Churchill Downs Incorporated Financial Report Summary and Analysis

Overview of the Company’s Financial Performance

Churchill Downs Incorporated (CDI) is a company that has been creating extraordinary entertainment experiences for over 150 years, with its most iconic asset being the Kentucky Derby. The company operates through three reportable segments: Live and Historical Racing, Wagering Services and Solutions, and Gaming.

Key financial indicators that CDI’s management monitors to evaluate the business include changes in net revenue, operating expense, operating income, earnings per share, outstanding debt, operating cash flow, and capital spending. The company also uses non-GAAP measures like EBITDA and Adjusted EBITDA to assess performance.

Revenue and Profit Trends

Three Months Ended September 30, 2025 vs 2024

• Net revenue increased $54.5 million, driven by a $52.5 million increase in the Live and Historical Racing segment and a $6.7 million increase in the Wagering Services and Solutions segment, partially offset by a $4.7 million decrease in the Gaming segment.
• Operating income decreased $27.9 million, primarily due to a $41.2 million increase in impairment expense and a $5.9 million increase in transaction costs, partially offset by an $18.2 million increase in the Live and Historical Racing segment.
• Net income attributable to CDI decreased $27.3 million, mainly due to the higher impairment charges and transaction expenses.
• Adjusted EBITDA increased $27.0 million, with the Live and Historical Racing segment up $23.4 million and the Wagering Services and Solutions segment up $3.5 million.

Nine Months Ended September 30, 2025 vs 2024

• Net revenue increased $149.9 million, with the Live and Historical Racing segment up $125.1 million, the Gaming segment up $11.1 million, and the Wagering Services and Solutions segment up $13.7 million.
• Operating income decreased $21.9 million, impacted by a $43.6 million increase in impairment expense, a $2.9 million decrease in All Other, and a $2.7 million increase in transaction expenses, partially offset by a $23.6 million increase in the Live and Historical Racing segment and an $8.1 million increase in Wagering Services and Solutions.
• Net income attributable to CDI decreased $23.4 million, primarily due to the higher impairment charges.
• Adjusted EBITDA increased $35.7 million, with the Live and Historical Racing segment up $41.9 million and the Wagering Services and Solutions segment up $7.0 million, partially offset by a $12.7 million decrease in the Gaming segment.

Strengths and Weaknesses

Strengths:

• Diversified business model with three reportable segments
• Strong performance in the Live and Historical Racing and Wagering Services and Solutions segments
• Successful expansion into new markets, such as the opening of The Rose Gaming Resort in Virginia

Weaknesses:

• Impairment charges related to the Chasers’ gaming rights in Louisiana
• Decrease in the Gaming segment’s performance, partially due to the cessation of HRM operations in Louisiana
• Increase in transaction expenses and other costs

Outlook and Future Prospects

CDI has announced several upcoming capital investment projects, including enhancements to Churchill Downs Racetrack, the development of new gaming venues in Kentucky and Virginia, and the expansion of existing HRM facilities. The company expects its project capital expenditures to be approximately $200 million to $240 million in 2025.

The company’s liquidity and cash flow position remain strong, with $572.8 million in available borrowing capacity under its revolving credit facility as of September 30, 2025. CDI’s management believes that cash flows from operations and availability of borrowings will be adequate to fund its business operations and capital expenditures over the next twelve months.

However, the company faces various risks, including those related to real estate ownership, legal proceedings, regulatory changes, and macroeconomic conditions. Ongoing monitoring and management of these risks will be crucial for CDI’s future success.