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Item 2. Management’s Discussion and Analysis

2025-10-22 compared with 2025-07-23 · 109 added, 108 removed, 226 unchanged (49% of the section changed)

28 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 JUNE 30, 2025

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025

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

16 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 JUNE 30, 2025

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

14 unchanged sentences

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 includes our portion of EBITDA from our equity investments and the portion of EBITDA attributable to noncontrolling interests.

Adjusted EBITDA excludes, as applicable:

4 unchanged sentences

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

• Asset impairments;

• Asset impairments, net;

• Gain on property sales;

9 unchanged sentences

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 JUNE 30, 2025

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025

Specific State Gaming Regulations

3 unchanged sentences

On February 23, 2024, the judge issued a ruling in favor of plaintiffs granting summary judgment stating that:

(i) historical horseracing is a new form of gaming not specifically authorized by law prior to 1996;

(ii) historical horseracing may not be conducted in any parish of the state unless voters approve it through referendum;

and (iii) the 2021 HHR Act that authorized historical horseracing is unconstitutional.

(i) historical horse racing is a new form of gaming not specifically authorized by law prior to 1996;

(ii) historical horse racing may not be conducted in any parish of the state unless voters approve it through referendum;

and (iii) the 2021 HHR Act that authorized historical horse racing is unconstitutional.

The summary judgment, which was certified as final for purposes of appeal, was entered on March 18, 2024, and the Company, along with other interested parties including the Louisiana Racing Commission, filed a joint motion for a suspensive appeal, which was entered on March 26, 2024.

4 unchanged sentences

The opinion became final and enforceable as of this date, at which time the Company discontinued its HRM operations in Louisiana.

Subsequent to this decision, the Company moved the majority of the approximate 500 HRMs previously located in the Louisiana OTBs to other HRM venues, primarily located in Virginia.

The reduction in revenues resulting from the removal of the HRMs from our OTBs will negatively impact the comparability of the 2025 results of our Louisiana operations to prior year.

The results of our Louisiana operations are reported in our Gaming segment.

Subsequent to this decision, the Company moved HRMs previously located in the Louisiana OTBs to other HRM venues, primarily located in Virginia.

The reduction in revenues resulting from the removal of the HRMs from our OTBs in Louisiana has negatively impacted the comparability of the 2025 Louisiana results to the prior year.

The results of the HRMs in Louisiana operations were 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 June 30, Six Months Ended June 30,

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

(in millions) 2025 2024 Change 2025 2024 Change

4 unchanged sentences

Adjusted EBITDA 262.3 235.3 27.0 958.3 922.6 35.7

Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024

• Net revenue increased $43.7 million driven by a $45.2 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 and a $6.7 million increase from the Wagering Services and Solutions segment primarily due to Exacta, partially offset by an $8.2 million decrease from the Gaming segment due to the cessation of HRM operations in Louisiana and net decreases at our other wholly owned gaming properties.

• Operating income decreased $2.3 million driven by an $11.1 million decrease from the Gaming segment and a $6.9 million decrease primarily due to increased SG&A expenses and the asset impairment charge for the Virginia HRMs.

These decreases were partially offset by a $10.5 million increase from the Live and Historical Racing segment primarily due to the opening of The Rose Gaming Resort in Northern Virginia and growth at our other HRM properties, and a $5.2 million increase in the Wagering Services and Solutions segment primarily due to Exacta.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025

• Net income attributable to Churchill Downs Incorporated increased $7.6 million.

The following impacted the comparability of the Company's net income for the three months ended June 30, 2025 compared to the three months ended June 30, 2024:

a $1.8 million after-tax impairment charge in the current year quarter related to a write-off of obsolete HRMs in Virginia, partially offset by a $0.4 million after-tax decrease in transaction, pre-open and other expenses.

Excluding these items, net income increased $9.0 million due to an $11.4 million after-tax increase primarily driven by lower state tax expense and the results of our operations and a $0.3 million after-tax increase in equity income from our unconsolidated affiliates, partially offset by a $2.0 million after-tax increase in interest expense associated primarily with higher outstanding debt balances and a $0.7 million after-tax increase due to a portion of the Company's income from United Tote being recognized as income attributable to a noncontrolling interest.

Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024

• Net revenue increased $54.5 million driven by a $52.5 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 and a $6.7 million increase from the Wagering Services and Solutions segment primarily from TwinSpires Horse Racing and Exacta, partially offset by an $4.7 million decrease from the Gaming segment due to the cessation of HRM operations in Louisiana and net decreases at our other wholly owned gaming properties.

• Operating income decreased $27.9 million driven by an increase in impairment expense of $41.2 million from the 45.1 million net impairment of Chasers' gaming rights partially offset by a $3.9 million impairment in the prior year, a $5.9 million increase in transaction costs, and a decrease of $1.0 million from the Gaming segment.

These decreases were partially offset by an $18.2 million increase from the Live and Historical segment primarily due to the opening of The Rose Gaming Resort in November 2024 and a $2.0 million increase from the Wagering Services and Solutions segment primarily due to Exacta.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025

• Net income attributable to Churchill Downs Incorporated decreased $27.3 million.

The following impacted the comparability of the Company's net income for the three months ended September 30, 2025 compared to the three months ended September 30, 2024:

a $31.0 million after-tax increase in impairment charges in the current year quarter due to the $33.9 million after-tax impairment of Chasers' gaming rights partially offset by $2.9 million of after-tax impairments in the prior year, and a $1.3 million after-tax increase in transaction, pre-opening, and other expenses.

Excluding these items, net income increased $5.0 million due to a $3.4 million after-tax increase primarily driven by the results of our operations and a $2.9 million after-tax decrease in interest expense.

These increases were partially offset by a $1.0 million after-tax decrease in equity income from our unconsolidated affiliates and a $0.3 million after-tax increase related to the income attributable to the noncontrolling interest of United Tote.

• Adjusted EBITDA increased $27.0 million driven by a $23.4 million increase from the Live and Historical Racing segment primarily due to the opening of The Rose Gaming Resort in November 2024 in Northern Virginia and growth at our Kentucky HRM properties, a $3.5 million increase from the Wagering Services and Solutions segment primarily due to Exacta, and a $0.1 million increase from All Other.

These increases were partially offset by a $13.4 million decrease from the Gaming segment driven by a higher effective state gaming tax rate at Terre Haute Casino Resort, the elimination of HRMs in Louisiana, net decreases at our other wholly owned gaming properties, and net decreases from our equity investments.

Six Months Ended June 30, 2025, Compared to Six Months Ended June 30, 2024

• Net revenue increased $95.4 million driven by a $72.6 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 and growth at our other HRM properties, a $15.8 million increase from the Gaming segment primarily driven by the opening of the Terre Haute Casino Resort in April 2024, partially offset by net decreases at our other wholly owned gaming properties, and a $7.0 million increase from the Wagering Services and Solutions segment primarily due to Exacta.

• Operating income increased $6.0 million driven by a $5.4 million increase from the Live and Historical Racing segment primarily due to the opening of The Rose Gaming Resort in Northern Virginia and growth at our other HRM properties, a $6.2 million increase in the Wagering Services and Solutions segment primarily due to Exacta, and a $0.7 million decrease from the Gaming segment primarily due to net decreases at our wholly owned gaming properties, offset by the opening of the Terre Haute Casino Resort in April 2024.

Further offsetting operating income was a $3.2 million increase in selling, general and administrative expenses, a $2.4 million impairment of HRMs in Virginia, and a $2.5 million decrease in All Other operating income, partially offset by a $3.2 million decrease in transaction expense, net.

• Net income attributable to Churchill Downs Incorporated increased $3.9 million.

The following impacted the comparability of the Company's net income for the six months ended June 30, 2025 compared to the six months ended June 30, 2024:

a $5.5 million after-tax decrease in transaction, pre-open and other expenses and a $1.8 million after-tax impairment charge in the current year quarter related to a write-off of obsolete HRMs in Virginia.

These were partially offset by a $6.3 million after-tax decrease in other recoveries, net primarily driven by insurance claim proceeds recorded in the prior year.

Excluding these items, net income increased $4.9 million due to a $13.1 million after-tax increase primarily driven by lower state tax expense and the results of our operations, partially offset by a $4.8 million after-tax increase in interest expense associated primarily with higher outstanding debt balances, a $2.2 million after-tax decrease in equity income from our unconsolidated affiliates, and a $1.2 million after-tax increase due to a portion of the Company's income from United Tote being recognized as income attributable to a noncontrolling interest.

• Adjusted EBITDA increased $8.7 million driven by an $18.5 million increase from the Live and Historical Racing segment primarily due to the opening of The Rose Gaming Resort in Northern Virginia in November 2024, and a $3.5 million increase from the Wagering Services and Solutions segment primarily due to Exacta.

Gaming Adjusted EBITDA was consistent with the prior year quarter.

Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024

• Net revenue increased $149.9 million driven by a $125.1 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 and growth at our other HRM properties, an $11.1 million increase from the Gaming segment primarily driven by the opening of the Terre Haute Casino Resort in April 2024, partially offset by net decreases at our other wholly owned gaming properties, and a $13.7 million increase from the Wagering Services and Solutions segment primarily due to increased Derby Week wagering at TwinSpires Horse Racing and Exacta.

• Operating income decreased $21.9 million driven by an increase in impairment expense of $43.6 million primarily related to the net impairment of Chasers' gaming rights, a $2.9 million decrease from All other, a $2.7 million increase in transaction expenses, a $2.7 million increase in SG&A expenses and a $1.7 million decrease from the Gaming segment.

These decreases were partially offset by a $23.6 million increase from the Live and Historical segment driven by the opening of The Rose Gaming Resort in November 2024 and the opening of Owensboro Racing and Gaming in February 2025, and an $8.1 million increase from Wagering Services and Solutions.

• Net income attributable to Churchill Downs Incorporated decreased $23.4 million.

The following impacted the comparability of the Company's net income for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024:

a $33.0 million after-tax increase in impairment charges in the current year primarily due to the impairment of the Chasers' gaming rights.

Excluding this item, net income increased $9.6 million due to a $17.5 million after-tax increase driven by tax expense and the results of our operations, partially offset by a $5.7 million after-tax increase in interest expense associated primarily with higher outstanding debt balances, a $1.6 million after-tax decrease in equity income from our unconsolidated affiliates, and a $0.6 million after-tax increase related to the income attributable to the noncontrolling interest of United Tote.

• Adjusted EBITDA increased $35.7 million driven by a $41.9 million increase from the Live and Historical Racing segment primarily due to the opening of The Rose Gaming Resort in Northern Virginia in November 2024, and a $7.0 million increase from the Wagering Services and Solutions segment primarily due to Exacta.

These increases were partially offset by a $12.7 million decrease from the Gaming segment driven by net decreases at our wholly owned gaming properties and equity investments, offset by the opening of the Terre Haute Casino Resort in April 2024, and a $0.5 million decrease from All other.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025

Revenue by Segment

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

Three Months Ended June 30, Change Six Months Ended June 30, Change

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

(in millions) 2025 2024 2025 2024

5 unchanged sentences

Net Revenue $ 683.0 $ 628.5 $ 54.5 $ 2,260.0 $ 2,110.1 $ 149.9

Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024

• Live and Historical Racing revenue increased $50.7 million due to a $23.8 million increase from our Virginia HRM venues, a $22.0 million increase from our Kentucky HRM venues, and a $4.9 million increase from Churchill Downs Racetrack.

The Virginia HRM increase was primarily due to a $24.4 million net increase from our Northern Virginia venues from the November 2024 opening of The Rose and a $3.4 million increase from our May 2025 expansion at our Richmond venue, partially offset by a $4.0 million net decrease from our five other Virginia venues.

The Kentucky HRM increase was primarily due to a $10.0 million net increase from our Western Kentucky venues, a $4.7 million net increase from our Northern Kentucky venues, a $4.1 million net increase from our Louisville venues, and a $3.2 million net increase from our Southwestern venue.

The Churchill Downs Racetrack increase was primarily due to record-breaking 2025 Spring Meet wagering and growth in Derby Week wagering and licensing/sponsorship revenue that was partially offset by lower Derby Week ticketing revenue.

• Wagering Services and Solutions revenue increased $8.5 million primarily due to a $5.1 million increase from TwinSpires Horse Racing primarily due to higher Derby Week wagering and a $3.4 million increase from Exacta attributable to incremental HRMs in Virginia and New Hampshire.

• Gaming revenue decreased $8.1 million due to a $5.2 million decrease from the cessation of HRM operations in Louisiana and a $2.9 million net decrease at our nine other wholly owned gaming properties.

• All Other revenue increased $0.4 million primarily due to intercompany revenue related to the captive insurance company.

Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024

• Live and Historical Racing revenue increased $53.3 million due to a $30.1 million increase from our Virginia HRM venues, a $20.9 million increase from our Kentucky HRM venues, and a $2.3 million increase primarily from our temporary facility at Casino Salem in New Hampshire.

The Virginia HRM increase was due to a $26.0 million net increase from our Northern Virginia venues and a $5.1 million net increase from our Central Virginia venues.

These increases were partially offset by a $1.0 million net decrease from our four other Virginia venues.

The Kentucky HRM increase was due to a $12.2 million increase from our Western Kentucky venues, a $3.5 million increase from our Louisville venues, a $3.0 million increase from our Northern Kentucky venues, and a $2.2 million increase from our Southwestern Kentucky venue.

• Wagering Services and Solutions revenue increased $8.5 million due to a $5.3 million increase from TwinSpires Horse Racing, a $3.0 million increase from Exacta attributable to incremental HRMs in Virginia and New Hampshire, and a $0.2 million increase from our sports betting business.

• Gaming revenue decreased $4.8 million due to a $6.1 million decrease from the cessation of HRM operations in Louisiana, partially offset by a $1.3 million net increase primarily from our New York, Maine, Indiana, and Iowa properties.

• All Other revenue decreased $0.4 million primarily due to intercompany revenue related to the captive insurance company.

All captive revenue is eliminated in consolidation.

Six Months Ended June 30, 2025, Compared to Six Months Ended June 30, 2024

• Live and Historical Racing revenue increased $78.2 million due to a $42.1 million increase from our Virginia HRM venues, a $30.9 million increase from our Kentucky HRM venues, and $5.2 million increase primarily at Churchill Downs Racetrack.

The Virginia HRM increase was primarily due to a $46.8 million net increase from our Northern Virginia venues from the November 2024 opening of The Rose and a $2.8 million increase from our May 2025 expansion at our Richmond venue, partially offset by a $7.5 million net decrease from our five other Virginia venues.

The Kentucky HRM increase was primarily due to a $15.7 million net increase from our Western Kentucky venues, a $7.4 million net increase from our Northern Kentucky venues, a $2.7 million net increase from our Louisville venues, and a $5.1 million net increase from our Southwestern venue.

The Churchill Downs Racetrack increase was primarily due to recording-breaking 2025 Spring Meet wagering and growth in Derby Week wagering and licensing/sponsorship revenue that was partially offset by lower Derby Week ticketing revenue.

• Wagering Services and Solutions revenue increased $10.2 million due to a $6.4 million increase from Exacta attributable to incremental HRMs in Virginia and New Hampshire and a $5.8 million increase in TwinSpires Horse Racing primarily due to Derby Week wagering.

These increases were partially offset by a $2.0 million decrease from our sports betting business.

Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024

• Live and Historical Racing revenue increased $131.5 million due to a $72.2 million increase from our Virginia HRM venues, a $51.8 million increase from our Kentucky HRM venues, a $6.0 million increase from Churchill Downs Racetrack driven by Derby Week, and a $1.5 million increase primarily from our temporary facility at Casino Salem in New Hampshire.

The Virginia HRM increase was primarily due to a $72.7 million net increase from our Northern Virginia venues and a $5.2 million net increase from our Central Virginia venues, partially offset by a $5.7 million net decrease from our four other Virginia venues.

The Kentucky HRM increase was primarily due to a $27.7 million increase from our Western Kentucky venues, a $10.5 million increase from our Northern Kentucky venues, a $7.4 million increase from our Southwestern venue, and a $6.2 million increase from our Louisville venues.

• Wagering Services and Solutions revenue increased $18.7 million due to an $11.1 million increase in TwinSpires Horse Racing primarily due to Derby Week wagering and a $9.4 million increase from Exacta attributable to incremental HRMs in Virginia and New Hampshire.

These increases were partially offset by a $1.8 million net decrease from our sports betting business.

• Gaming revenue increased $11.1 million due to a $31.1 million increase primarily attributable to the opening of the Terre Haute Casino Resort in April 2024, partially offset by a $20.0 million net decrease at our nine other wholly owned gaming properties.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025

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

• 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, 2025

Consolidated Operating Expense

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

Three Months Ended June 30, Change Six Months Ended June 30, Change

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

(in millions) 2025 2024 2025 2024

8 unchanged sentences

Transaction expense, net 1.9 (4.0) 5.9 3.4 0.7 2.7

Asset impairments 2.4 — 2.4 2.4 — 2.4

Asset impairments, net 45.1 3.9 41.2 47.5 3.9 43.6

Other operating expense 59.1 50.8 8.3 188.7 170.9 17.8

Total expense $ 585.0 $ 502.6 $ 82.4 $ 1,699.7 $ 1,527.9 $ 171.8

Three and Six Months Ended June 30, 2025, Compared to Three and Six Months Ended June 30, 2024

Operating expenses increased $46.0 million and $89.4 million for the three and six months ended June 30, 2025 compared to June 30, 2024 primarily due to the opening of Terre Haute Casino Resort in Indiana in April 2024 and the hotel in May 2024, The Rose Gaming Resort in Virginia in November 2024, and Owensboro Racing and Gaming in February 2025.

Asset impairments for the three and six months ended June 30, 2025 include a $2.4 million write-off in the second quarter of 2025 of HRMs in Virginia that are no longer in use.

Three and Nine Months Ended September 30, 2025, Compared to Three and Nine Months Ended September 30, 2024

Operating expenses increased $82.4 million and $171.8 million for the three and nine months ended September 30, 2025 compared to September 30, 2024 primarily due to the openings of Terre Haute Casino Resort in Indiana in April 2024 and the hotel in May 2024, The Rose Gaming Resort in Virginia in November 2024, Owensboro Racing and Gaming in February 2025, and the Roseshire Gaming Palor in September 2025, as well as the renovation and expansion of our Richmond venue and the addition of the temporary facility at Casino Salem in New Hampshire.

Asset impairments for the three and nine months ended September 30, 2025 include a $2.4 million write-off in the second quarter of 2025 of HRMs in Virginia that are no longer in use and a $45.1 million net impairment of the gaming rights for Chasers Poker Room in the third quarter of 2025.

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 June 30, Change Six Months Ended June 30, Change

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

(in millions) 2025 2024 2025 2024

5 unchanged sentences

Total Adjusted EBITDA $ 262.3 $ 235.3 $ 27.0 $ 958.3 $ 922.6 $ 35.7

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025

Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024

• Live and Historical Racing Adjusted EBITDA increased $17.3 million primarily due to a $15.3 million increase from our Kentucky HRM venues and a $3.0 million increase from our Virginia HRM venues, partially offset by a $1.0 million decrease at Churchill Downs Racetrack.

The Kentucky HRM increase was primarily due to a $5.2 million net increase from our Louisville venues, a $4.3 million net increase from our Northern Kentucky venues, a $3.6 million net increase from our Western Kentucky venues, and a $2.2 million net increase from our Southwestern venue.

The Virginia HRM increase was primarily due to a $5.6 million net increase from our Northern Virginia venues and a $1.8 million increase from our May 2025 expansion at our Richmond venue, partially offset by a $3.0 million net decrease from our five other Virginia venues and a $1.4 million decrease from increased handle tax.

The Churchill Downs Racetrack decrease was primarily due to lower Derby Week ticketing revenue and higher pari-mutuel taxes that were partially offset by increased wagering and licensing/sponsorship revenue.

• Wagering Services and Solutions Adjusted EBITDA increased $1.8 million due to a $3.4 million increase from Exacta attributable to incremental HRMs in Virginia and New Hampshire and a $0.8 million increase from our sports betting business, partially offset by a $2.4 million decrease from TwinSpires Horse Racing due to the increased legal expenses and increased marketing related to Derby Week.

• Gaming Adjusted EBITDA decreased $13.4 million due to a $11.6 million decrease from our wholly owned gaming properties and a $1.8 million decrease from our equity investments.

The decrease from our eight wholly owned gaming properties was due to a $7.0 million decrease at Terre Haute Casino Resort primarily from a higher effective state gaming tax rate in the current year as expected, a $1.4 million net decrease from the elimination of HRMs in Louisiana, and a $3.2 million net decrease at our other wholly owned gaming properties.

The decrease from our equity investments was due to a $2.6 million decrease from Rivers Des Plaines, partially offset by a $0.8 million increase from Miami Valley Gaming.

• All Other Adjusted EBITDA increased $0.4 million primarily due to the reduction of corporate legal-related fees in the current quarter, partially offset by increased all other corporate-related expenses.

Six Months Ended June 30, 2025, Compared to Six Months Ended June 30, 2024

• Live and Historical Racing Adjusted EBITDA increased $18.5 million due to a $18.5 million increase from our Kentucky HRM venues and a $1.0 million increase from our Virginia HRM venues, partially offset by a $1.0 million decrease primarily from Churchill Downs Racetrack.

The Kentucky HRM increase was primarily due to a $5.0 million net increase from our Louisville venues, a $5.8 million net increase from our Northern Kentucky venues, a $4.1 million net increase from our Western Kentucky venues, and a $3.6 million net increase from our Southwestern venues.

The Virginia HRM increase was primarily due to a $9.2 million net increase from our Northern Virginia venues and a $1.0 million increase from our May 2025 expansion at our Richmond venue, partially offset by a $9.2 million net decrease from our five other Virginia venues.

• Wagering Services and Solutions Adjusted EBITDA increased $3.5 million due to a $7.1 million increase from Exacta attributable to incremental HRMs in Virginia and New Hampshire, partially offset by a $3.4 million decrease attributable to TwinSpires Horse Racing and a $0.2 million decrease from our sports betting business.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025

Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024

• Live and Historical Racing Adjusted EBITDA increased $23.4 million due to a $12.4 million increase from our Kentucky HRM venues, a $10.8 million increase from our Virginia HRM venues, and a $0.2 million increase from our temporary facility at Casino Salem in New Hampshire.

The Kentucky HRM increase was primarily due to a $4.6 million increase from our Western Kentucky venues, a $3.9 million increase from our Louisville venues, a $3.1 million increase from our Northern Kentucky venues, and a $0.8 million increase from our Southwestern Kentucky venue.

The Virginia HRM increase was primarily due to a $11.3 million net increase from our Northern Virginia venues, which includes $3.5 million from a one-time business interruption insurance recovery related to the delayed opening of The Rose Gaming Resort in the fourth quarter of 2024, and a $1.1 million net increase from our Central Virginia venues, partially offset by a $1.1 million net decrease from our four other Virginia venues and a $0.5 million increase in shared services expense.

• Wagering Services and Solutions Adjusted EBITDA increased $3.5 million due to a $2.8 million increase from Exacta attributable to incremental HRMs in Virginia and New Hampshire, a $0.4 million increase from our sports betting business, and a $0.3 million net increase from TwinSpires Horse Racing.

• Gaming Adjusted EBITDA was consistent with the prior year quarter.

Our wholly owned gaming properties decreased $0.5 million which was offset by a $0.5 million increase from our equity investments.

The decrease from our wholly owned gaming properties was due to a $1.4 million net decrease from the cessation of HRM operations in Louisiana and a $0.9 million net increase primarily from our New York, Maine, Indiana, and Iowa properties.

The increase from our equity investments was due to a $1.1 million increase from Miami Valley Gaming, partially offset by a $0.6 million decrease from Rivers Des Plaines.

• All Other Adjusted EBITDA increased $0.1 million primarily due to decreased corporate-related expenses offset by a decrease related to our captive insurance company.

Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024

• Live and Historical Racing Adjusted EBITDA increased $41.9 million due to a $30.9 million increase from our Kentucky HRM venues and an $11.8 million increase from our Virginia HRM venues, and a $0.2 million increase from the temporary facility at Casino Salem in New Hampshire, partially offset by a $1.0 million decrease primarily from Churchill Downs Racetrack due to Derby Week.

The Kentucky HRM increase was primarily due to an $8.9 million increase from our Northern Kentucky venues, an $8.9 million increase from our Louisville venues, an $8.7 million increase from our Western Kentucky venues, and a $4.4 million increase from our Southwestern venues.

The Virginia HRM increase was primarily due to a $20.5 million net increase from our Northern Virginia venues which includes $3.5 million of one-time business interruption insurance recovery related to the delayed opening of The Rose Gaming Resort in fourth quarter 2024, partially offset by a $4.0 million decrease from our Western Virginia venues, a $2.9 million net decrease from our Southern Virginia venues, and a $1.8 million net decrease from our Central Virginia venues.

• Wagering Services and Solutions Adjusted EBITDA increased $7.0 million due to a $9.9 million increase from Exacta attributable to incremental HRMs in Virginia and New Hampshire, and a $0.2 million net increase from our sports betting business, partially offset by a $3.1 million net decrease attributable to TwinSpires Horse Racing.

• Gaming Adjusted EBITDA decreased $12.7 million due to a $7.0 million decrease from our wholly owned gaming properties and a $5.7 million decrease from our equity investments.

The decrease from our wholly owned gaming properties was due to a $11.1 million decrease from nine of our properties, partially offset by a $4.5 million increase from the opening of the Terre Haute Casino Resort in April 2024.

The decrease from our wholly owned gaming properties was due to an $11.6 million decrease from our existing properties, partially offset by a $4.6 million increase from the opening of the Terre Haute Casino Resort in April 2024.

The decrease from our equity investments was due to a $7.5 million decrease from Rivers Des Plaines, partially offset by a $1.8 million increase from Miami Valley Gaming.

• All Other Adjusted EBITDA decreased $0.6 million driven primarily by increased corporate administrative expenses, offset by a reduction in corporate legal-related fees.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025

• All Other Adjusted EBITDA decreased $0.5 million driven primarily by increased corporate administrative expenses offset by a decrease related to our captive insurance company.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025

Reconciliation of Comprehensive Income to Adjusted EBITDA

Three Months Ended June 30, Change Six Months Ended June 30, Change

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

(in millions) 2025 2024 2025 2024

Net income and comprehensive income attributable to Churchill Downs Incorporated $ 38.1 $ 65.4 $ (27.3) $ 331.7 $ 355.1 $ (23.4)

Net income attributable to noncontrolling interest 0.7 0.9 (0.2) 1.2 0.9 0.3

Net income attributable to noncontrolling interests 1.1 0.8 0.3 2.3 1.7 0.6

Net income 39.2 66.2 (27.0) 334.0 356.8 (22.8)

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Other expense, net 2.9 1.0 1.9 7.7 1.3 6.4

Asset impairments 2.4 — 2.4 2.4 — 2.4

Asset impairments, net 45.1 3.9 41.2 47.5 3.9 43.6

Transaction expense, net 1.9 (4.0) 5.9 3.4 0.7 2.7

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The following is a summary of our overall financial position:

(in millions) June 30, 2025 December 31, 2024 Change

(in millions) September 30, 2025 December 31, 2024 Change

Total assets $ 7,454.8 $ 7,275.9 $ 178.9

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

• Total assets increased $99.8 million driven by increased capital expenditures primarily at Churchill Downs Racetrack, Owensboro Racing and Gaming, and at our Richmond and Henrico Virginia HRM locations.

Current assets also increased, driven by restricted cash and accounts receivable.

• Total assets increased $178.9 million driven by the acquisition of the gaming rights for Casino Salem and increased capital expenditures primarily at Churchill Downs Racetrack, Owensboro Racing and Gaming, and at our Virginia HRM locations in Richmond and Henrico County, partially offset by the impairment of the gaming rights related to Chasers.

• Total liabilities increased $203.1 million driven primarily by an increase in the outstanding balance on the Revolver, which is included in long-term debt, and increases in income taxes payable and accounts payable.

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• Total equity decreased $48.7 million driven by share repurchases, partially offset by net income.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025

Liquidity and Capital Resources

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

(in millions) Six Months Ended June 30, Change

(in millions) Nine Months Ended September 30, Change

Cash flows from:

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Financing activities (236.6) (216.7) (19.9)

Six Months Ended June 30, 2025, Compared to the Six Months Ended June 30, 2024

Nine Months Ended September 30, 2025, Compared to the Nine Months Ended September 30, 2024

• Cash flows provided by operating activities increased $32.7 million driven by a decrease in cash paid income taxes and interest, partially offset by decreased distributions from our unconsolidated affiliates.

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 $124.0 million driven by a decrease in capital expenditures in 2025.

• Cash flows used in financing activities increased $113.6 million primarily driven by share repurchases in 2025.

• Cash flows used in investing activities increased $5.6 million driven by the Salem Transaction partially offset by a decrease in capital expenditures in 2025.

• Cash flows used in financing activities increased $19.9 million primarily driven by an increase in borrowings on the revolver to fund the Salem Transaction partially offset by share repurchases in 2025.

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

Starting Gate Pavilion and Courtyard (completed in April 2025) as well as enhancements to The Mansion and Finish Line Suites at Churchill Downs Racetrack;

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.

the Roseshire Gaming Parlor in Henrico County, Virginia;

and the Casino Salem venue in Salem, New Hampshire.

We currently expect our project capital to be approximately $200.0 to $240.0 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.

Common Stock Repurchase Program

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.

On July 22, 2025, the Board of Directors of the Company approved a common stock repurchase program of up to $500.0 million (the "July 2025 Stock Repurchase Program").

The July 2025 Stock Repurchase Program includes and is not in addition to the $169.2 million previously remaining under the March 2025 Stock Repurchase Program.

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.

We had approximately $184.2 million of repurchase authority remaining under the 2025 Stock Repurchase Program at June 30, 2025, based on trade date.

We had approximately $461.5 million of repurchase authority remaining under the July 2025 Stock Repurchase Program at September 30, 2025, based on trade date.

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

The March 2025 Stock Repurchase Program included and was not in addition to the $125.6 million remaining under the 2021 Stock Repurchase Program.

As described above, the March 2025 Stock Repurchase Program has since been replaced by the July 2025 Stock Repurchase Program.

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 JUNE 30, 2025

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025

Credit Facilities and Indebtedness

The following table presents our debt outstanding:

(in millions) June 30, 2025 December 31, 2024 Change

(in millions) September 30, 2025 December 31, 2024 Change

Revolver $ 619.0 $ 377.5 $ 241.5

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Credit Agreement

At June 30, 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"), $287.2 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 September 30, 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"), $286.5 million senior secured term loan B-1 (the "Term Loan B-1"), $1.1 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.

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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 June 30, 2025, that applicable margin was 150 basis points which was based on the pricing grid in the Credit Agreement.

The Company had $686.9 million available borrowing capacity, after consideration of $9.1 million in outstanding letters of credit, under the Revolver as of June 30, 2025.

As of September 30, 2025, that applicable margin was 150 basis points which was based on the pricing grid in the Credit Agreement.

The Company had $572.8 million available borrowing capacity, after consideration of $8.2 million in outstanding letters of credit, under the Revolver as of September 30, 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 June 30, 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 $178.0 million assuming no change in the weighted average borrowing rate of 6.0%, which was in place as of June 30, 2025.

During the six months ended June 30, 2025, we had repayments of principal and interest on the Credit Agreement of $603.8 million.

For the period ended September 30, 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 $182.3 million assuming no change in the weighted average borrowing rate of 5.8%, which was in place as of September 30, 2025.

During the nine months ended September 30, 2025, we had repayments of principal and interest on the Credit Agreement of $841.7 million.

2027 Senior Notes

As of June 30, 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").

As of September 30, 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 Indenture.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025

2028 Senior Notes

As of June 30, 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.

As of September 30, 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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2030 Senior Notes

As of June 30, 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").

As of September 30, 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 June 30, 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").

As of September 30, 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 June 30, 2025, minimum rent payable under operating leases was $36.4 million, with $7.1 million due in the next twelve months.

As of June 30, 2025, minimum rent payable accounted for as financing obligations was $52.5 million, with $5.1 million due in the next twelve months.

As of September 30, 2025, minimum rent payable under operating leases was $56.0 million, with $7.0 million due in the next twelve months.

As of September 30, 2025, minimum rent payable accounted for as financing obligations was $47.9 million, with $4.8 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