Churchill Downs Inc 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains various "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), which provides certain "safe harbor" provisions for forward-looking statements. All forward-looking statements made in this report are made pursuant to the Act. The reader is cautioned that such forward-looking statements are based on information available at the time and / or management’s good faith belief with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Forward-looking statements speak only as of the date that the statement was made. We assume no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. Forward-looking statements are typically identified by the use of terms such as "anticipate," "believe," "could," "estimate," "expect," '"intend," "may," "might," "plan," "predict," "project," "seek," "should," "will," "scheduled," and similar words or similar expressions (or negative versions of such words or expressions), although some forward-looking statements are expressed differently. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from expectations include the following: • the occurrence of extraordinary events, such as terrorist attacks, public health threats, civil unrest, and inclement weather, including as a result of climate change; • the effect of economic conditions on our consumers' confidence and discretionary spending or our access to credit, including the impact of inflation; • 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; • the impact of significant competition, and the expectation that competition levels will increase; • changes in consumer preferences, attendance, wagering, and sponsorships; • risks associated with equity investments, strategic alliances, and other third-party agreements; • inability to respond to rapid technological changes in a timely manner; • concentration and evolution of slot machine and historical racing machine ("HRM") manufacturing and other technology conditions that could impose additional costs; • 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 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; • inability to identify, complete, or fully realize the benefits of, our proposed acquisitions, divestitures, development of new venues or the expansion of existing facilities on time, on budget, or as planned; • difficulty in integrating recent or future acquisitions into our operations; • 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 SEPTEMBER 30, 2025 29 • 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; • compliance with the Foreign Corrupt Practices Act or other similar laws and regulations, or applicable anti-money laundering regulations; • payment-related risks, such as risk associated with fraudulent credit card or debit card use; • work stoppages and labor problems; • risks related to pending or future legal proceedings and other actions; • highly regulated operations and changes in the regulatory environment could adversely affect our business; • restrictions in our debt facilities limiting our flexibility to operate our business; • failure to comply with the financial ratios and other covenants in our debt facilities and other indebtedness; • increases to interest rates (due to inflation or otherwise); • disruption in the credit markets or changes to our credit ratings may adversely affect our business; • increase in our insurance costs, or inability to obtain similar insurance coverage in the future, and any inability to recover under our insurance policies for damages sustained at our properties in the event of inclement weather and casualty events; and • other factors described under the heading "Risk Factors" in our most recent Annual Report on Form 10-K and in other filings we make with the Securities and Exchange Commission. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The following information is unaudited. Tabular dollars are in millions, except per share amounts. All per share amounts assume dilution unless otherwise noted. 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, 2025 30 Our Business 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 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, Wagering Services and Solutions, and Gaming. We aggregate our other businesses as well as certain corporate operations in All Other. Key Indicators to Evaluate Business Results and Financial Condition Our management monitors a variety of key indicators to evaluate our business results and financial condition. These indicators include changes in net revenue, operating expense, operating income, earnings per share, outstanding debt balance, operating cash flow, and capital spend. Our consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"). We also use non-GAAP measures, including EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA. We believe that the use of Adjusted EBITDA as a key performance measure of results of operations enables management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Our chief operating decision maker utilizes Adjusted EBITDA to evaluate segment performance, develop strategy, and allocate resources. 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 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 noncontrolling interests. Adjusted EBITDA excludes, as applicable: • Transaction expense, net which includes: – Acquisition, disposition, and property sale related charges; – Other transaction expense, including legal, accounting, and other deal-related expense; • Stock-based compensation expense; • Rivers Des Plaines' impact on our investments in unconsolidated affiliates from legal reserves and transaction costs; • Asset impairments, net; • Gain on property sales; • Legal reserves; • Pre-opening expense; and • Other charges, recoveries and expenses 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. 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, 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 SEPTEMBER 30, 2025 31 Specific State Gaming Regulations Louisiana In Louisiana, the 2021 Historical Horse Racing Act (the "2021 HHR Act") allowed off-track betting facilities ("OTBs") to have up to 50 HRMs. On October 25, 2022, a number of individual plaintiffs associated with video poker and truck stops, filed a lawsuit in the 19th Judicial District Court in East Baton Rouge, Louisiana against certain racetracks in Louisiana, including our Fair Grounds Racecourse and Slots property, alleging that the 2021 HHR Act is unconstitutional to the extent it purports to permit historical racing in a parish without a referendum. On June 8, 2023, plaintiffs filed a motion for summary judgment on the constitutional issues raised in their complaint and a hearing was conducted on September 11, 2023. On February 23, 2024, the judge issued a ruling in favor of plaintiffs granting summary judgment stating that: (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. The suspensive appeal allows the continued operation of HHR during the pendency of the appeal before the Louisiana Supreme Court. 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, which was denied on May 8, 2025. 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 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 September 30, Nine Months Ended September 30, (in millions) 2025 2024 Change 2025 2024 Change Net revenue $ 683.0 $ 628.5 $ 54.5 $ 2,260.0 $ 2,110.1 $ 149.9 Operating income 98.0 125.9 (27.9) 560.3 582.2 (21.9) Operating income margin 14 % 20 % 25 % 28 % Net income attributable to Churchill Downs Incorporated 38.1 65.4 (27.3) 331.7 355.1 (23.4) Adjusted EBITDA 262.3 235.3 27.0 958.3 922.6 35.7 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 32 • 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. 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 SEPTEMBER 30, 2025 33 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 (in millions) 2025 2024 2025 2024 Live and Historical Racing $ 305.7 $ 252.4 $ 53.3 $ 1,123.0 $ 991.5 $ 131.5 Wagering Services and Solutions 127.2 118.7 8.5 411.4 392.7 18.7 Gaming 265.5 270.3 (4.8) 799.0 787.9 11.1 All Other 2.2 2.6 (0.4) 6.5 4.5 2.0 Eliminations (17.6) (15.5) (2.1) (79.9) (66.5) (13.4) Net Revenue $ 683.0 $ 628.5 $ 54.5 $ 2,260.0 $ 2,110.1 $ 149.9 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. 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. • 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 34 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 (in millions) 2025 2024 2025 2024 Gaming taxes and purses $ 176.4 $ 160.1 $ 16.3 $ 554.5 $ 501.2 $ 53.3 Salaries and benefits 86.7 83.5 3.2 261.0 244.1 16.9 Content expense 45.2 43.4 1.8 131.8 132.4 (0.6) Selling, general and administrative expense 59.3 59.8 (0.5) 174.7 172.0 2.7 Depreciation and amortization 56.5 49.6 6.9 173.5 145.7 27.8 Marketing and advertising 24.2 21.9 2.3 77.8 68.6 9.2 Maintenance, insurance and utilities 23.9 27.3 (3.4) 67.1 70.5 (3.4) Property and other taxes 6.7 6.3 0.4 19.7 17.9 1.8 Transaction expense, net 1.9 (4.0) 5.9 3.4 0.7 2.7 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 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 We believe that the use of Adjusted EBITDA as a key performance measure of the results of operations enables management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. 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 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 (in millions) 2025 2024 2025 2024 Live and Historical Racing $ 116.4 $ 93.0 $ 23.4 $ 514.9 $ 473.0 $ 41.9 Wagering Services and Solutions 46.0 42.5 3.5 135.3 128.3 7.0 Gaming 123.3 123.3 — 374.1 386.8 (12.7) Total Segment Adjusted EBITDA 285.7 258.8 26.9 1,024.3 988.1 36.2 All Other (23.4) (23.5) 0.1 (66.0) (65.5) (0.5) Total Adjusted EBITDA $ 262.3 $ 235.3 $ 27.0 $ 958.3 $ 922.6 $ 35.7 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025 35 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 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 $0.5 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 36 Reconciliation of Comprehensive Income to Adjusted EBITDA 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 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) Adjustments Depreciation and amortization 56.5 49.6 6.9 173.5 145.7 27.8 Interest expense 75.6 73.1 2.5 222.1 217.0 5.1 Income tax provision 22.0 19.9 2.1 115.1 125.4 (10.3) Stock-based compensation expense 7.4 7.1 0.3 18.2 23.2 (5.0) Pre-opening expense 2.4 7.8 (5.4) 9.0 23.6 (14.6) Other expense, net 2.9 1.0 1.9 7.7 1.3 6.4 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 Other income, expense: Interest, depreciation and amortization expense related to equity investments 9.4 10.6 (1.2) 28.9 31.4 (2.5) Rivers Des Plaines' legal reserves and transactions costs — — — — 0.3 (0.3) Other charges and recoveries, net (0.1) 0.1 (0.2) (1.1) (6.7) 5.6 Total adjustments 223.1 169.1 54.0 624.3 565.8 58.5 Adjusted EBITDA $ 262.3 $ 235.3 $ 27.0 $ 958.3 $ 922.6 $ 35.7 Consolidated Balance Sheet The following is a summary of our overall financial position: (in millions) September 30, 2025 December 31, 2024 Change Total assets $ 7,454.8 $ 7,275.9 $ 178.9 Total liabilities 6,375.7 6,172.6 203.1 Total equity 1,034.9 1,083.6 (48.7) Significant items affecting the comparability of our Condensed Consolidated Balance Sheets include: • 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. These increases were partially offset by decreased current deferred revenue due to the recognition of revenue related to the 151st Kentucky Derby, and a decrease in dividends payable due to the payment of the annual dividend. • Total equity decreased $48.7 million driven by share repurchases, partially offset by net income. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025 37 Liquidity and Capital Resources The following table is a summary of our liquidity and cash flows: (in millions) Nine Months Ended September 30, Change Cash flows from: 2025 2024 Operating activities $ 673.8 $ 641.1 $ 32.7 Investing activities (421.4) (415.8) (5.6) Financing activities (236.6) (216.7) (19.9) 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 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 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; 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 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 $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. This represented a discount of 4.03% to the closing price on December 15, 2023 of $128.95. The repurchase of shares of common stock from TDG was approved by the Company's Board of Directors separately from and did not reduce the authorized amount remaining under the existing common stock repurchase program. The repurchase of the shares was funded using available cash and borrowings under the Company’s senior secured credit facility. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025 38 Credit Facilities and Indebtedness The following table presents our debt outstanding: (in millions) September 30, 2025 December 31, 2024 Change Revolver $ 619.0 $ 377.5 $ 241.5 Term Loan B-1 due 2028 286.5 288.8 (2.3) Term Loan A due 2029 1,127.3 1,172.4 (45.1) 2027 Senior Notes 600.0 600.0 — 2028 Senior Notes 700.0 700.0 — 2030 Senior Notes 1,200.0 1,200.0 — 2031 Senior Notes 600.0 600.0 — Total debt 5,132.8 4,938.7 194.1 Current maturities of long-term debt (63.1) (63.1) — Total debt, net of current maturities 5,069.7 4,875.6 194.1 Issuance costs, net of premiums and discounts (26.6) (31.5) 4.9 Net debt $ 5,043.1 $ 4,844.1 $ 199.0 Credit Agreement 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. 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, 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 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 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 SEPTEMBER 30, 2025 39 2028 Senior Notes 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%. The 2028 Senior Notes were issued in a private offering to qualified institutional buyers, with interest payable in arrears on January 15th and July 15th of each year, commencing on July 15th, 2018. The 3.25% premium is being amortized through interest expense, net over the term of the notes. The Company may redeem some or all the 2028 Senior Notes at redemption prices set forth in the Indenture. 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. The Company may redeem some or all the 2030 Senior Notes at redemption prices set forth in the Indenture. 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. The Company may redeem some or all of the 2031 Senior Notes at redemption prices set forth in the Indenture. Leases The Company leases certain real estate and other property. Most of our building and land leases have terms of 2 to 10 years and include one or more options to renew, with renewal terms that can extend the lease term from 1 to 5 years or more. 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, 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 The Company has other contractual obligations with commitments of $10.9 million, $1.5 million of which is due within the next twelve months.