What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-20 compared with 2024-02-21 · 287 added, 341 removed, 1170 unchanged (35% of the section changed)

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Live and Historical Racing $ 1,225.6 $ 1,047.3 $ 614.6

TwinSpires 444.9 436.4 451.4

Wagering Services and Solutions 469.5 444.9 436.4

Gaming 1,039.1 968.6 755.9

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Live and Historical Racing 735.4 662.2 400.9

TwinSpires 288.2 293.6 345.8

Wagering Services and Solutions 296.5 288.2 293.6

Gaming 748.9 700.0 537.9

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Asset impairments 3.9 24.6 38.3

Transaction expense, net 4.8 42.1 7.9

Transaction (benefit) expense ( 12.1 ) 4.8 42.1

Total operating expense 2,025.3 1,897.7 1,488.0

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Total other (expense) income ( 135.8 ) ( 2.2 ) 287.0

Income before provision for income taxes 561.8 608.8 343.6

Income from operations before provision for income taxes 573.2 561.8 608.8

Income tax provision ( 144.1 ) ( 144.5 ) ( 169.4 )

Net income 429.1 417.3 439.4

Net income per common share data:

Net income attributable to noncontrolling interest 2.3 — —

Net income and comprehensive income attributable to Churchill Downs Incorporated $ 426.8 $ 417.3 $ 439.4

Net income attributable to Churchill Downs Incorporate per common share data:

Basic net income $ 5.73 $ 5.55 $ 5.79

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2,409.0 2,418.4

Long-term assets held for sale

Total assets $ 7,275.9 $ 6,955.5

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Commitments and contingencies

Redeemable noncontrolling interest 19.7 —

Shareholders' equity:

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Retained earnings

1,084.6 894.5

Accumulated other comprehensive loss

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Balance, December 31, 2021 76.2 $ — $ 307.7 $ ( 0.9 ) $ 306.8

Net income 249.1 249.1

Net income attributable to Churchill Downs Incorporated 439.4 439.4

Issuance of common stock 0.6 2.7 2.7

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Balance, December 31, 2022 74.8 — 552.4 ( 0.9 ) 551.5

Net income 439.4 439.4

Net income attributable to Churchill Downs Incorporated 417.3 417.3

Issuance of common stock 0.3 3.1 3.1

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( 28.5 ) ( 28.5 )

Other ( 0.9 ) ( 0.9 )

Balance, December 31, 2023 74.5 — 894.5 ( 0.9 ) 893.6

Net income 417.3 417.3

Net income attributable to Churchill Downs Incorporated 426.8 426.8

Issuance of common stock 0.7 4.2 4.2

Repurchase of common stock ( 1.5 ) ( 35.8 ) ( 153.2 ) ( 189.0 )

Reclassification to liability awards ( 20.9 ) ( 20.9 )

Taxes paid related to net share settlement of stock awards ( 0.2 ) ( 27.3 ) ( 27.3 )

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Other ( 2.5 ) ( 0.7 ) 2.3

Net cash provided by (used in) financing activities 129.3 2,416.0 ( 0.5 )

Net cash (used in) provided by financing activities ( 196.6 ) 129.3 2,416.0

Cash flows from discontinued operations:

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Deferred payment on gaming rights incurred during the period — — 50.6

Deferred payments for acquisition of business included in other liabilities 4.9 — —

Deferred payments on the acquisition of business included in other liabilities 1.2 4.9 —

Property and equipment additions included in accounts payable and accrued expense and other current liabilities 43.7 95.1 51.3

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DESCRIPTION OF BUSINESS

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.

We own and operate 14 live and historical racing entertainment venues in three states, one of the largest online horse racing wagering platforms in the U.S., nine wholly owned casino gaming properties in eight states and 13 retail sports books.

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.

We own and operate 15 live and historical racing entertainment venues in three states, one of the largest online horse racing wagering platforms in the U.S., ten wholly owned casino gaming properties in nine states and 14 retail sportsbooks.

We were organized as a Kentucky corporation in 1928, and our principal executive offices are located in Louisville, Kentucky.

In the first quarter of 2022, we updated our operating segments to reflect the internal management reporting used by our chief operating decision maker to evaluate results of operations and to assess performance and allocate resources.

During the first quarter of 2022, our chief operating decision maker decided to include the results of our United Tote business in the TwinSpires segment as we integrate the United Tote offering with TwinSpires Horse Racing.

For additional information, refer to Note 21, Segment Information.

Acquisition of Exacta Systems

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

Refer to Note 3, Acquisitions for further information on the transaction.

Effective May 22, 2023, the Company's common stock was split two -for-one (the "Stock Split") with a proportionate increase in the number of its authorized shares of common stock.

All share and per-share amounts have been retroactively adjusted to reflect the effects of the Stock Split.

Refer to Note 10, Shareholders' Equity for further information on the Stock Split.

Presque Isle Impairment

During the second quarter of 2023, we 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.

Based on the 2023 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 recognized a non-cash impairment charge of $ 24.5 million in the second quarter of 2023 for the Presque Isle gaming rights and trademark.

Refer to Note 8, Asset Impairments for further information on the impairment .

Arlington Sale

On February 15, 2023, we closed on the sale of the Arlington International Racecourse property ("Arlington") located in Arlington Heights, Illinois.

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

Refer to Note 4, Dispositions for further information on the transaction.

Acquisition of Peninsula Pacific Entertainment

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

The P2E assets acquired included Colonial Downs Racetrack ("Colonial Downs") and six Historical Racing Machine ("HRM") entertainment venues in Virginia, del Lago Resort & Casino in New York ("del Lago"), and Hard Rock Hotel & Casino in Iowa ("Hard Rock Sioux City"), as well as the HRM development rights for Emporia, Virginia, and Dumfries, Virginia, and up to five additional HRM entertainment venues in Virginia.

Refer to Note 3, Acquisitions, for further information on the transaction.

Acquisition of Ellis Park and Chasers Poker Room

Ellis Park Acquisition

On September 26, 2022, the Company completed the acquisition of Ellis Park Racing & Gaming ("Ellis Park") in Henderson, Kentucky, from Enchantment Holdings, LLC, an affiliate of Laguna Development Corporation, for total consideration of $ 79.0 million in cash, subject to certain working capital and other purchase price adjustments (the "Ellis Park Transaction").

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Chasers Poker Room Acquisition

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

As part of the transaction, we made an initial payment to the sellers for rights to operate the poker room and to build an HRM venue.

Additional payments will be made once all necessary permits are obtained, and the planned historical racing entertainment venue is opened.

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

Refer to Note 3, Acquisitions, for further information on the transactions.

SIGNIFICANT ACCOUNTING POLICIES

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Actual results may differ from those initial estimates.

Goodwill and Other Intangible Assets

Goodwill and Intangible Assets

Goodwill and indefinite-lived intangible assets are required to be tested annually or more frequently if events or changes in circumstances indicate that it is more likely than not that an asset is impaired.

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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 market values of our reporting units and assets.

The estimated future revenue, operating expenses, start-up costs, and discount rate are the primary inputs to the Greenfield Method.

The estimated future revenue and operating expenses, start-up costs, and discount rates are the primary assumptions and estimates in the valuation of gaming rights.

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

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

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

Adverse industry or economic trends, lower projections of profitability, or a sustained decline in our market capitalization, among other items, may be indications of potential impairment issues, which are triggering events requiring the testing of an asset’s carrying value for recoverability.

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We are required to aggregate the components of an operating segment into one reporting unit if they have similar economic characteristics.

Our gaming rights and certain trademarks are considered indefinite-lived intangible assets that do not require amortization based on our future expectations to operate our gaming facilities and use certain trademarks indefinitely and our historical

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

experience in renewing these intangible assets at minimal cost with various state gaming commissions.

Our gaming rights and trademarks are considered indefinite-lived intangible assets that do not require amortization based on our future expectations to operate our gaming facilities and use the trademarks indefinitely and our historical experience in renewing these intangible assets at minimal cost with various state gaming commissions.

The indefinite lived-intangible assets carrying value are tested annually, or more frequently, if indicators of impairment exist, by comparing the fair value of the recorded assets to the associated carrying amount.

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These arrangements are licenses of intellectual property containing a usage-based royalty.

As a result, we have elected to use the practical expedient to omit disclosure related to remaining performance obligations for our export revenue contracts.

As a result, we have elected to use

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

recognize on-track revenue, export revenue, and import revenue once the live race event is made official by the relevant racing regulatory body.

We recognize revenue we earn from providing a wagering service to our customers on historical races at our HRM facilities.

the practical expedient to omit disclosure related to remaining performance obligations for our export revenue contracts.

We recognize on-track revenue, export revenue, and import revenue once the live race event is made official by the relevant racing regulatory body.

We recognize revenue we earn from providing a wagering service to our customers on historical races at our historical racing machine ("HRM") facilities.

The transaction price for HRM revenue is based on the established commission rate we are entitled to retain for each wager on the HRM.

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Loyalty points are primarily redeemable for free wagering activities and food and beverage.

For purposes of allocating the transaction price in an HRM and gaming transaction between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone selling price of the points earned, which is determined by the value of a loyalty point that can be

For purposes of allocating the transaction price in an HRM and gaming transaction between the wagering performance obligation and the

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

redeemed for wagering activities or food and beverage.

obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone selling price of the points earned, which is determined by the value of a loyalty point that can be redeemed for wagering activities or food and beverage.

For gaming transactions, an amount of the transaction price allocated to the gaming performance obligation using the residual approach as the stand-alone price for wagers is highly variable and no set established price exists for such wagers.

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Restricted cash includes deposits collected from our TwinSpires' customers.

Other amounts included in restricted cash represent amounts due to horsemen for purses, stakes, and awards that are paid in accordance with the terms of our contractual agreements or statutory requirements, and other escrow deposits.

Allowance for Doubtful Accounts Receivable

Other amounts included in restricted cash represent amounts due to horsemen for purses, stakes and awards that are paid in accordance with the terms of our contractual agreements or statutory requirements.

The Company’s insurance captive, which was established in April 2024, maintains cash reserves to cover insurable claims.

Insurance captive cash reserves totaled $ 8.3 million as of December 31, 2024.

Allowance for Credit Losses

We maintain an allowance for doubtful accounts for current expected credit losses on our financial assets measured at amortized cost which are primarily included in accounts receivable, net in the accompanying Consolidated Balance Sheets.

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Internal Use Software

Internal use software costs for our TwinSpires' segment are capitalized in property and equipment, net in the accompanying Consolidated Balance Sheets, in accordance with accounting guidance governing computer software developed or obtained for internal use.

Internal use software costs for our Wagering Services and Solutions' segment software are capitalized in property and equipment, net in the accompanying Consolidated Balance Sheets, in accordance with accounting guidance governing computer software developed or obtained for internal use.

Once the software is placed in operation, we amortize the capitalized software over the software's estimated economic useful life, which is generally three years .

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We incurred amortization expense of approximately $ 13.0 million in 2024, $ 11.2 million in 2023, and $ 10.7 million in 2022, for projects which had been placed in service.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Fair Value of Assets and Liabilities

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Assets and liabilities that are carried at fair value are classified and disclosed in one of the following three categories:

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

quoted market prices in active markets for identical assets or liabilities;

Unadjusted quoted market prices in active markets for identical assets or liabilities;

Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability;

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Distributions in excess of equity method income are recognized as a return of investment and recorded as investing cash inflows in the accompanying Consolidated Statements of Cash Flows.

We classify income and losses as well as gains and impairments related to our investments in unconsolidated affiliates as a component of other (expense) income in the accompanying Consolidated Statements of Comprehensive Income.

We classify income and losses as well as gains and impairments related to our investments in unconsolidated affiliates as a component of other income (expense) in the accompanying Consolidated Statements of Comprehensive Income.

We evaluate our investments in unconsolidated affiliates for impairment whenever events or changes in circumstances indicate that the carrying value of the investment may have experienced an "other-than-temporary" decline in value.

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Costs incurred to complete the business combination are not considered part of consideration and are expensed as incurred.

Refer to Note 3, Acquisitions, for further information.

Refer to Note 3, Acquisitions and Dispositions, for further information.

We determine if an arrangement is a lease at inception and categorize as either operating or finance based on the criteria of ASC 842.

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Debt issuance costs and loan origination fees associated with our revolver are presented as an asset.

Casino and Pari-mutuel Taxes

We recognize casino and pari-mutuel tax expense based on the statutory requirements of the federal, state, and local jurisdictions in which we conduct business.

All our casino taxes and the majority of our pari-mutuel taxes are gross receipts taxes levied on the gaming entity.

We recognize these taxes as Live and Historical Racing, TwinSpires, Gaming, and All Other

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

operating expenses in our Consolidated Statements of Comprehensive Income.

Casino and Pari-mutuel Taxes

We recognize casino and pari-mutuel tax expense based on the statutory requirements of the federal, state, and local jurisdictions in which we conduct business.

All of our casino taxes and the majority of our pari-mutuel taxes are gross receipts taxes levied on the gaming entity.

We recognize these taxes as Live and Historical Racing, Wagering Services and Solutions, Gaming, and All Other operating expenses in our Consolidated Statements of Comprehensive Income.

In certain jurisdictions governing our pari-mutuel contracts with customers, there are specific pari-mutuel taxes that are assessed on winning wagers from our customers, which we collect and remit to the government.

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Stock-Based Compensation

All stock-based payments to employees and directors, including grants of performance share units and restricted stock, are recognized as compensation expense over the service period based on the fair value on the date of grant.

All stock-based payments to employees and directors, including grants of performance share units ("PSU"), restricted stock, and restricted stock units are recognized as compensation expense over the service period based on the fair value on the date of grant.

For awards that have a graded vesting schedule, we recognize expense on a straight-line basis for each separately vesting portion of the award.

We recognize forfeitures of awards as incurred.

The total compensation cost recognized for PSU awards is determined using the Monte Carlo valuation methodology, which factors in the achievement of the market criteria.

Compensation cost for PSUs is recognized during the three-year performance and service period based on the probable achievement of the performance criteria.

Compensation cost for equity-classified awards is recorded based on the grant date fair value of the award over the vesting period.

Compensation cost for liability-classified awards is determined on a quarterly basis.

Changes in market value of the liability-classified awards are recorded as adjustments to stock-based compensation expense over the vesting period.

Computation of Net Income per Common Share

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In such instances, we record the cost of any further share repurchases as a reduction to retained earnings.

Due to the large number of shares of our common stock repurchased over the past several years, our common stock balance will frequently be zero at the end of any given reporting period.

Due to the large number of shares of our common stock repurchased over the

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

past several years, our common stock balance will frequently be zero at the end of any given reporting period.

Refer to Note 9, Shareholders' Equity, for additional information on our share repurchases.

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Anticipated proceeds in excess of recognized losses would be considered a gain contingency and recognized when the contingency related to the insurance claim has been resolved.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Recent Accounting Pronouncements -effective in 2023 or thereafter

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, and to simplify the accounting for transitioning from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates.

The guidance was effective upon issuance.

In December 2022, the FASB deferred the date for which this guidance can be applied from December 31, 2022 to December 31, 2024.

During the second quarter of 2023, the Company completed the transition of its financing from LIBOR to the Secured Overnight Financing Rate ("SOFR").

These transition activities did not have a material impact on the Company’s financial statements.

Recent Accounting Pronouncements - Adopted in 2024

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 were effective for the Company in fiscal years beginning after December 15, 2023, and will be effective for the interim periods within fiscal years beginning after December 15, 2024.

The adoption of this ASU did not have a material impact on our business.

Refer to Note 21, Segment Information for applicable reportable segment disclosures required by this guidance.

Recent Accounting Pronouncements - Effective in 2025 or thereafter

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, to amend certain disclosure and presentation requirements for a variety of topics within the ASC.

These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC.

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.

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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):

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Early adoption is permitted.

The amendments should be applied prospectively to all annual periods beginning after December 15, 2024.

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.

In November 2024, FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

Under ASU 2024-03, a public entity would be required to disclose information about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion for each income statement line item that contains those expenses.

This standard is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently assessing the impact of this standard on the consolidated financial statements and related disclosures.

ACQUISITIONS & DISPOSITIONS

Exacta Systems

On August 22, 2023, the Company completed its acquisition of Exacta for preliminary purchase consideration of $ 248.2 million, net of cash acquired, consisting of a $ 241.3 million cash payment and $ 6.9 million of deferred payments, which is payable over two years (the "Exacta Transaction").

The preliminary purchase consideration is subject to working capital and other purchase price adjustments.

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

The Exacta Transaction is expected to enable the Company to realize significant and immediate synergies related to the Company’s Virginia operations.

The Company also expects to realize additional operational improvements over time through the diversification of games available at its HRM facilities.

Exacta will operate 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.

The Company recorded the fair values of the assets of the Exacta Transaction as of August 22, 2023 based upon preliminary valuations.

Estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period up to one year from the acquisition date.

The areas of the preliminary valuations that are not yet finalized relate to the amounts for adjustments to working capital, final value of intangible assets, final amount of residual goodwill, and final allocation of goodwill between segments.

The residual goodwill will be allocated between the TwinSpires and the Live and Historical Racing segments based upon the projected future benefits to be realized as a result of the Exacta Transaction.

The Company expects to continue to obtain information to assist in determining fair values of net assets acquired at the acquisition date during the measurement period.

The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed, net of cash acquired of $ 1.8 million, as of August 22, 2023:

On August 22, 2023, the Company completed its acquisition of Exacta for purchase consideration of $ 248.2 million, net of cash acquired, consisting of a $ 241.3 million cash payment and $ 6.9 million of deferred payments, which is payable over two years (the "Exacta Transaction").

As of December 31, 2024, there were $ 1.2 million deferred payments remaining.

Exacta is a leading provider of central determinant system technology in 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 Wagering Services and Solutions segment and will continue to service its growing portfolio of third-party HRM operators in several states and is expanding its international presence.

The following table summarizes the fair value of the assets acquired and liabilities assumed, net of cash acquired of $ 1.8 million, as of August 22, 2023:

Churchill Downs Incorporated

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Total intangible assets $ 54.3

Goodwill of $ 177.1 million related to the Exacta Transaction was recognized, of which $ 95.9 million was preliminarily allocated to the Live and Historical Racing segment and $ 81.2 million was preliminarily allocated to the TwinSpires segment.

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 Wagering Services and Solutions segment.

The goodwill related to the Exacta Transaction is deductible for tax purposes.

P2E Transaction

On November 1, 2022, the Company completed the acquisition of substantially all the ass ets of P2E for a purchase consideration of $ 2,835.9 million, net of cash acquired.

The P2E assets acquired included Colonial Downs and six HRM entertainment venues in Virginia, del Lago in New York, and Hard Rock Sioux City in Iowa, as well as the development rights for Dumfries and Emporia HRM facilities in Virginia, and up to five additional HRM entertainment venues in Virginia.

On November 1, 2022, the Company completed the acquisition of substantially all the ass ets of Peninsula Pacific Entertainment LLC (the "P2E Transaction") for a purchase consideration of $ 2,835.9 million, net of cash acquired.

The Peninsula Pacific Entertainment LLC ("P2E") assets acquired included Colonial Downs and six HRM entertainment venues in Virginia, del Lago in New York, and Hard Rock Sioux City in Iowa, as well as the development rights for Dumfries and Emporia HRM facilities in Virginia, and up to five additional HRM entertainment venues in Virginia.

The following table summarizes the fair value of the assets acquired and liabilities assumed, net of cash acquired of $ 126.4 million, as of November 1, 2022:

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The goodwill was assigned to the Gaming segment in the amount of $ 129.1 million and to the Live and Historical Racing segment in the amount of $ 218.7 million and is mostly deductible for tax purposes.

For the period November 1, 2022 through December 31, 2022, the operations of the properties acquired as part of the P2E Transaction, including the associated retail sports books, generated net revenue of $ 109.7 million and net income of $ 42.9 million.

For the period November 1, 2022 through December 31, 2022, the operations of the properties acquired as part of the P2E Transaction, including the associated retail sportsbooks, generated net revenue of $ 109.7 million and net income of $ 42.9 million.

The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the P2E Transaction had occurred as of January 1, 2021.

The unaudited pro forma financial information is not necessarily indicative of either future results of operations or results of operations that might have been achieved had the acquisition been consummated as of January 1, 2021.

(in millions) Year Ended December 31, 2022 Year Ended December 31, 2021

(in millions) Year Ended December 31, 2022

Net revenue $ 2,348.7

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We received net proceeds of $ 195.7 million for the 326 -acres and recognized a gain of $ 114.0 million on the sale, which is included in other (expense) income in the accompanying Consolidated Statements of Comprehensive Income.

Certain assets of Arlington totaling $ 82.0 million were classified held for sale as of December 31, 2022 on the accompanying Consolidated Balance Sheets.

Arlington’s operations and assets are included in All Other in our consolidated results.

The Company executed a forward like-kind exchange transaction by purchasing certain property as part of the P2E Transaction for $ 197.2 million, which qualified as an Internal Revenue Code §1031 transaction.

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The Company determined that it is the primary beneficiary of the EAT, thus the property held by the EAT has been consolidated and recorded in property and equipment, net on the Consolidated Balance Sheets.

As of December 31, 2023, the Company has a $ 27.8 million deferred tax liability related to the Arlington sale on the Consolidated Balance Sheets.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Calder Land Sale

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The gain consisted of cash proceeds of $ 279.0 million offset by the carrying value of the assets sold of $ 4.4 million.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

The proceeds were held by a qualifying intermediary in an interest-bearing account until they were utilized to purchase property as part of the P2E Transaction and to invest in other replacement properties that qualify as Internal Revenue Code §1031 transactions to defer the federal income tax on the gain on the Calder land sale.

The Company completed one reverse like-kind exchange in June 2022 involving our $ 9.9 million investment in real property for the Derby City Gaming Downtown facility in Louisville, Kentucky, and one reverse like-kind exchange in December 2022 involving our $ 24.9 million investment in real property for the Terre Haute Casino Resort in Vigo County, Indiana ("Terre Haute").

The remaining proceeds were used to execute a forward like-kind exchange with the P2E Transaction to purchase real property associated with del Lago in November 2022.

As of December 31, 2023, the Company has a $ 76.0 million deferred tax liability related to the Calder land sale on the Consolidated Balance Sheets.

Discontinued Operations

On January 9, 2018, the Company completed the sale of its mobile gaming subsidiary, Big Fish Games, Inc.

("Big Fish Games").

The Big Fish Games business met the criteria for discontinued operation presentation.

On May 22, 2020, we entered into an agreement in principle to settle Cheryl Kater v.

Churchill Downs Incorporated and Manasa Thimmegowda v.

Big Fish Games, Inc.

The $ 124.0 million settlement was paid on March 25, 2021.

During 2023 and 2022, the Company received tax refunds of $ 0.5 million and $ 26.0 million, respectively related to the capital loss associated with this settlement.

PROPERTY AND EQUIPMENT

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Depreciation expense was $ 188.0 million in 2024, $ 161.8 million in 2023 and $ 109.0 million in 2022 and is classified in operating expense in the accompanying Consolidated Statements of Comprehensive Income.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Goodwill, by segment, is comprised of the following:

(in millions) Live and Historical TwinSpires Gaming All Other Total

(in millions) Live and Historical Wagering Services and Solutions Gaming All Other Total

Balance, December 31, 2022 $ 280.3 $ 152.2 $ 290.3 $ 1.0 $ 723.8

Additions 95.9 81.2 — — 177.1

Adjustments — — — ( 1.0 ) ( 1.0 )

Balance, December 31, 2023 376.2 233.4 290.3 — 899.9

Additions 95.9 81.2 — — 177.1

Adjustments 0.1 0.2 — — 0.3

Balance, December 31, 2024 $ 376.3 $ 233.6 $ 290.3 $ — $ 900.2

In 2022, we established goodwill of $ 9.2 million related to the Ellis Park Transaction and $ 347.8 million related to the P2E Transaction.

The goodwill established as part of the P2E Transaction was assigned to the Gaming segment in the amount of $ 129.1 million and to the Live and Historical Racing segment in the amount of $ 218.7 million.

In 2023, we established goodwill of $ 177.1 million related to the Exacta Transaction.

The goodwill was assigned to the Live and Historical Racing segment in the amount of $ 95.9 million and to the TwinSpires segment in the amount of $ 81.2 million.

Refer to Note 3, Acquisitions for more information on these transactions.

In 2023, we established goodwill related to the Exacta Transaction.

The final amount of goodwill was $ 177.4 million.

The goodwill was assigned to the Live and Historical Racing segment in the amount of $ 96.0 million and to the Wagering Services and Solutions segment in the amount of $ 81.4 million.

We performed our annual goodwill impairment analysis as of April 1, 2024.

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Based on the results of these analyses, no goodwill impairments were identified in connection with our annual impairment testing.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

OTHER INTANGIBLE ASSETS

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Definite-lived intangible assets:

Favorable contracts $ 11.0 $ ( 10.7 ) $ 0.3 $ 11.0 $ ( 10.1 ) $ 0.9

Other 29.7 ( 6.6 ) 23.1 10.2 ( 5.5 ) 4.7

Customer relationships $ 25.9 $ ( 6.4 ) $ 19.5 $ 26.0 $ ( 3.9 ) $ 22.1

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Gaming licenses 6.4 ( 4.7 ) 1.7 6.9 ( 3.2 ) 3.7

Other 39.7 ( 18.5 ) 21.2 40.7 ( 17.3 ) 23.4

$ 95.9 $ ( 34.2 ) $ 61.7 $ 97.5 $ ( 26.4 ) $ 71.1

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Total $ 2,409.0 $ 2,418.4

During 2022, we established indefinite-lived intangibles assets of $ 5.0 million for gaming rights associated with the planned development of Terre Haute.

We also established indefinite-lived intangible assets of $ 82.2 million for the gaming rights related to the Chasers Transaction, as well as, $ 47.4 million for gaming rights and $ 3.6 million for trademarks related to the Ellis Park Transaction.

We also established indefinite-lived intangible assets of $ 1.9 billion for the gaming rights and $ 75.9 million for the trademarks related to the P2E Transaction.

During 2023, we established definite-lived intangible assets of $ 54.3 million for the technology asset, customer relationships, trademark, and other intangibles related to the Exacta Transaction.

Refer to Note 3, Acquisitions for further information on these transactions.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Indefinite-lived intangible assets consist primarily of trademarks and state gaming rights in Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Mississippi, New Hampshire, New York, and Virginia.

Amortization expense for definite-lived intangible assets was $ 11.1 million in 2024, $ 7.2 million in 2023, and $ 4.7 million in 2022, and is classified in operating expense in the accompanying Consolidated Statements of Comprehensive Income.

Indefinite-lived intangible assets consist primarily of trademarks and state gaming rights in Indiana, Maine, Maryland, Mississippi, Louisiana, Kentucky, New Hampshire, New York, Iowa, and Virginia.

Refer to Note 8, Asset Impairments for information regarding intangible asset impairments recognized during 2022 and 2023.

Refer to Note 7, Asset Impairments, for information regarding intangible asset impairments recognized during 2023.

We performed our annual indefinite-lived intangible assets impairment analysis as of April 1, 2024, which included an assessment of qualitative and quantitative factors to determine whether it is more likely than not that the fair values of the indefinite-lived intangible assets are less than the carrying amount.

We concluded that the fair values of our indefinite-lived intangible assets exceeded their carrying value other than impairments described in Note 8, Asset Impairments.

We concluded that the fair values of our indefinite-lived intangible assets exceeded their carrying value.

Future estimated aggregate amortization expense on existing definite-lived intangible assets for each of the next five fiscal years is as follows (in millions):

Years Ended December 31, Estimated Amortization Expense

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

ASSET IMPAIRMENTS

Presque Isle Impairment

During the quarter ended December 31, 2022, 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 the impact and uncertainty of negative economic trends ("2022 Trigger Event").

Presque Isle Impairments

During the quarter ended December 31, 2022, the Company concluded that a trigger event for impairment testing occurred related to the Presque Isle Downs and Casino ("Presque Isle") gaming rights, trademark, and the reporting unit's goodwill due to the impact and uncertainty of negative economic trends ("2022 Trigger Event").

Factors considered in this evaluation included, among other things, the amount of the fair value over carrying value from the annual impairment testing performed as of April 1, 2022, changes in carrying values, changes in discount rates, and the impact of negative economic trends on cash flows.

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Based on the trigger events described above, the Company updated the discount rate to reflect the increased uncertainty of the cash flows and updated the project cash flow stream.

As a result, the Company did not recognize any impairment for Presque Isle goodwill in 2022 or 2023 because the fair value exceeded the carrying value.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

As a result, the Company did not recognize any impairment for Presque Isle goodwill because the fair value exceeded the carrying value.

The Company continues to monitor the competitive environment and the impacts on the results of Presque Isle's operations.

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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 evaluation, the Company concluded that a trigger event for impairment testing occurred related to certain TwinSpires assets.

As a result, the Company recorded a $ 4.9 million non-cash impairment charge related to certain assets in the TwinSpires segment.

During the quarter ended December 31, 2021, the Company recorded a $ 4.1 million non-cash impairment charge related to certain assets in the TwinSpires segment due to changes in expectations of future realization of certain third-party market access royalty prepayments related to our New Jersey sports betting and iGaming that resulted in projected future cash flows being less than carrying value in the fourth quarter of 2021.

During the quarter ended June 30, 2021, the Company recorded an $ 11.2 million non-cash impairment charge related to certain assets at Churchill Downs Racetrack included in our Live and Historical Racing segment.

The impairment was due to a change in the Churchill Downs Racetrack capital plans and the Company's planned use of these assets.

Based on the evaluation, the Company concluded that a trigger event for impairment testing occurred related to certain Wagering Services and Solutions assets.

As a result, the Company recorded a $ 4.9 million non-cash impairment charge related to certain assets in the Wagering Services and Solutions segment.

In the third quarter of 2024, we recorded a $ 3.9 million write-off of HRMs in Virginia that are no longer in use.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Components of the provision for income taxes are as follows:

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State and local 0.3 4.9 28.8

Foreign — — —

44.5 47.4 108.7

Income tax provision $ 144.1 $ 144.5 $ 169.4

Income before provision for income taxes were as follows:

Income from operations before provision for income taxes were as follows:

Years Ended December 31,

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Foreign — — ( 0.1 )

Income before provision for income taxes $ 561.8 $ 608.8 $ 343.6

Our income tax provision is different from the amount computed by applying the federal statutory income tax rate to income before taxes as follows:

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Income from operations before provision for income taxes $ 573.2 $ 561.8 $ 608.8

Our income tax provision is different from the amount computed by applying the federal statutory income tax rate to income from operations before taxes as follows:

Years Ended December 31,

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Income tax provision $ 144.1 $ 144.5 $ 169.4

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Components of our deferred tax assets and liabilities were as follows:

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Deferred income 3.5 3.3

Research and experimental expenditures 2.2 3.0

Deferred tax assets 139.9 97.3

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state tax credits with a tax value of $ 2.2 million that do not expire which we expect to fully utilize.

The Internal Revenue Service has completed audits through 2012.

The Internal Revenue Service's most recent audit was completed for tax year 2012.

Tax years 2021 and after are open to examination.

Tax years 2015 and 2018 are open to examination as a result of the Company's claim for refund of 2015 and 2018 tax from carrying back its 2020 net operating loss and 2021 capital loss pursuant to the CARES Act.

As of December 31, 2024, we had approximately $ 3.2 million of total gross unrecognized tax benefits, excluding interest of $ 0.4 million.

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We anticipate a decrease in our unrecognized tax positions of approximately $ 0.2 million during the next twelve months primarily due to expected settlements with tax authorities and the expiration of statutes of limitation.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

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Stock Repurchase Programs

On October 30, 2018, the Board of Directors of the Company approved a common stock repurchase program of up to $ 300.0 million ("2018 Stock Repurchase Program").

The 2018 Stock Repurchase Program was in effect until September 29, 2021 and had unused authorization of $ 97.9 million.

On September 29, 2021, the Board of Directors of the Company approved a common stock repurchase program of up to $ 500.0 million ("2021 Stock Repurchase Program").

T he 2021 Stock Repurchase Program includes and is not in addition to any unspent amount remaining under the prior 2018 Stock Purchase Program authorization.

R epurchases 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.

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

We repurchased the following shares under the 2018 and 2021 Stock Repurchase Programs:

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

We repurchased the following shares under the 2021 Stock Repurchase Programs:

For the year ending December 31,

(in millions, except share data) 2024 2023 2022

Repurchase Program (1)

Shares Aggregate Purchase Price Shares Aggregate Purchase Price Shares Aggregate Purchase Price

2021 Stock Repurchase Program 461,761 $ 55.3 1,747,844 $ 175.5 452,464 $ 54.4

Repurchase Program Shares Aggregate Purchase Price Shares Aggregate Purchase Price Shares Aggregate Purchase Price

2021 Stock Repurchase Program 506,300 $ 65.3 461,761 $ 55.3 1,747,844 $ 175.5

Total 506,300 $ 65.3 461,761 $ 55.3 1,747,844 $ 175.5

(1) Number of shares have been adjusted for the Stock Split.

On April 25, 2023, the Company’s Board of Directors approved a two -for-one Stock Split and an amendment to the Company’s Articles of Incorporation to increase the number of shares of common stock the Company is authorized to issue from 150,000,000 shares, no par value, to 300,000,000 shares, no par value.

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All share and per-share amounts in the Company’s consolidated financial statements and related notes have been retroactively adjusted to reflect the effects of the Stock Split.

The Duchossois Group ("TDG") Share Repurchases

On February 1, 2021, the Company entered into an agreement (the "2021 Stock Repurchase Agreement") with an affiliate of TDG to repurchase 1,000,000 shares of the Company’s common stock for $ 193.94 per share in a privately negotiated transaction for an aggregate purchase price of $ 193.9 million.

The repurchase of shares of common stock from TDG pursuant to the 2021 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 program.

The Company repurchased the shares using available cash and borrowings under the Revolver (as defined in Note 12, Debt).

The Duchossois Group ("TDG") Share Repurchase

On December 18, 2023, the Company entered into an agreement (the “2023 Stock Repurchase Agreement”) with an affiliate of 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.

The repurchase of the shares of Company's common stock pursuant to the 2023 Stock Repurchase Agreement closed on January 2, 2024, and contained 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

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

amount remaining under, the existing common stock repurchase program.

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 program.

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

STOCK-BASED COMPENSATION PLANS

Our total compensation expense, which includes expense related to restricted stock awards, restricted stock unit awards, performance share unit awards, and stock options associated with our employee stock purchase plan, was $ 32.9 million in 2023, $ 31.8 million in 2022, and $ 27.8 million in 2021.

Our total stock based compensation expense, which includes expense related to restricted stock awards, restricted stock unit awards, performance share unit awards, and stock options associated with our employee stock purchase plan, was $ 36.1 million in 2024, $ 32.9 million in 2023, and $ 31.8 million in 2022.

We recorded a tax benefit related to stock-based compensation expense of $ 2.8 million in 2024, $ 2.3 million in 2023, and $ 1.6 million in 2022.

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The 2016 Plan permits the award of RSAs, RSUs, or PSUs to directors and key employees responsible for the management, growth and protection of our business.

The fair value of RSAs and RSUs that vest solely based on continued service under the Plan is determined by the product of the number of shares granted and the grant date market price of our common stock.

RSAs and RSUs granted to employees under the 2016 Plan generally vest either in full upon three years from the date of grant or on a pro rata basis over a three-year term.

RSAs are legally issued common stock at the time of grant, with certain restrictions placed on them.

RSUs granted to employees under the 2016 Plan generally vest either in full upon three years from the date of grant or on a pro rata basis over a three-year term.

RSUs granted to employees are converted into shares of our common stock at vesting.

The RSUs granted to directors under the 2016 Plan generally vests in full upon one year from the date of grant.

The RSAs and RSUs granted to directors under the 2016 Plan generally vest in full upon one year from the date of grant.

RSAs are legally issued common stock at the time of grant, with certain restrictions placed on them.

RSUs granted to directors are converted into shares of our common stock at the time of the director's retirement.

In 2021, 2022, and 2023, the Company granted three-year performance and total shareholder return ("TSR") PSU awards (the "PSU Awards") to certain named executive officers ("NEOs").

The two performance criteria for the PSU Awards are:

(1) a cumulative Adjusted EBITDA target that was set at the beginning of the plan performance period for the three-year period;

and (2) a cash flow metric that is the aggregate of the cash flow targets for the three individual years that is set annually at the beginning of each year.

The cash flow metric is defined as cash flow from operating activities and discontinued operations excluding the change in restricted cash, plus distributions of capital from equity investments less capital maintenance expenditures.

The Compensation Committee of the Board of Directors (the "Compensation Committee") can make adjustments as it may deem appropriate to these metrics.

Measurement against these criteria will be determined against a payout curve which provides up to 200 % of performance share units based on the original award.

The PSU Awards may be adjusted based on the Company’s TSR performance relative to the TSR performance during the performance period of the companies remaining in the Russell 2000 index and Russell 1000 index beginning with 2022 grants at the end of the performance period as follows:

The PSU Awards will increase by 25 % if the Company’s TSR is in the top quartile;

The PSU Awards will decrease by 25 % if the Company’s TSR is in the bottom quartile;

The PSU Awards will not change if the Company’s TSR is in the middle two quartiles.

The maximum number of PSU Awards, including the impact of the TSR performance, that can be earned for a performance period is 250 % of the original award.

In October 2018, the Company granted a special equity award to two NEOs (" 7 -Year Grant") consisting of PSU Awards that could be adjusted up to 200 % based on the Company's relative TSR performance versus the Russell 2000 over a three-year period ending October 29, 2021, and service-based RSU awards, both of which vest in 25 % annual increments over four years beginning on the fourth anniversary of the grant date, totaling seven years to be fully vested.

The performance period ended on October 29, 2021, and the TSR performance was 200 %.

The total compensation cost recognized for PSU Awards is determined using the Monte Carlo valuation methodology, which factors in the value of the TSR when determining the grant date fair value of the award.

Compensation cost for the PSU Awards is recognized during the three-year performance and service period based on the probable achievement of the two performance

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

criteria, with the exception of the 7-Year Grant, which compensation cost is recognized during the seven-year service period.

All PSUs awards are converted into shares of our common stock at the time the award value is finalized.

A summary of the 2023 RSUs, RSAs, and PSUs granted to certain NEOs, employees, and the Board of Directors is presented below (shares/units in thousands):

PSUs granted to key executives have performance periods ranging from two to three years and vest depending on the Company’s achievement of predetermined targets related to both performance and market criteria.

All PSUs awards are converted into shares of our common stock or settled in cash at the time the award value is finalized.

During the year ended December 31, 2024, the Company modified certain PSU awards to allow for settlement in the form of either cash or stock.

The modification required the awards to be recorded as liability-classified awards.

Compensation expense related to modified stock-based awards is based on the fair value for those awards as of the modification date with any remaining incremental stock-based compensation expense recognized ratably over the remaining requisite service period.

As a result of the modification, the Company recorded stock-based compensation expense of $ 4.1 million during the year ended December 31, 2024.

At December 31, 2024, the Company had $ 25.0 million recorded as liability-classified awards, which is included in accrued expense and other liabilities in the accompanying Consolidated Balance Sheets.

A summary of the 2024 RSA's, RSU's, and PSUs granted to certain executives, employees, and the Board of Directors is presented below (shares/units in thousands):

Grant Year Award Type Number of Units Awarded (1)

Vesting Terms

2023 RSU 122 Vest equally over three service periods ending in 2026

2024 PSU 63 Three -year performance and service period ending in 2026

2023 RSU 10 Three -year service period ending in 2024

2024 RSU 138 Vest equally over three service periods ending in 2026

2024 RSU 6 One year service period ending in 2025

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(1) PSUs presented are based on the target number of units for the original PSU grant.

(2) Number of units awarded have been adjusted for the Stock Split.

Activity for our RSAs, RSUs, and PSUs is presented below (shares/units in thousands):

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(in thousands, except grant date values) Number of

Shares / Units (1)(2)

Shares / Units Weighted

Fair Value Number of

Shares / Units (1)(2)

Shares / Units Weighted

Fair Value Number of

Shares / Units (1)(2)

Shares / Units Weighted

Balance, December 31, 2021 958 $ 41.50 358 $ 67.51 1,316 $ 45.14

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Vested ( 368 ) $ 57.66 ( 183 ) $ 79.45 ( 551 ) $ 64.83

Canceled/forfeited — $ — ( 24 ) $ 80.21 ( 24 ) $ 80.21

Forfeited ( 11 ) $ 106.90 ( 12 ) $ 102.36 ( 23 ) $ 104.41

Balance, December 31, 2022 741 $ 45.04 297 $ 80.09 1,038 $ 55.07

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Vested ( 305 ) $ 62.10 ( 164 ) $ 90.10 ( 469 ) $ 71.91

Canceled/forfeited ( 11 ) $ 106.90 ( 12 ) $ 102.36 ( 23 ) $ 104.41

Forfeited — $ — ( 7 ) $ 99.74 ( 7 ) $ 99.74

Balance, December 31, 2023 547 $ 99.64 268 $ 69.60 815 $ 139.72

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Vested ( 343 ) $ 68.11 ( 163 ) $ 99.51 ( 506 ) $ 78.25

Canceled/forfeited — $ — ( 7 ) $ 99.74 ( 7 ) $ 99.74

Forfeited — $ — ( 12 ) $ 122.46 ( 12 ) $ 122.46

Balance, December 31, 2024 335 $ 60.83 241 $ 110.48 576 $ 81.58

(1) Adjustment to number of target units awarded for PSUs based on achievement of underlying performance goals.

(2) Number of shares and weighted average grant date fair values have been adjusted for the Stock Split.

Churchill Downs Incorporated

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RSU & RSA $ 9.6 1.84

PSU 13.1 1.36

Total $ 10.7 1.79

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Term Loan B-1 due 2028 $ 288.8 $ 291.8

Term Loan B-1 due 2028 291.8 294.7

Term Loan A due 2029 1,172.4 1,235.0

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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 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, 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.

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.

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.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

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.

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 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 the SOFR plus 10 basis points, plus a variable applicable margin which is determined by the Company's net leverage ratio.

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

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For the period ended December 31, 2024, the Company's commitment fee rate was 0.25 %.

The Company completed the transition of its financing from LIBOR to SOFR during the second quarter of 2023.

The Company completed the transition of its financing from London Interbank Offered Rate to SOFR during the second quarter of 2023.

These transition activities did not have a material impact on the Company’s financial statements.

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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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The 2027 Senior Notes were issued at par, with interest payable on April 1st and October 1st of each year, commencing on October 1, 2019.

T he 2027 Senior Notes will vote as one class under the indenture governing the 2027 Senior Notes.

The 2027 Senior Notes will vote as one class under the indenture governing the 2027 Senior Notes.

The Company may redeem some or all of the 2027 Senior Notes at redemption prices set forth in the 2027 Indenture.

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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In connection with the offering, we capitalized $ 7.7 million of debt issuance costs which are being amortized as interest expense over the term of the Existing 2028 Notes.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S.

On March 17, 2021, the Company completed an offering of $ 200.0 million in aggregate principal amount of 4.75 % Senior Unsecured Notes that mature on January 15, 2028 (the "Additional 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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The Issuer may redeem some of or all the 2030 Senior Notes at any time prior to April 1, 2025, at redemption prices set forth in the 2030 Offering Memorandum.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

2031 Senior Notes

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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.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Future aggregate maturities of total debt are as follows (in millions):

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Contract liabilities primarily relate to our Live and Historical Racing segment.

The increase in contract liabilities from December 31, 2022 to December 31, 2023 was due to increased advanced ticket sales for the 150 th Kentucky Derby week.

The decrease in contract liabilities from December 31, 2023 to December 31, 2024 was primarily due to decreased advanced ticket sales in the deferred revenue balance at December 31, 2024.

We recognized $ 76.1 million of revenue during the year ended December 31, 2024 that was included in the contract liabilities balance on December 31, 2023.

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The Company has included its disaggregated revenue disclosures as follows:

• For the Live and Historical Racing segment, revenue is disaggregated between Churchill Downs Racetrack and historical racing properties given that our racing facilities revenues primarily revolve around live racing events while our historical racing properties revenues primarily revolve around historical racing.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

our 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 Wagering Services and Solutions 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.

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The tables below present net revenue from external customers and intercompany revenue from each of our segments:

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Years Ended December 31,

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Total Live and Historical Racing $ 1,225.6 $ 1,047.3 $ 614.6

Wagering Services and Solutions:

$ 469.5 $ 444.9 $ 436.4

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Iowa 93.3 96.0 15.6

Indiana 96.6 — —

Louisiana 150.2 145.6 140.8

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Live and Historical Racing $ 41.4 $ 37.3 $ 31.8

TwinSpires 13.5 5.2 6.4

Wagering Services and Solutions 31.2 13.5 5.2

Gaming 6.3 6.0 5.9

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Year Ended December 31, 2024

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

(in millions) Live and Historical Racing Wagering Services and Solutions Gaming Total Segments All Other Total

Net revenue from external customers

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Year Ended December 31, 2023

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

(in millions) Live and Historical Racing Wagering Services and Solutions Gaming Total Segments All Other Total

Net revenue from external customers

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Year Ended December 31, 2022

(in millions) Live and Historical Racing TwinSpires Gaming Total Segments All Other Total

(in millions) Live and Historical Racing Wagering Services and Solutions Gaming Total Segments All Other Total

Net revenue from external customers

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Notes to Consolidated Financial Statements

OTHER BALANCE SHEET ITEMS

SUPPLEMENTAL BALANCE SHEET INFORMATION

Accounts receivable, net

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Total $ 98.7 $ 106.9

We recognized bad debt expense of $ 2.9 million in 2023, $ 2.3 million in 2022 and $ 3.2 million in 2021.

We recognized credit loss expense of $ 2.8 million in 2024, $ 2.9 million in 2023 and $ 2.3 million in 2022.

Other current assets

(in millions) 2024 2023

Inventory $ 11.6 $ 17.2

Prepaid technology costs 6.4 7.7

Prepaid insurance and taxes 7.7 7.4

Other prepaid costs 16.0 18.3

Insurance deposits and other 4.7 8.9

Total $ 46.4 $ 59.5

Accrued expenses and other current liabilities

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Accrued gaming liabilities 35.3 29.5

Deferred payment on gaming rights 50.6 50.6

Accrued insurance 13.1 12.8

Accrued property taxes 9.7 8.5

Current lease liabilities 8.7 7.8

Other 88.1 91.2

Total $ 402.0 $ 426.8

INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

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 Content Management Solutions, LLC ("NYRA"), a subsidiary of the New York Racing Association, Inc.

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.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

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 20, 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 2.3

Redemption value adjustment 3.0

Balance, December 31, 2024 $ 19.7

INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Investments in and advances to unconsolidated affiliates as of December 31, 2024 and 2023 primarily consisted of interests in Rivers Casino Des Plaines ("Rivers Des Plaines") and Miami Valley Gaming and Racing ("MVG").

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The Company’s investment in Midwest Gaming is presented at our initial cost of investment plus the Company's accumulated proportional share of income or loss, including depreciation/accretion of the difference in the historical basis of the Company’s contribution, less any distributions it has received.

Following the point at which the Company gained 61.3 % of Midwest Gaming, the carrying value of the Company’s investment was $ 835.0 million higher than the Company’s underlying equity in the net assets of Midwest Gaming.

Following the point at which the Company gained 61.3 % interest in Midwest Gaming, the carrying value of the Company's investment was $ 835.0 million higher than the Company’s underlying equity in the net assets of Midwest Gaming.

This equity method basis difference was comprised of $ 853.7 million related to goodwill and indefinite-lived intangible assets, $( 13.7 ) million related to non-depreciable land, $( 9.5 ) million related to buildings that will be accreted into income over a weighted average useful life of 35.3 years, and $ 4.5 million related to personal property that will be depreciated over a weighted average useful life of 3.7 years.

As of December 31, 2024 , the net aggregate basis difference between the Company’s investment in Midwest Gaming and the amounts of the underlying equity in net assets was $ 832.9 million.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

We also recognized a $ 103.2 million deferred tax liability and a corresponding increase in our investment in unconsolidated affiliates related to an entity we acquired in conjunction with our acquisition of the Clairvest ownership stake in Midwest Gaming.

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The Company received distributions from MVG of $ 46.5 million in 2024, $ 44.0 million in 2023 and $ 33.0 million in 2022.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Summarized Financial Results for our Unconsolidated Affiliates

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The estimated discount rate for each of our leases is determined based on adjustments made to our secured debt borrowing rate.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

The components of total lease cost were as follows:

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(b) Includes variable lease costs, which were not material.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Supplemental cash flow information related to leases are as follows:

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Finance leases 4.9 % 4.8 %

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

As of December 31, 2024, the future undiscounted cash flows associated with the Company's operating and financing lease liabilities were as follows:

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Present value of lease liabilities $ 23.5 $ 42.7

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

BOARD OF DIRECTOR AND EMPLOYEE BENEFIT PLANS

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Investments in our common stock are credited as hypothetical shares of common stock based on the market price of the stock at the time the compensation was earned.

Upon the end of the director's service, common stock shares are issued to the director.

Upon the end of the director's service, common stock shares or the cash value is issued to the director based upon their elections.

Prior to December 13, 2019, we provided eligible executives the opportunity to defer the receipt of base and bonus compensation to a future date and included a Company matching contribution on base compensation with certain limits through the Deferred Plan.

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On December 13, 2019, the Compensation Committee adopted the Churchill Downs Incorporated Restricted Stock Unit Deferral Plan, effective January 1, 2020 (the "RSU Deferral Plan").

Under the RSU Deferral Plan, certain individual employees who are management or highly compensated employees of the Company may elect to defer settlement of RSUs granted pursuant to the 2016 Plan.

The Compensation Committee adopted an Amended and Restated Churchill Downs Incorporated Equity Award Deferral Plan, effective December 31, 2024 (the "Equity Award Deferral Plan") to amend the RSU Deferral Plan.

Under the Equity Award Deferral Plan, certain individual employees who are management or highly compensated employees of the Company may elect to defer settlement of RSUs, PSUs, and other share based awards granted pursuant to the 2016 Plan.

Other Retirement Plans

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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:

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Restricted Cash

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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, 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 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.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

The carrying amounts and estimated fair values by input level of the Company's financial instruments are as follows:

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Term Loan B-1 289.2 291.8 — 291.8 —

Term Loan B-1 291.6 294.8 — 294.8 —

Term Loan A 1,228.7 1,235.0 — 1,235.0 —

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2030 Senior Notes 1,185.6 1,171.5 — 1,171.5 —

2031 Senior Notes 590.4 611.2 — 611.2 —

CONTINGENCIES

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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

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

minimum amount of the estimable loss.

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.

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In the event that a legal proceeding results in a substantial judgment against, 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.

NET INCOME PER COMMON SHARE COMPUTATION

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

NET INCOME PER COMMON SHARE COMPUTATIONS

The following is a reconciliation of the numerator and denominator of the net income per common share computations:

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Numerator for basic net income per common share:

Net income $ 417.3 $ 439.4 $ 249.1

Net income attributable to Churchill Downs Incorporated $ 426.8 $ 417.3 $ 439.4

Adjustments related to redeemable noncontrolling interest 3.0 — —

Net income attributable to common shareholders $ 423.8 $ 417.3 $ 439.4

Denominator for net income per common share:

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We manage our operations through three reportable segments:

Live and Historical Racing, TwinSpires, and Gaming.

Refer to Note 1, Description of Business for additional information regarding the changes we made to our segments during the first quarter of 2022.

Prior year amounts have been reclassified to conform to this presentation.

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.

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

Our operating segments reflect the internal management reporting used by our chief operating decision maker, Chief Executive Officer, to evaluate results of operations and to assess performance and allocate resources.

• Live and Historical Racing

The Live and Historical Racing segment primarily includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs Racetrack and our historical racing properties in Kentucky, Virginia, and New Hampshire.

The Live and Historical Racing segment includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs Racetrack and our historical racing properties in Kentucky, Virginia, and New Hampshire.

Our Live and Historical Racing properties earn commissions primarily from pari-mutuel wagering on live and historical races;

simulcast fees earned from other wagering sites, fees from racing event-related services including admissions, personal seat licenses, sponsorships, television rights, other miscellaneous services, and revenue from food and beverage services.

The TwinSpires segment includes the revenue and expenses from our TwinSpires horse racing business, our TwinSpires sports betting business, United Tote, and Exacta.

Our TwinSpires horse racing business operates the online horse racing wagering business for TwinSpires.com, BetAmerica.com, and other white-label platforms;

facilitates high dollar wagering by certain customers;

simulcast fees earned from other wagering sites, fees from racing event-related services including admissions, personal seat licenses, sponsorships, television rights, and other miscellaneous services, and revenue from food and beverage services.

• Wagering Services and Solutions

The Wagering Services and Solutions segment includes the revenue and expenses for TwinSpires Horse Racing, our sports betting business, United Tote, and Exacta.

TwinSpires Horse Racing operates the online horse racing wagering business for TwinSpires.com, BetAmerica.com, and other white-label platforms;

facilitates high dollar wagering by international customers;

and provides the Bloodstock Research Information Services platform for horse racing statistical data.

TwinSpires accepts pari-mutuel wagers from customers residing in certain states who establish and fund an account from which these customers may place wagers via telephone, mobile applications, or through the Internet.

Our TwinSpires sports betting business includes the results of our retail sports books at our wholly owned gaming properties, our retail sports books in Kentucky, and our monetized online sports wagering licenses in Pennsylvania and

Our sports betting business includes the results of our retail sportsbooks at our wholly owned gaming properties, our retail sportsbooks in Kentucky, and our monetized online sports wagering licenses in Pennsylvania and Kentucky.

The retail and online sportsbooks, if applicable, related to Rivers Des Plaines and MVG are included in the Gaming segment.

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

The retail and online sports books, if applicable, related to Rivers Des Plaines and MVG are included in the Gaming segment.

United Tote manufactures and operates pari-mutuel wagering systems for racetracks, OTBs and other pari-mutuel wagering businesses.

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United Tote has contracts to provide totalisator services to third-party racetracks, OTBs and other pari-mutuel wagering businesses and also provides these services at our facilities.

On August 22, 2023, the Company completed the acquisition of Exacta.

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 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.

The Gaming segment includes revenue and expenses for the wholly owned casino properties and associated racetrack facilities which support the casino license in Florida, Iowa, Louisiana, Maine, Maryland, Mississippi, New York, and Pennsylvania.

Exacta is a leading provider of central determinant system technology in HRMs across the country.

The Gaming segment includes revenue and expenses for the wholly owned casino properties and associated racetrack facilities which support the casino license in Florida, Indiana, Iowa, Louisiana, Maine, Maryland, Mississippi, New York, and Pennsylvania.

The Gaming segment also includes our share of our equity investments in Illinois and Ohio.

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• Asset impairments;

• Gain on sales of assets;

• Gain on property sales;

• Legal reserves;

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

Refer to Note 4, Dispositions for additional information.

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

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

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

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 Consolidated Statements of Comprehensive Income.

The tables below present net revenue from external customers and intercompany revenue from each of our segments, Adjusted EBITDA by segment and reconciles comprehensive income to Adjusted EBITDA:

Net revenue by segment is comprised of the following:

The tables below present net revenue from external customers, intercompany revenue from each of our segments, Adjusted EBITDA by segment, and reconciliation of net income to Adjusted EBITDA.

Refer to Note 12, Revenue from Contracts with Customers to see intercompany revenues by segment.

Net revenue from external customers by segment is comprised of the following:

Years Ended December 31,

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Live and Historical Racing $ 1,225.6 $ 1,047.3 $ 614.6

TwinSpires 444.9 436.4 451.4

Wagering Services and Solutions 469.5 444.9 436.4

Gaming 1,039.1 968.6 755.9

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Year Ended December 31, 2024

(in millions) Live and Historical Racing TwinSpires Gaming

(in millions) Live and Historical Racing Wagering Services and Solutions Gaming

Revenue $ 1,267.0 $ 500.7 $ 1,045.4

Gaming taxes and purses ( 267.7 ) ( 22.6 ) ( 322.8 )

Pari-mutuel taxes and purses ( 300.0 ) ( 19.7 ) ( 43.5 )

Gaming taxes ( 5.7 ) ( 2.4 ) ( 291.6 )

Marketing and advertising ( 42.1 ) ( 8.9 ) ( 35.4 )

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Maintenance, insurance and utilities ( 46.5 ) ( 4.2 ) ( 42.1 )

Property and other taxes ( 6.0 ) ( 0.2 ) ( 13.5 )

Gaming equipment rental and technology costs ( 41.6 ) ( 3.5 ) ( 15.4 )

Food and beverage costs ( 12.9 ) — ( 16.7 )

Other operating expense (1)

( 70.6 ) ( 42.6 ) ( 62.9 )

Equity in income of unconsolidated affiliates — — 186.4

Other income 0.5 0.3 1.9

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Year Ended December 31, 2023

(in millions) Live and Historical Racing TwinSpires Gaming

(in millions) Live and Historical Racing Wagering Services and Solutions Gaming

Revenue $ 1,084.6 $ 458.4 $ 974.6

Gaming taxes and purses ( 168.6 ) ( 27.0 ) ( 278.1 )

Pari-mutuel taxes and purses ( 262.5 ) ( 19.9 ) ( 39.2 )

Gaming taxes ( 5.2 ) ( 2.7 ) ( 283.6 )

Marketing and advertising ( 37.6 ) ( 9.8 ) ( 35.4 )

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Maintenance, insurance and utilities ( 43.2 ) ( 3.8 ) ( 40.0 )

Property and other taxes ( 2.6 ) ( 0.2 ) ( 10.5 )

Gaming equipment rental and technology costs ( 48.7 ) ( 3.7 ) ( 15.6 )

Food and beverage costs ( 11.3 ) — ( 14.9 )

Other operating expense (1)

( 56.6 ) ( 40.6 ) ( 53.2 )

Equity in income of unconsolidated affiliates — — 191.6

Other income 1.3 1.0 1.8

Adjusted EBITDA $ 475.4 $ 132.1 $ 488.6

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

Year Ended December 31, 2022

(in millions) Live and Historical Racing TwinSpires Gaming

(in millions) Live and Historical Racing Wagering Services and Solutions Gaming

Revenue $ 646.4 $ 441.6 $ 761.8

Gaming taxes and purses ( 126.3 ) ( 30.7 ) ( 264.4 )

Pari-mutuel taxes and purses ( 167.1 ) ( 18.7 ) ( 36.4 )

Gaming taxes ( 1.5 ) ( 8.3 ) ( 241.7 )

Marketing and advertising ( 19.8 ) ( 13.0 ) ( 18.9 )

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Maintenance, insurance and utilities ( 24.3 ) ( 3.0 ) ( 31.1 )

Property and other taxes ( 3.1 ) ( 0.2 ) ( 9.6 )

Gaming equipment rental and technology costs ( 18.6 ) ( 3.4 ) ( 11.8 )

Food and beverage costs ( 6.0 ) — ( 10.0 )

Other operating expense (1)

( 36.6 ) ( 41.4 ) ( 38.6 )

Equity in income of unconsolidated affiliates — — 184.5

Other income 0.4 0.1 6.4

Adjusted EBITDA $ 287.5 $ 114.1 $ 421.9

(1) Other operating expense primarily includes supplies, regulatory licenses and fees, property taxes, and third-party service fees and costs.

Churchill Downs Incorporated

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(in millions) 2024 2023 2022

Reconciliation of Comprehensive Income to Adjusted EBITDA:

Net income and comprehensive income $ 417.3 $ 439.4 $ 249.1

Reconciliation of Net Income to Adjusted EBITDA:

Net income attributable to Churchill Downs Incorporated $ 426.8 $ 417.3 $ 439.4

Net income attributable to noncontrolling interest 2.3 — —

Net income 429.1 417.3 439.4

Depreciation and amortization 199.1 169.0 113.7

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Income tax provision 144.1 144.5 169.4

EBITDA $ 999.2 $ 869.8 $ 531.5

Adjustments to EBITDA:

Stock-based compensation expense 36.1 32.9 31.8

Legal reserves — ( 1.2 ) 3.8

Pre-opening expense 18.6 13.2 5.8

Pre-opening expenses 29.6 18.6 13.2

Arlington exit costs — 9.4 5.7

Other expense, net 4.2 7.0 1.7

Transaction expense, net 4.8 42.1 2.6

Transaction (benefit) expense, net ( 12.1 ) 4.8 42.1

Asset impairments 3.9 24.6 38.3

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Gain on sale of assets — ( 114.0 ) ( 274.6 )

Total adjustments to EBITDA 24.7 ( 106.2 ) 95.5

Total adjustments 730.1 606.6 324.2

Adjusted EBITDA $ 1,159.2 $ 1,023.9 $ 763.6

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Live and Historical Racing $ 574.6 $ 475.4 $ 287.5

TwinSpires 132.1 114.1 82.7

Wagering Services and Solutions 165.6 132.1 114.1

Gaming 506.9 488.6 421.9

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Live and Historical Racing $ 4,143.3 $ 3,872.9

TwinSpires 473.9 287.9

Wagering Services and Solutions 460.6 473.9

Gaming 1,953.7 1,920.9

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Live and Historical Racing $ 385.4 $ 461.1 $ 307.0

TwinSpires 14.6 87.6 18.6

Wagering Services and Solutions 19.0 14.6 87.6

Gaming 130.0 188.1 11.8

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We believe that each such transaction has been on terms no less favorable for us than could have been obtained in a transaction with a third party, and no officer or director received any extra or special benefit in connection with such transactions.

Stock Repurchase Agreements

On February 1, 2021, the Company entered into the 2021 Stock Repurchase Agreement with an affiliate of TDG to repurchase 1,000,000 shares of the Company’s common stock for $ 193.94 per share in a privately negotiated transaction.

The aggregate purchase price was $ 193.9 million.

The Company repurchased the shares using available cash and borrowings under the Revolver.

Stock Repurchase Agreement

On December 18, 2023, the Company entered into the 2023 Stock Repurchase Agreement with an affiliate of 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.

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

Churchill Downs Incorporated

Notes to Consolidated Financial Statements

SUBSEQUENT EVENTS

On January 2, 2024, the Company closed on the repurchase of 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, pursuant to the 2023 Stock Repurchase Agreement.

The agreement contains customary representations, warranties, and covenants of the parties.

Refer to Note 10, Shareholders' Equity for additional information.

On February 14, 2025, the Company closed an amendment of the Credit Agreement.

Refer to Note 11, Debt for further information.

Report of Independent Registered Public Accounting Firm

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Exacta Systems, LLC ("Exacta") from its assessment of internal control over financial reporting as of December 31, 2023, because it was acquired by the Company in a purchase business combination during 2023.

We have also excluded Exacta from our audit of internal control over financial reporting.

Exacta is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less than 1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

Definition and Limitations of Internal Control over Financial Reporting

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Acquisition of Exacta Systems LLC – Valuation of Technology Asset

As described in Note 3 to the consolidated financial statements, on August 22, 2023, the Company completed the acquisition of Exacta for preliminary purchase consideration of $248.2 million, net of cash acquired.

The Company recorded intangible assets of $54.3 million, which includes $23.9 million of a definite-lived technology asset.

As disclosed by management, the fair value of the technology asset was determined using the relief-from-royalty method of the income approach.

The estimated future revenue, royalty rate, and discount rate are the primary assumptions and estimates used in the valuation.

The principal considerations for our determination that performing procedures relating to the valuation of the technology asset acquired in the acquisition of Exacta is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the technology asset;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumption related to future revenue;

Indefinite-Lived Intangible Asset Annual Impairment Assessment – Virginia Gaming Rights Intangible Asset

As described in Notes 2 and 6 to the consolidated financial statements, the Company’s indefinite-lived gaming rights intangible assets balance was $2,225.8 million as of December 31, 2024, of which a majority relates to the Virginia gaming rights intangible asset.

Management performs an annual review for impairment of indefinite-lived intangible assets on April 1 of each fiscal year, or more frequently if events or circumstances indicate that it is more likely than not the relevant asset may be impaired.

If the carrying amount of the gaming rights intangible asset exceeds fair value, an impairment loss is recognized.

Management generally determines the fair value of gaming rights using the Greenfield Method.

The estimated future revenue and operating expenses, start-up costs, and discount rates are the primary assumptions and estimates in the valuation of the gaming rights.

The principal considerations for our determination that performing procedures relating to the indefinite-lived intangible asset annual impairment assessment of the Virginia gaming rights intangible asset is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Virginia gaming rights intangible asset;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to estimated future revenue and discount rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation estimate of the technology asset acquired.

These procedures also included, among others, (i) reading the purchase agreement;

(ii) testing management’s process for developing the fair value estimate of the technology asset acquired;

(iii) evaluating the appropriateness of the relief-from-royalty method used by management;

(iv) testing the completeness and accuracy of the underlying data used in the relief-from-royalty method;

and (v) evaluating the reasonableness of the future revenue significant assumption used by management.

Evaluating the reasonableness of the future revenue assumption involved considering (i) the current and past performance of Exacta;

These procedures included testing the effectiveness of controls relating to management’s indefinite-lived intangible asset impairment assessment, including controls over the valuation of the Virginia

gaming rights intangible asset.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimate of the Virginia gaming rights intangible asset;

(ii) evaluating the appropriateness of the Greenfield Method used by management;

(iii) testing the completeness and accuracy of the underlying data used in the

Greenfield Method;

and (iv) evaluating the reasonableness of the estimated future revenue and discount rate assumptions used by management.

Evaluating the reasonableness of the estimated future revenue assumption involved considering (i) the current and past performance of the Virginia properties;

(ii) the consistency with economic and industry forecasts;

and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the relief-from-royalty method.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Greenfield Method and (ii) the reasonableness of the discount rate assumption.

/s/ PricewaterhouseCoopers LLP

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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 8. Financial Statements and Supplementary Data