LOUISVILLE, Ky., Oct. 26, 2022 (GLOBE NEWSWIRE) -- Churchill Downs Incorporated (Nasdaq: CHDN) (the "Company") today reported business results for the third quarter ended September 30, 2022.

Third Quarter 2022 Highlights

• Net revenue of $383.1 million compared to $393.0 million in third quarter 2021
• Net income of $57.0 million compared to $61.4 million in third quarter 2021
• Record third quarter Adjusted EBITDA of $163.2 million compared to $156.1 million in third quarter 2021
• Completed the previously-announced purchase of Chasers Poker Room in Salem, New Hampshire ("Chasers")
• Announced and closed on the acquisition of Ellis Park Racing & Gaming ("Ellis Park") in Henderson, Kentucky for total consideration of $79.0 million in cash
• Announced a multi-year agreement with FanDuel to enable FanDuel to create a fully integrated and seamless wagering experience with a single wallet for horse racing and sports

During the first quarter of 2022, we updated our operating segments to include the results of our United Tote business in the TwinSpires segment. Results of our United Tote business were previously included in our All Other segment.

The summaries below present net revenue from external customers and intercompany revenue from each of our reportable segments:

Live and Historical Racing

For the third quarter of 2022, net revenue increased $20.9 million due primarily to a $6.5 million increase at Churchill Downs Racetrack as a result of increased handle from holding more live race days in the third quarter of 2022 as compared to the same quarter of 2021, a $6.2 million increase at Oak Grove Racing, Gaming and Hotel ("Oak Grove"), a $3.2 million increase at Turfway Park as a result of the opening of the historical racing facility on September 1, 2022, a $2.6 million increase at Newport Racing & Gaming ("Newport"), a $1.3 million increase at Derby City Gaming, and a $1.1 million increase related to the acquisitions of Chasers and Ellis Park in September 2022.

Adjusted EBITDA increased $6.8 million due to a $1.8 million increase at Churchill Downs Racetrack driven by increased race days in the third quarter of 2022 as compared to the same quarter of 2021 and a $5.0 million increase at our HRM properties driven primarily by a $3.1 million increase at Oak Grove and a $1.6 million increase at Newport.

TwinSpires

For the third quarter of 2022, net revenue decreased $1.6 million from the prior year quarter primarily due to a decrease of $3.4 million from Sports and Casino and a $1.8 million increase from Horse Racing. The decrease in Sports and Casino was driven by the decision to exit the direct online Sports and Casino business in the first quarter of 2022. The increase in Horse Racing net revenue was driven by increased handle from our high wagering-volume customer base.

Adjusted EBITDA increased $9.0 million primarily due to an $11.1 million increase from our Sports and Casino business due to decreased online marketing and promotional activities in the current year quarter. This increase was offset by a $1.5 million decrease from Horse Racing due to increased content expenses and a $0.6 million decrease from United Tote.

Gaming

For the third quarter of 2022, net revenue increased $0.3 million primarily due to increases at Fair Grounds and Ocean Downs. Fair Grounds revenue increased $5.7 million as a result of closures in the prior year quarter from Hurricane Ida that did not recur and incremental historical racing revenue from machines installed at certain off-track betting facilities. Ocean Downs net revenue increased $1.6 million as a result of strong attendance during the summer months. These increases were nearly offset by decreases at our Mississippi and Pennsylvania properties as a result of current economic conditions and competitive pressures.

Adjusted EBITDA increased $0.9 million driven by a $1.4 million increase from our equity investments partially offset by a $0.5 million decrease at our wholly-owned Gaming properties. The increase in our equity investments was driven by increased revenue at Rivers Des Plaines. The decrease from our wholly-owned Gaming properties is the result of decreased revenue and increases in marketing and salaries expense. Gaming Adjusted EBITDA includes $4.1 million in proceeds received for business interruption insurance claims related to Hurricane Ida.

All Other

For the third quarter of 2022, All Other revenue and Adjusted EBITDA decreased primarily as a result of Arlington not conducting live racing in the third quarter of 2022 as we ceased racing and simulcast operations at the end of 2021. We are excluding Arlington's operating results from Adjusted EBITDA in 2022 pending the sale of the property to the Chicago Bears.

Chasers Poker Room Acquisition:

On September 2, 2022, the Company completed its previously announced purchase of Chasers in Salem, New Hampshire. Chasers is a charitable gaming facility located approximately 30 miles from Boston, Massachusetts, that offers poker and a variety of table games. The Company plans to develop an expanded charitable gaming facility in Salem to accommodate historical racing machines and table games. As part of the acquisition, the Company made an initial payment to the sellers for rights to operate the poker room and to build a historical racing facility. Additional payments will be made once all necessary permits are obtained and the planned historical racing facility is opened. The Company expects the total investment in Salem, inclusive of the Chasers purchase price, to be approximately $150 million.

Ellis Park Acquisition:

On September 26, 2022, the Company completed the acquisition of Ellis Park in Henderson, Kentucky for total consideration of $79.0 million in cash, subject to certain working capital and other purchase price adjustments. Ellis Park is a Thoroughbred racetrack and gaming facility located north of the Ohio River and just south of Evansville, Indiana and features approximately 300 historical racing machines ("HRMs"). In acquiring Ellis Park, the Company also assumes the opportunity to construct a track extension facility with HRMs in Owensboro, Kentucky. Over the next year, the Company expects its total investment in Henderson and Daviess Counties to be approximately $75 million in addition to the purchase price.

Peninsula Pacific Entertainment LLC ("P2E") Acquisition:

The Company has entered into a definitive purchase agreement to acquire substantially all of the assets of P2E for total consideration of $2.75 billion (the “P2E Acquisition”). The P2E Acquisition contemplates the Company acquiring the following properties: Colonial Downs Racetrack in New Kent, Virginia, six historical racing entertainment venues across Virginia, del Lago Resort & Casino in Waterloo, New York, and Hard Rock Hotel & Casino in Sioux City, Iowa (“Hard Rock Sioux City”).

The P2E Acquisition also includes other development rights including the opportunity, under Virginia law, to develop up to five additional HRM entertainment venues in Virginia with collectively up to approximately 2,300 additional HRMs. These development rights include:

• The rights to build a new HRM entertainment venue with up to 1,150 HRMs in Dumfries, Virginia with potential for expansion up to 1,800 HRMs after initial build out. The Dumfries facility will replace the existing Rosie's Dumfries facility located in northern Virginia and the initial phase of the project is expected to open in 2023.
• The rights to develop one of the additional HRM entertainment venues with up to 150 HRMs in Emporia, Virginia. The Emporia Project will be located along I-95 near the North Carolina border and is expected to open in 2023.

The P2E Acquisition also includes the rights to P2E’s ongoing effort in partnership with Urban One, to develop ONE Casino + Resort, a $565 million destination casino in Richmond, Virginia.

The Company has obtained the acquisition of ownership interest approval for the Virginia properties from the Virginia Racing Commission and approval for Hard Rock Sioux City from the Iowa Racing and Gaming Commission. The P2E Transaction remains dependent on customary closing conditions, including the Company obtaining approval from the New York State Gaming Commission. The transaction is expected to close before the end of 2022.

Share Repurchase Program:

The Company repurchased 288,781 shares of its common stock at an average share price of approximately $204.04 based on trade date in conjunction with its publicly announced share repurchase program at a total cost of $59.0 million in the third quarter of 2022. We had approximately $300.2 million of repurchase authority remaining under this program as of September 30, 2022.

Annual Dividend:

On October 25, 2022, the company's Board of Directors approved an annual cash dividend on the Company's common stock of $0.714 per outstanding share, a 7 percent increase over the prior year. The dividend is payable on January 6, 2023, to shareholders of record as of the close of business on December 2, 2022, with the aggregate cash dividend paid to each shareholder rounded to the nearest whole cent. This marks the twelfth consecutive year that the Company has increased the dividend.

The Company's third quarter of 2022 net income was $57.0 million compared to $61.4 million in the prior year quarter.

The following items impacted the comparability of the Company's third quarter net income:

• $2.4 million after-tax increase in expenses related to transaction, pre-opening and other expenses, net; and
• $1.4 million after-tax reduction in the benefit related to our equity portion of the non-cash change in the fair value of Rivers Des Plaines' interest rate swaps.

These items were partially offset by:

• $0.3 million after-tax decrease in expenses related to our equity portion of Rivers Des Plaines' legal reserves and transaction costs.

Excluding the items above, third quarter 2022 adjusted net income decreased $0.9 million primarily due to the following:

• $11.5 million after-tax increase from the prior year quarter in interest expense associated with higher outstanding debt balances;
• Partially offset by $10.6 million after-tax increase from the prior year quarter driven by proceeds from business interruption insurance from Hurricane Ida and other nonrecurring income tax benefits.

Conference Call

A conference call regarding this news release is scheduled for Thursday, October 27, 2022, at 9 a.m. ET. Investors and other interested parties may listen to the teleconference by accessing the online, real-time webcast at http://ir.churchilldownsincorporated.com/events.cfm, or by registering in advance via teleconference here. Once registration is completed, participants will be provided with a dial-in number containing a personalized conference code to access the call. All participants are instructed to dial-in 15 minutes prior to the start time. An online replay will be available at approximately noon ET on Thursday, October 27, 2022, and will continue to be available for two weeks. A copy of the Company’s news release announcing quarterly results and relevant financial and statistical information about the period will be accessible at www.churchilldownsincorporated.com.

Use of Non-GAAP Measures

In addition to the results provided in accordance with GAAP, the Company also uses non-GAAP measures, including adjusted net income, adjusted diluted EPS, EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA.

The Company uses non-GAAP measures as a key performance measure of the results of operations for purposes of evaluating performance internally. These measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of the Company by excluding certain items that may not be indicative of the Company's core business or operating results. The Company believes the use of these measures enables management and investors to evaluate and compare, from period to period, the Company’s operating performance in a meaningful and consistent manner. The non-GAAP measures are a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP, and should not be considered as an alternative to, or more meaningful than, net income or diluted EPS (as determined in accordance with GAAP) as a measure of our operating results.

We use Adjusted EBITDA to evaluate segment performance, develop strategy and allocate resources. We utilize the Adjusted EBITDA metric to provide a more accurate measure of our core operating results and enable management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure provided in accordance with GAAP. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.

Adjusted net income and adjusted diluted EPS exclude discontinued operations net income or loss; net income or loss attributable to noncontrolling interest; changes in fair value for interest rate swaps related to Rivers Des Plaines; Rivers Des Plaines' legal reserves and transaction costs; transaction expense, which includes acquisition and disposition related charges, as well as legal, accounting, and other deal-related expense; pre-opening expense; and certain other gains, charges, recoveries, and expenses.

Adjusted EBITDA includes the Company's portion of EBITDA from our equity investments.

Adjusted EBITDA excludes:

• Transaction expense, net which includes:
  • Acquisition, disposition, and land sale related charges;
  • Direct online Sports and Casino business exit costs; 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:
  • The impact of changes in fair value of interest rate swaps; and
  • Legal reserves and transaction costs;
• Asset impairments;
• Gain on Calder land sale;
• Legal reserves;
• Pre-opening expense; and
• Other charges, recoveries and expenses.

As of December 31, 2021, Arlington ceased racing and simulcast operations given the pending sale of the property to the Chicago Bears. Arlington's operating loss in the current year quarter was treated as an adjustment to EBITDA and is included in Other expenses, net in the Reconciliation of Comprehensive Income to Adjusted EBITDA.

For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the consolidated statements of comprehensive income. Refer to the Reconciliation of Comprehensive Income to Adjusted EBITDA included herewith for additional information.

About Churchill Downs Incorporated

Churchill Downs Incorporated (“CDI”, NASDAQ: CHDN) has been creating extraordinary entertainment experiences for nearly 150 years, beginning with the company’s most iconic and enduring asset, the Kentucky Derby. Headquartered in Louisville, Kentucky, CDI has expanded through the development of live and historical racing entertainment venues, the growth of the TwinSpires horse racing online wagering business and the operation and development of regional casino gaming properties. www.churchilldownsincorporated.com

This news release contains various “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by the use of terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “seek,” “should,” “will,” and similar words or similar expressions (or negative versions of such words or expressions).

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors, among others, that may materially affect actual results or outcomes include the following: the impact of the novel coronavirus (COVID-19) pandemic, including the emergence of variant strains, and related economic matters on our results of operations, financial conditions and prospects; the occurrence of extraordinary events, such as terrorist attacks, public health threats, civil unrest, and inclement weather; the effect of economic conditions on our consumers' confidence and discretionary spending or our access to credit; additional or increased taxes and fees; the impact of significant competition, and the expectation the competition levels will increase; changes in consumer preferences, attendance, wagering, and sponsorships; loss of key or highly skilled personnel; lack of confidence in the integrity of our core businesses or any deterioration in our reputation; risks associated with equity investments, strategic alliances and other third-party agreements; inability to respond to rapid technological changes in a timely manner; concentration and evolution of slot machine manufacturing and other technology conditions that could impose additional costs; inability to negotiate agreements with industry constituents, including horsemen and other racetracks; inability to successfully expand our TwinSpires Sports and Casino business and effectively compete; inability to identify and complete expansion, acquisition or divestiture projects, on time, on budget or as planned; difficulty in integrating recent or future acquisitions into our operations; costs and uncertainties relating to the development of new venues and expansion of existing facilities; general risks related to real estate ownership and significant expenditures, including fluctuations in market values and environmental regulations; reliance on our technology services and catastrophic events and system failures disrupting our operations; online security risk, including cyber-security breaches, or loss or misuse of our stored information as a result of a breach, including customers’ personal information, could lead to government enforcement actions or other litigation; personal injury litigation related to injuries occurring at our racetracks; compliance with the Foreign Corrupt Practices Act or applicable money-laundering regulations; payment-related risks, such as risk associated with fraudulent credit card and debit card use; work stoppages and labor issues; risks related to pending or future legal proceedings and other actions; highly regulated operations and changes in the regulatory environment could adversely affect our business; restrictions in our debt facilities limiting our flexibility to operate our business; failure to comply with the financial ratios and other covenants in our debt facilities and other indebtedness; and increase in our insurance costs, or obtain similar insurance coverage in the future, and inability to recover under our insurance policies for damages sustained at our properties in the event of inclement weather and casualty events.

We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

LOUISVILLE, KY., (June 27, 2022) – Churchill Downs Incorporated (Nasdaq: CHDN) (the "Company") today reported business results for the second quarter ended June 30, 2022.

Second Quarter 2022 Highlights

• Record second quarter 2022 results:
  • Record net revenue of $582.5 million compared to $515.1 million in second quarter 2021
  • Record net income of $339.3 million compared to $108.3 million in second quarter 2021
  • Record Adjusted EBITDA of $291.2 million compared to $233.3 million in second quarter 2021
• Our Live and Historical Racing segment delivered record revenue and Adjusted EBITDA, with Adjusted EBITDA up 67% compared to the second quarter of 2021
  • Churchill Downs Racetrack ran the 148th Kentucky Derby with record Derby Week all-sources handle for Churchill Downs Racetrack, record Derby Week Adjusted EBITDA, and debuted the new Homestretch Club
• The TwinSpires segment delivered Adjusted EBITDA of $33.9 million, up 38% compared to the second quarter of 2021
• Closed on the sale of 115.7 acres of excess land near Calder Casino for $291 million

Second Quarter 2022 Results

The Company's second quarter of 2022 net income was $339.3 million compared to $108.3 million in the prior year quarter.

The following items impacted the comparability of the Company's second quarter net income:

• $193.6 million after-tax gain on the sale of Calder land;
• $8.1 million after-tax charge related to the 2021 asset impairment at Churchill Downs Racetrack that did not recur in 2022;
• $4.7 million after-tax decrease in expenses related to our equity portion of Rivers Des Plaines' legal reserves and transaction costs; and
• $0.3 million after-tax benefit increase related to our equity portion of the non-cash change in the fair value of Rivers Des Plaines' interest rate swaps.

These increases were partially offset by:

• $2.8 million after-tax increase in expenses related to transaction, pre-opening and other expenses, net; and
• $2.3 million after-tax increase in legal reserves.

Excluding the items above, second quarter 2022 adjusted net income increased $29.4 million primarily due to the following:

• $38.6 million after-tax increase from the prior year quarter driven by the results of our operations and equity income from our unconsolidated affiliates,
• Partially offset by $9.2 million after-tax increase from the prior year quarter in interest expense associated with higher outstanding debt balances.

During the first quarter of 2022, we updated our operating segments to include the results of our United Tote business in the TwinSpires segment. Results of our United Tote business were previously included in our All Other segment.

The summaries below present net revenue from external customers and intercompany revenue from each of our reportable segments:

Live and Historical Racing

For the second quarter of 2022, net revenue increased $85.4 million due primarily to a $69.3 million increase at Churchill Downs Racetrack due to the running of the Kentucky Derby in 2022 without capacity restrictions that were in place in 2021, an $8.5 million increase at Oak Grove Racing, Gaming and Hotel ("Oak Grove"), a $4.3 million increase from Derby City Gaming, a $2.9 million increase at Newport Racing & Gaming ("Newport"), and a $0.4 million increase at Turfway Park. The historical racing machine ("HRM") properties benefited from the elimination of the capacity restrictions that were in place during the second quarter of 2021 and overall continued growth in the businesses.

Adjusted EBITDA increased $65.5 million due to a $58.5 million increase at Churchill Downs Racetrack driven by the running of the Kentucky Derby in 2022 without capacity restrictions that were in place in 2021, a $4.0 million increase at Oak Grove, a $1.7 million increase at Derby City Gaming, and a $1.3 million increase at Newport, all of which were driven by increases in net revenue.

TwinSpires

For the second quarter of 2022, net revenue decreased $4.1 million from the prior year quarter primarily due to a decrease of $2.2 million from Sports and Casino and a $1.9 million decrease from Horse Racing. The decrease in Sports and Casino was driven by the decision to exit the direct online sports and casino business in the first quarter of 2022. Horse Racing net revenue decreased as a higher portion of our patrons returned to wagering at brick-and-mortar facilities instead of wagering online in the current quarter compared to the prior year quarter.

Adjusted EBITDA increased $9.3 million primarily due to a $10.8 million increase from our Sports and Casino business due to decreased online marketing and promotional activities. This increase was partially offset by a $1.2 million decrease from Horse Racing due to a reduction in net revenue and a $0.3 million decrease from United Tote.

Gaming

For the second quarter of 2022, net revenue decreased $1.5 million primarily due to a decrease of $4.6 million at Harlow's and a $4.4 million decrease at Riverwalk as a result of the current economic conditions, competitive pressures, and a mask mandate at Harlow's that was discontinued in early June 2022. These decreases were partially offset by a $4.8 million increase at Oxford due to the lifting of restrictions that were in place during the prior year quarter, a $2.1 million increase at Fair Grounds from the 2022 Jazz Festival that more than offset the decline in Fair Grounds Slots revenue due to current economic conditions and the ongoing closure of our Houma off-track betting facility (“OTB”), and a $0.6 million net increase in all other properties.

Adjusted EBITDA decreased $13.0 million driven by a $10.2 million decrease at our wholly-owned Gaming properties and a $2.8 million decrease from our equity investments. The decreases at our wholly-owned Gaming properties are the result of decreased revenue and increases in marketing and salaries expense. The decrease in our equity investments is also driven by increases in marketing and salaries expense.

All Other

For the second quarter of 2022, All Other Adjusted EBITDA decreased $3.9 million primarily driven by a $3.1 million decrease as a result of Arlington not conducting live racing in the second quarter of 2022 as we ceased racing and simulcast operations at the end of 2021. We are excluding Arlington's operating results from Adjusted EBITDA in 2022 pending the sale of the property to the Chicago Bears, which we anticipate to close in the first quarter of 2023.

Peninsula Pacific Entertainment LLC ("P2E") Acquisition:

On February 18, 2022, the Company entered into a definitive purchase agreement to acquire substantially all of the assets of P2E for total consideration of $2.485 billion (the “P2E Acquisition”). The P2E Acquisition contemplates the Company acquiring the following properties: Colonial Downs Racetrack in New Kent, Virginia ("Colonial Downs"), six historical racing entertainment venues across Virginia, del Lago Resort & Casino ("del Lago") in Waterloo, New York, and the operations of Hard Rock Hotel & Casino in Sioux City, Iowa (“Hard Rock Sioux City”).

The Company has obtained the acquisition of ownership interest approval for the Virginia properties from the Virginia Racing Commission. The P2E Transaction remains dependent on customary closing conditions, including the Company obtaining approvals from the New York State Gaming Commission and the Iowa Racing and Gaming Commission. The transaction is expected to close before the end of 2022.

Calder Land Sale:

On June 17, 2022, the Company closed on the previously announced sale of 115.7 acres of excess land near Calder Casino for $291.0 million (or approximately $2.5 million per acre) to Link Logistics, a Blackstone portfolio company. The Company received cash proceeds of $279.0 million which was net of $12.0 million of transaction costs. We recognized a gain of $274.6 million on the sale of the land, which is included in other income (expense) in the accompanying Condensed Consolidated Statements of Comprehensive Income.

The Company is planning on using certain proceeds of the sale to purchase property as part of the previously announced P2E acquisition and to invest in other replacement properties that qualify as Internal Revenue Code §1031 transactions to defer the federal income tax on the gain on the Calder land sale. The Company has identified two reverse like-kind exchange transactions for property acquired prior to the sale of the Calder land and a forward like-kind exchange transaction to acquire additional property for the Internal Revenue Code §1031 transactions.

The first reverse like-kind exchange involved our $9.9 million investment in real property for the Derby City Gaming Downtown facility in Louisville, Kentucky. This reverse like-kind exchange was completed in June 2022.

The second reverse like-kind exchange involves the Company’s investment in real property for the Queen of Terre Haute Casino Resort (“Queen of Terre Haute”) property in Terre Haute, Indiana. As of June 30, 2022, $10.0 million had been invested in real property for the Queen of Terre Haute. The Company plans to make additional investments in real property for the Queen of Terre Haute and expects to complete this reverse like-kind exchange in fourth quarter 2022.

The Company is planning on utilizing the remainder of the proceeds from the Calder land sale to execute a forward like-kind exchange transaction by purchasing property as part of the previously announced P2E Acquisition. The Company anticipates closing the P2E Acquisition prior to the end of 2022. If the acquisition of replacement property is not completed within 180 days of the Calder land sale, all applicable income taxes will be assessed on the remaining gain that was not deferred by acquiring replacement property.

Chasers Poker Room Acquisition:

On March 22, 2022, the Company entered into a definitive purchase agreement to acquire Chasers Poker Room ("Chasers") in Salem, New Hampshire. Chasers is a charitable gaming facility located approximately 30 miles from Boston, Massachusetts, that offers poker and a variety of table games. Following the closing of the acquisition, the Company plans to develop an expanded charitable gaming facility in Salem to accommodate historical racing machines. The Company expects the total investment in Salem, inclusive of the Chasers purchase price to be approximately $150 million. The transaction is expected to close in the third quarter of 2022.

Share Repurchase Program:

The Company repurchased 321,554 shares of its common stock at an average share price of approximately $191.37 based on trade date in conjunction with its publicly announced share repurchase program at a total cost of $61.5 million in the second quarter of 2022. We had approximately $359.1 million of repurchase authority remaining under this program as of June 30, 2022.

April 2022 Financing Transactions:

On April 13, 2022, the Company entered into the fourth amendment of its Credit Agreement (the “Fourth Amendment to the Credit Agreement”) to extend the maturity of its existing revolving credit facility to April 13, 2027 and to increase the commitments under the existing revolving credit facility from $700 million to $1.2 billion (the “Revolver”). The Fourth Amendment to the Credit Agreement also provides for a senior secured Delayed Draw Term Loan A credit facility due April 13, 2027 in the amount of $800 million (the “Delayed Draw Term Loan A”) which is part of the financing for the P2E Acquisition. The interest rate applicable to the borrowings on the Revolver and Delayed Draw Term Loan A will be SOFR plus a spread, determined by the Company’s total net leverage ratio. We also successfully closed into escrow the previously announced offering of $1.2 billion in aggregate principal amount of 5.75% senior notes due 2030. The proceeds from the senior notes offering will also be used for the financing for the P2E Acquisition.

Use of Non-GAAP Measures

In addition to the results provided in accordance with GAAP, the Company also uses non-GAAP measures, including adjusted net income, adjusted diluted EPS, EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA.

The Company uses non-GAAP measures as a key performance measure of the results of operations for purposes of evaluating performance internally. These measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of the Company by excluding certain items that may not be indicative of the Company's core business or operating results. The Company believes the use of these measures enables management and investors to evaluate and compare, from period to period, the Company’s operating performance in a meaningful and consistent manner. The non-GAAP measures are a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP, and should not be considered as an alternative to, or more meaningful than, net income or diluted EPS (as determined in accordance with GAAP) as a measure of our operating results.

We use Adjusted EBITDA to evaluate segment performance, develop strategy and allocate resources. We utilize the Adjusted EBITDA metric to provide a more accurate measure of our core operating results and enable management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure provided in accordance with GAAP. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.

Adjusted net income and adjusted diluted EPS exclude discontinued operations net income or loss; net income or loss attributable to noncontrolling interest; changes in fair value for interest rate swaps related to Rivers Des Plaines; Rivers Des Plaines' legal reserves and transaction costs; transaction expense, which includes acquisition and disposition related charges, as well as legal, accounting, and other deal-related expense; pre-opening expense; and certain other gains, charges, recoveries, and expenses.

Adjusted EBITDA includes the Company's portion of EBITDA from our equity investments.

Adjusted EBITDA excludes:

• Transaction expense, net which includes:
  • Acquisition, disposition, and land sale related charges;
  • Direct online Sports and Casino business exit costs; 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:
  • The impact of changes in fair value of interest rate swaps; and
  • Legal reserves and transaction costs;
• Asset impairments;
• Gain on Calder land sale;
• Legal reserves;
• Pre-opening expense; and
• Other charges, recoveries and expenses.

As of December 31, 2021, Arlington ceased racing and simulcast operations given the pending sale of the property to the Chicago Bears. Arlington's operating loss in the current year quarter was treated as an adjustment to EBITDA and is included in Other expenses, net in the Reconciliation of Comprehensive Income to Adjusted EBITDA.

For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the consolidated statements of comprehensive income. Refer to the Reconciliation of Comprehensive Income to Adjusted EBITDA included herewith for additional information.

CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

CHURCHILL DOWNS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)

CHURCHILL DOWNS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION
(Unaudited)

(a)   The income tax impact for each adjustment is derived by applying the effective tax rate, including current and deferred income tax expense, based upon the jurisdiction and the nature of the adjustment.

(a) Total handle generated by Velocity is not included in total handle from TwinSpires Horse Racing.

CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION
(Unaudited)

CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION
(Unaudited)

(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 $7.7 million for the three months ended June 30, 2022 and $5.2 million for the three months ended June 30, 2021.

CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION
(Unaudited)

(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 $14.8 million for the six months ended June 30, 2022 and $8.9 million for the six months ended June 30, 2021.

CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION
(Unaudited)

Adjusted EBITDA by segment is comprised of the following:

CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION
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Adjusted EBITDA by segment is comprised of the following:

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SUPPLEMENTAL INFORMATION
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SUPPLEMENTAL JOINT VENTURE FINANCIAL STATEMENTS
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Summarized financial information for our equity investments is comprised of the following:

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SUPPLEMENTAL INFORMATION
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Planned capital projects for the Company are as follows:

About Churchill Downs Incorporated

Churchill Downs Incorporated is an industry-leading racing, online wagering and gaming entertainment company anchored by our iconic flagship event, the Kentucky Derby. We own and operate three entertainment venues with approximately 3,050 historical racing machines in Kentucky. We also own and operate TwinSpires, one of the largest and most profitable online wagering platforms for horse racing in the U.S. and we have nine retail sportsbooks. We are also a leader in brick-and-mortar casino gaming in nine states with approximately 11,000 slot machines and video lottery terminals and 200 table games. Additional information about Churchill Downs Incorporated can be found online at www.churchilldownsincorporated.com.

LOUISVILLE, KY., (June 17, 2022) – Churchill Downs Incorporated (“CDI” or “Company”) (Nasdaq: CHDN) announced today that it closed on the sale of 115.7 acres of excess land near Calder Casino for $291 million (or approximately $2.5 million per acre) to Link Logistics, one of the premier owners of logistics real estate assets, established in 2019 by Blackstone.

CDI is planning to use certain proceeds of the sale to purchase property as part of the previously announced Peninsula Pacific Gaming acquisition and to invest in other replacement properties that qualify as Internal Revenue Code §1031 transactions.

CDI now retains ownership of approximately 54 acres of land on which the Company’s wholly-owned Calder Casino sits. The Company may sell 15-20 acres of land along NW 27^th Ave. in the Miami Gardens area in the future for retail development.

About Churchill Downs Incorporated

Churchill Downs Incorporated is an industry-leading racing, online wagering and gaming entertainment company anchored by our iconic flagship event, the Kentucky Derby. We own and operate three entertainment venues with approximately 3,050 historical racing machines in Kentucky. We also own and operate TwinSpires, one of the largest and most profitable online wagering platforms for horse racing in the U.S. and we have nine retail sportsbooks. We are also a leader in brick-and-mortar casino gaming in nine states with approximately 11,000 slot machines and video lottery terminals and 200 table games. Additional information about Churchill Downs Incorporated can be found online at www.churchilldownsincorporated.com.

LOUISVILLE, KY., (April 27, 2022) – Churchill Downs Incorporated (Nasdaq: CHDN) (the "Company", "we", "us", "our") today reported business results for the first quarter ended March 31, 2022.

First Quarter 2022 Highlights

• Record First Quarter 2022 results:
  • Record net revenue of $364.1 million compared to $324.3 million in first quarter 2021
  • Record net income of $42.1 million compared to $36.1 million in first quarter 2021
  • Record Adjusted EBITDA of $128.5 million compared to $110.6 million in first quarter 2021
• Our Gaming segment delivered double digit revenue and Adjusted EBITDA growth in first quarter 2022 compared to first quarter 2021
• Announced a definitive agreement to acquire substantially all of the assets of Peninsula Pacific Entertainment LLC ("P2E") for total consideration of $2.485 billion
  • Completed the financing for the P2E acquisition by closing a $1.2 billion senior secured revolver due 2027, an $800 million senior secured delayed draw term loan A due 2027, and issuing $1.2 billion of senior secured notes due 2030 on April 13, 2022
• Completed the first two phases of the previously announced $90 million expansion of Rivers Casino Des Plaines ("Rivers Des Plaines")
• Announced a definitive agreement to acquire Chasers Poker Room in Salem, New Hampshire, with plans to develop an expanded charitable gaming facility to accommodate historical racing machines ("HRMs") with a total investment of up to $150 million

First Quarter 2022 Results

The Company's first quarter of 2022 net income was $42.1 million compared to $36.1 million in the prior year's first quarter.

The following items impacted the comparability of the Company's first quarter net income:

• $6.3 million after-tax increase in transaction, pre-opening and other expenses from the prior year quarter related primarily to pre-opening expenses for Turfway Park and P2E transaction expenses;
• $3.5 million after-tax non-cash impairment charge driven by the decision to exit the direct online Sports and Casino business; and
• $0.7 million primarily related to our equity portion of Miami Valley Gaming's after-tax non-cash impairment charge related to prior expansion plans.

These increases were partially offset by:

• $4.5 million after-tax benefit increase related to our equity portion of the non-cash change in the fair value of Rivers Des Plaines' interest rate swaps; and
• $0.7 million after-tax decrease related to our equity portion of Rivers Des Plaines' legal reserves and transaction costs.

Excluding the items above, first quarter 2022 net income increased $11.3 million primarily due to the following:

• $12.9 million after-tax increase from the prior year quarter driven by the results of our operations and equity income from our unconsolidated affiliates,
• Partially offset by $1.6 million after-tax increase from the prior year quarter in interest expense associated with higher outstanding debt balances.

During the first quarter of 2022, we updated our operating segments to include the results of our United Tote business in the TwinSpires segment. We are evolving our strategy to integrate the United Tote offering with TwinSpires Horse Racing, which we believe will create additional business to business revenue opportunities. Results of our United Tote business were previously included in our All Other segment.

The summaries below present net revenue from external customers and intercompany revenue from each of our reportable segments:

Live and Historical Racing

For the first quarter of 2022, net revenue increased $22.5 million due primarily to an $11.0 million increase at Oak Grove Racing, Gaming and Hotel ("Oak Grove"), a $9.9 million increase from Derby City Gaming, and a $1.9 million increase at Newport Racing & Gaming ("Newport"). Oak Grove and Derby City Gaming reflected the benefit of the elimination of the operating restrictions that were in place during the first quarter of 2021 and overall continued growth in the businesses.

Adjusted EBITDA increased $9.6 million due to a $5.3 million increase at Oak Grove, a $5.2 million increase at Derby City Gaming, and a $0.7 million increase at Newport from the increase in net revenue. Partially offsetting these increases was a $1.2 million decrease at Churchill Downs Racetrack due to the timing of Derby Week expenses and a $0.4 million decrease from higher expenses at Turfway Park.

TwinSpires

For the first quarter of 2022, net revenue decreased $3.6 million from the prior year quarter primarily due to a $6.9 million decrease from Horse Racing that was partially offset by a $3.3 million increase from Sports and Casino. Horse Racing net revenue decreased as a portion of our patrons returned to wagering at brick-and-mortar facilities in the current quarter instead of wagering online. Sports and Casino net revenue increased as a result of our expansion into additional states during 2021.

Adjusted EBITDA increased $1.0 million primarily due to a $3.7 million increase from our Sports and Casino business due to decreased marketing and promotional activities and a $0.6 million increase at United Tote. Partially offsetting these increases was a decrease from Horse Racing of $3.3 million due to the reduction in net revenue.

Gaming

For the first quarter of 2022, net revenue increased $25.2 million primarily due to certain capacity restrictions on patrons and gaming during the prior year quarter that were no longer in place at Oxford, Calder, and Presque Isle.

Adjusted EBITDA increased $8.7 million driven by a $5.6 million increase at our wholly-owned Gaming properties due to increased net revenue and a $3.1 million increase from our equity investments, both of which were due to certain capacity restrictions on patrons and gaming during the prior year quarter.

All Other

For the first quarter of 2022, All Other Adjusted EBITDA decreased $1.4 million driven by a $2.6 million increase in legal fees and timing of other Corporate expenses that was partially offset by a $1.2 million decrease in the Arlington operating loss in the current year quarter compared to the prior year quarter as a result of Arlington ceasing racing and simulcast operations at the end of 2021. We are excluding Arlington's operating results from Adjusted EBITDA in 2022 pending the sale of the property to the Chicago Bears.

Share Repurchase Program:

The Company repurchased 116,863 shares of its common stock in conjunction with its publicly announced share repurchase program at a total cost of $25.0 million in the first quarter of 2022. We had approximately $420.6 million repurchase authority remaining under this program as of March 31, 2022.

April 2022 Financing Transactions:

On April 13, 2022, the Company announced an amendment of its senior secured credit agreement (the “Credit Agreement Amendment”) to extend the maturity date of its existing revolving credit facility to 2027 and to increase the commitments under the existing revolving credit facility from $700 million to $1.2 billion (the "Revolver"). The Credit Agreement Amendment also provides for a senior secured delayed draw term loan A credit facility due 2027 in the amount of $800 million (the “Delayed Draw Term Loan A”) and makes certain other changes to its existing credit agreement. The interest rate applicable to borrowings on the Revolver and Delayed Draw Term Loan A will be secured financing overnight rate-based plus a spread, determined by the Company’s total net leverage ratio. The Company also successfully closed into escrow the previously announced offering of $1.2 billion in aggregate principal amount of its 5.750% senior notes due 2030.

Conference Call

A conference call regarding this news release is scheduled for Thursday, April 28, 2022, at 9 a.m. ET. Investors and other interested parties may listen to the teleconference by accessing the online, real-time webcast and broadcast of the call at http://ir.churchilldownsincorporated.com/events.cfm, or by dialing (877) 372-0878 and entering the pass code 9395627 at least 10 minutes before the appointed time. International callers should dial (253) 237-1169. An online replay will be available at approximately noon ET on Thursday, April 28, 2022, and will continue to be available for two weeks. A copy of the Company’s news release announcing quarterly results and relevant financial and statistical information about the period will be accessible at www.churchilldownsincorporated.com.

Use of Non-GAAP Measures

In addition to the results provided in accordance with GAAP, the Company also uses non-GAAP measures, including adjusted net income, adjusted diluted EPS, EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA.

The Company uses non-GAAP measures as a key performance measure of the results of operations for purposes of evaluating performance internally. These measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of the Company by excluding certain items that may not be indicative of the Company's core business or operating results. The Company believes the use of these measures enables management and investors to evaluate and compare, from period to period, the Company’s operating performance in a meaningful and consistent manner. The non-GAAP measures are a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP, and should not be considered as an alternative to, or more meaningful than, net income or diluted EPS (as determined in accordance with GAAP) as a measure of our operating results.

We use Adjusted EBITDA to evaluate segment performance, develop strategy and allocate resources. We utilize the Adjusted EBITDA metric to provide a more accurate measure of our core operating results and enable management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure provided in accordance with GAAP. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited.

Adjusted net income and adjusted diluted EPS exclude discontinued operations net income or loss; net income or loss attributable to noncontrolling interest; changes in fair value for interest rate swaps related to Rivers Des Plaines; Rivers Des Plaines' legal reserves and transaction costs; transaction expense, which includes acquisition and disposition related charges, as well as legal, accounting, and other deal-related expense; pre-opening expense; and certain other gains, charges, recoveries, and expenses.

Adjusted EBITDA includes the Company's portion of EBITDA from our equity investments.

Adjusted EBITDA excludes:

• Transaction expense, net which includes:
  • Acquisition, disposition, and land sale related charges;
  • Direct online Sports and Casino business exit costs; 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:
  • The impact of changes in fair value of interest rate swaps; and
  • Legal reserves and transaction costs;
• Asset impairments;
• Legal reserves;
• Pre-opening expense; and
• Other charges, recoveries and expenses.

As of December 31, 2021, Arlington ceased racing and simulcast operations given the pending sale of the property to the Chicago Bears. Arlington's operating loss in the current year quarter was treated as an adjustment to EBITDA and is included in other Other expenses, net in the Reconciliation of Comprehensive Income to Adjusted EBITDA.

For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the consolidated statements of comprehensive income. Refer to the Reconciliation of Comprehensive Income to Adjusted EBITDA included herewith for additional information.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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CONSOLIDATED BALANCE SHEETS
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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SUPPLEMENTAL INFORMATION
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(a)   The income tax impact for each adjustment is derived by applying the effective tax rate, including current and deferred income tax expense, based upon the jurisdiction and the nature of the adjustment.

(a) Total handle generated by Velocity is not included in total handle from TwinSpires Horse Racing.

CHURCHILL DOWNS INCORPORATED
SUPPLEMENTAL INFORMATION
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