acquisition

On September 26, 2022, the Company completed the acquisition of Ellis Park Racing & Gaming ("Ellis Park Transaction").

Ellis Park Racing & Gaming ("Ellis Park") is a racetrack and gaming facility venue with HRMs.

As part of the acquisition, the Company also acquired the rights to construct an HRM entertainment venue as an annex of Ellis Park.

In June 2023, the

Company announced it planned to invest approximately $100 million in a new HRM entertainment venue on the east side of Owensboro, Kentucky with an expected completion in the first quarter of 2025.

Chasers Poker Room Acquisition

On September 2, 2022, the Company completed the acquisition of Chasers Poker Room ("Chasers") in Salem, New Hampshire ("Chasers Transaction").

Chasers is a charitable gaming facility located approximately 30 miles from Boston, Massachusetts that offers poker and a variety of table games.

The Company plans to develop an expanded charitable gaming facility in Salem to accommodate HRMs and table games.

Calder Land Sale

On June 17, 2022, the Company closed on the sale of 115.7 acres of land near Calder Casino for $291.0 million to Link Logistics Real Estate, a Blackstone portfolio company.

The Company received cash proceeds of $279.0 million which was net of $12.0 million of transaction costs.

We recognized a gain of $274.6 million on the sale of the land.

Other Business Activities

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.

For additional information, refer to Note 10, Shareholders' Equity to the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Presque Isle Impairment

During the quarter ended June 30, 2023, the Company evaluated economic conditions subsequent to the date of our annual impairment assessment on April 1, 2023, including competition in the market and inflationary pressures, which increased during the second quarter of 2023, and impacted the performance and outlook of Presque Isle Downs and Casino ("Presque Isle").

As a result, the Company concluded that a trigger event for impairment testing occurred related to the Presque Isle gaming rights, trademark, and the reporting unit's goodwill at the end of the second quarter ("2023 Trigger Event").

Based on the trigger event, the Company evaluated and subsequently updated the projected cash flows and discount rate to reflect the economic environment at that time.

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Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

During the quarter ended December 31, 2022, the Company evaluated whether events or circumstances changed that would indicate it is more likely than not that any of the Company's intangible assets, goodwill, or property and equipment, were impaired.

Based on the Company's evaluation, the Company concluded that a trigger event for impairment testing occurred related to the Presque Isle gaming rights, trademark, and the reporting unit's goodwill due to negative economic conditions ("2022 Trigger Event").

Based on the 2022 Trigger Event, the Company evaluated and subsequently updated the projected cash flows and discount rate to reflect the economic environment at that time.

As a result, the Company recorded a $33.4 million non-cash impairment charge in fourth quarter of 2022 for the Presque Isle gaming rights and trademark.

Exit of the Direct Online Sports and Casino Business

In 2022, the Company exited the direct online Sports and Casino business in every state except for Pennsylvania and Arizona.

During the quarter ended March 31, 2022, the Company evaluated whether this planned exit would indicate it is more likely than not that any of the Company’s intangible assets, long-lived assets, current assets, or property and equipment, were impaired.

Based on the Company’s evaluation, the Company recorded a $4.9 million non-cash impairment charge related to certain assets in the TwinSpires segment.

As of December 31, 2023, the Company has exited every state for the direct online Sports and Casino business.

The Company will maintain its retail sports betting operations and has monetized four of its online market access licenses.

Financing Transactions

On April 25, 2023, we completed an offering of $600.0 million in aggregate principal amount of 6.750% senior notes that mature in 2031.

The Company used a portion of the net proceeds from the offering to repay indebtedness outstanding under its Term Loan B Facility due 2024 and to fund related transaction fees and expenses, working capital, and other general corporate purposes.

On February 24, 2023, we entered into an incremental joinder to our senior secured credit agreement to increase the loans under the existing Term Loan A due 2027 by $500.0 million.

This joinder increased the existing Term Loan A due 2027 from $800.0

million to $1.3 billion and makes certain other changes to the existing credit agreement.

The Company used the net proceeds from the borrowings under the increased Term Loan A to repay outstanding loans under its senior secured revolving credit facility, pay related transaction fees and expenses, and for general corporate purposes.

On April 13, 2022, we completed an offering of $1.2 billion in aggregate principal amount of 5.75% senior notes that mature in 2030.

The offering of the 2030 Senior Notes was part of the financing utilized for the P2E Transaction.

For additional information on these transactions, refer to Note 12, Debt to the notes to consolidated financial statements included in Item 8.

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.

For additional information, refer to Note 9, Shareholders' Equity to the notes to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Transaction Update

On August 11, 2022, the Company entered into an agreement to sell 49% of United Tote, a wholly owned subsidiary of the Company to NYRA Content Management Solutions, LLC, a subsidiary of the New York Racing Association.

The Company has received a deposit on the pending transaction of $14.4 million.

The transaction is subject to usual and customary closing conditions, including applicable regulatory notices and approvals and is expected to close in the first half of 2024.

Key Indicators to Evaluate Business Results and Financial Condition

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

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

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

Adjusted EBITDA excludes:

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– Acquisition, disposition, and property sale related charges;

– Direct online Sports and Casino business exit costs;

– Other transaction expense, including legal, accounting and other deal-related expense;

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• Rivers Des Plaines' impact on our investments in unconsolidated affiliates from:

– The impact of changes in fair value of interest rate swaps, and

– Legal reserves and transaction costs;

• Asset impairments;

• Gain on sale of assets;

• Gain on property sales;

• Legal reserves;

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• Other charges, recoveries and expenses

On June 26, 2023, the Company's management agreement for Lady Luck expired and was not renewed.

The Company completed the sale of substantially all its assets at Lady Luck for an immaterial amount.

As of December 31, 2021, Arlington International Racecourse ("Arlington") ceased racing and simulcast operations.

On February 15, 2023, the Company closed on the sale of the property to the Chicago Bears.

For more information, refer to Note 4, Dispositions, to the notes to consolidated financial statements included in this Annual Report on Form 10-K.

Arlington's results and exit costs in 2022 and 2023 are treated as an adjustment to EBITDA.

As of December 31, 2021, Arlington International Racecourse ("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.

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

For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the Consolidated Statements of Comprehensive Income.

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

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

Business Highlights

In 2023, we delivered strong performance while continuing the execution of several organic investments.

We delivered strong growth in net revenue, operating income, and Adjusted EBITDA compared to fiscal year 2022:

In 2024, we delivered strong performance while continuing the execution of several organic investments that we believe will provide long-term sustainable value creation.

We delivered strong growth in net revenue, operating income, net income, and Adjusted EBITDA compared to fiscal year 2023:

• Net revenue was $2.7 billion, up $272.6 million or 11.1%;

• Operating income was $564.0 million, up $242.2 million or 75%.

• Net income was $417.3 million, down $22.1 million or 5%.

• Net income was $426.8 million, up $9.5 million or 2.3%;

• Adjusted EBITDA was $1.2 billion, up $135.3 million, or 13.2%;

• Cash from operations was $771.7 million, up $166.4 million or 27.5%.

Live and Historical Racing Segment:

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• Churchill Downs Racetrack:

◦ Churchill Downs Racetrack ran the 149 th Kentucky Derby with record Derby Week all-sources handle and record Derby Week contribution to Adjusted EBITDA with over 150,000 fans gathered in person to watch the most exciting two minutes in sports on the first Saturday in May.

◦ We successfully completed the First Turn Experience prior to the 149 th Kentucky Derby.

◦ We continued construction of the Paddock Project which is scheduled to be finished in time for the 150 th Kentucky Derby the first weekend in May 2024.

◦ Churchill Downs Racetrack ran the 150th Kentucky Derby on the first Saturday of May, generating all-time record all-sources handle and all-time record Derby Week Adjusted EBITDA with nearly 157,000 fans gathered in person to watch the most exciting two minutes in sports.

◦ We successfully completed the transformative Paddock Project prior to the 150th Kentucky Derby.

This multi-year project fundamentally improves the entire venue for every guest and provides a foundation to further innovate for years to come.

◦ We extended the agreement with NBC Sports to continue hosting the Kentucky Derby on NBC and Peacock through 2032.

◦ We announced the Starting Gate Pavilion and Courtyard renovation to be open for the 151st Kentucky Derby.

• Kentucky HRMs:

◦ Derby City Gaming:

Delivered record net revenue and Adjusted EBITDA and completed the expansion of the gaming floor and opened a new hotel.

◦ Derby City Gaming Downtown :

Opened in Louisville, Kentucky, on December 6, 2023.

Delivered record net revenue and Adjusted EBITDA for a second year in a row.

Announced plans to invest approximately $100 million in a new HRM entertainment venue on the east side of Owensboro with an expected completion in the first quarter of 2025.

◦ Owensboro Racing & Gaming:

Constructed a new HRM entertainment venue that opened in February 2025 in Owensboro, Kentucky.

◦ Marshall Yards Racing & Gaming:

Announced a new HRM entertainment venue near Paducah, Kentucky, that will open in the first quarter of 2026.

• Virginia HRMs:

◦ Southern Virginia - Rosie's Gaming Emporium:

Opened in Emporia, Virginia on September 26, 2023.

◦ Northern Virginia - The Rose Gaming Resort (Dumfries):

We continued construction of a $460 million gaming and entertainment resort and hotel in Dumfries, Virginia with a scheduled completion late in the third quarter of 2024.

TwinSpires Segment:

◦ The Rose Gaming Resort:

Opened a world class entertainment resort in Dumfries, Virginia in November 2024 that includes 1,650 HRMs, eight bars and restaurants, and a hotel with over 100 rooms and event space.

◦ Richmond Expansion:

Announced plans to further expand the Richmond, Virginia HRM venue by 450 HRMs.

◦ Roseshire Henrico County:

Announced plans to open a new HRM entertainment venue in Henrico County, Virginia that will include 175 HRMs.

Wagering Services and Solutions Segment:

• Adjusted EBITDA was $165.6 million, up $33.5 million or 25.4% from fiscal year 2023.

• TwinSpires Horse Racing:

◦ We launched a multi-year agreement with FanDuel to enable FanDuel to create a fully integrated and seamless wagering experience with a single wallet for their customers who want to bet on sports and horse racing with FanDuel.

◦ We launched a multi-year agreement with DraftKings to provide ADW technology and other services.

We completed the acquisition of Exacta, a leading provider of central determinate system technology in HRMs across the country.

• Sports Betting:

We opened seven retail sports books and monetized three of our Kentucky online sports betting licenses upon the authorization of sports betting in Kentucky.

• We expanded Exacta technology and product offerings to customers in new states and internationally.

• We monetized online sports betting market access in select states (Indiana, Kentucky, and Pennsylvania) with third parties.

Gaming Segment:

• Adjusted EBITDA was a record $488.6 million, up $66.7 million or 16% from fiscal year 2022.

• Adjusted EBITDA was $506.9 million, up $18.3 million or 3.7% from fiscal year 2023.

• Terre Haute Casino Resort:

We continued construction of a $290 million casino, hotel, and entertainment venue in Terre Haute, Indiana scheduled to open in the second quarter of 2024.

• We closed the sale of our Arlington Heights, Illinois property to the Chicago Bears for $197.2 million on February 15, 2023.

• We completed the offering of $600.0 million in 6.750% senior notes that mature in 2031.

• We amended our senior secured credit agreement to increase the loans under the existing Term Loan A due 2027 by $500 million.

• Effective May 22, 2023, the Company's common stock was split two-for-one with a proportionate increase in the number of authorized shares of common stock.

• In December 2023 we announced a repurchase of 1,000,000 shares of our common stock for $123.75 per share from an affiliate of The Duchossois Group, Inc that closed on January 2, 2024.

The Company’s total shareholder return was 28% for 2023 compared to 26.5% for the Russell 1000 and 26.3% for the S&P 500.

The Company’s five-year total shareholder return for 2023 was 237% compared to 106% for the Russell 1000 and 107% for the S&P 500.

The preceding shareholder return calculations assume dividends are reinvested.

We delivered strong financial results in 2023 and remain committed to driving long-term sustainable growth.

Our company generates strong cash flow and our balance sheet is solid and able to support our organic growth and strategic acquisitions that we believe will create long-term value for our shareholders.

Environmental, Social, and Governance

• We expanded our ESG efforts including the ongoing promotion of responsible gaming;

Opened the Terre Haute Casino Resort in April 2024 and luxury 122-room hotel in May 2024 that includes over 1,000 slot machines, table games, a state-of-the-art retail sportsbook, a 400,000 square-foot entertainment venue, and several food and drink offerings.

• We amended our senior secured credit agreement to extend the maturity date of our revolving credit facility and term loan A facility from 2027 to 2029 and to make certain other changes to our existing credit agreement.

• We repurchased $65.3 million of shares under our share repurchase program in 2024, based on trade date.

• We continued in our ESG efforts with the ongoing promotion of responsible gaming;

initiatives at our properties to lessen energy and water usage, to decrease carbon emissions, and to responsibly manage waste;

increasing investments in the communities in which we operate and supporting our teams through educational and leadership development;

and further diversification of our Board of Directors and increasing engagement with our shareholders.

• We also continued our diversity, equity, and inclusion initiatives (DE&I) including the roll-out of our mission, vision, culture statement, and core values company-wide.

and increasing engagement with our shareholders.

The Company’s five-year total shareholder return for 2024 was 97.6% compared to 94.9% for the Russell 1000 and 97.0% for the S&P 500.

The preceding shareholder return calculations assume dividends are reinvested.

We remain committed to delivering strong financial results and long-term sustainable growth.

Our businesses generate strong cash flow, and we have a solid balance sheet that supports our organic growth as well as strategic acquisitions that we believe will create long-term value for our shareholders.

Our Operations

We manage our operations through three reportable segments:

Live and Historical Racing, TwinSpires, and Gaming.

Live and Historical Racing, Wagering Services and Solutions, and Gaming.

Refer to Part I, Item 1.

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Operating income margin 25.9 % 22.9 %

Net income $ 417.3 $ 439.4 $ (22.1)

Net income attributable to Churchill Down Incorporated $ 426.8 $ 417.3 $ 9.5

Adjusted EBITDA 1,159.2 1,023.9 135.3

Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

• Net revenue increased $651.9 million driven by a $432.7 million increase in Live and Historical Racing revenue primarily attributable to the Virginia properties acquired in the P2E Transaction, the opening of Turfway Park in Northern Kentucky in September 2022, a record-breaking Derby Week at Churchill Downs Racetrack, the properties acquired in the Ellis Park and Chasers Transactions, and continued growth at our other Kentucky properties, a $212.7

million increase in Gaming revenue primarily due to our New York and Iowa properties acquired in the P2E Transaction, and an $8.5 million increase in TwinSpires revenue primarily attributable to the Exacta Transaction, partially offset by a $2.0 million decrease in All Other revenue.

• Operating income increased $242.2 million due to a $171.4 million increase in Live and Historical Racing income primarily attributable to the Virginia properties acquired in the P2E Transaction, the opening of Turfway Park in Northern Kentucky in September 2022, the properties acquired in the Ellis Park and Chasers Transactions, and continued growth at our other Kentucky properties, a $50.6 million increase in Gaming income primarily from the New York and Iowa properties acquired in the P2E Transaction, a $13.9 million increase in TwinSpires income primarily due to the exit of the direct online Sports and Casino business in the first quarter of 2022 and an increase attributable to the Exacta Transaction, a $37.3 million decrease in transaction costs, and a $13.7 million decrease in non-cash impairment costs.

These increases were partially offset by a $38.1 million increase in selling, general and administrative expenses primarily due to the P2E Transaction, and a $6.6 million decrease in All Other operating income primarily related to Arlington exit costs.

• Net income from decreased $22.1 million.

The following items impacted comparability of the Company's net income for the year ended December 31, 2023 compared to the prior year:

a $112.4 million decrease in after-tax gains on property sales and a $9.2 million after-tax benefit related to our equity portion of the non-cash change in the fair value of Rivers Des Plaines' interest rate swap that did not recur in 2023.

Offsetting these decreases to net income were a $16.6 million after-tax decrease in transaction, pre-opening and other expenses, a $10.1 million after-tax decrease in non-cash asset impairments, and a $3.1 million decrease of other charges.

Excluding these items, net income increased $69.7 million due to a $197.1 million after-tax increase primarily driven by the results of our operations, partially offset by a $127.4 million after-tax increase in interest expense associated with higher outstanding debt balances.

• Adjusted EBITDA increased $260.3 million driven by a $187.9 million increase in Live and Historical Racing Adjusted EBITDA primarily attributable to the Virginia properties acquired in the P2E Transaction, a record-breaking Derby Week at Churchill Downs Racetrack, and continued growth at our other Kentucky properties, a $66.7 million increase in Gaming Adjusted EBITDA primarily from the New York and Iowa properties acquired in the P2E Transaction, and an $18.0 million increase in TwinSpires Adjusted EBITDA primarily due to the exit of the direct online Sports and Casino business and an increase attributable to the Exacta Transaction, partially offset by a $12.3 million increase in corporate general administrative expenses.

• Net revenue increased $272.6 million driven by a $178.3 million increase from the Live and Historical Racing segment primarily from growth at our Virginia properties and the opening of the Rosie's Emporia HRM venue and The Rose Gaming Resort, a record-breaking Derby Week at Churchill Downs Racetrack, and growth at our other HRM venues, a $70.5 million increase from the Gaming segment primarily from the opening of the Terre Haute Casino Resort, and a $24.6 million increase from the Wagering Services and Solutions segment primarily from to our Exacta business.

All Other net revenue decreased $0.8 million.

• Operating income increased $145.0 million driven by a $105.1 million increase from the Live and Historical Racing segment primarily from a record-breaking Derby Week at Churchill Downs Racetrack, lower fees related to the Exacta technology used in the Company's HRM operations, the opening of the Rosie's Emporia HRM venue and The Rose Gaming Resort, and growth at our other HRM venues, a $21.6 million increase from the Gaming segment primarily from the opening of the Terre Haute Casino Resort, partially offset by inclement weather in January 2024, regional

gaming softness, and increased competition, a $20.7 million increase from a reduction of non-cash impairment costs, a $16.9 million benefit to transaction expense primarily related to the settlement of certain liabilities recorded at the time of the Company's November 2022 acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC, and a $16.3 million increase in the Wagering Services and Solutions segment primarily from our Exacta business.

Partially offsetting these increases to operating income was a $35.4 million increase in selling, general and administrative expenses and a $0.2 million decrease in All Other operating income.

• Net income attributable to Churchill Downs Incorporated increased $9.5 million.

The following impacted comparability of the Company's net income for the year ended December 31, 2024 compared to the prior year:

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 after-tax decrease in non-cash impairment costs, a $12.8 million after- tax decrease in transaction, pre-opening, and other expense primarily from the settlement of certain liabilities recorded at the time of the Company's November 2022 acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC, a $5.1 million after-tax increase of other charges and recoveries, net related to non-recurring insurance claim recoveries, and a $0.9 million after-tax decrease of all other charges.

Excluding these items, net income increased $61.2 million primarily due to a $77.0 million after-tax increase primarily driven by the results of our operations and equity income from our unconsolidated affiliates, partially offset by a $15.8 million after-tax increase in interest expense associated with higher outstanding debt balances and higher interest rates.

• Adjusted EBITDA increased $135.3 million driven by a $99.2 million increase from the Live and Historical Racing segment primarily from a record-breaking Derby Week at Churchill Downs Racetrack and growth at our HRM venues, a $33.5 million increase from the Wagering Services and Solutions segment primarily due to our Exacta business, and an $18.3 million increase from the Gaming segment primarily from 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 $15.7 million.

Revenue by Segment

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Live and Historical Racing $ 1,267.0 $ 1,084.6 $ 182.4

TwinSpires 458.4 441.6 16.8

Wagering Services and Solutions 500.7 458.4 42.3

Gaming 1,045.4 974.6 70.8

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Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

• Live and Historical Racing revenue increased $438.2 million driven by a $313.9 million increase attributable to the Virginia properties acquired in the P2E Transaction, a $41.2 million increase in Northern Kentucky primarily due to the opening of Turfway Park in September 2022, a $36.4 million increase attributable to properties acquired in the Ellis Park and Chasers Transactions, a $20.7 million increase due to a record-breaking Derby Week at Churchill Downs Racetrack, a $19.2 million increase from our Derby City Gaming property and the opening of Derby City Gaming Downtown in December 2023 in Louisville, Kentucky, and a $16.5 million increase from our Oak Grove property in Southwestern Kentucky.

These increases were partially offset by a $9.7 million decrease for non-Derby Week racing operations primarily due to the decision to move a portion of the Churchill Downs Racetrack Spring Meet to Ellis Park.

• TwinSpires revenue increased $16.8 million driven by a $19.1 million increase attributable to the Exacta Transaction, a $5.3 million increase primarily from the B2B expansion strategy associated with United Tote totalisator fees, a $1.9

million increase from our retail sports betting business, and a $1.8 million increase in all other Horse Racing revenue primarily driven by increased handle from our higher-wagering volume customer base, partially offset by lower retail Horse Racing handle due to industry race day cancellations and the decision to move a portion of the Churchill Downs Racetrack Spring Meet to Ellis Park in 2023 and an $11.3 million reduction primarily due to the exit of the direct online Sports and Casino business in the first quarter of 2022.

• Gaming revenue increased $212.8 million driven by a $230.0 million increase attributable to the New York and Iowa properties acquired in the P2E Transaction, partially offset by a $16.9 million decrease in Pennsylvania primarily due to our decision not to renew the management agreement at Lady Luck and a $0.3 million net decrease from our other gaming properties.

• Live and Historical Racing revenue increased $182.4 million due to a $57.2 million increase at Churchill Downs Racetrack due to a record-breaking 150th Derby Week, a $25.9 million increase in Northern Virginia including the opening of The Rose Gaming Resort, a $17.2 million increase from the opening of the Rosie’s Emporia HRM venue in Southern Virginia in September 2023, a $39.5 million increase from our other Virginia HRM venues, a $41.5 million increase from our Kentucky HRM venues, and a $1.1 million increase from our New Hampshire venue.

• Wagering Services and Solutions revenue increased $42.3 million due to a $40.8 million increase from our Exacta business primarily from growth in our third party HRM business and from the growth of our Virginia HRM venues and a $2.0 million increase from our sports betting business, partially offset by a $0.5 million decrease from TwinSpires Ho rse Racing.

• Gaming revenue increased $70.8 million primarily due to a $96.6 million increase from the opening of the Terre Haute Casino Resort.

This increase was partially offset by a $15.6 million decrease from our other wholly owned gaming properties primarily due to inclement weather in January 2024, regional gaming softness, and increased competition;

and a $10.2 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 $5.7 million primarily due to intercompany revenue related to the captive insurance company that was established in April 2024.

All captive revenue is eliminated in consolidation.

Consolidated Operating Expense

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(in millions) 2024 2023

Gaming taxes and purses $ 613.4 $ 473.7 $ 139.7

Taxes and purses $ 662.9 $ 613.4 $ 49.5

Content expense 168.4 173.0 (4.6)

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Asset impairments 3.9 24.6 (20.7)

Transaction expense 4.8 42.1 (37.3)

Transaction (benefit) expense, net (12.1) 4.8 (16.9)

Other operating expense 226.4 226.6 (0.2)

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Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Significant items affecting comparability of consolidated operating expense include:

• Taxes and purses, salaries and benefits, selling, general and administrative, marketing and advertising, depreciation and amortization, maintenance, insurance and utilities, property and other taxes, and other operating expenses increased due to the P2E, Ellis Park, Chasers, and Exacta Transactions, as well as the opening of Turfway Park in September of 2022.

• The decrease in asset impairments was driven by reduced non-cash impairment charges in 2023 compared to 2022 primarily at Presque Isle.

• Transaction expenses decreased $37.3 million primarily driven by expenses incurred in 2022 in connection with the P2E Transaction.

Operating expenses increased $127.6 million for the year ended December 31, 2024 compared to December 31, 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, Terre Haute Casino Resort in Indiana in April 2024, and The Rose Gaming Resort in Virginia in November 2024.

Transaction (benefit) expense, net for the year ended December 31, 2024, includes the settlement of certain liabilities recorded at the time of the Company's November 2022 acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC which resulted in a benefit to transaction expense of $18.8 million.

Asset impairments for the year ended December 31, 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 year ended December 31, 2023 include the $24.5 million non-cash impairment of Presque Isle intangible assets in the second quarter of 2023.

Adjusted EBITDA by Segment

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Live and Historical Racing $ 574.6 $ 475.4 $ 99.2

TwinSpires 132.1 114.1 18.0

Wagering Services and Solutions 165.6 132.1 33.5

Gaming 506.9 488.6 18.3

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Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

• Live and Historical Racing Adjusted EBITDA increased $187.9 million driven by a $145.0 million increase attributable to the Virginia properties acquired in the P2E Transaction and savings as a result of the Exacta Transaction, a $15.7 million increase due to a record-breaking Derby Week at Churchill Downs Racetrack, a $13.1 million increase from continued growth at Oak Grove in Southwestern Kentucky, an $8.6 million increase in Northern Kentucky primarily due to the opening of Turfway Park in September 2022, a $7.2 million increase due to growth from our Derby City Gaming property and the opening of Derby City Gaming Downtown in December 2023 in Louisville, Kentucky, and a $5.4 million increase attributable to our other Live and Historical Racing properties.

These increases were partially offset by a $7.1 million decrease for non-Derby Week racing operations primarily driven by the decision to move a portion of the Churchill Downs Racetrack Spring Meet to Ellis Park in 2023.

• TwinSpires Adjusted EBITDA increased $18.0 million driven by an $11.8 million increase attributable to the Exacta Transaction, an $11.3 million increase primarily from significant cost reductions associated with the exit of the direct online Sports and Casino business in the first quarter of 2022, and a $3.7 million increase primarily from the B2B expansion strategy associated with United Tote totalisator fees.

These increases were partially offset by an $8.8 million decrease primarily as a result of lower retail Horse Racing handle as well as higher content-related expenses and higher advance deposit wagering taxes in certain jurisdictions.

• Gaming Adjusted EBITDA increased $66.7 million driven by a $78.9 million increase attributable to the New York and Iowa properties acquired in the P2E Transaction and a $7.1 million increase from our equity investments.

These increases were partially offset by a $14.6 million decrease from our other wholly owned Gaming properties primarily driven by Florida, Mississippi, and Pennsylvania, and a $4.7 million decrease attributable to proceeds for business interruption insurance claims related to Hurricane Ida.

We received $6.3 million of insurance proceeds in 2022 compared to $1.6 million in 2023.

• All Other Adjusted EBITDA decreased $12.3 million primarily driven by increased corporate compensation expenses.

Reconciliation of Comprehensive Income to Adjusted EBITDA

• Live and Historical Racing Adjusted EBITDA increased $99.2 million due to a $32.6 million increase at Churchill Downs Racetrack due to a record-breaking 150th Derby Week, $9.7 million increase in Northern Virginia including the opening of The Rose Gaming Resort, a $7.1 million increase from the opening of the Rosie’s Emporia HRM venue in Southern Virginia in September 2023, a $38.3 million increase from our other Virginia HRM venues, and an $11.5 million increase primarily from our other Kentucky HRM venues.

• Wagering Services and Solutions Adjusted EBITDA increased $33.5 million due to a $29.2 million increase from our Exacta business because of increased fees from our Virginia HRM venues, a $2.2 million increase from a one-time reduction in accrued compensation expenses related to our Exacta business, and a $2.6 million increase primarily from our sports betting business, partially offset by a $0.5 million decrease from TwinSpires Horse Racing.

• Gaming Adjusted EBITDA increased $18.3 million primarily due to a $44.5 million increase from the opening of the Terre Haute Casino Resort and a $3.0 million increase from our equity investment in Miami Valley Gaming.

These increases were partially offset by a $19.5 million decrease from our wholly owned gaming properties and an $8.5 million decrease from our equity investment in Rivers Des Plaines primarily due to inclement weather in January 2024, regional gaming softness, increased competition, and higher labor and benefit expense;

and a $1.2 million decrease from proceeds for business interruption insurance claims in the third quarter 2023 that did not reoccur.

• All Other Adjusted EBITDA decreased $15.7 million driven primarily by increased corporate compensation related expenses and other corporate administrative expenses driven by enterprise growth.

Reconciliation of Net Income to Adjusted EBITDA

Years Ended December 31, Change

(in millions) 2024 2023

Net income and comprehensive income $ 417.3 $ 439.4 $ (22.1)

Net income attributable to Churchill Downs Incorporated $ 426.8 $ 417.3 $ 9.5

Net income attributable to noncontrolling interest 2.3 — 2.3

Net income 429.1 417.3 11.8

Depreciation and amortization 199.1 169.0 30.1

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Income tax provision 144.1 144.5 (0.4)

EBITDA $ 999.2 $ 869.8 $ 129.4

Adjustments to EBITDA:

Stock-based compensation expense 36.1 32.9 3.2

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Other expense, net 4.2 7.0 (2.8)

Transaction expense, net 4.8 42.1 (37.3)

Transaction (benefit) expense, net (12.1) 4.8 (16.9)

Asset impairments 3.9 24.6 (20.7)

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Interest, depreciation and amortization expense related to equity investments 42.0 40.2 1.8

Changes in fair value of Rivers Des Plaines' interest rate swaps — (12.6) 12.6

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

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Gain on the sale of assets — (114.0) 114.0

Total adjustments to EBITDA 24.7 (106.2) 130.9

Total adjustments 730.1 606.6 123.5

Adjusted EBITDA $ 1,159.2 $ 1,023.9 $ 135.3

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Total shareholders’ equity 1.1 0.9 0.2

• Total assets increased $0.8 billion driven by increased capital expenditures and assets acquired in the Exacta Transaction, partially offset by the sale of our Arlington property and the Presque Isle impairment in 2023.

• Total liabilities increased $0.5 billion driven by increased notes payable, accrued capital expenditures, and increased deferred revenue primarily due to increased advanced ticket sales related to the 150 th Kentucky Derby, partially offset by a net pay down of long-term debt.

• Total shareholders’ equity increased $0.3 billion driven by increased net income and stock-based compensation, partially offset by share repurchases.

• Total assets increased $0.3 billion 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 Northern Virginia.

• Total liabilities increased $0.1 billion driven primarily by increased borrowings on our revolver and increased deferred income taxes, partially offset by decreased accrued capital expenditures and decreased deferred revenue due to the recognition of revenue related to the 150th Kentucky Derby.

• Total shareholders’ equity increased $0.2 billion driven by net income and the addition of a redeemable noncontrolling interest, partially offset by share repurchases.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources have been and will continue to be cash flow from operations, borrowings under our credit facility, and proceeds from the issuance of debt securities.

Our ongoing liquidity will depend on several factors, including available cash resources, cash flow from operations, acquisitions, or equity investments, funding of construction for development projects, and our compliance with our covenants under our credit facility.

Our ongoing liquidity will depend on a number of factors, including available cash resources, cash flow from operations, acquisitions or equity investments, funding of construction for development projects, and our compliance with our covenants under our credit facility.

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

Year Ended December 31, Change

(in billions) 2023 2022

(in millions) 2024 2023

Cash Flows from:

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Operating Cash Flow

Cash flows provided by operating activities increased $0.1 billion driven by increased operating income and increased deferred revenue from advanced ticket sales and sponsorships related to the 150 th Kentucky Derby .

These increases were partially offset by an increase in net interest paid and net income taxes paid.

Cash flows from operating activities increased $166.4 million driven by increased operating income and due to the change in working capital primarily related to an increase in short-term gaming and racing liabilities as a result of our Company’s growth and a decrease in accounts receivable primarily from the timing of collections.

Partially offsetting these increases to cash from operating activities was 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.

Investing Cash Flow

Cash used in investing activities decreased $2.4 billion driven by the P2E Transaction in 2022, partially offset by increased capital project expenditures in 2023 primarily at Churchill Downs Racetrack, Terre Haute Casino Resort, and The Rose Gaming Resort in Dumfries, Virginia, and decreased proceeds from the sale of assets.

Cash flows used in investing activities decreased $172.8 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.

Financing Cash Flow

Cash provided by financing activities decreased $2.3 billion primarily driven by a $2.4 billion decrease in net borrowings from long-term debt and notes payable and a $119.0 million decrease in common stock repurchases.

Cash flows from financing activities decreased $325.9 million primarily driven by decreased net proceeds from long-term debt in 2024 compared to 2023 and by increased share repurchases in 2024.

Capital Expenditures

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We have spent $463.4 million in 2024 on project capital investments including:

Churchill Downs Racetrack Paddock Project, Derby City Gaming Downtown, Owensboro Racing & Gaming in Eastern Daviess County, Kentucky, the Terre Haute Casino Resort in Vigo County, Indiana, a New Hampshire HRM Facility, and The Rose Gaming Resort in Dumfries.

Churchill Downs Racetrack Paddock Project, the Terre Haute Casino Resort in Vigo County, Indiana, The Rose Gaming Resort in Northern Virginia, and Owensboro Racing & Gaming in Western Kentucky.

We currently expect our project capital to be approximately $350 to $400 million in 2025, 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.

We had $214.9 million of repurchase authority remaining under this program on December 31, 2023.

On December 18, 2023, the Company entered into an agreement (the “2023 Stock Repurchase Agreement”) 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 representing a discount of 4.03% to the closing price on December 15, 2023 of $128.95 for an aggregate purchase price of $123.8 million.

The repurchase of the shares of Company's common stock pursuant to the 2023 Stock Repurchase Agreement closed on January 2, 2024, and contains customary representations, warranties, and covenants of the parties.

The repurchase of shares of common stock from TDG pursuant to the 2023 Stock Repurchase Agreement was approved by the Company's Board of Directors separately from and did not reduce the authorized amount remaining under the existing common stock repurchase

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

On October 24, 2023, the Company's Board of Directors approved an annual cash dividend on our common stock of $0.382 per outstanding share, which represented a 7% increase over the prior year on a split adjusted basis.

We had $149.6 million of repurchase authority remaining under this program as of December 31, 2024.

On October 22, 2024, the Company's Board of Directors approved an annual cash dividend on our common stock of $0.409 per outstanding share, which represented a 7% increase over the prior year.

The dividend was payable on January 3, 2025 to shareholders of record as of the close of business on December 6, 2024.

The 7% increase marked the thirteenth consecutive year that the Company has increased the dividend per share.

The 7% increase marked the fourteenth consecutive year that the Company has increased the dividend.

The payment and amount of future dividends will be determined by the Board of Directors and will depend upon, among other things, our operating results, financial condition, cash requirements and general business conditions at the time such payment is considered.

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Term Loan B-1 due 2028 $ 288.8 $ 291.8 $ (3.0)

Term Loan B-1 due 2028 291.8 294.7 (2.9)

Term Loan A due 2029 1,172.4 1,235.0 (62.6)

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Certain amendments to the Credit Agreement entered into during 2023, 2024, and 2025 are described below.

On April 13, 2022, the Company amended the Credit Agreement to extend the maturity date of its existing Revolver to April 13, 2027, to increase the commitments under the existing Revolver from $700.0 million to $1.2 billion, and to increase the swing line commitment from $50.0 million to $100.0 million.

The amendment also provided for a senior secured Term Loan A due April 13, 2027 in the amount of $800.0 million, which was drawn on November 1, 2022 as part of the financing for the P2E Transaction.

Refer to Note 3, Acquisitions in the accompanying Consolidated Financial Statements for more information regarding the P2E Transaction.

The Company capitalized $3.5 million of debt issuance costs associated with the Revolver commitment increase and $6.4 million of debt issuance costs associated with the Term Loan A which are being amortized as interest expense over the 5-year term.

On February 24, 2023, we amended our Credit Agreement to increase the loans under the Term Loan A due 2027 from $800.0 million to $1.3 billion and made certain other changes to the existing credit agreement.

On February 24, 2023, the Company closed an amendment of the Credit Agreement to increase the loans under the Term Loan A from $800.0 million to $1.3 billion and made certain other changes to the existing credit agreement.

The Company used the net proceeds from the borrowings under the increased Term Loan A to repay outstanding loans under its Revolver, pay related transaction fees and expenses, and for general corporate purposes.

The Company capitalized $2.6 million of debt issuance costs associated with the increased Term Loan A which are being amortized as interest expense over the remainder of the 5-year term.

Term Loan B-1 bears interest at 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.

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

The Company has $5.7 million of capitalized unamortized debt issuance costs associated with the Term Loan A which are being amortized as interest expense over the remainder of the term.

On February 14, 2025, the Company announced that it closed the seventh amendment of the Credit Agreement.

The seventh amendment to the Credit Agreement (i) reduced the interest rate for the Term Loan B-1 from Secured Overnight Financing Rate ("SOFR") plus 200 basis points to SOFR plus 175 basis points, (ii) eliminates the 0.10% credit spread adjustment, and (iii) makes certain other amendments to the Credit Agreement.

The Term Loan B-1 requires quarterly payments of 0.25% of the original $300.0 million balance and 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 December 31, 2023, that applicable margin was 150 basis points which

was based on the pricing grid in the Credit Agreement.

As of December 31, 2024, that applicable margin was 150 basis points which was based on the pricing grid in the Credit Agreement.

The Company had $814.9 million available borrowing capacity, after consideration of $7.6 million in outstanding letters of credit, under the Revolver as of December 31, 2024.

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2027 Senior Notes

On March 25, 2019, we completed an offering of $600.0 million in aggregate principal amount of 5.50% Senior Unsecured Notes that mature on April 1, 2027 (the "2027 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S.

On March 25, 2019, the Company completed an offering of $600.0 million in aggregate principal amount of 5.50% Senior Unsecured Notes that mature on April 1, 2027 (the "2027 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S.

persons in accordance with Regulation S under the Securities Act.

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2028 Senior Notes

On December 27, 2017, we completed an offering of $500.0 million in aggregate principal amount of 4.75% Senior Unsecured Notes that mature on January 15, 2028 (the "Existing 2028 Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S.

On December 27, 2017, the Company completed an offering of $500.0 million in aggregate principal amount of 4.75% Senior Unsecured Notes that mature on January 15, 2028 (the "Existing 2028 Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S.

persons in accordance with Regulation S under the Securities Act.

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persons in accordance with Regulation S under the Securities Act.

The offering of the 2030 Senior Notes was part of the financing utilized for the P2E Transaction.

The offering of the 2030 Senior Notes was part of the financing utilized for the acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC.

In connection with the offering, we capitalized $18.3 million of debt issuance costs which are being amortized as interest expense over the term of the 2030 Senior Notes.

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Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Our consolidated financial statements have been prepared in conformity with GAAP, which requires management to make estimates, judgments, and assumptions that we believe are reasonable based on our historical experience, contract terms, observance of known trends in our Company and the industry as a whole and information available from other outside sources.

observance of known trends in our Company and the industry as a whole and information available from other outside sources.

Our estimates affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period.

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The use of these valuation methods requires us to make significant estimates and assumptions about future revenue and operating expenses, expected start-up costs, capital expenditures, royalty rate, and the discount rate.

The fair values of gaming rights are generally determined using the Greenfield Method, which is an income

approach methodology that calculates the present value based on a projected cash flow stream.

The fair values of gaming rights are generally determined using the Greenfield Method, which is an income approach methodology that calculates the present value based on a projected cash flow stream.

This method assumes that the gaming rights provides the opportunity to develop a casino or historical racing facility in a specified region, and that the present value of the projected cash flows are a result of the realization of advantages contained in these rights.

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Changes in estimates or the application of alternative assumptions could produce significantly different results.

Assessments of goodwill and indefinite-lived intangible assets

Assessments of goodwill and intangible assets

We perform our annual review for impairment of goodwill and indefinite-lived intangible assets on April 1st of each fiscal year, or more frequently if events or changes in circumstances indicate that it is more likely than not the asset is impaired.

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These factors require significant judgments and estimates, and application of alternative assumptions could produce materially different results.

Evaluations of possible impairment require us to estimate, among other factors, forecasts of future operating results, revenue growth, operating expense, tax rates, start-up costs, capital expenditures, depreciation, working capital, discount rates, long-term growth rates, risk premiums, royalty rates, terminal values, and fair values of our reporting units and assets.

discount rates, long-term growth rates, risk premiums, royalty rates, terminal values, and fair values of our reporting units and assets.

The impairment tests for goodwill and indefinite-lived intangible assets are subject to uncertainties arising from such events as changes in competitive conditions, the current economic environment, material changes in growth rate assumptions that could positively or negatively impact anticipated future operating conditions and cash flows, changes in the discount rate, and the impact of strategic decisions.

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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 7. Management’s Discussion and Analysis