What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-23 compared with 2024-10-23 · 97 added, 122 removed, 197 unchanged (53% of the section changed)

10 unchanged sentences

• the effect of economic conditions on our consumers' confidence and discretionary spending or our access to credit, including the impact of inflation;

• additional or increased taxes and fees;

• changes in, or new interpretations of, applicable tax law or rulings that could result in additional tax liabilities;

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

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

• negative shifts in public opinion regarding gambling that could result in increased regulation of, or new restrictions on, the gaming industry;

• loss of key or highly skilled personnel, as well as general disruptions in the general labor market;

5 unchanged sentences

• failure to enter into or maintain agreements with industry constituents, including horsemen and other racetracks;

• inability to successfully focus on market access and retail operations for our TwinSpires sports betting business and effectively compete;

• inability to successfully focus on market access and retail operations for our sports betting business and effectively compete;

• online security risk, including cyber-security breaches, or loss or misuse of our stored information as a result of a breach including customers’ personal information could lead to government enforcement actions or other litigation;

• costs of compliance with increasingly complex laws and regulations regarding data privacy and protection of personal information;

• reliance on our technology services and catastrophic events and system failures disrupting our operations;

2 unchanged sentences

• cost overruns and other uncertainties associated with the development of new venues and the expansion of existing facilities;

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

• general risks related to real estate ownership and significant expenditures, including risks related to environmental liabilities;

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

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

• compliance with the Foreign Corrupt Practices Act or other similar laws and regulations, or applicable anti-money laundering regulations;

14 unchanged sentences

This report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024, including Part I - Item 1A, "Risk Factors" of our Form 10-K for a discussion regarding some of the reasons that actual results may be materially different from those we anticipate.

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

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 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.

Headquartered in Louisville, Kentucky, CDI has expanded through the development of live and historical racing entertainment venues, the growth of the 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 conduct our business through three reportable segments:

Live and Historical Racing, TwinSpires, and Gaming.

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

We aggregate our other businesses as well as certain corporate operations in All Other.

8 unchanged sentences

Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP.

Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (as determined in accordance with GAAP) as a measure of our operating results.

Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (as determined in accordance with GAAP) as a measure of our operating r`esults.

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

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

Adjusted EBITDA excludes:

Adjusted EBITDA excludes, as applicable in each period:

• Transaction expense, net which includes:

2 unchanged sentences

• Stock-based compensation expense;

• Rivers Des Plaines' impact on our investments in unconsolidated affiliates from legal reserves and transaction costs;

• Asset impairments;

3 unchanged sentences

• Other charges, recoveries and expenses

As of December 31, 2021, our property in Arlington Heights, Illinois ("Arlington") ceased racing and simulcast operations and the property was sold on February 15, 2023 to the Chicago Bears.

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

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

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

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

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

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

Governmental Regulations and Legislative Changes

We are subject to various federal, state, and international laws and regulations that affect our businesses.

The ownership, operation, and management of our Live and Historical Racing, TwinSpires, and Gaming segments, as well as our other operations, are subject to regulation under the laws and regulations of each of the jurisdictions in which we operate.

The ownership, operation, and management of our Live and Historical Racing, Wagering Services and Solutions, and Gaming segments, as well as our other operations, are subject to regulation under the laws and regulations of each of the jurisdictions in which we operate.

The ownership, operation, and management of our businesses and properties are also subject to legislative actions at both the federal and state level.

The following update on our regulatory and legislative actions should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024, including Part I - Item 1, "Business" for a discussion of regulatory and legislative changes.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

Specific State Gaming Regulations

8 unchanged sentences

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

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

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

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

If the 2021 HHR Act is determined to be unconstitutional it could have an adverse impact on our Louisiana HRM results which are reported in our Gaming segment.

Oral arguments took place before the Louisiana Supreme Court on January 27, 2025, and an opinion was issued on March 21, 2025.

The opinion affirmed the ruling of the District Court, which stated the 2021 HHR Act is unconstitutional, and that before historical horse racing is licensed or permitted to be conducted in a parish it first requires a voter referendum in an affected parish.

The Company submitted an Application for Rehearing to the Louisiana Supreme Court on April 4, 2025.

Should this request be denied, the opinion will become final and enforceable.

As of March 31, 2025, the Company had approximately 500 HRMs in OTBs in Louisiana.

A final opinion by the Louisiana Supreme Court declaring the 2021 HHR Act unconstitutional could have an adverse impact on our Louisiana HRM results which are reported in our Gaming segment.

Consolidated Financial Results

The following table reflects our net revenue, operating income, net income attributable to Churchill Downs Incorporated, Adjusted EBITDA, and certain other financial information:

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

(in millions) 2024 2023 Change 2024 2023 Change

Three Months Ended March 31,

(in millions) 2025 2024 Change

Net revenue $ 642.6 $ 590.9 $ 51.7

3 unchanged sentences

Adjusted EBITDA 245.1 242.5 2.6

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

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

All Other net revenue decreased $0.2 million.

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

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

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

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

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

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

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

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

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

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

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

• Net revenue increased $209.6 million driven by a $138.4 million increase from the Live and Historical Racing segment primarily due to a record-breaking Derby Week at Churchill Downs Racetrack, the opening of the Rosie's Emporia property in September 2023 and growth at our other HRM properties, a $42.9 million increase from the Gaming segment primarily driven by the opening of the Terre Haute Casino Resort in April 2024, and a $28.9 million increase from the TwinSpires segment primarily due to Exacta.

All Other net revenue decreased $0.6 million.

• Operating income increased $124.4 million driven by a $94.2 million increase from the Live and Historical Racing segment primarily due to a record-breaking Derby Week at Churchill Downs Racetrack, Exacta savings, the opening of the Rosie's Emporia property in September 2023, and growth at our other HRM properties, a $20.6 million increase attributable to a $24.5 million non-cash impairment of Presque Isle intangible assets in the second quarter of 2023 compared to a $3.9 million write-off of HRMs in Virginia that are no longer in use in the third quarter of 2024, a $19.2 million increase in the TwinSpires segment primarily due to Exacta, a $9.5 million increase from the Gaming segment primarily due to opening of the Terre Haute Casino Resort in April 2024, partially offset by inclement weather in January, regional gaming softness, and increased competition, a $1.2 million increase in All Other operating income, and a $1.1 million decrease in transaction costs.

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

Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024

• Net revenue increased $51.7 million driven by a $27.4 million increase from the Live and Historical Racing segment primarily due to the opening of The Rose Gaming Resort in November 2024 and the opening of Owensboro Racing and Gaming in February 2025, a $24.0 million increase from the Gaming segment primarily driven by the opening of the Terre Haute Casino Resort in April 2024, and a $0.3 million increase from all other sources.

• Operating income increased $8.3 million driven by a $10.4 million increase from the Gaming segment primarily due to the opening of the Terre Haute Casino Resort in April 2024 that was partially offset by regional gaming softness and increased competition, a $1.0 million increase in the Wagering Services and Solutions segment primarily due to Exacta, a $3.7 million decrease in transaction expenses, and a $0.3 million decrease in selling, general and administrative expenses.

Partially offsetting these increases was a $5.1 million decrease in the Live and Historical segment and a $2.0 million increase in All Other operating expenses driven primarily by increased insurance expense and depreciation.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

• Net income attributable to Churchill Downs Incorporated decreased $3.7 million.

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

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

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

• Adjusted EBITDA increased $117.8 million driven by an $86.5 million increase from the Live and Historical Racing segment primarily due to a record-breaking Derby Week at Churchill Downs Racetrack and growth at our HRM properties, a $31.1 million increase from the TwinSpires segment primarily due to Exacta, and an $11.6 million increase from the Gaming segment driven by the opening of the Terre Haute Casino Resort in April 2024 that was partially offset by inclement weather in January 2024, regional gaming softness, and increased competition.

The following impacted the comparability of the Company's net income for the three months ended March 31, 2025 compared to the three months ended March 31, 2024:

a $6.7 million after-tax decrease in other recoveries, net primarily driven by insurance claim proceeds recorded in the prior year quarter, partially offset by a $5.6 million after-tax decrease in transaction, pre-opening, and other expenses.

Excluding these items, net income decreased $4.8 million primarily due to a $3.0 million after-tax decrease in equity income from our unconsolidated affiliates, a $2.0 million after-tax increase in interest expense, and a $0.5 million after-tax decrease due to a portion of United Tote's income being recognized as noncontrolling interest, partially offset by a $0.7 million after-tax increase primarily driven by the results of our operations.

• Adjusted EBITDA increased $2.6 million driven by a $1.2 million increase from the Live and Historical Racing segment primarily due to the opening of The Rose Gaming Resort in November 2024 and Owensboro Racing and Gaming in February 2025, an $1.7 million increase from the Wagering Services and Solutions segment primarily due to Exacta, and a $0.7 million increase from the Gaming segment driven by the opening of the Terre Haute Casino Resort in April 2024 that was partially offset by regional gaming softness and increased competition.

These increases were partially offset by a decrease of All Other adjusted EBITDA of $1.0 million.

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

Revenue by Segment

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

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

Three Months Ended March 31, Change

(in millions) 2025 2024

Live and Historical Racing $ 276.4 $ 248.9 $ 27.5

TwinSpires 118.7 112.4 6.3 392.7 347.8 44.9

Wagering Services and Solutions 115.8 114.1 1.7

Gaming 267.2 243.2 24.0

2 unchanged sentences

Net Revenue $ 642.6 $ 590.9 $ 51.7

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

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

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

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

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

• All Other revenue increased due to intercompany revenue related to the captive insurance company that was established in April 2024.

All captive revenue is eliminated in consolidation.

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

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

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

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

• All Other revenue increased due to intercompany revenue related to the captive insurance company that was established in April 2024.

Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024

• Live and Historical Racing revenue increased $27.5 million due to an $18.2 million increase at our Virginia HRM venues, an $8.9 million increase from our Kentucky HRM venues, and a $0.4 million increase from our other Live and Historical Racing properties.

The Virginia HRM increase of $18.2 million was primarily due to the November 2024 opening of The Rose Gaming Resort in Northern Virginia, partially offset by a decrease from our other Virginia HRM venues primarily due to lower unrated play from consumer softness and competition, inclement weather, and one less day in the quarter due to the 2024 leap year.

The Kentucky HRM increase of $8.9 million was primarily due to the February 2025 opening of Owensboro Racing and Gaming in Western Kentucky and growth from our Northern and Southwestern Kentucky properties, partially offset by a decrease at our Louisville properties due to the impact of weather and one less day in the quarter due to 2024 leap year.

• Wagering Services and Solutions revenue increased $1.7 million due to a $3.1 million increase from Exacta due to incremental HRMs in Virginia and New Hampshire and a $0.8 million increase in TwinSpires Horse Racing.

These increases were partially offset by a $2.2 million decrease from our sports betting business.

• Gaming revenue increased $24.0 million due to a $31.6 million increase from the April 2024 opening of the Terre Haute Casino Resort, partially offset by a $7.6 million decrease primarily due to regional gaming softness, increased competition, one less day in the quarter due to the 2024 leap year, and the impact of weather at certain properties.

• All Other revenue increased $2.0 million due to intercompany revenue related to the captive insurance company that was established in April 2024.

All captive revenue is eliminated in consolidation.

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

Consolidated Operating Expense

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

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

Three Months Ended March 31, Change

(in millions) 2025 2024

8 unchanged sentences

Transaction expense, net 0.4 4.1 (3.7)

Asset impairments 3.9 — 3.9 3.9 24.5 (20.6)

Other operating expense 53.4 48.8 4.6

Total expense $ 508.0 $ 464.6 $ 43.4

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

Operating expenses increased $42.4 million and $85.2 million for the three and nine months ended September 30, 2024 compared to September 30, 2023 primarily due to the Exacta Transaction in August 2023, the opening of Rosie's Emporia in September 2023, Derby City Gaming Downtown in December 2023, and Terre Haute Casino Resort in Indiana on April 5, 2024 and the hotel on May 15, 2024, and The Rose Gaming Resort in Virginia.

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

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

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

Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024

Operating expenses increased $43.4 million for the three months ended March 31, 2025 compared to March 31, 2024 primarily due to the opening of Terre Haute Casino Resort in Indiana in April 2024 and the hotel in May 2024, and The Rose Gaming Resort in Virginia in November 2024.

Adjusted EBITDA

2 unchanged sentences

Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure provided in accordance with GAAP.

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

Three Months Ended March 31, Change

(in millions) 2025 2024

Live and Historical Racing $ 102.0 $ 100.8 $ 1.2

TwinSpires 42.5 33.9 8.6 128.3 97.2 31.1

Wagering Services and Solutions 41.3 39.6 1.7

Gaming 123.5 122.8 0.7

2 unchanged sentences

Total Adjusted EBITDA $ 245.1 $ 242.5 $ 2.6

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

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

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

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

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

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

• All Other Adjusted EBITDA decreased $4.6 million driven primarily by increased corporate compensation related expenses and other corporate administrative expenses.

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

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

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

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

• All Other Adjusted EBITDA decreased $11.4 million driven primarily by increased corporate compensation related expenses and other corporate administrative expenses.

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

Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024

• Live and Historical Racing Adjusted EBITDA increased $1.2 million due to a $3.1 million increase at our Kentucky HRM venues, partially offset by a $1.9 million decrease primarily from our Virginia HRM venues.

Our Kentucky HRM venues increase was primarily due to the February 2025 opening of Owensboro Racing and Gaming in Western Kentucky and growth at our Northern and Southwestern Kentucky properties, partially offset by a decrease from our Louisville properties due to inclement weather and one less day in the quarter due to the 2024 leap year.

Our Virginia HRM venues decreased $2.0 million primarily due to lower unrated play from consumer softness and competition, the impact of weather, increased handle tax and racing-related expenses, and one less day in the quarter due to the 2024 leap year, partially offset by the November 2024 opening of The Rose Gaming Resort.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

• Wagering Services and Solutions Adjusted EBITDA increased $1.7 million due to a $3.8 million from Exacta due to a $2.7 million increase primarily from incremental HRMs in Virginia and New Hampshire and $1.1 million decrease from lower compensation expense.

These increases were partially offset by a $1.1 million decrease from our sports betting business and a $1.0 millio n decrease at tributable to TwinSpires Horse Racing from increased legal expenses.

• Gaming Adjusted EBITDA increased $0.7 million due to an $11.5 million increase attributable to the opening of the Terre Haute Casino Resort in April 2024, partially offset by a $6.6 million decrease from our wholly owned gaming properties and a $4.2 million decrease from our equity investments primarily due to regional gaming softness, increased competition, higher labor and benefit expense, one less day in the quarter due to the 2024 leap year, and the impact of weather at certain properties.

• All Other Adjusted EBITDA decreased $1.0 million driven primarily by increased corporate compensation related expenses and other corporate administrative expenses driven by enterprise growth.

Reconciliation of Comprehensive Income to Adjusted EBITDA

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

Three Months Ended March 31, Change

(in millions) 2025 2024

Net income attributable to Churchill Downs Incorporated $ 65.4 $ 61.0 $ 4.4 $ 355.1 $ 359.7 $ (4.6)

Net income and comprehensive income attributable to Churchill Downs Incorporated $ 76.7 $ 80.4 $ (3.7)

Net income attributable to noncontrolling interest 0.5 — 0.5

Net income and comprehensive income 66.2 61.0 5.2 356.8 359.7 (2.9)

Net income 77.2 80.4 (3.2)

Depreciation and amortization 59.2 46.9 12.3

1 unchanged sentence

Income tax provision 18.7 21.4 (2.7)

EBITDA $ 208.8 $ 191.8 $ 17.0 $ 844.9 $ 809.5 $ 35.4

Adjustments to EBITDA:

Stock-based compensation expense 3.6 7.2 (3.6)

Pre-opening expense 4.2 8.3 (4.1)

Arlington exit costs — 0.1 (0.1) — 9.4 (9.4)

Other expense, net (0.4) 0.2 (0.6)

Asset impairments 3.9 — 3.9 3.9 24.5 (20.6)

Transaction expense, net 0.4 4.1 (3.7)

1 unchanged sentence

Interest, depreciation and amortization expense related to equity investments 9.9 10.3 (0.4)

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

Other charges and recoveries, net — (6.7) 6.7

Gain on sale of Arlington — — — — (114.0) 114.0

Total adjustments to EBITDA 26.5 26.4 0.1 77.7 (4.7) 82.4

Total adjustments 167.9 162.1 5.8

Adjusted EBITDA $ 245.1 $ 242.5 $ 2.6

1 unchanged sentence

The following is a summary of our overall financial position:

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

(in millions) March 31, 2025 December 31, 2024 Change

Total assets $ 7,347.1 $ 7,275.9 $ 71.2

2 unchanged sentences

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

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

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

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

• Total equity increased $221.3 million driven by net income and the addition of a redeemable noncontrolling interest, partially offset by share repurchases.

• Total assets increased $71.2 million driven by increased capital expenditures primarily at Churchill Downs Racetrack and Owensboro Racing and Gaming, and an increase in other current assets driven by prepaid insurance and information technology related items.

• Total liabilities increased $81.4 million driven primarily by increased current deferred revenue primarily related to advance ticket sales and sponsorships for the Kentucky Oaks and Derby, partially offset by decreased dividends

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

payable due to the payment of the annual dividend, and decreased long-term debt primarily due to payments on the Revolver and Term Loan A.

• Total equity decreased $11.9 million driven by share repurchases, partially offset by net income.

Liquidity and Capital Resources

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

(in millions) Nine Months Ended September 30, Change

(in millions) Three Months Ended March 31, Change

Cash flows from:

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Financing activities (147.9) (101.1) (46.8)

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

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

Three Months Ended March 31, 2025, Compared to the Three Months Ended March 31, 2024

• Cash flows provided by operating activities decreased $8.2 million driven primarily a decrease in cash used for working capital and an increase in operating income, partially offset by increased interest paid and decreased distributions from our unconsolidated affiliates in 2025.

We anticipate that cash flows from operations and availability of borrowings under our credit facility over the next twelve months will be adequate to fund our business operations and capital expenditures.

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

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

• Cash flows used in investing activities decreased $73.3 million primarily driven by decreased capital expenditures in 2025.

• Cash flows used in financing activities increased $46.8 million primarily driven by payments on the Revolver, increased payment of dividends, partially offset by decreased stock repurchases in 2025.

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

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

Starting Gate Pavilion and Courtyard as well as enhancements to The Mansion and Finish Line Suites at Churchill Downs Racetrack;

Marshall Yards Racing and Gaming in Southwestern Kentucky;

expansion of the Richmond, Virginia HRM venue;

and the Roseshire HRM entertainment venue in Henrico County, Virginia.

We currently expect our project capital to be approximately $250.0 to $290.0 million in 2025, although this amount may vary significantly based on the timing of work completed, unanticipated delays, and timing of payments to third parties.

The 2025 project capital range was reduced to reflect the temporary pause of The Skye, Conservatory, and Infield General Admission capital projects at Churchill Downs Racetrack.

Common Stock Repurchase Program

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

The 2021 Stock Repurchase Program includes and is not in addition to the unspent amount remaining under the prior authorization.

Repurchases may be made at management’s discretion from time to time on the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions.

On March 12, 2025, the Board of Directors of the Company approved a common stock repurchase program of up to $500.0 million (the "2025 Stock Repurchase Program").

The 2025 Stock Repurchase Program includes and is not in addition to any unspent amount remaining under the prior authorization.

Share repurchases may be made at management's discretion from time to time in 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.

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

We had approximately $170.9 million of repurchase authority remaining under this program on September 30, 2024, based on trade date.

We had approximately $434.6 million of repurchase authority remaining under the 2025 Stock Repurchase Program at March 31, 2025, based on trade date.

On January 2, 2024, the Company closed on an agreement, dated December 18, 2023, with an affiliate of The Duchossois Group ("TDG") to repurchase 1,000,000 shares of the Company’s common stock, for $123.75 per share in a privately negotiated transaction for an aggregate purchase price of $123.8 million.

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

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

Credit Facilities and Indebtedness

The following table presents our debt outstanding:

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

(in millions) March 31, 2025 December 31, 2024 Change

Revolver $ 361.7 $ 377.5 $ (15.8)

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Credit Agreement

At September 30, 2024, the Company’s senior secured credit facility (as amended from time to time, the “Credit Agreement") consisted of a $1.2 billion revolving credit facility (the "Revolver"), $289.5 million senior secured term loan B-1 (the "Term Loan B-1"), $1.2 billion senior secured term loan A (the "Term Loan A"), and $100.0 million swing line commitment.

At March 31, 2025, the Company’s senior secured credit facility (as amended from time to time, the “Credit Agreement") consisted of a $1.2 billion revolving credit facility (the "Revolver"), $288.0 million senior secured term loan B-1 (the "Term Loan B-1"), $1.2 billion senior secured term loan A (the "Term Loan A"), and $100.0 million swing line commitment.

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

Term Loan B-1 bears interest at the Secured Overnight Financing Rate ("SOFR") plus 210 basis points and requires quarterly payments of 0.25% of the original $300.0 million balance.

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 margin applicable to the Term Loan B-1 by 0.25%, from Secured Overnight Financing Rate ("SOFR") plus 200 basis points to SOFR plus 175 basis points, (ii) eliminated the 0.10% credit spread adjustment previously applicable to the Term Loan B-1, and (iii) made certain other amendments to the Credit Agreement, as set forth therein.

Term Loan B-1 requires quarterly payments of 0.25% of the original $300.0 million balance.

The Term Loan B-1 may be subject to additional mandatory prepayment from excess cash flow on an annual basis per the provisions of the Credit Agreement.

The Revolver and Term Loan A bear interest at SOFR plus 10 basis points, plus a variable applicable margin which is determined by the Company's net leverage ratio.

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

The Company had $902.4 million available borrowing capacity, after consideration of $7.6 million in outstanding letters of credit, under the Revolver as of September 30, 2024.

As of March 31, 2025, that applicable margin was 150 basis points which was based on the pricing grid in the Credit Agreement.

The Company had $830.9 million available borrowing capacity, after consideration of $7.4 million in outstanding letters of credit, under the Revolver as of March 31, 2025.

The Company is required to pay a commitment fee on the unused portion of the Revolver as determined by a pricing grid based on the consolidated total net secured leverage ratio of the Company.

For the period ended September 30, 2024, the Company's commitment fee rate was 0.25%.

The estimated contractual payments, including interest, under the Credit Agreement for the next twelve months are estimated to be $178.5 million assuming no change in the weighted average borrowing rate of 6.5%, which was in place as of September 30, 2024.

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

For the period ended March 31, 2025, the Company's commitment fee rate was 0.25%.

The estimated contractual payments, including interest, under the Credit Agreement for the next twelve months are estimated to be $170.4 million assuming no change in the weighted average borrowing rate of 5.95%, which was in place as of March 31, 2025.

During the three months ended March 31, 2025, we had repayments of principal and interest on the Credit Agreement of $279.2 million.

2027 Senior Notes

As of September 30, 2024, we had $600.0 million in aggregate principal amount of 5.500% senior unsecured notes that mature on April 1, 2027 (the "2027 Senior Notes").

As of March 31, 2025, we had $600.0 million in aggregate principal amount of 5.500% senior unsecured notes that mature on April 1, 2027 (the "2027 Senior Notes").

The 2027 Senior Notes were issued at par in a private offering to qualified institutional buyers, with interest payable in arrears on April 1st and October 1st of each year, commencing on October 1st, 2019.

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

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

2028 Senior Notes

As of September 30, 2024, we had a total of $700.0 million in aggregate principal amount of 4.750% senior unsecured notes (the “2028 Senior Notes”) maturing on January 15, 2028.

As of March 31, 2025, we had a total of $700.0 million in aggregate principal amount of 4.750% senior unsecured notes (the “2028 Senior Notes”) maturing on January 15, 2028.

The 2028 Senior Notes consist of $500.0 million notes issued at par and $200.0 million notes issued at 103.25%.

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The Company may redeem some or all the 2028 Senior Notes at redemption prices set forth in the 2028 Indenture.

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

2030 Senior Notes

As of September 30, 2024, we had $1.2 billion in aggregate principal amount of 5.750% senior unsecured notes that mature on April 13, 2030 (the "2030 Senior Notes").

As of March 31, 2025, we had $1.2 billion in aggregate principal amount of 5.750% senior unsecured notes that mature on April 13, 2030 (the "2030 Senior Notes").

The 2030 Senior Notes were issued at par in a private offering to qualified institutional buyers, with interest payable in arrears on April 1st and October 1st of each year, commencing on October 1st, 2022.

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2031 Senior Notes

As of September 30, 2024, we had $600.0 million in aggregate principal amount of 6.750% senior unsecured notes that mature on April 25, 2031 (the "2031 Senior Notes").

As of March 31, 2025, we had $600.0 million in aggregate principal amount of 6.750% senior unsecured notes that mature on April 25, 2031 (the "2031 Senior Notes").

The 2031 Senior Notes were issued at par in a private offering to qualified institutional buyers, with interest payable in arrears on May 1st and November 1st of each year, commencing on November 1st, 2023.

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Certain of our lease agreements include lease payments based on a percentage of net gaming revenue and others include rental payment adjustments periodically for inflation.

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

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

As of March 31, 2025, minimum rent payable under operating leases was $34.1 million, with $6.7 million due in the next twelve months.

As of March 31, 2025, minimum rent payable accounted for as financing obligations was $53.8 million, with $5.1 million due in the next twelve months.

Other Contractual Obligations

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis