SEC Filing | Churchill Downs, Inc.

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chdn-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33998

Churchill Downs Incorporated

(Exact name of registrant as specified in its charter)

Kentucky

61-0156015

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

600 North Hurstbourne Parkway, Suite 400

Louisville,

Kentucky

40222

(Address of Principal Executive Offices)

(Zip Code)

(502) 636-4400

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, No Par Value	CHDN	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of registrant’s common stock at October 19, 2023 was 74,594,820 shares.

CHURCHILL DOWNS INCORPORATED

INDEX TO QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended September 30, 2023


	Part I-FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and 2022	3
	Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022	4
	Condensed Consolidated Statements of Shareholders' Equity for the three and nine months ended September 30, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	43

	Part II-OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
	Signatures	46


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except per common share data)	2023		2022		2023		2022
Net revenue:
Live and Historical Racing	$	219.5	$	92.3	$	818.9	$	439.2
TwinSpires	108.5		106.2		340.7		343.3
Gaming	244.3		183.4		740.2		545.0
All Other	0.2		1.2		0.7		2.2
Total net revenue	572.5		383.1		1,900.5		1,329.7
Operating expense:
Live and Historical Racing	158.2		80.1		505.7		269.2
TwinSpires	73.4		64.5		219.8		229.6
Gaming	175.6		133.0		528.3		387.0
All Other	1.3		2.9		12.0		8.8
Selling, general and administrative expense	50.2		38.4		150.6		112.7
Asset impairments	—		—		24.5		4.9
Transaction expense, net	1.5		1.2		1.8		7.4
Total operating expense	460.2		320.1		1,442.7		1,019.6
Operating income	112.3		63.0		457.8		310.1
Other (expense) income:
Interest expense, net	(67.9)		(36.2)		(197.8)		(92.6)
Equity in income of unconsolidated affiliates	33.3		42.4		110.4		115.4
Gain on sale of assets	—		—		114.0		274.6
Miscellaneous, net	4.1		4.2		5.5		4.4
Total other (expense) income	(30.5)		10.4		32.1		301.8
Income from operations before provision for income taxes	81.8		73.4		489.9		611.9
Income tax provision	(20.8)		(16.4)		(130.2)		(173.5)
Net income	$	61.0	$	57.0	$	359.7	$	438.4

Net income per common share data:
Basic net income	$	0.81	$	0.75	$	4.78	$	5.76







Diluted net income	$	0.79	$	0.74	$	4.69	$	5.68

Weighted average shares outstanding:
Basic	75.2		75.6		75.3		76.1
Diluted	77.1		76.7		76.7		77.2

The accompanying notes are an integral part of the condensed consolidated financial statements.


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			3

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in millions)	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	129.9	$	129.8
Restricted cash	63.3		74.9
Accounts receivable, net	102.2		81.5
Income taxes receivable	5.9		14.0
Other current assets	69.3		44.3
Total current assets	370.6		344.5
Property and equipment, net	2,383.6		1,978.3
Investment in and advances to unconsolidated affiliates	660.1		659.4
Goodwill	899.9		723.8
Other intangible assets, net	2,417.3		2,391.8
Other assets	19.0		27.0
Long-term assets held for sale	—		82.0
Total assets	$	6,750.5	$	6,206.8

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	169.0	$	145.5
Accrued expenses and other current liabilities	401.4		363.1

Current deferred revenue	30.5		39.0
Current maturities of long-term debt	68.0		47.0
Dividends payable	1.0		27.0
Total current liabilities	669.9		621.6
Long-term debt, net of current maturities and loan origination fees	1,585.0		2,081.6
Notes payable, net of debt issuance costs	3,069.8		2,477.1
Non-current deferred revenue	9.5		11.8
Deferred income taxes	386.1		340.8
Other liabilities	141.5		122.4
Total liabilities	5,861.8		5,655.3
Commitments and contingencies
Shareholders' equity:
Preferred stock	—		—
Common stock	—		—
Retained earnings	889.6		552.4
Accumulated other comprehensive loss	(0.9)		(0.9)
Total shareholders' equity	888.7		551.5
Total liabilities and shareholders' equity	$	6,750.5	$	6,206.8

The accompanying notes are an integral part of the condensed consolidated financial statements.


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			4

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
(in millions)	Shares	Amount
Balance, December 31, 2022	74.8	$	—	$	552.4	$	(0.9)	$	551.5
Net income				155.7				155.7
Issuance of common stock	0.2							—

Taxes paid related to net share settlement of stock awards	(0.1)	(8.6)		(2.7)				(11.3)
Stock-based compensation		8.6						8.6
Other				(0.3)				(0.3)
Balance, March 31, 2023	74.9	—		705.1		(0.9)		704.2
Net income				143.0				143.0


Taxes paid related to net share settlement of stock awards		(0.1)						(0.1)
Stock-based compensation		8.1						8.1
Other				(1.4)				(1.4)
Balance, June 30, 2023	74.9	8.0		846.7		(0.9)		853.8
Net income				61.0				61.0
Issuance of common stock		3.1						3.1
Repurchase of common stock	(0.3)	(19.2)		(18.1)				(37.3)

Stock-based compensation		8.1						8.1

Balance, September 30, 2023	74.6	$	—	$	889.6	$	(0.9)	$	888.7


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
(in millions)	Shares	Amount
Balance, December 31, 2021	76.2	$	—	$	307.7	$	(0.9)	$	306.8
Net income				42.1				42.1
Issuance of common stock	0.2							—
Repurchase of common stock	(0.2)	(7.0)		(18.0)				(25.0)
Taxes paid related to net share settlement of stock awards	(0.2)			(13.1)				(13.1)
Stock-based compensation		7.0						7.0

Balance, March 31, 2022	76.0	—		318.7		(0.9)		317.8
Net income				339.3				339.3

Repurchase of common stock	(0.6)	(7.4)		(54.1)				(61.5)
Taxes paid related to net share settlement of stock awards				(0.1)				(0.1)
Stock-based compensation		7.4						7.4
Balance, June 30, 2022	75.4	—		603.8		(0.9)		602.9
Net income				57.0				57.0
Issuance of common stock		2.7						2.7
Repurchase of common stock	(0.6)	(11.8)		(47.2)				(59.0)
Stock-based compensation		9.1						9.1

Balance, September 30, 2022	74.8	$	—	$	613.6	$	(0.9)	$	612.7

The accompanying notes are an integral part of the condensed consolidated financial statements.


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			5

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(in millions)	2023		2022
Cash flows from operating activities:
Net income	$	359.7	$	438.4
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	121.8		78.7
Distributions from unconsolidated affiliates	126.6		117.9
Equity in income of unconsolidated affiliates	(110.4)		(115.4)
Stock-based compensation	24.8		23.5
Deferred income taxes	45.3		26.7
Asset impairments	24.5		4.9
Amortization of operating lease assets	4.8		3.9
Gain on sale of assets	(114.0)		(274.6)
Other	6.5		5.8
Changes in operating assets and liabilities:
Income taxes	6.0		127.3
Deferred revenue	(10.8)		(34.6)
Other assets and liabilities	14.0		22.0
Net cash provided by operating activities	498.8		424.5
Cash flows from investing activities:
Capital maintenance expenditures	(52.4)		(37.1)
Capital project expenditures	(445.7)		(226.6)
Acquisition of businesses, net of cash acquired	(241.3)		(81.7)
Acquisition of gaming rights, net of cash acquired	—		(33.3)
Proceeds from sale of assets	195.7		279.0
Other	(5.8)		(7.3)
Net cash used in investing activities	(549.5)		(107.0)
Cash flows from financing activities:
Proceeds from borrowings under long-term debt obligations	1,420.8		1,220.0
Repayments of borrowings under long-term debt obligations	(1,297.1)		(5.3)
Payment of dividends	(26.8)		(25.7)
Repurchase of common stock	(35.8)		(143.5)
Taxes paid related to net share settlement of stock awards	(13.2)		(13.2)
Debt issuance costs	(12.3)		(12.8)
Change in bank overdraft	1.4		(1.8)
Other	1.7		2.4
Net cash provided by financing activities	38.7		1,020.1
Cash flows from discontinued operations:
Operating activities of discontinued operations	0.5		—
Net (decrease) increase in cash, cash equivalents and restricted cash	(11.5)		1,337.6
Cash, cash equivalents and restricted cash, beginning of period	204.7		355.6
Cash, cash equivalents and restricted cash, end of period	$	193.2	$	1,693.2

The accompanying notes are an integral part of the condensed consolidated financial statements.


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			6

CHURCHILL DOWNS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)


	Nine Months Ended September 30,
(in millions)	2023		2022
Supplemental disclosures of cash flow information:
Cash paid for interest	$	180.5	$	66.4
Cash paid for income taxes	78.9		53.9
Cash received from income tax refunds	0.8		34.2
Schedule of non-cash operating, investing and financing activities:
Deferred payment on gaming rights incurred during the period	$	—	$	50.0
Property and equipment additions included in accounts payable and accrued expenses	52.0		45.0
Deferred payments for acquisition of business included in other liabilities	6.9		—


Right-of-use assets obtained in exchange for lease obligations in finance leases	33.4		6.2

The accompanying notes are an integral part of the condensed consolidated financial statements.


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			7


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. DESCRIPTION OF BUSINESS

Basis of Presentation

Churchill Downs Incorporated (the "Company", "we", "our") financial statements are presented in conformity with the requirements of this Quarterly Report on Form 10-Q and consequently do not include all of the disclosures normally required by U.S. generally accepted accounting principles ("GAAP") or those normally made in our Annual Report on Form 10-K. The December 31, 2022 Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all disclosures required by GAAP.

The following information is unaudited. All per share amounts assume dilution unless otherwise noted. This report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022.

In the opinion of management, all adjustments necessary for a fair statement of this information have been made, and all such adjustments are of a normal, recurring nature.

We conduct our business through three reportable segments: Live and Historical Racing, TwinSpires, and Gaming. We aggregate our other businesses as well as certain corporate operations, and other immaterial joint ventures, in All Other. We report net revenue and operating expense associated with these reportable segments in the accompanying Condensed Consolidated Statements of Comprehensive Income.

Acquisition of Exacta Systems

On August 22, 2023, the Company completed its previously-announced acquisition of Exacta Systems, LLC ("Exacta"). Refer to Note 3, Acquisitions for further information on the transaction.

Stock Split

Effective May 22, 2023, the Company's common stock was split two-for-one (the "Stock Split") with a proportionate increase in the number of its authorized shares of common stock. All share and per-share amounts have been retroactively adjusted to reflect the effects of the Stock Split. Refer to Note 8, Shareholders' Equity for further information on the Stock Split.

Presque Isle Impairment

During the second quarter, we evaluated economic conditions subsequent to the date of our annual impairment assessment on April 1, 2023, including competition in the market and inflationary pressures, which increased during the second quarter of 2023, and impacted the performance and outlook of Presque Isle Downs and Casino ("Presque Isle"). As a result, the Company concluded that a trigger event for impairment testing occurred related to the Presque Isle gaming rights, trademark, and the reporting unit's goodwill at the end of the second quarter. Based on the 2023 trigger event, the Company evaluated and subsequently updated the projected cash flows and discount rate to reflect the current environment. As a result, the Company recognized a non-cash impairment charge of $24.5 million in the second quarter of 2023 for the Presque Isle gaming rights and trademark. Refer to Note 5, Asset Impairments for further information on the impairment.

Arlington Sale

On February 15, 2023, we closed on the sale of the Arlington International Racecourse property ("Arlington") located in Arlington Heights, Illinois. We sold 326-acres to the Chicago Bears for $197.2 million. Refer to Note 4, Dispositions for further information on the transaction.

Acquisition of Peninsula Pacific Entertainment

On November 1, 2022, the Company completed the acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC ("P2E") with a base purchase price of $2.75 billion ("P2E Transaction") subject to working capital and other purchase price adjustments. The P2E assets acquired included Colonial Downs Racetrack ("Colonial Downs") and six Historical Racing Machine ("HRM") entertainment venues in Virginia, del Lago Resort & Casino in New York ("del Lago"), and Hard Rock Hotel & Casino in Iowa ("Hard Rock Sioux City"), as well as the development rights for the Dumfries and Emporia HRM facilities in Virginia, up to five additional HRM entertainment venues in Virginia, and the potential for ONE Casino and Resort in Virginia in collaboration with Urban One, Inc. ("Urban One"). Refer to Note 3, Acquisitions for further information on the transaction.


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			8


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Acquisitions of Ellis Park and Chasers Poker Room

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

On September 2, 2022, the Company completed the acquisition of Chasers Poker Room ("Chasers") in Salem, New Hampshire (the "Chasers Transaction"). As part of the transaction, we made an initial payment to the sellers for rights to operate the poker room and to build an HRM venue. Additional payments will be made once all necessary permits are obtained, and the planned historical racing entertainment venue is opened. The Company plans to develop an expanded charitable gaming facility in New Hampshire to accommodate HRMs and table games.

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

Exit of the Direct Online Sports and Casino Business

On February 24, 2022 the Company announced plans to exit the direct online Sports and Casino business. The Company has exited the direct online Sports and Casino business in every state except for Arizona. The Company continues to operate retail sports betting at certain of its racetracks and HRM and gaming facilities.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Pronouncements - effective in 2023 or thereafter

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, and to simplify the accounting for transitioning from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance. In December 2022, the FASB deferred the date for which this guidance can be applied from December 31, 2022 to December 31, 2024. The use of LIBOR was phased out at the end of 2021, although the phase-out of U.S. dollar LIBOR for existing agreements was delayed until June 2023. During the second quarter of 2023, the Company completed the transition of its financing from LIBOR to the Secured Overnight Financing Rate ("SOFR"). These transition activities did not have a material impact on the Company’s financial statements.

3. ACQUISITIONS

Exacta Systems

On August 22, 2023, the Company completed its previously-announced acquisition of Exacta for preliminary purchase consideration of $248.2 million, net of cash acquired, consisting of a $241.3 million cash payment and $6.9 million of deferred payments, which is payable over two years (the "Exacta Transaction"). The preliminary purchase consideration is subject to working capital and other purchase price adjustments. Exacta is a leading provider of technology to support historical horse racing (“HHR”) operations across the country. The Exacta Transaction is expected to enable the Company to realize significant and immediate synergies related to the Company’s Virginia operations. The Company also expects to realize additional operational improvements over time through the diversification of games available at its HRM facilities. Exacta will operate within the Company’s TwinSpires segment and will continue to service its growing portfolio of third-party HHR operators in Kentucky, Wyoming, and New Hampshire.

The Company recorded the fair values of the assets of the Exacta Transaction as of August 22, 2023 based upon preliminary valuations. Estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period up to one year from the acquisition date. The areas of the preliminary valuations that are not yet finalized relate to the amounts for income taxes, property and equipment, inventory, intangible assets, adjustments to working capital, the final amount of residual goodwill, and final allocation of goodwill between segments. The residual goodwill will be allocated between the TwinSpires and the Live and Historical Racing segments based upon the projected future benefits to be realized as a result of the Exacta Transaction. The Company expects to continue to obtain information to assist in determining fair values of net assets acquired at the acquisition date during the measurement period.

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


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			9


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)


(in millions)	Total
Accounts receivable	$	9.0
Other current assets	3.0
Property and equipment	9.0
Goodwill	177.1
Other intangible assets	54.3
Other assets	0.9
Total assets acquired	$	253.3

Accounts payable	2.7
Accrued expenses and other current liabilities	1.8
Other liabilities assumed	0.6

Total liabilities assumed	5.1
Net assets acquired (net of cash)	$	248.2

The fair value of the intangible assets consists of the following:


(in millions)	Fair Value Recognized		Weighted-Average 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 $177.1 million related to the Exacta Transaction was recognized as of September 30, 2023, of which $95.9 million was preliminarily allocated to the Live and Historical Racing segment and $81.2 million was preliminarily allocated to the TwinSpires segment. The goodwill related to the Exacta Transaction is deductible for tax purposes.

P2E Transaction

On November 1, 2022, the Company completed the acquisition of substantially all the assets of P2E for preliminary purchase consideration of $2,835.9 million, net of cash acquired. The P2E assets acquired included Colonial Downs and six HRM entertainment venues in Virginia, del Lago in New York, and Hard Rock Sioux City in Iowa, as well as the development rights for Dumfries and Emporia HRM facilities in Virginia, up to five additional HRM entertainment venues in Virginia, and the potential for ONE Casino & Resort in Virginia in collaboration with Urban One.

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


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			10


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)


(in millions)	Total
Accounts receivable	$	9.8
Other current assets	7.2
Property and equipment	611.2
Goodwill	347.8
Other intangible assets	1,941.5
Deferred taxes	20.8
Other assets	16.0
Total assets acquired	$	2,954.3

Accounts payable	4.0
Accrued expenses and other current liabilities	96.9
Other liabilities assumed	17.5
Total liabilities assumed	118.4
Net assets acquired (net of cash)	$	2,835.9

The fair value of the intangible assets consists of the following:


(in millions)	Fair Value Recognized
Gaming rights	$	1,865.6
Trademark	75.9
Total intangible assets	$	1,941.5

Goodwill of $347.8 million was recognized due to the expected contribution of P2E to the Company's overall business strategy. The goodwill was assigned to the Gaming segment in the amount of $129.1 million and to the Live and Historical Racing segment in the amount of $218.7 million and is mostly deductible for tax purposes.

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. The trademarks were assigned an indefinite useful life based on the Company’s intention to keep the trademarks for an indefinite period of time.

Estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period up to one year from the acquisition date. The preliminary purchase consideration is subject to adjustment upon finalization of customary post-closing adjustments. The primary areas of the preliminary valuation that are not yet finalized relate to the adjustments to working capital and the final amount of residual goodwill. The Company expects to continue to obtain information to assist in determining fair values of net assets acquired at the acquisition date during the measurement period.

The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the P2E Transaction had occurred as of January 1, 2021. The unaudited pro forma financial information is not necessarily indicative of either future results of operations or results of operations that might have been achieved had the acquisition been consummated as of January 1, 2021.


(in millions)	Three months ended September 30, 2022		Nine months ended September 30, 2022
Net revenue	$	552.9	$	1,811.7
Net income	$	70.0	$	471.4


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			11


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Ellis Park

On September 26, 2022, the Company completed the Ellis Park Transaction for total consideration of $79.0 million in cash, plus $3.5 million in working capital and other purchase price adjustments. The fair values as of September 30, 2023 for the assets acquired and liabilities assumed, net of cash acquired of $1.4 million, at the date of acquisition are as follows: property and equipment of $19.3 million, indefinite-lived gaming rights of $47.4 million, indefinite-lived trademark of $3.6 million, goodwill of $9.3 million, and net working capital of $1.5 million.

Chasers Poker Room

On September 2, 2022, the Company completed the Chasers Transaction which was treated as an asset acquisition because substantially all the value of the gross assets acquired was concentrated in gaming rights. The Company made an initial payment at closing and recorded a liability for the remaining payments due on a future date. In conjunction with the acquisition, the Company recorded an $82.2 million indefinite-lived gaming rights intangible asset which represented its fair value at the date of acquisition.

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 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.

The Company has not included other disclosures regarding the Exacta, Chasers, or Ellis Park Transactions as these transactions are immaterial to our business.

4. DISPOSITIONS

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 income in the accompanying Condensed Consolidated Statements of Comprehensive Income. Certain assets of Arlington totaling $82.0 million were classified held for sale as of December 31, 2022 on the accompanying Condensed Consolidated Balance Sheets. Arlington’s operations and assets are included in All Other in our consolidated results.


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			12


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The Company executed a forward like-kind exchange transaction by purchasing certain property as part of the P2E Transaction for $197.2 million, which qualified as an Internal Revenue Code §1031 transaction. An exchange accommodation titleholder ("EAT"), a type of variable interest entity, was used to facilitate this reverse like-kind exchange. The Company determined that it is the primary beneficiary of the EAT, thus the property held by the EAT has been consolidated and recorded in property and equipment, net on the Condensed Consolidated Balance Sheets.

As of September 30, 2023, the Company has a $27.8 million deferred tax liability related to the Arlington sale on the Condensed Consolidated Balance Sheets.

5. ASSET IMPAIRMENTS

Presque Isle Impairment

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.

Based on the 2023 trigger event, the Company evaluated and subsequently updated the projected cash flows and discount rate to reflect the current environment. As a result, the Company recognized a non-cash impairment charge of $24.5 million in the second quarter of 2023 for the Presque Isle gaming rights and trademark, which are included in the Gaming segment. 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 comparable publicly traded companies. No impairment was recognized for the Presque Isle goodwill in 2023.

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill, by segment, is composed of the following:


(in millions)	Live and Historical Racing		TwinSpires		Gaming		All Other		Total
Balances as of December 31, 2022	$	280.3	$	152.2	$	290.3	$	1.0	$	723.8
Additions	95.9		81.2		—		—		177.1
Adjustments	—		—		—		(1.0)		(1.0)
Balances as of September 30, 2023	$	376.2	$	233.4	$	290.3	$	—	$	899.9

Goodwill of $177.1 million related to the Exacta Transaction was recognized as of September 30, 2023, of which $95.9 million was allocated to the Live and Historical Racing segment and $81.2 million was allocated to the TwinSpires segment. The goodwill related to the Exacta Transaction is deductible for tax purposes. Refer to Note 3, Acquisitions for further information on the transaction.

We performed our annual goodwill impairment analysis as of April 1, 2023, and no adjustment to the carrying value of goodwill was required. We assessed goodwill for impairment by performing qualitative or quantitative analyses for each reporting unit. We concluded that the fair values of our reporting units exceeded their carrying values, and therefore no impairments were identified.

Other intangible assets are comprised of the following:


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			13


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)


	September 30, 2023						December 31, 2022
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Definite-lived intangible assets	$	95.8	$	(25.6)	$	70.2	$	31.0	$	(21.4)	$	9.6
Indefinite-lived intangible assets					2,347.1						2,382.2
Total					$	2,417.3					$	2,391.8

We established definite-lived intangible assets of $54.3 million for the technology asset, customer relationships, trademark and other intangibles related to the Exacta Transaction. Refer to Note 3, Acquisitions for further information on the transaction.

We performed our annual indefinite-lived intangible assets impairment analysis as of April 1, 2023. We assessed our indefinite-lived intangible assets for impairment by performing qualitative or quantitative analyses for each asset. Based on the results of these analyses, no indefinite-lived intangible asset impairments were identified in connection with our annual impairment testing.

Refer to Note 5, Asset Impairments, for information regarding the intangible asset impairment recognized during the second quarter of 2023.

7. INCOME TAXES

The Company’s effective income tax rate for the three months ended September 30, 2023 was higher than the U.S. federal statutory rate of 21.0% primarily resulting from state income taxes. The Company’s effective income tax rate for the nine months ended September 30, 2023 was higher than the U.S. federal statutory rate of 21.0% primarily resulting from state income taxes and non-deductible officer’s compensation.

The Company’s effective income tax rate for the three months ended September 30, 2022 was higher than the U.S. federal statutory rate of 21.0% primarily resulting from state income taxes and non-deductible officer’s compensation, partially offset by tax benefits resulting from certain tax credits and incentives. The Company's effective income tax rate for the nine months ended September 30, 2022 was higher than the U.S. federal statutory rate of 21.0% primarily resulting from state income taxes and non-deductible officer's compensation.

8. SHAREHOLDERS' EQUITY

Stock Repurchase Programs

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"). Repurchases may be made at management’s discretion from time to time on the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions. The repurchase program has no time limit and may be suspended or discontinued at any time. The Company repurchased $37.3 million of its common stock during the three months ended September 30, 2023 and had approximately $232.9 million of repurchase authority remaining under the 2021 Stock Repurchase Program at September 30, 2023, based on trade date.

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


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions, except share data)	2023			2022			2023			2022
Repurchase Program	Shares	Aggregate Purchase Price		Shares	Aggregate Purchase Price		Shares	Aggregate Purchase Price		Shares	Aggregate Purchase Price
2021 Stock Repurchase Program (1)	310,367	$	37.3	577,562	$	59.0	310,367	$	37.3	1,454,396	$	145.5

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


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			14


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Stock Split

On April 25, 2023, the Company’s Board of Directors approved a two-for-one Stock Split and an amendment to the Company’s Articles of Incorporation to increase the number of shares of common stock the Company is authorized to issue from 150,000,000 shares, no par value, to 300,000,000 shares, no par value. This amendment to the Company’s Articles of Incorporation became effective on May 19, 2023 and our common stock began trading at the split-adjusted price on May 22, 2023. All share and per-share amounts in the Company’s consolidated financial statements and related notes have been retroactively adjusted to reflect the effects of the Stock Split.

9. STOCK-BASED COMPENSATION PLANS

We have stock-based employee compensation plans with awards outstanding under the Churchill Downs Incorporated 2016 Omnibus Stock Incentive Plan (the "2016 Plan") and the Executive Long-Term Incentive Compensation Plan, which was adopted pursuant to the 2016 Plan. Our total stock-based compensation expense, which includes expenses related to restricted stock awards ("RSAs"), restricted stock unit awards ("RSUs"), performance share unit awards ("PSUs"), and stock options associated with our employee stock purchase plan was $8.1 million and $24.8 million for the three and nine months ended September 30, 2023, and $9.1 million and $23.5 million for the three and nine months ended September 30, 2022, respectively.

During the nine months ended September 30, 2023, the Company awarded RSUs to employees, RSUs and PSUs to certain named executive officers ("NEOs"), and RSAs and RSUs to directors. The vesting criteria for the PSU awards granted in 2023 were based on a three-year service period with two performance conditions and a market condition related to relative total shareholder return ("TSR") consistent with prior year grants. The total compensation cost we will recognize under the PSUs is determined using the Monte Carlo valuation methodology, which factors in the value of the TSR market condition when determining the grant date fair value of the PSU. Compensation cost for each PSU is recognized during the performance and service period based on the probable achievement of the two performance criteria. The PSUs are converted into shares of our common stock at the time the PSU award value is finalized.

A summary of the RSAs, RSUs and PSUs granted during 2023 is presented below (units in thousands):


Grant Year	Award Type	Number of Units Awarded(1)(2)	Vesting Terms

2023	RSU	121	Vest equally over three service periods ending in 2026
2023	PSU	62	Three year performance and service period ending in 2025
2023	RSU	10	Three year service period ending in 2026
2023	RSU	6	One year service period ending in 2024
2023	RSA	4	One year service period ending in 2024

(1) PSUs reflect the target number of units for the original PSU grant.

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


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			15


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

10. DEBT

The following table presents our total debt outstanding:


(in millions)	September 30, 2023		December 31, 2022

Term Loan B due 2024	$	—	$	380.0
Term Loan B-1 due 2028	292.5		294.7
Term Loan A due 2027	1,251.3		800.0
Revolver	118.7		664.1
2027 Senior Notes	600.0		600.0
2028 Senior Notes	700.0		700.0
2030 Senior Notes	1,200.0		1,200.0
2031 Senior Notes	600.0		—
Total debt	4,762.5		4,638.8
Current maturities of long-term debt	(68.0)		(47.0)
Unamortized premium and deferred finance charges	(39.7)		(33.1)
Total debt, net of current maturities and costs	$	4,654.8	$	4,558.7

Credit Agreement

At September 30, 2023, 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"), $300.0 million senior secured term loan B-1 due 2028 (the "Term Loan B-1"), $1.3 billion senior secured term loan A due 2027 (the "Term Loan A"), and $100.0 million swing line commitment. Certain amendments to the Credit Agreement entered into during 2022 and 2023 are described below.

On April 13, 2022, we amended the Credit Agreement to extend the maturity date of its Revolver to April 13, 2027, to increase the commitments under the existing revolving credit facility from $700.0 million to $1.2 billion, and to increase the swing line commitment from $50.0 million to $100.0 million. This amendment also provided for the senior secured Term Loan A due April 13, 2027 in the amount of $800.0 million, which was drawn on November 1, 2022 as part of the financing for the P2E Transaction. Refer to Note 3, Acquisitions for more information regarding the P2E Transaction. The Company capitalized $3.5 million of debt issuance costs associated with the Revolver commitment increase and $6.4 million of debt issuance costs associated with the Term Loan A which are being amortized as interest expense over the 5-year term.

On February 24, 2023, we amended our Credit Agreement to increase the loans under the existing Term Loan A due 2027 from $800.0 million to $1.3 billion and made certain other changes to the existing credit agreement. The Company 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. The Company capitalized $2.6 million of debt issuance costs associated with the increased Term Loan A which are being amortized as interest expense over the remainder of the 5-year term.

The Company is required to pay a commitment fee on the unused portion of the Revolver as determined by a pricing grid based on the consolidated total net secured leverage ratio of the Company. For the period ended September 30, 2023, the Company's commitment fee rate was 0.25%.

The Revolver and Term Loan A bear interest at SOFR plus 10 basis points, plus a variable applicable margin which is determined by the Company's net leverage ratio. As of September 30, 2023, that applicable margin was 150 basis points. The Term Loan B-1 bears interest at SOFR plus 210 basis points.

The Company completed the transition of its financing from LIBOR to SOFR during the second quarter of 2023. These transition activities did not have a material impact on the Company’s financial statements.

2031 Senior Notes

On April 25, 2023, the Company completed an offering of $600.0 million in aggregate principal amount of 6.750% senior unsecured notes that mature on April 25, 2031 (the "2031 Senior Notes") in a private offering to qualified institutional buyers


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			16


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

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 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 Condensed Consolidated Statements of Comprehensive Income. The Company capitalized $10.7 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 2031 Senior Notes were issued pursuant to an indenture, entered into on April 25, 2023 (the "2031 Indenture"), among the Company, certain subsidiaries of the Company as guarantors, and U.S. Bank National Association, as trustee. The Company may redeem some or all of the 2031 Senior Notes at any time at redemption prices set forth in the 2031 Indenture. The terms of the 2031 Indenture, among other things, limit the ability of the Company to: (i) incur additional debt and issue preferred stock, (ii) pay dividends or make other restricted payments, (iii) make certain investments, (iv) create liens, (v) allow restrictions on the ability of certain of our subsidiaries to pay dividends or make other payments, (vi) sell assets, (vii) merge or consolidate with other entities, and (viii) enter into transactions with affiliates.

In connection with the issuance of the 2031 Senior Notes, the Company and the guarantors entered into a Registration Rights Agreement to register any notes under the Securities Act for resale that are not freely tradable 366 days from April 25, 2023.

11. REVENUE FROM CONTRACTS WITH CUSTOMERS

Performance Obligations

As of September 30, 2023, 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 $138.5 million. The revenue we expect to recognize on these remaining performance obligations is $1.0 million for the remainder of 2023, $54.9 million in 2024, $41.7 million in 2025, and the remainder thereafter.

As of September 30, 2023, 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

As of September 30, 2023 and December 31, 2022, contract assets were not material.

As of September 30, 2023 and December 31, 2022, contract liabilities were $48.1 million and $58.7 million, respectively, which are included in current deferred revenue, non-current deferred revenue, and accrued expense in the accompanying Condensed Consolidated Balance Sheets. Contract liabilities primarily relate to the Live and Historical Racing segment and the decrease was primarily due to revenue recognized for fulfilled performance obligations. We recognized $1.2 million and $43.6 million of revenue during the three months and nine months ended September 30, 2023, respectively, which was included in the contract liabilities balance at December 31, 2022. We recognized $1.3 million and $48.1 million of revenue during the three months and nine months ended September 30, 2022, respectively, which was included in the contract liabilities balance at December 31, 2021.

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.


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			17


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)

•For the TwinSpires 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.

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:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022
Net revenue from external customers:
Live and Historical Racing:
Churchill Downs Racetrack	$	10.6	$	6.4	$	191.3	$	182.6
Louisville	48.9		41.5		138.2		128.5
Northern Kentucky	19.5		10.0		63.1		29.2
Southwestern Kentucky	37.6		33.3		111.7		97.8
Western Kentucky	11.6		0.2		25.8		0.2
Virginia	88.1		—		280.4		—
New Hampshire	3.2		0.9		8.4		0.9
Total Live and Historical Racing	$	219.5	$	92.3	$	818.9	$	439.2

TwinSpires:	$	108.5	$	106.2	$	340.7	$	343.3

Gaming:
Florida	$	24.4	$	26.3	$	76.5	$	81.2
Iowa	24.0		—		72.5		—
Louisiana	32.2		28.5		110.1		107.2
Maine	30.9		31.6		88.1		87.8
Maryland	32.0		33.3		82.9		82.0
Mississippi	24.2		24.5		77.5		78.0
New York	46.2		—		135.3		—
Pennsylvania	30.4		39.2		97.3		108.8
Total Gaming	$	244.3	$	183.4	$	740.2	$	545.0
All Other	0.2		1.2		0.7		2.2
Net revenue from external customers	$	572.5	$	383.1	$	1,900.5	$	1,329.7

Intercompany net revenues:
Live and Historical Racing	$	6.0	$	10.1	$	30.4	$	26.3
TwinSpires	3.9		1.2		7.1		4.0
Gaming	0.6		2.5		4.2		4.6
All Other	—		—		—		—
Eliminations	(10.5)		(13.8)		(41.7)		(34.9)
Intercompany net revenue	$	—	$	—	$	—	$	—


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			18


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)


	Three Months Ended September 30, 2023
(in millions)	Live and Historical Racing		TwinSpires		Gaming		Total Segments		All Other		Total
Net revenue from external customers
Pari-mutuel:
Live and simulcast racing	$	16.0	$	86.3	$	5.1	$	107.4	$	—	$	107.4
Historical racing(a)	179.9		—		7.5		187.4		—		187.4
Racing event-related services	3.3		—		1.4		4.7		—		4.7
Gaming(a)	3.1		5.3		203.0		211.4		—		211.4
Other(a)	17.2		16.9		27.3		61.4		0.2		61.6
Total	$	219.5	$	108.5	$	244.3	$	572.3	$	0.2	$	572.5


	Three Months Ended September 30, 2022
(in millions)	Live and Historical Racing		TwinSpires		Gaming		Total Segments		All Other		Total
Net revenue from external customers
Pari-mutuel:
Live and simulcast racing	$	1.8	$	91.0	$	3.6	$	96.4	$	—	$	96.4
Historical racing(a)	78.7		—		3.5		82.2		—		82.2
Racing event-related services	3.0		—		0.1		3.1		—		3.1
Gaming(a)	0.9		5.3		160.6		166.8		—		166.8
Other(a)	7.9		9.9		15.6		33.4		1.2		34.6
Total	$	92.3	$	106.2	$	183.4	$	381.9	$	1.2	$	383.1

(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 $13.3 million for the three months ended September 30, 2023 and $8.4 million for the three months ended September 30, 2022.


FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
			19


Churchill Downs Incorporated
Notes to Condensed Consolidated Financial Statements
(Unaudited)


	Nine Months Ended September 30, 2023
(in millions)	Live and Historical Racing		TwinSpires		Gaming		Total Segments		All Other		Total
Net revenue from external customers
Pari-mutuel:
Live and simulcast racing	$	67.2	$	283.2	$	19.9	$	370.3	$	—	$	370.3
Historical racing(a)	549.3		—		20.5		569.8		—		569.8
Racing event-related services	141.0		—		4.8		145.8		—		145.8
Gaming(a)	8.2		10.9		615.4		634.5		—		634.5
Other(a)	53.2		46.6		79.6		179.4		0.7		180.1
Total	$	818.9	$	340.7	$	740.2	$	1,899.8	$	0.7	$	1,900.5


	Nine Months Ended September 30, 2022
(in millions)	Live and Historical Racing		TwinSpires		Gaming		Total Segments		All Other		Total
Net revenue from external customers
Pari-mutuel:
Live and simulcast racing	$	53.9	$	290.9	$	22.0	$	366.8	$	—	$	366.8
Historical racing(a)	230.7		—		4.8		235.5		—		235.5
Racing event-related services	125.4		—		0.7		126.1