Churchill Downs Inc 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CHURCHILL DOWNS INCORPORATED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME for the years ended December 31, (in millions, except per common share data) 2025 2024 2023 Net revenue: Live and Historical Racing $ 1,394.7 $ 1,225.6 $ 1,047.3 Wagering Services and Solutions 488.2 469.5 444.9 Gaming 1,042.9 1,039.1 968.6 All Other 0.1 0.1 0.9 Total net revenue 2,925.9 2,734.3 2,461.7 Operating expense: Live and Historical Racing 861.4 735.4 662.2 Wagering Services and Solutions 301.3 296.5 288.2 Gaming 763.0 748.9 700.0 All Other 17.6 15.0 15.6 Selling, general and administrative expense 246.2 237.7 202.3 Asset impairments, net 47.5 3.9 24.6 Transaction expense (benefit) 5.1 ( 12.1 ) 4.8 Total operating expense 2,242.1 2,025.3 1,897.7 Operating income 683.8 709.0 564.0 Other (expense) income: Interest expense, net ( 297.7 ) ( 289.8 ) ( 268.4 ) Equity in income of unconsolidated affiliates 139.4 144.9 146.3 Gain on the sale of assets — — 114.0 Miscellaneous, net 6.9 9.1 5.9 Total other (expense) income ( 151.4 ) ( 135.8 ) ( 2.2 ) Income from operations before provision for income taxes 532.4 573.2 561.8 Income tax provision ( 146.9 ) ( 144.1 ) ( 144.5 ) Net income 385.5 429.1 417.3 Net income attributable to noncontrolling interests 2.5 2.3 — Net income and comprehensive income attributable to Churchill Downs Incorporated $ 383.0 $ 426.8 $ 417.3 Net income attributable to Churchill Downs Incorporated per common share data: Basic net income $ 5.32 $ 5.73 $ 5.55 Diluted net income $ 5.29 $ 5.68 $ 5.49 Weighted average shares outstanding: Basic 71.4 74.0 75.2 Diluted 71.8 74.6 76.1 The accompanying notes are an integral part of the consolidated financial statements. 47 CHURCHILL DOWNS INCORPORATED CONSOLIDATED BALANCE SHEETS December 31, (in millions) 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 200.6 $ 175.5 Restricted cash 87.9 77.2 Accounts receivable, net 93.5 98.7 Income taxes receivable 17.0 14.5 Other current assets 44.2 46.4 Total current assets 443.2 412.3 Property and equipment, net 2,918.6 2,874.9 Investment in and advances to unconsolidated affiliates 684.6 661.2 Goodwill 900.2 900.2 Other intangible assets, net 2,515.3 2,409.0 Other assets 22.6 18.3 Total assets $ 7,484.5 $ 7,275.9 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 184.3 $ 180.3 Accrued expenses and other current liabilities 400.5 402.0 Current deferred revenue 54.7 52.9 Current maturities of long-term debt 63.1 63.1 Dividends payable 30.7 31.0 Total current liabilities 733.3 729.3 Long-term debt (net of current maturities and loan origination fees of $ 6.0 in 2025 and $ 7.7 in 2024) 1,985.9 1,767.9 Notes payable (net of debt issuance costs of $ 18.8 in 2025 and $ 23.8 in 2024) 3,081.2 3,076.2 Non-current deferred revenue 15.4 20.0 Deferred income taxes 519.9 432.7 Other liabilities 93.0 146.5 Total liabilities 6,428.7 6,172.6 Commitments and contingencies Redeemable noncontrolling interest 46.1 19.7 Shareholders' equity: Preferred stock, no par value; 0.3 shares authorized; no shares issued or outstanding — — Common stock, no par value; 300.0 shares authorized; 69.6 shares issued and outstanding December 31, 2025 and 73.5 shares at December 31, 2024 — — Retained earnings 1,010.7 1,084.6 Accumulated other comprehensive loss ( 1.0 ) ( 1.0 ) Total shareholders' equity 1,009.7 1,083.6 Total liabilities and shareholders' equity $ 7,484.5 $ 7,275.9 The accompanying notes are an integral part of the consolidated financial statements. 48 CHURCHILL DOWNS INCORPORATED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY for the years ended December 31, 2025, 2024 and 2023 Common Stock Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders' Equity (in millions, except per common share data) Shares Amount Balance, December 31, 2022 74.8 $ — $ 552.4 $ ( 0.9 ) $ 551.5 Net income attributable to Churchill Downs Incorporated 417.3 417.3 Issuance of common stock 0.3 3.1 3.1 Repurchase of common stock ( 0.5 ) ( 36.0 ) ( 19.3 ) ( 55.3 ) Taxes paid related to net share settlement of stock awards ( 0.1 ) ( 26.5 ) ( 26.5 ) Stock-based compensation 32.9 32.9 Cash dividends ($ 0.382 per share) ( 28.5 ) ( 28.5 ) Other ( 0.9 ) ( 0.9 ) Balance, December 31, 2023 74.5 — 894.5 ( 0.9 ) 893.6 Net income attributable to Churchill Downs Incorporated 426.8 426.8 Issuance of common stock 0.7 4.2 4.2 Repurchase of common stock ( 1.5 ) ( 35.8 ) ( 153.2 ) ( 189.0 ) Reclassification to liability rewards ( 20.9 ) ( 20.9 ) Taxes paid related to net share settlement of stock awards ( 0.2 ) ( 27.3 ) ( 27.3 ) Stock-based compensation 32.0 32.0 Cash dividends ($ 0.409 per share) ( 30.1 ) ( 30.1 ) Other ( 0.4 ) ( 5.2 ) ( 0.1 ) ( 5.7 ) Balance, December 31, 2024 73.5 — 1,084.6 ( 1.0 ) 1,083.6 Net income attributable to Churchill Downs Incorporated 383.0 383.0 Issuance of common stock 0.4 5.0 5.0 Repurchase of common stock ( 4.2 ) ( 24.2 ) ( 401.1 ) ( 425.3 ) Taxes paid related to net share settlement of stock awards ( 0.1 ) ( 17.2 ) ( 17.2 ) Stock-based compensation 19.2 19.2 Cash dividends ($ 0.438 per share) ( 30.5 ) ( 30.5 ) Other ( 8.1 ) ( 8.1 ) Balance, December 31, 2025 69.6 $ — $ 1,010.7 $ ( 1.0 ) $ 1,009.7 The accompanying notes are an integral part of the consolidated financial statements. 49 CHURCHILL DOWNS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31, (in millions) 2025 2024 2023 Cash flows from operating activities: Net income $ 385.5 $ 429.1 $ 417.3 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 233.1 199.1 169.0 Equity in income of unconsolidated affiliates ( 139.4 ) ( 144.9 ) ( 146.3 ) Distributions from unconsolidated affiliates 116.0 138.7 155.1 Stock-based compensation 30.2 36.1 32.9 Deferred income taxes 86.8 44.5 47.4 Asset impairments 87.5 3.9 24.6 Gain on settlement of liability ( 40.0 ) — — Amortization of operating lease assets 6.4 5.6 6.2 Gain on sale of assets — — ( 114.0 ) Other 8.8 9.7 5.4 Changes in operating assets and liabilities, net of businesses acquired and dispositions: Income taxes ( 3.5 ) ( 4.5 ) ( 1.1 ) Deferred revenue ( 2.8 ) ( 12.1 ) 34.2 Other assets and liabilities 1.2 66.5 ( 25.4 ) Net cash provided by operating activities 769.8 771.7 605.3 Cash flows from investing activities: Capital maintenance expenditures ( 70.2 ) ( 83.6 ) ( 77.7 ) Capital project expenditures ( 204.7 ) ( 463.4 ) ( 598.8 ) Acquisition of businesses, net of cash acquired — — ( 241.3 ) Acquisition of gaming rights, net of cash acquired ( 185.3 ) — — Proceeds from sale of assets — — 195.7 Other ( 11.3 ) 1.8 4.1 Net cash used in investing activities ( 471.5 ) ( 545.2 ) ( 718.0 ) Cash flows from financing activities: Proceeds from borrowings under long-term debt obligations 1,098.1 965.5 1,771.1 Repayments of borrowings under long-term debt obligations ( 881.7 ) ( 900.8 ) ( 1,536.0 ) Payment of dividends ( 30.8 ) ( 29.2 ) ( 27.1 ) Repurchase of common stock ( 427.8 ) ( 186.0 ) ( 55.9 ) Taxes paid related to net share settlement of stock awards ( 17.0 ) ( 30.1 ) ( 25.5 ) Proceeds from pending equity transaction — — 14.4 Debt issuance costs ( 0.3 ) ( 2.6 ) ( 13.0 ) Change in bank overdraft ( 2.3 ) ( 10.9 ) 2.0 Other ( 0.7 ) ( 2.5 ) ( 0.7 ) Net cash (used in) provided by financing activities ( 262.5 ) ( 196.6 ) 129.3 Cash flows from discontinued operations: Operating cash flows of discontinued operations — 1.0 0.5 Net increase (decrease) in cash, cash equivalents and restricted cash 35.8 30.9 17.1 Cash, cash equivalents and restricted cash, beginning of year 252.7 221.8 204.7 Cash, cash equivalents and restricted cash, end of year $ 288.5 $ 252.7 $ 221.8 The accompanying notes are an integral part of the consolidated financial statements. 50 CHURCHILL DOWNS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) for the years ended December 31, (in millions) 2025 2024 2023 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 294.5 $ 306.8 $ 283.6 Taxes paid (net of refunds) by jurisdiction Federal $ 46.7 $ 83.3 $ 67.4 State Illinois 3.3 4.3 6.5 Virginia 3.3 2.8 3.4 Kentucky 2.4 3.6 5.7 Other 7.9 9.0 15.2 $ 63.6 $ 103.0 $ 98.2 Schedule of non-cash investing and financing activities: Dividends payable $ 30.7 $ 31.0 $ 29.3 Deferred payments on the acquisition of business included in other liabilities — 1.2 4.9 Property and equipment additions included in accounts payable and accrued expense and other current liabilities 30.1 43.7 95.1 Fair value of noncontrolling interest recognized in connection with asset acquisition 20.4 — — The accompanying notes are an integral part of the consolidated financial statements. 51 Churchill Downs Incorporated Notes to Consolidated Financial Statements 1. DESCRIPTION OF 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 acquisition, development, and operation of live and historical racing entertainment venues, the growth of the online wagering businesses, and the acquisition, development, and operation of regional casino gaming properties. We own and operate 17 live and historical racing entertainment venues with seven retail sportsbooks in three states, one of the largest online horse racing wagering platforms in the U.S., ten wholly owned casino gaming properties with nine retail sportsbooks in nine states. We were organized as a Kentucky corporation in 1928, and our principal executive offices are located in Louisville, Kentucky. 2. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. We consolidate all subsidiaries in which we have a controlling financial interest and variable interest entities ("VIEs") for which we or one of our consolidated subsidiaries is the primary beneficiary. We consolidate a VIE when we have both the power to direct the activities that most significantly impact the results of the VIE and the right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE. Use of Estimates Our financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"), which requires management to make estimates, judgments and assumptions that we believe are reasonable based on our historical experience, contract terms, observance of known trends in our Company and the industry as a whole and information available from other outside sources. Our estimates affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ from those initial estimates. Goodwill and Intangible Assets Goodwill and indefinite-lived intangible assets are required to be tested annually or more frequently if events or changes in circumstances indicate that it is more likely than not that an asset is impaired. An entity may first assess qualitative factors to determine whether it is necessary to complete the impairment test using a more likely than not criteria. If an entity believes it is more likely than not that the fair value of a reporting unit is greater than the reporting unit's carrying value, including goodwill, the quantitative impairment test can be bypassed. Alternatively, an entity has an unconditional option to bypass the qualitative assessment and proceed directly to performing the quantitative impairment test. If a quantitative impairment test of goodwill is required, we generally determine the fair value under the market and income valuation approaches using inputs primarily related to discounted projected cash flows and price multiples of publicly traded comparable companies. If a quantitative impairment test of our indefinite-lived intangible assets is required, we generally determine the fair value using the Greenfield Method for gaming rights and relief-from-royalty method of the income approach for trademarks. The Greenfield Method is an income approach methodology that calculates the present value based on a projected cash flow stream. Qualitative factors include macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, among others. These factors require judgments and estimates, and application of alternative assumptions could produce significantly different results. Evaluations of possible impairment require us to estimate, among other factors, forecasts of future operating results, revenue growth, operating expense, tax rates, start-up costs, capital expenditures, depreciation, working capital, discount rates, long-term growth rates, risk premiums, royalty rates, terminal values and fair market values of our reporting units and assets. The estimated future revenue and operating expenses, start-up costs, and discount rates are the primary assumptions and estimates in the valuation of gaming rights. Changes in estimates or the application of alternative assumptions could produce significantly different results. We perform our annual review for impairment of goodwill and indefinite-lived intangible assets on April 1 of each fiscal year, or more frequently if events or changes in circumstances indicate that it is more likely than not the relevant asset is impaired. Adverse industry or economic trends, lower projections of profitability, or a sustained decline in our market capitalization, among other items, may be indications of potential impairment issues, which are triggering events requiring the testing of an asset’s carrying value for recoverability. Goodwill is allocated and evaluated for impairment at the reporting unit level, which is 52 Churchill Downs Incorporated Notes to Consolidated Financial Statements defined as an operating segment or one level below an operating segment, referred to as a component. We are required to aggregate the components of an operating segment into one reporting unit if they have similar economic characteristics. Our gaming rights and trademarks are considered indefinite-lived intangible assets that do not require amortization based on our future expectations to operate our gaming facilities and use the trademarks indefinitely and our historical experience in renewing these intangible assets at minimal cost with various state gaming commissions. The indefinite lived-intangible assets carrying value are tested annually, or more frequently, if indicators of impairment exist, by comparing the fair value of the recorded assets to the associated carrying amount. If the carrying amount of the gaming rights and trademark intangible assets exceed fair value, an impairment loss is recognized. Other definite-lived intangible assets, consisting primarily of customer relationships and technology assets, are amortized over periods from seven to 15 years. Amortization expense related to the definite-lived intangible assets is provided on a straight-line basis, as it approximates the economic benefit over the estimated useful lives of the assets. With respect to definite-lived intangible assets, we periodically evaluate whether events and circumstances have occurred that may affect the estimated useful life or the recoverability of the remaining balance of such assets. If such events or circumstances indicate that the carrying amount of these assets may not be recoverable, we would estimate the future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected future cash flows were less than the carrying amount of the assets, we would recognize an impairment charge to reduce such assets to their fair value. Property and Equipment We review the carrying value of our property and equipment to be held and used in our operations whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable from estimated future undiscounted cash flows expected to result from the asset's use and eventual disposition. Adverse industry or economic trends, lower projections of profitability, or a significant adverse change in legal factors or in the business climate, among other items, may be indications of potential impairment issues. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, an impairment is recorded based on the fair value of the asset. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets as follows: 10 to 40 years for grandstands and buildings, two to 10 years for equipment, two to 10 years for furniture and fixtures and 10 to 20 years for tracks and other improvements. Our capital maintenance expenditures relate to the replacement of existing fixed assets with a useful life greater than one year that are obsolete, exhausted, or no longer cost effective to repair. Our capital project expenditures represent fixed asset additions related to land or building improvements to new or existing assets or purchases of new (non-replacement) equipment or software related to specific projects deemed necessary expenditures. Revenue Recognition We generate revenue from pari-mutuel wagering transactions with customers related to live races, simulcast races, and historical races as well as simulcast host fees earned from other wagering sites. Our racetracks that host live races also generate revenue through sponsorships, admissions (including luxury suites), personal seat licenses ("PSLs"), television rights, concessions, programs and parking. Concessions, programs, and parking revenue is recognized once the good or service is delivered. Our live racetracks' revenue and income are influenced by our racing calendar. Similarly, TwinSpires advance deposit wagering ("ADW") and United Tote revenue and income is influenced by racing calendars. Therefore, revenue and operating results for any interim quarter are not generally indicative of the revenue and operating results for the year and may not be comparable with results for the corresponding period of the previous year. We historically have had fewer live racing days during the first quarter of each year, and the majority of our live racing revenue occurs during the second quarter with the running of the Kentucky Oaks and Kentucky Derby. For live races we present at our racetracks, we recognize revenue on wagers we accept from customers at our racetrack ("on-track revenue") and revenue we earn from exporting our live racing signals to other racetracks, off-track betting facilities ("OTBs"), and ADW providers ("export revenue"). For simulcast races we display at our racetracks, OTBs, and TwinSpires' platforms, we recognize revenue we earn from providing a wagering service to our customers on these imported live races ("import revenue"). TwinSpires import revenue is generated through ADW which consists of patrons wagering through an advance deposit account. Each wagering contract for on-track revenue, and import revenue contains a single performance obligation and our export revenue contracts contain a series of distinct services that form a single performance obligation. The transaction price for on-track revenue and import revenue is fixed based on the established commission rate we are entitled to retain. The transaction price for export revenue is variable based on the simulcast host fee we charge our customers for exporting our signal. We may provide cash incentives in conjunction with wagering transactions we accept from TwinSpires' 53 Churchill Downs Incorporated Notes to Consolidated Financial Statements customers. These cash incentives represent consideration payable to a customer and therefore are treated as a reduction of the transaction price for the wagering transaction. Our export revenue contracts generally have a duration of one year or less. These arrangements are licenses of intellectual property containing a usage-based royalty. As a result, we have elected to use the practical expedient to omit disclosure related to remaining performance obligations for our export revenue contracts. We recognize on-track revenue, export revenue, and import revenue once the live race event is made official by the relevant racing regulatory body. We recognize revenue we earn from providing a wagering service to our customers on historical races at our historical racing machine ("HRM") facilities. The transaction price for HRM revenue is based on the established commission rate we are entitled to retain for each wager on the HRM. We recognize HRM revenue once the historical race has been completed on the HRM, net of the liability to the pool. We evaluate our on-track revenue, export revenue, import revenue, and HRM revenue contracts in order to determine whether we are acting as the principal or as the agent when providing services, which we consider in determining if revenue should be reported gross or net. An entity is a principal if it controls the specified service before that service is transferred to a customer. The revenue we recognize for on-track revenue, import revenue, and HRM revenue is the commission we are entitled to retain for providing a wagering service to our customers. For these arrangements, we are the principal as we control the wagering service; therefore, any charges, including any applicable simulcast fees, we incur for delivering the wagering service are presented as operating expenses. For export revenue, our customer is the third-party wagering site such as a racetrack, OTB, or ADW provider. Therefore, the revenue we recognize for export revenue is the simulcast host fee we earn for exporting our racing signal to the third-party wagering site. Our admission contracts are either for a single live racing event day or multiple days. Our PSLs, sponsorships, and television rights contracts generally relate to multiple live racing event days. Multiple day admission, PSLs, sponsorships, and television rights contracts contain a distinct series of services that form single performance obligations. Sponsorship contracts generally include performance obligations related to admissions and advertising rights at our racetracks. Television rights contracts contain a performance obligation related to the rights to distribute certain live racing events on media platforms. The transaction prices for our admissions, PSLs, sponsorships, and television rights contracts are fixed. We allocate the transaction price to our sponsorship contract performance obligations based on the estimated relative standalone selling price of each distinct service. The revenue we recognize for admissions to a live racing event day is recognized once the related event is complete. For admissions, PSLs, sponsorships, and television rights contracts that relate to multiple live racing event days, we recognize revenue over time using an output method of each completed live racing event day as our measure of progress. Each completed live racing event day corresponds with the transfer of the relevant service to a customer and therefore is considered a faithful depiction of our efforts to satisfy the promises in these contracts. This output method results in measuring the value transferred to date to the customer relative to the remaining services promised under the contracts. Certain premium live racing event days such as the Kentucky Derby and Oaks result in a higher value of revenue allocated relative to other live racing event days due to, among other things, the quality of thoroughbreds racing, higher levels of on-track attendance, national broadcast audience, local and national media coverage, and overall entertainment value of the event. While these performance obligations are satisfied over time, the timing of when this revenue is recognized is directly associated with the occurrence of our live racing events, which is when the majority of our revenues recognized at a point in time are also recognized. Timing of revenue recognition may differ from the timing of invoicing to customers for our long-term contracts for racing event-related services. We generally invoice customers prior to delivery of services for our admissions, PSLs, sponsorships, and television rights contracts. We recognize a receivable and a contract liability at the time we have an unconditional right to receive payment. When cash is received in advance of delivering services under our contracts, we defer revenue and recognize it in accordance with our policies for that type of contract. In situations where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts do not include a significant financing component. The primary purpose of our invoicing terms is to allow our customers to secure the right to the specific services provided under our contracts, not to receive financing from our customers. Gaming revenue primarily consists of gaming transactions. Other operating revenue, such as food and beverage or hotel revenue, is recognized once delivery of the product or service has occurred. The transaction price for gaming transactions is the difference between gaming wins and losses. Gaming wager revenue is recognized when the wager settles. The majority of our HRM facilities and gaming properties offer loyalty programs that enable customers to earn loyalty points based on their play. HRM and gaming transactions involve two performance obligations for those customers earning loyalty 54 Churchill Downs Incorporated Notes to Consolidated Financial Statements points under the Company’s loyalty programs and a single performance obligation for customers who do not participate in the program. Loyalty points are primarily redeemable for free wagering activities and food and beverage. For purposes of allocating the transaction price in an HRM and gaming transaction between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone selling price of the points earned, which is determined by the value of a loyalty point that can be redeemed for wagering activities or food and beverage. For gaming transactions, an amount of the transaction price allocated to the gaming performance obligation using the residual approach as the stand-alone price for wagers is highly variable and no set established price exists for such wagers. For HRM transactions, the amount of the transaction price allocated to the HRM performance obligation is the commission rate we are entitled to retain. The loyalty point contract liability amount is deferred and recognized as revenue when the customer redeems the points for a wagering transaction or food and beverage, and such goods or services are delivered to the customer. Income Taxes We use estimates and judgments for financial reporting to determine our current tax liability and deferred taxes. In accordance with the liability method of accounting for income taxes, we recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the consolidated financial statements or tax returns. Adjustments to deferred taxes are determined based upon the changes in differences between the book basis and tax basis of our assets and liabilities and measured using enacted tax rates we estimate will be applicable when these differences are expected to reverse. Changes in current tax laws, enacted tax rates or the estimated level of taxable income or non-deductible expense could change the valuation of deferred tax assets and liabilities and affect the overall effective tax rate and tax provision. When tax returns are filed, it is highly certain that some positions taken will be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that will be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with the tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying Consolidated Balance Sheets, along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Cash and Cash Equivalents We consider investments with original maturities of three months or less that are readily convertible to cash to be cash equivalents. We have, from time to time, cash in the bank in excess of federally insured limits. Under our cash management system, checks issued but not yet presented to banks that would result in negative bank balances when presented are classified as a current liability in the accompanying Consolidated Balance Sheets. Restricted Cash and Account Wagering Deposit Liabilities Restricted cash includes deposits collected from our TwinSpires' customers. Other amounts included in restricted cash represent amounts due to horsemen for purses, stakes and awards that are paid in accordance with the terms of our contractual agreements or statutory requirements. The Company’s insurance captive, which was established in April 2024, maintains cash reserves to cover insurable claims. Insurance captive cash reserves totaled $ 15.1 million and $ 8.3 million as of December 31, 2025 and December 31, 2024, respectively. Allowance for Credit Losses We maintain an allowance for doubtful accounts for current expected credit losses on our financial assets measured at amortized cost which are primarily included in accounts receivable, net in the accompanying Consolidated Balance Sheets. The Company evaluates current expected credit losses on a collective (pool) basis when similar risk characteristics exist. Write-offs are recognized when the Company concludes that all or a portion of a financial asset is no longer collectible. Any subsequent recovery is recognized when it occurs. Internal Use Software Internal use software costs for our Wagering Services and Solutions' segment software are capitalized in property and equipment, net in the accompanying Consolidated Balance Sheets, in accordance with accounting guidance governing computer software developed or obtained for internal use. Once the software is placed in operation, we amortize the capitalized software 55 Churchill Downs Incorporated Notes to Consolidated Financial Statements over the software's estimated economic useful life, which is generally three years . We capitalized internal use software of approximately $ 19.3 million in 2025, $ 18.4 million in 2024, and $ 13.2 million in 2023. We incurred amortization expense of approximately $ 12.8 million in 2025, $ 13.0 million in 2024, and $ 11.2 million in 2023, for projects which had been placed in service. Fair Value of Assets and Liabilities We adhere to a hierarchy for ranking the quality and reliability of the information used to determine fair values. Assets and liabilities that are carried at fair value are classified and disclosed in one of the following three categories: Level 1: Unadjusted quoted market prices in active markets for identical assets or liabilities; Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability; and Level 3: Unobservable inputs for the asset or liability. We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Investments in and Advances to Unconsolidated Affiliates We have investments in unconsolidated affiliates accounted for under the equity method. Under the equity method, carrying value is adjusted for our share of the investees' income and losses, amortization of certain basis differences as well as capital contributions to and distributions from these companies. We use the cumulative earnings approach to present distributions received from equity method investees. Distributions in excess of equity method income are recognized as a return of investment and recorded as investing cash inflows in the accompanying Consolidated Statements of Cash Flows. We classify income and losses as well as gains and impairments related to our investments in unconsolidated affiliates as a component of other income (expense) in the accompanying Consolidated Statements of Comprehensive Income. We evaluate our investments in unconsolidated affiliates for impairment whenever events or changes in circumstances indicate that the carrying value of the investment may have experienced an "other-than-temporary" decline in value. If such conditions exist, we compare the estimated fair value of the investment to the investment's carrying value to determine if an impairment is indicated and determine whether the impairment is "other-than-temporary" based on an assessment of all relevant factors, including consideration of our intent and ability to retain our investment until the recovery of the unrealized loss. We estimate fair value using a discounted cash flow analysis based on estimated future results of the investee. Business Combinations We account for acquisitions of businesses in accordance with ASC 805, Business Combinations . We initially allocate the purchase price of an acquisition to the assets acquired and liabilities assumed based on their estimated fair values, with any excess of consideration transferred recorded as goodwill. The results of operations of acquisitions are included in the consolidated financial statements from their respective dates of acquisition. Costs incurred to complete the business combination are not considered part of consideration and are expensed as incurred. Refer to Note 3, Acquisitions, for further information. Leases We determine if an arrangement is a lease at inception and categorize as either operating or finance based on the criteria of ASC 842. An arrangement contains a lease when the arrangement conveys the right to control the use of an identified asset over the lease term. Operating and finance leases are included in property and equipment, net; accrued expense and other current liabilities; and other liabilities in the accompanying Consolidated Balance Sheets. We generally do not separate lease and non-lease components for our lease contracts. We do not apply the right-of-use assets ("ROUA") and leases liability recognition requirements to short-term leases. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. These leases do not provide an implicit rate, so therefore we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future lease payments. ROUAs are recognized at the lease commencement date at the value of the lease liability, adjusted for any lease payments made prior to commencement and exclude lease incentives and initial direct costs incurred. The lease terms include all non-cancelable periods and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term for operating leases. Interest expense on the finance lease liabilities is recorded separately using the interest method. We do not have any material leases where we are the lessor. Debt Issuance Costs and Loan Origination Fees Debt issuance costs and loan origination fees associated with our term debt, Revolver (as defined in Note 11, Debt), and notes payable are amortized as interest expense over the term of each respective financial instrument. Debt issuance costs and loan 56 Churchill Downs Incorporated Notes to Consolidated Financial Statements origination fees associated with our term debt and notes payable are presented as a direct deduction from the carrying amount of the related liability. Debt issuance costs and loan origination fees associated with our revolver are presented as an asset. Casino and Pari-mutuel Taxes We recognize casino and pari-mutuel tax expense based on the statutory requirements of the federal, state, and local jurisdictions in which we conduct business. All of our casino taxes and the majority of our pari-mutuel taxes are gross receipts taxes levied on the gaming entity. We recognize these taxes as Live and Historical Racing, Wagering Services and Solutions, Gaming, and All Other operating expenses in our Consolidated Statements of Comprehensive Income. In certain jurisdictions governing our pari-mutuel contracts with customers, there are specific pari-mutuel taxes that are assessed on winning wagers from our customers, which we collect and remit to the government. These taxes are presented on a net basis. Purse Expense We recognize purse expense based on the statutorily or contractually determined amount that is required to be paid out in the form of purses to the qualifying finishers of horse races run at our racetracks in the period in which wagering occurs. We incur a liability for all unpaid purses that will be paid out on a future live race event. Self-insurance Accruals We are self-insured up to certain limits for costs associated with general liability, workers’ compensation and certain employee health coverage costs, and we purchase insurance for claims that exceed our self-insurance retention or deductible levels. We record self-insurance reserves that include accruals of estimated settlements for known claims ("Case Reserves"), as well as accruals of third-party actuarial estimates for claims incurred but not yet reported ("IBNR"). Case Reserves represent estimated liabilities for unpaid losses, based on a claims administrator's estimates of future payments on individual reported claims, including allocated loss adjustment expense, which generally include claims settlement costs such as legal fees. IBNR includes the provision for unreported claims, changes in case reserves and future payments on reopened claims. Key variables and assumptions include, but are not limited to, loss development factors and trend factors such as changes in workers' compensation laws, medical care costs and wages. These loss development factors and trend factors are developed using our actual historical losses. It is possible that reasonable alternative selections would produce different reserve estimates. Advertising and Marketing We expense the costs of general advertising, marketing and associated promotional expenditures at the time the costs are incurred. We incurred advertising and marketing expense of approximately $ 101.9 million in 2025, $ 90.7 million in 2024, and $ 83.4 million in 2023 in our accompanying Consolidated Statements of Comprehensive Income. Stock-Based Compensation All stock-based payments to employees and directors, including grants of performance share units ("PSU"), restricted stock, and restricted stock units are recognized as compensation expense over the service period based on the fair value on the date of grant. For awards that have a graded vesting schedule, we recognize expense on a straight-line basis for each separately vesting portion of the award. We recognize forfeitures of awards as incurred. The total compensation cost recognized for PSU awards is determined using the Monte Carlo valuation methodology, which factors in the achievement of the market criteria. Compensation cost for PSUs is recognized during the three-year performance and service period based on the probable achievement of the performance criteria. Compensation cost for equity-classified awards is recorded based on the grant date fair value of the award over the vesting period. Compensation cost for liability-classified awards is determined on a quarterly basis. Changes in market value of the liability-classified awards are recorded as adjustments to stock-based compensation expense over the vesting period. Computation of Net Income per Common Share Net income per common share is presented for both basic earnings per common share ("Basic EPS") and diluted earnings per common share ("Diluted EPS"). Basic EPS is based upon the weighted average number of common shares outstanding, excluding unvested stock awards, during the period plus vested common stock equivalents that have not yet been converted to common shares. Diluted EPS is based upon the weighted average number of shares used to calculate Basic EPS and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares result from applying the treasury stock method to unvested stock awards. Common Stock Share Repurchases From time-to-time, we repurchase shares of our common stock under share repurchase programs and privately negotiated transactions authorized by our Board of Directors. Share repurchases constitute authorized but unissued shares under the Kentucky laws under which we are incorporated. Our common stock has no par or stated value. We record the full value of share repurchases, upon the trade date, against common stock on our Consolidated Balance Sheets except when to do so would 57 Churchill Downs Incorporated Notes to Consolidated Financial Statements result in a negative balance in such common stock account. In such instances, we record the cost of any further share repurchases as a reduction to retained earnings. Due to the large number of shares of our common stock repurchased over the past several years, our common stock balance will frequently be zero at the end of any given reporting period. Refer to Note 9, Shareholders' Equity, for additional information on our share repurchases. Insurance Recoveries The Company maintains insurance policies that provide coverage for property damages and business interruption. Losses due to physical damages are recognized during the accounting period in which the loss occurs, while the amount of monetary assets to be received from the insurance policy is recognized when receipt of insurance recoveries is probable. Losses, which are reduced by the related probable insurance recoveries, are recorded as operating expenses on the accompanying Consolidated Statements of Comprehensive Income. Anticipated proceeds in excess of recognized losses would be considered a gain contingency and recognized when the contingency related to the insurance claim has been resolved. Recent Accounting Pronouncements - Adopted in 2025 In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. The amendments were effective for the Company for fiscal years beginning after December 15, 2024, and will be effective for the interim periods within fiscal years beginning after December 15, 2025. The adoption of this ASU, including retrospective application, did not have a material impact on our business. Refer to Note 8, Income Taxes and the Consolidated Statements of Cash Flows for the applicable disclosures required by this guidance. Recent Accounting Pronouncements - Effective in 2026 or thereafter In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the Securities and Exchange Commission’s ("SEC") Disclosure Update and Simplification Initiative, to amend certain disclosure and presentation requirements for a variety of topics within FASB's Accounting Standards Codification ("ASC"). These amendments align the requirements in the ASC regarding the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC. The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. The Company is currently evaluating the impact of this standard on the consolidated financial statements and related disclosures. In November 2024, FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Under ASU 2024-03, a public entity would be required to disclose information about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion for each income statement line item that contains those expenses. This standard is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently assessing the impact of this standard on the consolidated financial statements and related disclosures. In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses: Measurement of Credit Losses for Accounts Receivable and Contract Assets (Topic 326). The update permits entities to elect a practical expedient for estimating expected credit losses on current trade receivables and current contract assets by assuming that conditions existing at the balance sheet date will remain unchanged over the life of those assets. The updated standard is effective for fiscal years beginning after December 15, 2025, and interim periods beginning after December 15, 2026, with early adoption permitted. The Company is currently assessing the impact of this standard on the consolidated financial statements and related disclosures. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting for internal-use software. The update removes all references to software development stages and requires capitalization of software costs when management has committed to the software project and it is probable the software will be completed and perform its intended use. This standard is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. The Company is currently assessing the impact of this standard on the consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies certain interim reporting guidance. The update is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. The Company is currently assessing the impact of this standard on the consolidated financial statements and related disclosures. 58 Churchill Downs Incorporated Notes to Consolidated Financial Statements 3. ACQUISITIONS Casino Salem On August 27, 2025, the Company completed its acquisition of 90 % of the outstanding equity interests of Casino Salem (the "Salem Transaction") for a base purchase price of $ 180.0 million, and the transaction was treated as an asset acquisition because substantially all the value of the gross assets acquired was concentrated in the gaming rights. In conjunction with the acquisition, the Company recorded a $ 196.6 million indefinite-lived gaming rights intangible, which represented the fair value of the gaming rights at the date of acquisition. The fair value of the gaming rights acquired in the transaction was determined using the Greenfield Method, which is an income approach methodology that calculates the present value of the gaming rights intangible asset based on a projected cash flow stream. This method assumes that the gaming rights intangible asset provides the opportunity to develop a gaming facility in a specified region, and that the present value of the projected cash flows is a result of the realization of advantages contained in these rights. Under this methodology, the acquirer is expected to absorb all start-up costs, as well as incur all expenses pertaining to the acquisition and/or the creation of all tangible and intangible assets. The estimated future revenue, future operating expenses, start-up costs, and discount rate were the primary inputs in the valuation. The gaming rights intangible asset was assigned an indefinite useful life based on the Company's expected use of the asset and determination that no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of the gaming rights. Exacta Systems On August 22, 2023, the Company completed its acquisition of Exacta (the "Exacta Transaction") for purchase consideration of $ 248.2 million, net of cash acquired, consisting of a $ 241.3 million cash payment and $ 6.9 million of deferred payments, which were paid over two years . As of December 31, 2025, there were no deferred payments remaining. Exacta is a leading provider of central determinant system technology in HRMs across the country. The Exacta Transaction enables the Company to realize significant synergies related to the Company’s HRM operations. Exacta operates within the Company’s Wagering Services and Solutions segment and will continue to service its growing portfolio of third-party HRM operators in several states and is expanding its international presence. The following table summarizes the fair value of the assets acquired and liabilities assumed, net of cash acquired of $ 1.8 million, as of August 22, 2023: (in millions) Total Accounts receivable $ 9.0 Other current assets 3.0 Property and equipment 9.0 Goodwill 177.4 Other intangible assets 54.3 Other assets 0.9 Total assets acquired $ 253.6 Accounts payable 2.7 Accrued expenses and other current liabilities 2.1 Other liabilities assumed 0.6 Total liabilities assumed $ 5.4 Net assets acquired (net of cash) $ 248.2 59 Churchill Downs Incorporated Notes to Consolidated Financial Statements The fair value of the intangible assets consists of the following: (in millions) Fair Value Recognized Estimated Useful Life Technology asset $ 23.9 7.0 years Customer relationships 21.3 15.0 years Trademark 8.7 10.0 years Other 0.4 5.0 years Total intangible assets $ 54.3 Goodwill of $ 177.4 million related to the Exacta Transaction was recognized, of which $ 96.0 million was allocated to the Live and Historical Racing segment and $ 81.4 million was allocated to the Wagering Services and Solutions segment. The goodwill related to the Exacta Transaction is deductible for tax purposes. Valuation Techniques For these transactions any current assets and current liabilities were valued at the existing carrying values, as these items are short term in nature and represent management's estimated fair value of the respective items. Property and equipment acquired primarily relates to land, buildings, equipment, and furniture and fixtures. The fair value of the land was determined using the market approach and the fair values of the remaining property and equipment were primarily determined using the cost replacement method which is based on replacement or reproduction costs of the assets. The Company has not included other disclosures regarding the Salem and Exacta Transactions as these transactions are immaterial to our business. Lady Luck Casino Nemacolin On June 26, 2023, the Company's management agreement for Lady Luck Casino Nemacolin ("Lady Luck") in Farmington, Pennsylvania expired and was not renewed. The Company completed the sale of substantially all its assets at Lady Luck for an immaterial amount. Arlington On February 15, 2023, we closed on the sale of the Arlington property in Arlington Heights, Illinois, to the Chicago Bears for $ 197.2 million. We received net proceeds of $ 195.7 million for the 326 -acres and recognized a gain of $ 114.0 million on the sale, which is included in other (expense) income in the accompanying Consolidated Statements of Comprehensive Income. 60 Churchill Downs Incorporated Notes to Consolidated Financial Statements 4. PROPERTY AND EQUIPMENT Property and equipment, net is comprised of the following: December 31, (in millions) 2025 2024 Grandstands and buildings $ 2,425.3 $ 2,258.0 Equipment 940.7 847.5 Tracks and other improvements 424.0 411.1 Land 164.3 164.3 Furniture and fixtures 202.5 199.3 Construction in progress 102.5 140.3 4,259.3 4,020.5 Accumulated depreciation ( 1,378.0 ) ( 1,168.6 ) Subtotal 2,881.3 2,851.9 Operating lease right-of-use assets 37.3 23.0 Total $ 2,918.6 $ 2,874.9 Depreciation expense was $ 222.8 million in 2025, $ 188.0 million in 2024 and $ 161.8 million in 2023 and is classified in operating expense in the accompanying Consolidated Statements of Comprehensive Income. 5. GOODWILL Goodwill, by segment, is comprised of the following: (in millions) Live and Historical Wagering Services and Solutions Gaming All Other Total Balance, December 31, 2023 $ 376.2 $ 233.4 $ 290.3 $ — $ 899.9 Adjustments 0.1 0.2 — — 0.3 Balance, December 31, 2024 376.3 233.6 290.3 — 900.2 Adjustments — — — — — Balance, December 31, 2025 $ 376.3 $ 233.6 $ 290.3 $ — $ 900.2 In 2023, we established goodwill related to the Exacta Transaction. The final amount of goodwill was $ 177.4 million. The goodwill was assigned to the Live and Historical Racing segment in the amount of $ 96.0 million and to the Wagering Services and Solutions segment in the amount of $ 81.4 million. We performed our annual goodwill impairment analysis as of April 1, 2025. We assessed goodwill for impairment by performing qualitative or quantitative analyses for each reporting unit. Based on the results of these analyses, no goodwill impairments were identified in connection with our annual impairment testing. 61 Churchill Downs Incorporated Notes to Consolidated Financial Statements 6. OTHER INTANGIBLE ASSETS Other intangible assets, net is comprised of the following: December 31, 2025 December 31, 2024 (in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets: Customer relationships $ 25.9 $ ( 8.0 ) $ 17.9 $ 25.9 $ ( 6.4 ) $ 19.5 Technology asset 23.9 ( 8.0 ) 15.9 23.9 ( 4.6 ) 19.3 Gaming licenses 6.4 ( 3.3 ) 3.1 6.4 ( 4.7 ) 1.7 Other 39.7 ( 22.9 ) 16.8 39.7 ( 18.5 ) 21.2 $ 95.9 $ ( 42.2 ) $ 53.7 $ 95.9 $ ( 34.2 ) $ 61.7 Indefinite-lived intangible assets: Trademarks 121.5 121.5 Gaming rights 2,340.1 2,225.8 Total $ 2,515.3 $ 2,409.0 Indefinite-lived intangible assets consist primarily of trademarks and state gaming rights in Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Mississippi, New Hampshire, New York, and Virginia. The fair value of gaming rights was determined using the Greenfield Method, which is an income approach methodology that calculates the present value of the overall business enterprise based on a projected cash flow stream. This method assumes that the gaming rights intangible assets provide the opportunity to develop a casino or historical racing facility in a specified region, and that the present value of the projected cash flows are a result of the realization of advantages contained in these rights. Under this methodology, the acquirer is expected to absorb all start-up costs, as well as incur all expenses pertaining to the acquisition and/or the creation of all tangible and intangible assets. The estimated future revenue and operating expenses, start-up costs, and discount rates were the primary assumptions and estimates in the valuation of the gaming rights. The gaming rights intangible assets were assigned an indefinite useful life based on the Company's expected use of the assets and determination that no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of the gaming rights. Trademark intangible assets were valued using the relief-from-royalty method of the income approach, which estimates the fair value of the intangible assets by discounting the fair value of the hypothetical royalty payments a market participant would be willing to pay to enjoy the benefits of the assets. The estimated future revenue, royalty rates, and discount rates were the primary assumptions and estimates in the valuation of the trademarks. Amortization expense for definite-lived intangible assets was $ 10.3 million in 2025, $ 11.1 million in 2024, and $ 7.2 million in 2023, and is classified in operating expense in the accompanying Consolidated Statements of Comprehensive Income. Refer to Note 7, Asset Impairments, for information regarding intangible asset impairments recognized during 2025 and 2023. We performed our annual indefinite-lived intangible assets impairment analysis as of April 1, 2025, which included an assessment of qualitative and quantitative factors to determine whether it is more likely than not that the fair values of the indefinite-lived intangible assets are less than the carrying amount. We concluded that the fair values of our indefinite-lived intangible assets exceeded their carrying value. 62 Churchill Downs Incorporated Notes to Consolidated Financial Statements Future estimated aggregate amortization expense on existing definite-lived intangible assets for each of the next five fiscal years is as follows (in millions): Years Ended December 31, Estimated Amortization Expense 2026 $ 8.7 2027 7.3 2028 7.2 2029 7.0 2030 5.8 7. ASSET IMPAIRMENTS Chasers Poker Room Impairment During the third quarter of 2025, the Company concluded that the completion of the Salem Transaction qualified as a trigger event for impairment testing related to the Chasers Poker Room ("Chasers"). At the time the Company acquired Chasers, the valuation of the gaming rights contemplated a future expansion of the existing operations in Salem, New Hampshire. Given the completion of the Salem Transaction, the Company now intends to open Rockingham Grand Casino and does not plan to expand Chasers. Because the Company does not currently intend to expand Chasers, the Company settled an outstanding liability owed to the former owners of Chasers, related to the Chasers' gaming rights, in the amount of $ 10.0 million. The settlement of the noncurrent liability resulted in a gain of $ 40.0 million in the third quarter of 2025. Given the completion of the Salem Transaction and the settlement of the liability related to the Chasers' gaming rights, the Company evaluated and subsequently updated the projected cash flows and discount rate related to the Chasers' gaming rights. The fair value of the Chasers' gaming rights intangible was determined using the Greenfield Method, an income approach methodology that calculates the present value based on a projected cash flow stream. This method assumes that the gaming rights intangible assets provide the opportunity to develop a casino or historical racing facility in a specified region, and that the present value of the projected cash flows are a result of the realization of advantages contained in these rights. Under this methodology, the acquirer is expected to absorb all start-up costs, as well as incur all expenses pertaining to the acquisition and/or the creation of all tangible and intangible assets. The estimated future revenue and operating expenses, start-up costs, and discount rates were the primary assumptions and estimates in the valuation of the gaming rights intangible. As a result of this assessment, the Company recognized a non-cash impairment charge of $ 85.1 million in the third quarter of 2025 for the entire value of the Chasers' gaming rights, which are included in the Live and Historical Racing segment. The $ 40.0 million gain on settlement of the noncurrent liability and the $ 85.1 million impairment charge of the gaming rights intangible are included in Asset impairments, net in the Consolidated Statements of Comprehensive Income. Presque Isle Impairments During the quarter ended December 31, 2022, the Company concluded that a trigger event for impairment testing occurred related to the Presque Isle Downs and Casino ("Presque Isle") gaming rights, trademark, and the reporting unit's goodwill due to the impact and uncertainty of negative economic trends ("2022 Trigger Event"). Factors considered in this evaluation included, among other things, the amount of the fair value over carrying value from the annual impairment testing performed as of April 1, 2022, changes in carrying values, changes in discount rates, and the impact of negative economic trends on cash flows. Based on the 2022 Trigger Event, the Company updated the discount rate to reflect the increased uncertainty of the cash flows and updated the projected cash flow stream. As a result, the Company recognized a $ 33.4 million non-cash impairment charge in the fourth quarter of 2022 for the Presque Isle gaming rights and trademark, which are included in the Gaming segment. We performed our annual goodwill and indefinite-lived intangible assets impairment analysis for Presque Isle as of April 1, 2023. Based on the results of this analysis, no impairments for Presque Isle were identified. Subsequent to the annual test, we continued to evaluate economic conditions, including competition in the market and inflationary pressures, which increased during the second quarter of 2023, and impacted the performance and outlook of Presque Isle. As a result, the Company concluded that a trigger event for impairment testing occurred related to the Presque Isle gaming rights, trademark, and the reporting unit's goodwill at the end of the second quarter ("2023 Trigger Event"). 63 Churchill Downs Incorporated Notes to Consolidated Financial Statements Based on the 2023 Trigger Event, the Company evaluated and subsequently updated the projected cash flows and discount rate to reflect the economic environment at that time. As a result, the Company recognized a $ 24.5 million non-cash impairment charge in the second quarter of 2023 for the Presque Isle gaming rights and trademark. The fair value of the Presque Isle gaming rights was determined using the Greenfield Method, an income approach methodology that calculates the present value based on a projected cash flow stream. The fair value of the trademark was determined by using the relief-from-royalty method of the income approach. The fair value of the Presque Isle reporting unit's goodwill was determined under the market and income valuation approaches using inputs primarily related to discounted projected cash flows and price multiples of publicly traded comparable companies. In accordance with ASC 350, Intangibles - Goodwill and Other, the Company performed the impairment testing of the Presque Isle gaming rights and trademark prior to testing Presque Isle goodwill. Based on the trigger events described above, the Company updated the discount rate to reflect the increased uncertainty of the cash flows and updated the project cash flow stream. As a result, the Company did not recognize any impairment for Presque Isle goodwill because the fair value exceeded the carrying value. The Company continues to monitor the competitive environment and the impacts on the results of Presque Isle's operations. Future economic conditions and increased competition could have a negative impact on the estimates and assumptions utilized in our asset impairment assessments. These potential impacts could increase the risk of a future impairment of assets at Presque Isle. Other Impairments We recorded a $ 2.4 million and $ 3.9 million write-off of HRMs in Virginia that are no longer in use in the second quarter of 2025 and the third quarter of 2024, respectively. 64 Churchill Downs Incorporated Notes to Consolidated Financial Statements 8. INCOME TAXES Components of the provision for income taxes are as follows: Years Ended December 31, (in millions) 2025 2024 2023 Current provision: Federal $ 43.9 $ 75.2 $ 74.4 State and local 16.2 24.4 22.8 Foreign — — ( 0.1 ) 60.1 99.6 97.1 Deferred provision: Federal 63.3 44.2 42.5 State and local 23.5 0.3 4.9 86.8 44.5 47.4 Income tax provision $ 146.9 $ 144.1 $ 144.5 Income from operations before provision for income taxes for the year ended December 31, 2025, 2024 and 2023 was $ 532.4 million, $ 573.2 million and $ 561.8 million, respectively, and were all domestic in each period. Our income tax provision is different from the amount computed by applying the federal statutory income tax rate to income from operations before taxes as follows: Years Ended December 31, (in millions) 2025 2024 2023 Income from operations before provision for income taxes $ 532.4 $ 573.2 $ 561.8 Federal statutory tax on earnings before income taxes $ 111.8 21.0 % $ 120.3 21.0 % $ 117.9 21.0 % State income taxes, net of federal income tax benefit 31.7 6.0 % 19.7 3.4 % 23.5 4.2 % Effect of cross border tax laws — — ( 0.4 ) ( 0.1 ) % ( 0.4 ) ( 0.1 ) % Tax credits ( 1.1 ) ( 0.2 ) % ( 0.9 ) ( 0.1 ) % ( 0.8 ) ( 0.1 ) % Nontaxable or nondeductible items - U.S. federal Non-deductible officer's compensation 6.5 1.2 % 7.0 1.2 % 5.0 0.9 % Other ( 1.4 ) ( 0.3 ) % ( 0.1 ) — 0.7 0.1 % Changes in unrecognized tax benefits - fed, state & foreign ( 0.6 ) ( 0.1 ) % ( 1.5 ) ( 0.3 ) % ( 1.4 ) ( 0.3 ) % Income tax provision $ 146.9 27.6 % $ 144.1 25.1 % $ 144.5 25.7 % During 2025, greater than 50% of the Company’s effective tax rate related to the state income tax category was generated from tax expense in Kentucky, New Hampshire, Virginia, and Illinois. During 2024, greater than 50% of the Company’s effective tax rate related to the state income tax category was generated from tax expense in Kentucky and Virginia, and in 2023 from tax expense in Illinois, Virginia and Kentucky. 65 Churchill Downs Incorporated Notes to Consolidated Financial Statements Components of our deferred tax assets and liabilities were as follows: December 31, (in millions) 2025 2024 Deferred tax assets: § 163(j) interest expense limitation carryforward $ 99.1 $ 91.2 Lease liabilities 17.8 17.2 Net operating losses and credits carryforward 8.1 8.6 Deferred liabilities 10.9 10.1 Deferred compensation plans 10.7 9.3 Deferred income 5.7 3.5 Deferred tax assets 152.3 139.9 Valuation allowance ( 18.2 ) ( 4.6 ) Net deferred tax asset 134.1 135.3 Deferred tax liabilities: Property and equipment in excess of tax basis 255.5 220.8 Equity investments in excess of tax basis 159.5 157.3 Intangible assets in excess of tax basis 217.3 169.0 Right-of-use assets 16.5 16.1 Other 4.8 4.8 Deferred tax liabilities 653.6 568.0 Net deferred tax liability $ ( 519.5 ) $ ( 432.7 ) On July 4, 2025, the United States enacted H.R. 1, a new federal tax and spending bill. Many of the tax provisions included in the bill are retroactive and are expected to have a significant favorable impact on the Company's current tax expense, primarily due to the permanent reinstatements of 100% bonus depreciation rules and a 30% of EBITDA-based interest expense deduction limitation. The expected reduction in cash paid taxes as a result of these new tax provisions will increase cash flow from operating activities. During 2025, the Company began utilizing the deferred tax asset related to its § 163(j) interest expense limitation carryforward for federal and certain states. We have recorded a valuation allowance of $ 14.0 million against net deferred tax assets primarily related to the interest carryforward that we do not expect to utilize for state purposes. As of December 31, 2025, we had U.S. state and foreign net operating losses with tax values of $ 7.5 million and $ 0.5 million, respectively. We have recorded a valuation allowance of $ 4.2 million due to the fact that it is unlikely that we will generate income in certain state and foreign jurisdictions which is necessary to utilize the deferred tax assets. We also had U.S. state tax credits and deductions with a tax value of $ 2.0 million that do not expire which we expect to fully utilize. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: (in millions) 2025 2024 2023 Balance as of January 1 $ 3.2 $ 4.8 $ 6.4 Additions for tax positions related to the current year 0.1 0.3 0.2 Additions for tax positions of prior years — — 0.3 Reductions for tax positions of prior years ( 0.9 ) ( 1.9 ) ( 2.1 ) Balance as of December 31 $ 2.4 $ 3.2 $ 4.8 The Internal Revenue Service's most recent audit was completed for tax year 2012. Tax years 2022 and after are open to examination. As of December 31, 2025, we had approximately $ 2.4 million of total gross unrecognized tax benefits, excluding interest of $ 0.4 million. If the total gross unrecognized tax benefits were recognized, there would be a $ 2.2 million effect to the annual effective tax rate. We anticipate a decrease in our unrecognized tax positions of approximately $ 0.4 million during the next twelve months primarily due to expected settlements with tax authorities and the expiration of statutes of limitation. 66 Churchill Downs Incorporated Notes to Consolidated Financial Statements 9. SHAREHOLDERS' EQUITY Stock Repurchase Programs 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 $ 429.5 million of repurchase authority remaining under the July 2025 Stock Repurchase Program at December 31, 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 September 29, 2021, the Board of Directors of the Company approved a common stock repurchase program of up to $ 500.0 million ("2021 Stock Repurchase Program"). As described above, the 2021 Stock Repurchase Program was replaced by the March 2025 Stock Repurchase Program. We repurchased the following shares under our Stock Repurchase Programs: For the year ended December 31, (in millions, except share data) 2025 2024 2023 Repurchase Program Shares Aggregate Purchase Price Shares Aggregate Purchase Price Shares Aggregate Purchase Price July 2025 Stock Repurchase Program 683,921 $ 70.5 — $ — — $ — March 2025 Stock Repurchase Program 3,294,447 330.8 — — — — 2021 Stock Repurchase Program 212,012 24.0 506,300 65.3 461,761 55.3 Total 4,190,380 $ 425.3 506,300 $ 65.3 461,761 $ 55.3 As of December 31, 2025 and December 31, 2024, we had $ 0.5 million and $ 3.0 million, respectively, accrued for the future cash settlement of executed repurchases of our common stock. The Duchossois Group ("TDG") Share Repurchase On December 18, 2023, the Company entered into an agreement (the "2023 Stock Repurchase Agreement") with an affiliate of TDG to repurchase 1,000,000 shares of the Company’s common stock, for $ 123.75 per share in a privately negotiated transaction, for an aggregate purchase price of $ 123.8 million. The repurchase of the shares of Company's common stock pursuant to the 2023 Stock Repurchase Agreement closed on January 2, 2024, and contained customary representations, warranties, and covenants of the parties. The repurchase of shares of common stock from TDG pursuant to the 2023 Stock Repurchase Agreement was approved by the Company's Board of Directors separately from, and did not reduce the authorized 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. 10. STOCK-BASED COMPENSATION PLANS Our total stock based compensation expense, which includes expense related to restricted stock awards, restricted stock unit awards, performance share unit awards, and stock options associated with our employee stock purchase plan, was $ 30.2 million in 2025, $ 36.1 million in 2024, and $ 32.9 million in 2023. We recorded a tax benefit related to stock-based compensation expense of $ 3.2 million in 2025, $ 2.8 million in 2024, and $ 2.3 million in 2023. Our stock-based employee compensation plans are described below. 2025 Omnibus Stock Incentive Plan On February 18, 2025, our Board of Directors approved the replacement of the Churchill Downs Incorporated 2016 Omnibus Stock Incentive Plan (the "2016 Plan") with a new plan, the Churchill Downs Incorporated 2025 Omnibus Stock and Incentive 67 Churchill Downs Incorporated Notes to Consolidated Financial Statements Plan (the "2025 Plan"). The 2025 Plan was approved by shareholders at the Company's 2025 Annual Meeting of Shareholders held on April 22, 2025, and no further awards will be granted under the 2016 Plan. We have stock-based employee compensation plans with awards outstanding under the 2016 Plan, the 2025 Plan, and the Executive Long-Term Incentive Compensation Plan, which was adopted pursuant to the 2016 Plan. The Plans are intended to advance our long-term success by encouraging stock ownership among key employees and the Board of Directors. Awards may be in the form of stock options, stock appreciation rights, restricted stock awards ("RSA"), restricted stock units ("RSU"), other share-based awards, performance share units ("PSU"), performance units, or performance cash. Restricted Stock, Restricted Stock Units, and Performance Share Units The 2025 Plan permits the award of RSAs, RSUs, or PSUs to directors and key employees responsible for the management, growth and protection of our business. RSUs granted to employees under the 2025 and 2016 Plans generally vest either in full upon three years from the date of grant or on a pro rata basis over a three-year term. RSUs granted to employees are converted into shares of our common stock at vesting or may be settled in cash upon vesting. The RSAs and RSUs granted to directors under the 2025 and 2016 Plans generally vest in full upon one year from the date of grant. RSAs are legally issued common stock at the time of grant, with certain restrictions placed on them. RSUs granted to directors are converted into shares of our common stock at the time of the director's retirement. The fair value of RSAs and RSUs that vest solely based on continued service under the Plan is determined by the product of the number of shares granted and the grant date market price of our common stock. PSUs granted to key executives have performance periods ranging from two to three years and vest depending on the Company’s achievement of predetermined targets related to both performance and market criteria. All PSUs awards are converted into shares of our common stock or settled in cash at the time the award value is finalized. During the year ended December 31, 2024, the Company modified certain PSU awards to allow for settlement in the form of either cash or stock. The modification required the awards to be recorded as liability-classified awards. Compensation expense related to modified stock-based awards is based on the fair value for those awards as of the modification date with any remaining incremental stock-based compensation expense recognized ratably over the remaining requisite service period. As a result of the modification, the Company recorded stock-based compensation expense of $ 4.1 million during the year ended December 31, 2024. At December 31, 2025 and 2024, the Company had $ 21.0 million and $ 25.0 million, respectively, recorded as liability-classified awards, which is included in accrued expense and other liabilities in the accompanying Consolidated Balance Sheets. A summary of the 2025 RSA's, RSU's, and PSUs granted to certain executives, employees, and the Board of Directors is presented below (shares/units in thousands): Grant Year Award Type Number of Units Awarded (1) Vesting Terms 2025 PSU 87 Three -year performance and service period ending in 2027 2025 RSU 161 Vest equally over three service periods ending in 2028 2025 RSU 12 One year service period ending in 2026 2025 RSA 2 One year service period ending in 2026 (1) PSUs presented are based on the target number of units for the original PSU grant. 68 Churchill Downs Incorporated Notes to Consolidated Financial Statements Activity for our RSAs, RSUs, and PSUs is presented below (shares/units in thousands): PSUs RSAs and RSUs Total (in thousands, except grant date values) Number of Shares / Units Weighted Average Grant Date Fair Value Number of Shares / Units Weighted Average Grant Date Fair Value Number of Shares / Units Weighted Average Grant Date Fair Value Balance, December 31, 2022 741 $ 45.04 297 $ 80.09 1,038 $ 55.07 Granted 62 $ 134.12 142 $ 124.89 204 $ 127.69 Performance adjustment (1) 49 $ 127.15 — $ — 49 $ 127.15 Vested ( 305 ) $ 62.10 ( 164 ) $ 90.10 ( 469 ) $ 71.91 Forfeited — $ — ( 7 ) $ 99.74 ( 7 ) $ 99.74 Balance, December 31, 2023 547 $ 99.64 268 $ 69.60 815 $ 139.72 Granted 63 $ 115.22 148 $ 123.37 211 $ 120.93 Performance adjustment (1) 68 $ 110.12 — $ — 68 $ 110.13 Vested ( 343 ) $ 68.11 ( 163 ) $ 99.51 ( 506 ) $ 78.25 Forfeited — $ — ( 12 ) $ 122.46 ( 12 ) $ 122.46 Balance, December 31, 2024 335 $ 60.83 241 $ 110.48 576 $ 81.58 Granted 87 $ 111.83 175 $ 120.45 262 $ 117.59 Performance adjustment (1) 24 $ 134.12 — $ — 24 $ 134.12 Vested ( 293 ) $ 67.90 ( 178 ) $ 103.97 ( 471 ) $ 81.52 Forfeited — $ — ( 8 ) $ 123.30 ( 8 ) $ 123.30 Balance, December 31, 2025 153 $ 15.32 230 $ 117.49 383 $ 76.64 (1) Adjustment to number of target units awarded for PSUs based on achievement of underlying performance goals. The fair value of shares and units vested was $ 48.8 million in 2025, $ 69.7 million in 2024, and $ 55.0 million in 2023. A summary of total unrecognized stock-based compensation expense related to RSAs, RSUs, and PSUs (based on current performance estimates), on December 31, 2025, is presented below: (in millions, except years) December 31, 2025 Weighted Average Remaining Vesting Period (Years) Unrecognized expense: RSU & RSA $ 7.2 1.30 PSU 1.0 1.44 Total $ 8.2 1.33 Employee Stock Purchase Plan Under the Employee Stock Purchase Plan (the "ESP Plan"), we are authorized to sell, pursuant to short-term stock options, shares of our common stock to our full-time and qualifying part-time employees at a discount from our common stock’s fair market value. The ESP Plan operates on the basis of recurring, consecutive one-year periods. Each period commences on August 1 and ends on the following July 31. Compensation expense related to the ESP Plan was not material for any year included in our accompanying Consolidated Statements of Comprehensive Income. 69 Churchill Downs Incorporated Notes to Consolidated Financial Statements 11. DEBT The following table presents our total debt outstanding: (in millions) December 31, 2025 December 31, 2024 Term Loan B-1 due 2028 $ 285.8 $ 288.8 Term Loan A due 2029 1,112.3 1,172.4 Revolver 657.0 377.5 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 5,155.1 4,938.7 Current maturities of long-term debt ( 63.1 ) ( 63.1 ) Unamortized premium and deferred finance charges ( 24.9 ) ( 31.5 ) Total debt, net of current maturities and costs $ 5,067.1 $ 4,844.1 Credit Agreement At December 31, 2025, the Company’s senior secured credit facility (as amended from time to time, the "Credit Agreement") consisted of a $ 1.2 billion revolving credit facility (the "Revolver"), $ 285.8 million senior secured term loan B-1 due 2028 (the "Term Loan B-1"), $ 1.1 billion senior secured term loan A due 2029 (the "Term Loan A"), and $ 100.0 million swing line commitment. Certain amendments to the Credit Agreement entered into during 2023, 2024, and 2025 are described below. On February 24, 2023, the Company closed an amendment of the Credit Agreement to increase the loans under the Term Loan A from $ 800.0 million to $ 1.3 billion and made certain other changes to the existing credit agreement. The Company used the net proceeds from the borrowings under the increased Term Loan A to repay outstanding loans under its Revolver, pay related transaction fees and expenses, and for general corporate purposes. On July 3, 2024, the Company closed an amendment of the Credit Agreement to (i) extend the maturity date of the Revolver and Term Loan A from 2027 to 2029 subject to an earlier "springing maturity" if certain indebtedness in respect of outstanding notes or other material indebtedness having a maturity date prior to July 3, 2029, is not refinanced or extended to a date after July 3, 2029, at least 91 days prior to such other debt's stated maturity date, and (ii) amend certain other provisions of the Credit Agreement. The Company has $ 4.4 million of capitalized unamortized debt issuance costs associated with the Term Loan A which are being amortized as interest expense over the remainder of the term. On February 14, 2025, the Company announced that it closed the seventh amendment of the Credit Agreement. The seventh amendment to the Credit Agreement (i) reduced the interest rate for the Term Loan B-1 from Secured Overnight Financing Rate ("SOFR") plus 200 basis points to SOFR plus 175 basis points, (ii) eliminates the 0.10 % credit spread adjustment, and (iii) makes certain other amendments to the Credit Agreement. The Term Loan B-1 requires quarterly payments of 0.25 % of the original $ 300.0 million balance and may be subject to additional mandatory prepayment from excess cash flow on an annual basis per the provisions of the Credit Agreement. The Revolver and Term Loan A bear interest at SOFR plus 10 basis points, plus a variable applicable margin which is determined by the Company's net leverage ratio. As of December 31, 2025, that applicable margin was 150 basis points which was based on the pricing grid in the Credit Agreement. The Company had $ 534.8 million available borrowing capacity, after consideration of $ 8.2 million in outstanding letters of credit, under the Revolver as of December 31, 2025. The Company is required to pay a commitment fee on the unused portion of the Revolver as determined by a pricing grid based on the consolidated total net secured leverage ratio of the Company. For the period ended December 31, 2025, the Company's commitment fee rate was 0.25 %. The Company completed the transition of its financing from London Interbank Offered Rate to SOFR during the second quarter of 2023. These transition activities did not have a material impact on the Company’s financial statements. The Credit Agreement is collateralized by substantially all the wholly owned assets of the Company. The Credit Agreement contains certain customary affirmative and negative covenants, which include limitations on liens, investments, indebtedness, dispositions, mergers and acquisitions, the making of restricted payments, changes in the nature of business, changes in fiscal 70 Churchill Downs Incorporated Notes to Consolidated Financial Statements year, and transactions with affiliates. The Credit Agreement also contains financial covenants providing for the maintenance of a maximum consolidated secured net leverage ratio and maintenance of a minimum consolidated interest coverage ratio. Actual as of December 31, 2025 Requirement Interest coverage ratio 3.9 to 1.0 > 2.5 to 1.0 Consolidated total secured net leverage ratio 1.4 to 1.0 < 4.0 to 1.0 The Company was compliant with all applicable covenants on December 31, 2025. 2027 Senior Notes On March 25, 2019, the Company completed an offering of $ 600.0 million in aggregate principal amount of 5.50 % Senior Unsecured Notes that mature on April 1, 2027 (the "2027 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The Company used the net proceeds from the offering to repay the then-outstanding balance on the Revolver portion of our Credit Agreement. In connection with the offering, we capitalized $ 8.9 million of debt issuance costs which are being amortized as interest expense over the term of the 2027 Senior Notes. The 2027 Senior Notes were issued at par, with interest payable on April 1st and October 1st of each year, commencing on October 1, 2019. The 2027 Senior Notes will vote as one class under the indenture governing the 2027 Senior Notes. The Company may redeem some or all the 2027 Senior Notes at redemption prices set forth in the 2027 Indenture. 2028 Senior Notes On December 27, 2017, the Company completed an offering of $ 500.0 million in aggregate principal amount of 4.75 % Senior Unsecured Notes that mature on January 15, 2028 (the "Existing 2028 Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The Existing 2028 Notes were issued at par, with interest payable on January 15th and July 15th of each year, commencing on July 15, 2018. The Company used the net proceeds from the offering to repay a portion of our $ 600.0 million 5.375 % Senior Unsecured Notes due in 2021. In connection with the offering, we capitalized $ 7.7 million of debt issuance costs which are being amortized as interest expense over the term of the Existing 2028 Notes. On March 17, 2021, the Company completed an offering of $ 200.0 million in aggregate principal amount of 4.75 % Senior Unsecured Notes that mature on January 15, 2028 (the "Additional 2028 Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The Additional 2028 Notes were offered under the indenture dated as of December 27, 2017, governing the $ 500.0 million aggregate principal amount of 4.75 % Senior Unsecured Notes due 2028 and form a part of the same series for purposes of the indenture. In connection with the offering, we capitalized $ 3.4 million of debt issuance costs which are being amortized as interest expense over the term of the Additional 2028 Notes. Upon completion of this offering, the aggregate principal amount outstanding of the Existing 2028 Notes, together with the Additional 2028 Notes (collectively, the "2028 Senior Notes"), is $ 700.0 million. The Additional 2028 Notes were issued at 103.25 % of the principal amount, plus interest deemed to have accrued from January 15, 2021, with interest payable on January 15th and July 15th of each year, commencing on July 15, 2021. The 2028 Senior Notes will vote as one class under the indenture governing the 2028 Senior Notes. The 3.25 % premium is being amortized through interest expense, net over the term of the Additional 2028 Notes. The Company may redeem some or all the 2028 Senior Notes at redemption prices set forth in the 2028 Indenture. 2030 Senior Notes On April 13, 2022, a wholly owned subsidiary of the Company completed an offering of $ 1.2 billion in aggregate principal amount of 5.75 % Senior Unsecured Notes that mature on April 13, 2030 (the "2030 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that was exempt from registration under the Securities Act, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The offering of the 2030 Senior Notes was part of the financing utilized for the P2E Transaction. In connection with the offering, we capitalized $ 18.3 million of debt issuance costs which are being amortized as interest expense over the term of the 2030 Senior Notes. 71 Churchill Downs Incorporated Notes to Consolidated Financial Statements The 2030 Senior Notes were issued at 100 % of the principal amount, plus interest deemed to have accrued from April 13, 2022, with interest payable in arrears on April 1st and October 1st of each year, commencing on October 1, 2022. The 2030 Senior Notes will vote as one class under the indenture governing the 2030 Senior Notes. The Company may redeem some or all the 2030 Senior Notes at redemption prices set forth in the 2030 Indenture. 2031 Senior Notes On April 25, 2023, the Company completed an offering of $ 600.0 million in aggregate principal amount of 6.75 % senior unsecured notes that mature on April 25, 2031 (the "2031 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The Company used a portion of the net proceeds from the offering to repay indebtedness outstanding under its Term Loan B Facility due 2024 and to fund related transaction fees and expenses, working capital, and other general corporate purposes. The Company recognized a loss on extinguishment on Term Loan B of $ 1.3 million, which is included in miscellaneous, net in the accompanying Consolidated Statements of Comprehensive Income. The Company capitalized $ 10.5 million of debt issuance costs associated with the 2031 Senior Notes which are being amortized as interest expense over the remainder of the 8-year term. The 2031 Senior Notes were issued at 100 % of the principal amount, plus interest deemed to have accrued from April 25, 2023, with interest payable in arrears on May 1st and November 1st of each year, commencing on November 1, 2023. The 2031 Senior Notes will vote as one class under the indenture governing the 2031 Senior Notes. The Company may redeem some or all the 2031 Senior Notes at redemption prices set forth in the 2031 Indenture. Future aggregate maturities of total debt are as follows (in millions): Years Ended December 31, 2026 $ 63.1 2027 663.1 2028 1,039.9 2029 1,589.0 2030 1,200.0 Thereafter 600.0 Total $ 5,155.1 The Company is exploring options to fund upcoming senior note maturities through a combination of cash on hand, cash generated from operations, available capacity under its revolving credit facility, and capital markets to fund the obligation. Access to capital markets and the terms under which we would fund the obligations are subject to our ability to access the market and other market conditions. 12. REVENUE FROM CONTRACTS WITH CUSTOMERS Performance Obligations As of December 31, 2025, our Live and Historical Racing segment had remaining performance obligations on contracts with a duration greater than one year relating to television rights, sponsorships, personal seat licenses, and admissions, with an aggregate transaction price of $ 255.3 million. The revenue we expect to recognize on these remaining performance obligations is $ 70.8 million in 2026, $ 60.2 million in 2027, $ 35.6 million in 2028, and the remainder thereafter. As of December 31, 2025, our remaining performance obligations on contracts with a duration greater than one year in segments other than Live and Historical Racing were not material. Contract Assets and Contract Liabilities Contract assets were not material as of December 31, 2025 and 2024. Contract liabilities were $ 79.7 million as of December 31, 2025 and $ 81.5 million as of December 31, 2024. Contract liabilities are included in current deferred revenue, non-current deferred revenue, and accrued expense and other current liabilities in the accompanying Consolidated Balance Sheets. Contract liabilities primarily relate to our Live and Historical Racing segment. The decrease in contract liabilities from December 31, 2024 to December 31, 2025 was primarily due to the recognition of revenue for fulfilled performance obligations. We recognized $ 61.2 million of revenue during the year ended December 31, 2025 that 72 Churchill Downs Incorporated Notes to Consolidated Financial Statements was included in the contract liabilities balance on December 31, 2024. We recognized $ 76.1 million of revenue during the year ended December 31, 2024 that was included in the contract liabilities balance on December 31, 2023. Disaggregation of Revenue The Company has included its disaggregated revenue disclosures as follows: • For the Live and Historical Racing segment, revenue is disaggregated between Churchill Downs Racetrack and historical racing properties given that our racing facilities revenues primarily revolve around live racing events while our historical racing properties revenues primarily revolve around historical racing. This segment is also disaggregated by location given the geographic economic factors that affect the revenue of service offerings. Within the Live and Historical racing segment, revenue is further disaggregated between live and simulcast racing, historical racing, racing event-related services, and other services. • For the Wagering Services and Solutions segment, revenue is disaggregated between live and simulcast racing, gaming, and other services. • For the Gaming segment, revenue is disaggregated by location given the geographic economic factors that affect the revenue of Gaming service offerings. Within the Gaming segment, revenue is further disaggregated between live and simulcast racing, racing event-related services, gaming, and other services. 73 Churchill Downs Incorporated Notes to Consolidated Financial Statements We believe that these disclosures depict how the amount, nature, timing, and uncertainty of cash flows are affected by economic factors. The tables below present net revenue from external customers and intercompany revenue from each of our segments: Years Ended December 31, (in millions) 2025 2024 2023 Net revenue from external customers: Live and Historical Racing: Churchill Downs Racetrack $ 262.4 $ 259.5 $ 205.8 Louisville 217.1 209.1 189.0 Northern Kentucky 113.2 98.9 85.8 Southwestern Kentucky 168.3 158.3 147.8 Western Kentucky 68.7 28.8 31.8 Virginia 546.1 458.2 375.4 New Hampshire 18.9 12.8 11.7 Total Live and Historical Racing $ 1,394.7 $ 1,225.6 $ 1,047.3 Wagering Services and Solutions: $ 488.2 $ 469.5 $ 444.9 Gaming: Florida $ 97.9 $ 100.2 $ 100.7 Iowa 93.9 93.3 96.0 Indiana 129.9 96.6 — Louisiana 131.4 150.2 145.6 Maine 106.5 106.0 114.1 Maryland 99.3 101.8 106.9 Mississippi 93.5 98.7 100.9 New York 184.5 183.0 180.5 Pennsylvania 106.0 109.3 123.9 Total Gaming $ 1,042.9 $ 1,039.1 $ 968.6 All Other 0.1 0.1 0.9 Net revenue from external customers $ 2,925.9 $ 2,734.3 $ 2,461.7 Intercompany net revenues: Live and Historical Racing $ 47.7 $ 41.4 $ 37.3 Wagering Services and Solutions 38.1 31.2 13.5 Gaming 6.4 6.3 6.0 All Other 8.6 6.5 — Eliminations ( 100.8 ) ( 85.4 ) ( 56.8 ) Intercompany net revenue $ — $ — $ — 74 Churchill Downs Incorporated Notes to Consolidated Financial Statements Year Ended December 31, 2025 (in millions) Live and Historical Racing Wagering Services and Solutions Gaming Total Segments All Other Total Net revenue from external customers Pari-mutuel: Live and simulcast racing $ 98.3 $ 367.2 $ 26.0 $ 491.5 $ — $ 491.5 Historical racing (a) 1,003.4 — 13.7 1,017.1 — 1,017.1 Racing event-related services 183.6 — 1.4 185.0 — 185.0 Gaming (a) 14.1 19.7 883.9 917.7 — 917.7 Other (a) 95.3 101.3 117.9 314.5 0.1 314.6 Total $ 1,394.7 $ 488.2 $ 1,042.9 $ 2,925.8 $ 0.1 $ 2,925.9 Year Ended December 31, 2024 (in millions) Live and Historical Racing Wagering Services and Solutions Gaming Total Segments All Other Total Net revenue from external customers Pari-mutuel: Live and simulcast racing $ 91.3 $ 352.2 $ 26.4 $ 469.9 $ — $ 469.9 Historical racing (a) 854.9 — 37.0 891.9 — 891.9 Racing event-related services 188.0 — 6.6 194.6 — 194.6 Gaming (a) 12.6 17.3 856.0 885.9 — 885.9 Other (a) 78.8 100.0 113.1 291.9 0.1 292.0 Total $ 1,225.6 $ 469.5 $ 1,039.1 $ 2,734.2 $ 0.1 $ 2,734.3 Year Ended December 31, 2023 (in millions) Live and Historical Racing Wagering Services and Solutions Gaming Total Segments All Other Total Net revenue from external customers Pari-mutuel: Live and simulcast racing $ 81.9 $ 359.7 $ 26.6 $ 468.2 $ — $ 468.2 Historical racing (a) 739.1 — 28.6 767.7 — 767.7 Racing event-related services 145.9 — 6.4 152.3 — 152.3 Gaming (a) 11.4 17.3 803.5 832.2 — 832.2 Other (a) 69.0 67.9 103.5 240.4 0.9 241.3 Total $ 1,047.3 $ 444.9 $ 968.6 $ 2,460.8 $ 0.9 $ 2,461.7 (a) Food and beverage, hotel, and other services furnished to customers for free as an inducement to wager or through the redemption of our customers' loyalty points are recorded at the estimated standalone selling prices in Other revenue with a corresponding offset recorded as a reduction in historical racing pari-mutuel revenue for HRMs or gaming revenue for our casino properties. These amounts were $ 60.8 million in 2025, $ 56.0 million in 2024, and $ 50.9 million in 2023. 75 Churchill Downs Incorporated Notes to Consolidated Financial Statements 13. SUPPLEMENTAL BALANCE SHEET INFORMATION Accounts receivable, net Accounts receivable is comprised of the following: December 31, (in millions) 2025 2024 Trade receivables $ 34.5 $ 37.3 Simulcast and online wagering receivables 34.5 40.2 Other receivables 29.7 26.1 98.7 103.6 Allowance for credit losses ( 5.2 ) ( 4.9 ) Total $ 93.5 $ 98.7 We recognized credit loss expense of $ 2.5 million in 2025, $ 2.8 million in 2024 and $ 2.9 million in 2023. Other current assets December 31, (in millions) 2025 2024 Inventory $ 11.9 $ 11.6 Prepaid technology costs 7.4 6.4 Prepaid insurance and taxes 6.5 7.7 Other prepaid costs 14.1 16.0 Insurance deposits and other 4.3 4.7 Total $ 44.2 $ 46.4 Accrued expenses and other current liabilities Accrued expenses and other current liabilities consisted of the following: December 31, (in millions) 2025 2024 Account wagering deposits liability $ 67.7 $ 63.1 Accrued salaries and related benefits 54.8 57.7 Purses payable 40.0 35.4 Accrued interest 47.8 48.2 Accrued fixed assets 27.0 42.7 Accrued gaming liabilities 34.9 35.3 Accrued insurance 14.8 13.1 Accrued property taxes 14.5 9.7 Current lease liabilities 8.4 8.7 Other 90.6 88.1 Total $ 400.5 $ 402.0 14. REDEEMABLE NONCONTROLLING INTEREST In April 2024, the Company closed on the sale of 49 % of United Tote, a wholly owned subsidiary of CDI, to NYRA Content Management Solutions, LLC ("NYRA"), a subsidiary of the New York Racing Association, Inc. NYRA's interest includes certain embedded redemption features, such as a put right, that are not exclusively within the Company’s control. NYRA's interest is treated as redeemable noncontrolling interest and is presented outside of permanent equity on the Company’s Consolidated Balance Sheets. 76 Churchill Downs Incorporated Notes to Consolidated Financial Statements In August 2025, the Company closed on the purchase of 90 % of the outstanding equity interest of Casino Salem, a joint venture with SL Salem, LLC and JPF Casino Enterprises, LLC (collectively, the "Casino Salem Minority Interest Holders"). The Casino Salem Minority Interest Holders' interests include certain embedded redemption features, such as put rights, that are not exclusively within the Company’s control. The Casino Salem Minority Interest Holders' interests are treated as redeemable noncontrolling interest and are not included in the permanent equity on the Company’s Consolidated Balance Sheets. The redeemable noncontrolling interest is initially accounted for at fair value and subsequently adjusted to the greater of the redemption value or the carrying value. Redeemable noncontrolling interest adjustments of carrying value to redemption value are reflected in retained earnings and are also included as an adjustment to income available to the Company’s shareholders in the calculation of earnings per share (See Note 20, Net Income Per Common Share Computations). The table below depicts changes in the Company’s redeemable noncontrolling interest balance. (in millions) Balance, December 31, 2023 $ — Redeemable noncontrolling interest initial measurement 14.4 Net income attributable to redeemable noncontrolling interest 2.3 Redemption value adjustment 3.0 Balance, December 31, 2024 $ 19.7 Redeemable noncontrolling interest initial measurement 20.4 Net income attributable to redeemable noncontrolling interests 2.5 Redemption value adjustment 3.3 Minority holder contributions 0.2 Balance, December 31, 2025 $ 46.1 15. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES Investments in and advances to unconsolidated affiliates as of December 31, 2025 and 2024 primarily consisted of interests in Rivers Casino Des Plaines ("Rivers Des Plaines") and Miami Valley Gaming and Racing ("MVG"). Rivers Des Plaines The ownership of Rivers Des Plaines is comprised of the following: (1) the Company owns 61.3 % interest in Midwest Gaming Holdings, LLC ("Midwest Gaming"), the parent company of Rivers Des Plaines, (2) High Plaines Gaming, LLC ("High Plaines"), an affiliate of Rush Street Gaming, LLC owns 36.0 % of Midwest Gaming, and (3) Casino Investors, LLC own 2.7 % of Midwest Gaming. Both the Company and High Plaines have participating rights over Rivers Des Plaines, and both must consent to certain operating, investing, and financing decisions. As a result, we account for Rivers Des Plaines using the equity method. The Company’s investment in Midwest Gaming is presented at our initial cost of investment plus the Company's accumulated proportional share of income or loss, including depreciation/accretion of the difference in the historical basis of the Company’s contribution, less any distributions it has received. Following the point at which the Company gained 61.3 % interest in Midwest Gaming, the carrying value of the Company's investment was $ 835.0 million higher than the Company’s underlying equity in the net assets of Midwest Gaming. This equity method basis difference was comprised of $ 853.7 million related to goodwill and indefinite-lived intangible assets, $( 13.7 ) million related to non-depreciable land, $( 9.5 ) million related to buildings that will be accreted into income over a weighted average useful life of 35.3 years, and $ 4.5 million related to personal property that will be depreciated over a weighted average useful life of 3.7 years. As of December 31, 2025 , the net aggregate basis difference between the Company’s investment in Midwest Gaming and the amounts of the underlying equity in net assets was $ 833.2 million. We also recognized a $ 103.2 million deferred tax liability and a corresponding increase in our investment in unconsolidated affiliates related to an entity we acquired in conjunction with our acquisition of the Clairvest ownership stake in Midwest Gaming. Our investment in Rivers Des Plaines was $ 572.4 million as of December 31, 2025 and $ 547.1 million as of December 31, 2024. The Company received distributions from Rivers Des Plaines of $ 68.5 million in 2025, $ 92.2 million in 2024 and $ 111.1 million in 2023. 77 Churchill Downs Incorporated Notes to Consolidated Financial Statements Miami Valley Gaming The Company owns 50 % interest in MVG and Delaware North Companies Gaming & Entertainment Inc. ("DNC") owns the remaining 50 % interest. Since both we and DNC have participating rights over MVG, and both must consent to certain operating, investing and financing decisions, we account for MVG using the equity method. Our investment in MVG was $ 112.2 million as of December 31, 2025 and $ 114.1 million as of December 31, 2024. The Company received distributions from MVG of $ 47.5 million in 2025, $ 46.5 million in 2024 and $ 44.0 million in 2023. Summarized Financial Results for our Unconsolidated Affiliates The financial results for our unconsolidated affiliates are summarized below. The summarized income statement information for 2025 and 2024 and summarized balance sheet information as of December 31, 2025 and 2024 includes the following equity investments: MVG and Rivers Des Plaines. December 31, (in millions) 2025 2024 Assets Current assets $ 108.8 $ 100.5 Property and equipment, net 314.5 325.6 Other assets, net 265.4 267.5 Total assets $ 688.7 $ 693.6 Liabilities and Members' Deficit Current liabilities $ 88.9 $ 89.9 Long-term debt 802.5 839.8 Other liabilities 0.4 1.7 Members' deficit ( 203.1 ) ( 237.8 ) Total liabilities and members' deficit $ 688.7 $ 693.6 Years Ended December 31, (in millions) 2025 2024 2023 Net revenue $ 843.0 $ 851.5 $ 864.8 Operating and SG&A expense 533.4 528.5 534.0 Depreciation and amortization 24.4 27.0 23.8 Operating income 285.2 296.0 307.0 Interest and other expense, net ( 41.4 ) ( 44.2 ) ( 43.9 ) Net income $ 243.8 $ 251.8 $ 263.1 78 Churchill Downs Incorporated Notes to Consolidated Financial Statements 16. LEASES Our operating leases with terms greater than one year are primarily related to buildings and land. Our operating leases with terms less than one year are primarily related to equipment. 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. The estimated discount rate for each of our leases is determined based on adjustments made to our secured debt borrowing rate. The components of total lease cost were as follows: Years Ended December 31, (in millions) 2025 2024 Short-term lease cost (a) (b) $ 23.6 $ 21.0 Operating lease cost (b) 7.9 9.5 Finance lease interest expense 1.8 2.3 Finance lease amortization expense (b) 3.7 4.2 Total lease cost $ 37.0 $ 37.0 (a) Includes leases with terms of one year or less. (b) Includes variable lease costs, which were not material. Supplemental cash flow information related to leases are as follows: Years Ended December 31, (in millions) 2025 2024 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 6.8 $ 6.5 Operating cash flows from finance leases 1.8 2.1 Financing cash flows from finance leases 2.9 2.6 Right-of-use assets obtained in exchange for lease obligations Operating leases $ 17.6 $ 6.0 Finance leases — 3.6 Other information related to operating leases was as follows: December 31, Weighted Average Remaining Lease Term 2025 2024 Operating leases 11.2 years 5.7 years Finance leases 8.6 years 10.4 years Weighted Average Discount Rate Operating leases 5.1 % 4.6 % Finance leases 4.8 % 4.9 % 79 Churchill Downs Incorporated Notes to Consolidated Financial Statements As of December 31, 2025, the future undiscounted cash flows associated with the Company's operating and financing lease liabilities were as follows: (in millions) Years Ended December 31, Operating Leases Finance Leases 2026 $ 6.9 $ 3.9 2027 6.3 4.0 2028 5.0 4.0 2029 4.1 4.1 2030 3.7 4.2 Thereafter 28.3 13.7 Total future minimum lease payments 54.3 33.9 Less: Imputed interest 15.3 6.1 Present value of lease liabilities $ 39.0 $ 27.8 Reported lease liabilities as of December 31, 2025 Accrued expense and other current liabilities (current maturities of leases) $ 5.7 $ 2.7 Other liabilities (non-current maturities of leases) 33.3 25.1 Present value of lease liabilities $ 39.0 $ 27.8 17. BOARD OF DIRECTOR AND EMPLOYEE BENEFIT PLANS Board of Directors and Officers Retirement Plan Under the 2005 Deferred Compensation Plan (the "Deferred Plan"), members of our Board of Directors may elect to invest the deferred director fee compensation into our common stock within the Deferred Plan. Investments in our common stock are credited as hypothetical shares of common stock based on the market price of the stock at the time the compensation was earned. Upon the end of the director's service, common stock shares or the cash value is issued to the director based upon their elections. Prior to December 13, 2019, we provided eligible executives the opportunity to defer the receipt of base and bonus compensation to a future date and included a Company matching contribution on base compensation with certain limits through the Deferred Plan. On December 13, 2019, the Compensation Committee elected to freeze the Deferred Plan for eligible executives after the 2019 plan year. On December 13, 2019, the Compensation Committee adopted the Churchill Downs Incorporated Restricted Stock Unit Deferral Plan, effective January 1, 2020 (the "RSU Deferral Plan"). The Compensation Committee adopted an Amended and Restated Churchill Downs Incorporated Equity Award Deferral Plan, effective December 31, 2024 (the "Equity Award Deferral Plan") to amend the RSU Deferral Plan. Under the Equity Award Deferral Plan, certain individual employees who are management or highly compensated employees of the Company may elect to defer settlement of RSUs, PSUs, and other share based awards granted pursuant to the 2016 Plan. Other Retirement Plans We have a profit-sharing plan for all employees with three months or more of service who are not otherwise participating in an associated profit-sharing plan. We match contributions made by employees up to 3 % of the employee’s annual compensation and match at 50 % any contributions made by the employee up to an additional 2 % of compensation with certain limits. We may also contribute a discretionary amount determined annually by the Board of Directors as well as a year-end discretionary match not to exceed 4 % of compensation. Our cash contribution to the plan was $ 7.3 million in 2025, $ 6.5 million in 2024, and $ 5.1 million in 2023. 80 Churchill Downs Incorporated Notes to Consolidated Financial Statements 18. FAIR VALUE OF ASSETS AND LIABILITIES We endeavor to utilize the best available information in measuring fair value. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate: Restricted Cash Our restricted cash accounts that are held in interest-bearing accounts qualify for Level 1 in the fair value hierarchy, which includes unadjusted quoted market prices in active markets for identical assets. Debt The fair value of the Company’s 2031 Senior Notes, 2030 Senior Notes, 2028 Senior Notes, and 2027 Senior Notes are estimated based on unadjusted quoted prices for identical or similar liabilities in markets that are not active and as such are Level 2 measurements. The fair values of the Company's Term Loan B-1, Term Loan A, and Revolver under the Credit Agreement approximate the gross carrying value of the variable rate debt and as such are Level 2 measurements. The carrying amounts and estimated fair values by input level of the Company's financial instruments are as follows: December 31, 2025 (in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Restricted cash $ 87.9 $ 87.9 $ 87.9 $ — $ — Financial liabilities: Term Loan B-1 284.2 285.8 — 285.8 — Term Loan A 1,107.9 1,112.3 — 1,112.3 — Revolver 657.0 657.0 — 657.0 — 2027 Senior Notes 598.7 598.7 — 598.7 — 2028 Senior Notes 699.3 696.1 — 696.1 — 2030 Senior Notes 1,190.2 1,211.0 — 1,211.0 — 2031 Senior Notes 593.0 621.9 — 621.9 — December 31, 2024 (in millions) Carrying Amount Fair Value Level 1 Level 2 Level 3 Financial assets: Restricted cash $ 77.2 $ 77.2 $ 77.2 $ — $ — Financial liabilities: Term Loan B-1 286.8 288.8 — 288.8 — Term Loan A 1,166.7 1,172.4 — 1,172.4 — Revolver 377.5 377.5 — 377.5 — 2027 Senior Notes 597.6 593.2 — 593.2 — 2028 Senior Notes 699.0 675.2 — 675.2 — 2030 Senior Notes 1,187.9 1,172.6 — 1,172.6 — 2031 Senior Notes 591.7 605.2 — 605.2 — 19. CONTINGENCIES We are involved in litigation arising in the ordinary course of conducting business. We carry insurance for workers' compensation claims from our employees and general liability for claims from independent contractors, customers, and guests. We are self-insured up to an aggregate stop loss for our general liability and workers' compensation coverages. 81 Churchill Downs Incorporated Notes to Consolidated Financial Statements We review all litigation on an ongoing basis when making accrual and disclosure decisions. For certain legal proceedings, we cannot reasonably estimate losses or a range of loss, if any, particularly for proceedings that are in the early stages of development or where the plaintiffs seek indeterminate damages. Various factors, including but not limited to, the outcome of potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability can be established or before a loss or range of loss can be reasonably estimated. In accordance with current accounting standards for loss contingencies and based upon information currently known to us, we establish reserves for litigation when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss or range of loss can be reasonably estimated. When no amount within the range of loss is a better estimate than any other amount, we accrue the minimum amount of the estimable loss. To the extent that such litigation against us may have an exposure to a loss in excess of the amount we have accrued, we believe that such excess would not be material to our consolidated financial condition, results of operations, or cash flows. Legal fees are expensed as incurred. If the loss contingency in question is not both probable and reasonably estimable, we do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable. In the event that a legal proceeding results in a substantial judgment against, or settlement by us, there can be no assurance that any resulting liability or financial commitment would not have a material adverse impact on our business. 20. NET INCOME PER COMMON SHARE COMPUTATIONS The following is a reconciliation of the numerator and denominator of the net income per common share computations: Years Ended December 31, (in millions, except per share data) 2025 2024 2023 Numerator for basic net income per common share: Net income attributable to Churchill Downs Incorporated $ 383.0 $ 426.8 $ 417.3 Adjustments related to redeemable noncontrolling interests 3.3 3.0 — Net income attributable to common shareholders $ 379.7 $ 423.8 $ 417.3 Denominator for net income per common share: Basic 71.4 74.0 75.2 Plus dilutive effect of stock awards 0.4 0.6 0.9 Diluted 71.8 74.6 76.1 Net income attributable to Churchill Downs Incorporated per common share data: Basic net income $ 5.32 $ 5.73 $ 5.55 Diluted net income $ 5.29 $ 5.68 $ 5.49 21. SEGMENT INFORMATION We manage our operations through three reportable segments: Live and Historical Racing, Wagering Services and Solutions, and Gaming. Our operating segments reflect the internal management reporting used by our chief operating decision maker, Chief Executive Officer, to evaluate results of operations and to assess performance and allocate resources. • Live and Historical Racing The Live and Historical Racing segment includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs Racetrack and our historical racing properties in Kentucky, Virginia, and New Hampshire. Our Live and Historical Racing properties earn commissions primarily from pari-mutuel wagering on live and historical races; simulcast fees earned from other wagering sites, fees from racing event-related services including admissions, personal seat licenses, sponsorships, television rights, and other miscellaneous services, and revenue from food and beverage services. • Wagering Services and Solutions The Wagering Services and Solutions segment includes the revenue and expenses for TwinSpires Horse Racing, our sports betting business, United Tote, and Exacta. 82 Churchill Downs Incorporated Notes to Consolidated Financial Statements TwinSpires Horse Racing operates the online horse racing wagering business for TwinSpires.com, BetAmerica.com, and other white-label platforms; facilitates high dollar wagering by international customers; and provides the Bloodstock Research Information Services platform for horse racing statistical data. Our sports betting business includes the results of our retail sportsbooks at our wholly owned gaming properties, our retail sportsbooks in Kentucky, and our monetized online sports wagering licenses in Pennsylvania and Kentucky. The retail and online sportsbooks, if applicable, related to Rivers Des Plaines and MVG are included in the Gaming segment. United Tote manufactures and operates pari-mutuel wagering systems for racetracks, OTBs and other pari-mutuel wagering businesses. United Tote provides totalisator services which accumulate wagers, calculate payoffs and displays wagering data to patrons who wager on horse races. United Tote has contracts to provide totalisator services to third-party racetracks, OTBs and other pari-mutuel wagering businesses and also provides these services at our facilities. Exacta is a leading provider of central determinant system technology in HRMs across the country. Exacta's system architecture supports multiple game vendors and virtually unlimited math modeling capabilities on a single system enabling Exacta to deliver a diverse gaming library to Company owned and third-party HRM entertainment venues in several states. • Gaming The Gaming segment includes revenue and expenses for the wholly owned casino properties and associated racetrack facilities. The Gaming segment also includes our share of our equity investments in Illinois and Ohio. The Gaming segment generates revenue and expenses from slot machines, table games, VLTs, video poker, HRMs, ancillary food and beverage services, hotel services, commission on pari-mutuel wagering, racing event-related services, and other miscellaneous operations. On June 26, 2023, the Company's management agreement for Lady Luck expired and was not renewed. The Company completed the sale of substantially all its assets at Lady Luck for an immaterial amount. We have aggregated Arlington as well as certain corporate operations, and other immaterial joint ventures in All Other to reconcile to consolidated results. Eliminations include the elimination of intersegment transactions. We utilize non-GAAP measures, including EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA. Our chief operating decision maker utilizes Adjusted EBITDA to evaluate segment performance, develop strategy and allocate resources. Adjusted EBITDA includes the following adjustments: Adjusted EBITDA includes our portion of EBITDA from our equity investments and the portion of EBITDA attributable to noncontrolling interests. Adjusted EBITDA excludes: • Transaction expense, net which includes: – Acquisition, disposition, and property sale related charges; and – 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 The property associated with Arlington International Racecourse ("Arlington") was sold on February 15, 2023 to the Chicago Bears. Arlington's results and exit costs in 2023 are treated as an adjustment. 83 Churchill Downs Incorporated Notes to Consolidated Financial Statements The tables below present net revenue from external customers, intercompany revenue from each of our segments, Adjusted EBITDA by segment, and reconciliation of net income to Adjusted EBITDA. Refer to Note 12, Revenue from Contracts with Customers to see intercompany revenues by segment. Net revenue from external customers by segment is comprised of the following: Years Ended December 31, (in millions) 2025 2024 2023 Live and Historical Racing $ 1,394.7 $ 1,225.6 $ 1,047.3 Wagering Services and Solutions 488.2 469.5 444.9 Gaming 1,042.9 1,039.1 968.6 All Other 0.1 0.1 0.9 Net Revenue $ 2,925.9 $ 2,734.3 $ 2,461.7 84 Churchill Downs Incorporated Notes to Consolidated Financial Statements Adjusted EBITDA by segment is comprised of the following: Year Ended December 31, 2025 (in millions) Live and Historical Racing Wagering Services and Solutions Gaming Revenue $ 1,442.4 $ 526.3 $ 1,049.3 Pari-mutuel taxes and purses ( 349.4 ) ( 22.0 ) ( 36.2 ) Gaming taxes ( 7.5 ) ( 2.3 ) ( 308.7 ) Marketing and advertising ( 56.8 ) ( 9.6 ) ( 35.0 ) Salaries and benefits ( 142.9 ) ( 34.9 ) ( 170.4 ) Content expense ( 6.3 ) ( 210.2 ) ( 8.6 ) Selling, general and administrative expense ( 43.2 ) ( 18.1 ) ( 44.4 ) Maintenance, insurance and utilities ( 44.4 ) ( 4.1 ) ( 39.6 ) Gaming equipment rental and technology costs ( 51.6 ) ( 3.1 ) ( 17.4 ) Food and beverage costs ( 15.0 ) — ( 16.4 ) Other operating expense (1) ( 92.3 ) ( 45.3 ) ( 68.3 ) Equity in income of unconsolidated affiliates — — 178.1 Other income 4.0 0.6 0.6 Adjusted EBITDA $ 637.0 $ 177.3 $ 483.0 Year Ended December 31, 2024 (in millions) Live and Historical Racing Wagering Services and Solutions Gaming Revenue $ 1,267.0 $ 500.7 $ 1,045.4 Pari-mutuel taxes and purses ( 300.0 ) ( 19.7 ) ( 43.5 ) Gaming taxes ( 5.7 ) ( 2.4 ) ( 291.6 ) Marketing and advertising ( 42.1 ) ( 8.9 ) ( 35.4 ) Salaries and benefits ( 127.0 ) ( 32.8 ) ( 164.6 ) Content expense ( 6.4 ) ( 205.8 ) ( 8.5 ) Selling, general and administrative expense ( 40.1 ) ( 15.5 ) ( 46.1 ) Maintenance, insurance and utilities ( 46.5 ) ( 4.2 ) ( 42.1 ) Gaming equipment rental and technology costs ( 41.6 ) ( 3.5 ) ( 15.4 ) Food and beverage costs ( 12.9 ) — ( 16.7 ) Other operating expense (1) ( 70.6 ) ( 42.6 ) ( 62.9 ) Equity in income of unconsolidated affiliates — — 186.4 Other income 0.5 0.3 1.9 Adjusted EBITDA $ 574.6 $ 165.6 $ 506.9 85 Churchill Downs Incorporated Notes to Consolidated Financial Statements Year Ended December 31, 2023 (in millions) Live and Historical Racing Wagering Services and Solutions Gaming Revenue $ 1,084.6 $ 458.4 $ 974.6 Pari-mutuel taxes and purses ( 262.5 ) ( 19.9 ) ( 39.2 ) Gaming taxes ( 5.2 ) ( 2.7 ) ( 283.6 ) Marketing and advertising ( 37.6 ) ( 9.8 ) ( 35.4 ) Salaries and benefits ( 107.0 ) ( 29.3 ) ( 146.0 ) Content expense ( 6.5 ) ( 205.1 ) ( 8.8 ) Selling, general and administrative expense ( 31.9 ) ( 12.4 ) ( 42.7 ) Maintenance, insurance and utilities ( 43.2 ) ( 3.8 ) ( 40.0 ) Gaming equipment rental and technology costs ( 48.7 ) ( 3.7 ) ( 15.6 ) Food and beverage costs ( 11.3 ) — ( 14.9 ) Other operating expense (1) ( 56.6 ) ( 40.6 ) ( 53.2 ) Equity in income of unconsolidated affiliates — — 191.6 Other income 1.3 1.0 1.8 Adjusted EBITDA $ 475.4 $ 132.1 $ 488.6 (1) Other operating expense primarily includes supplies, regulatory licenses and fees, property taxes, and third-party service fees and costs. 86 Churchill Downs Incorporated Notes to Consolidated Financial Statements Years Ended December 31, (in millions) 2025 2024 2023 Reconciliation of Net Income to Adjusted EBITDA: Net income attributable to Churchill Downs Incorporated $ 383.0 $ 426.8 $ 417.3 Net income attributable to noncontrolling interests 2.5 2.3 — Net income 385.5 429.1 417.3 Adjustments: Depreciation and amortization 233.1 199.1 169.0 Interest expense 297.7 289.8 268.4 Income tax provision 146.9 144.1 144.5 Stock-based compensation expense 30.2 36.1 32.9 Legal reserves — — ( 1.2 ) Pre-opening expenses 11.7 29.6 18.6 Arlington exit costs — — 9.4 Other expense, net 10.1 4.2 7.0 Transaction expense (benefit), net 5.1 ( 12.1 ) 4.8 Asset impairments, net 47.5 3.9 24.6 Other income, expense: Interest, depreciation and amortization expense related to equity investments 38.6 42.0 40.2 Rivers Des Plaines' legal reserves and transactions costs — 0.3 — Other charges and recoveries, net ( 1.1 ) ( 6.9 ) 2.4 Gain on sale of assets — — ( 114.0 ) Total adjustments 819.8 730.1 606.6 Adjusted EBITDA $ 1,205.3 $ 1,159.2 $ 1,023.9 Adjusted EBITDA by segment: Live and Historical Racing $ 637.0 $ 574.6 $ 475.4 Wagering Services and Solutions 177.3 165.6 132.1 Gaming 483.0 506.9 488.6 Total segment Adjusted EBITDA 1,297.3 1,247.1 1,096.1 All Other ( 92.0 ) ( 87.9 ) ( 72.2 ) Total Adjusted EBITDA $ 1,205.3 $ 1,159.2 $ 1,023.9 87 Churchill Downs Incorporated Notes to Consolidated Financial Statements The table below presents total capital expenditures for each of our segments: Years Ended December 31, (in millions) 2025 2024 2023 Capital expenditures: Live and Historical Racing $ 216.9 $ 385.4 $ 461.1 Wagering Services and Solutions 22.7 19.0 14.6 Gaming 29.9 130.0 188.1 Total segment capital expenditures 269.5 534.4 663.8 All Other 5.4 12.6 12.7 Total capital expenditures $ 274.9 $ 547.0 $ 676.5 Our chief operating decision maker does not review disaggregated assets by segment. The measure of segment assets is reported on the balance sheet as total consolidated assets. 22. RELATED PARTY TRANSACTIONS Directors and employees may from time to time own or have interests in horses racing at our racetracks. All such races are conducted under the regulations of each state’s respective regulatory agency, as applicable, and no director or employee receives any extra or special benefit with regard to having his or her horses selected to run in races or in connection with the actual running of races. There is no material financial statement impact attributable to directors or employees who may have interests in horses racing at our racetracks. In the ordinary course of business, we may enter into transactions with certain of our officers and directors for the sale of personal seat licenses, suite accommodations, and tickets for our live racing events. We believe that each such transaction has been on terms no less favorable for us than could have been obtained in a transaction with a third-party, and no officer or director received any extra or special benefit in connection with such transactions. Stock Repurchase Agreement On December 18, 2023, the Company entered into the 2023 Stock Repurchase Agreement with an affiliate of TDG to repurchase 1,000,000 shares of the Company’s common stock, for $ 123.75 per share representing a discount of 4.03 % to the closing price on December 15, 2023 of $ 128.95 for an aggregate purchase price of $ 123.8 million. The repurchase of the shares of Company's common stock pursuant to the 2023 Stock Repurchase Agreement closed on January 2, 2024, and contains customary representations, warranties, and covenants of the parties. The repurchase of shares of common stock from TDG pursuant to the 2023 Stock Repurchase Agreement was approved by the Company's Board of Directors separately from, and did not reduce the authorized amount remaining under, the existing common stock repurchase program. The repurchase of the shares was funded using available cash and borrowings under the Company’s senior secured credit facility. 88 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Churchill Downs Incorporated Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Churchill Downs Incorporated and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2025 appearing under Item 15(a)(2) (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 89 Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of the Acquired Casino Salem Gaming Rights Intangible Asset As described in Note 3 to the consolidated financial statements, on August 27, 2025, the Company completed its acquisition of 90% of Casino Salem for a base purchase price of $180.0 million. Management recorded a $196.6 million indefinite-lived gaming rights intangible asset, which represented the fair value of the gaming rights at the date of acquisition. The fair value of the gaming rights acquired was determined using the Greenfield Method, which is an income approach methodology. The estimated future revenue, future operating expenses, start-up costs, and discount rate were the primary inputs in the valuation. The principal considerations for our determination that performing procedures relating to the valuation of the acquired Casino Salem gaming rights intangible asset is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Casino Salem gaming rights intangible asset acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to estimated future revenue, future operating expenses, and discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to accounting for an asset acquisition, including controls over management’s valuation of the Casino Salem gaming rights intangible asset acquired. These procedures also included, among others (i) reading the purchase agreement; (ii) testing management’s process for developing the fair value estimate of the Casino Salem gaming rights intangible asset acquired; (iii) evaluating the appropriateness of the Greenfield Method used by management; (iv) testing the completeness and accuracy of the underlying data used in the Greenfield Method; and (v) evaluating the reasonableness of the significant assumptions used by management related to estimated future revenue, future operating expenses, and discount rate. Evaluating management’s assumptions related to estimated future revenue and future operating expenses involved considering (i) the current and past performance of similar casino properties; (ii) the consistency with economic and industry forecasts; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Greenfield Method and (ii) the reasonableness of the discount rate assumption. /s/ PricewaterhouseCoopers LLP Louisville, Kentucky February 25, 2026 We have served as the Company’s auditor since 1990. 90 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.