ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes included in Part II, Item 8. Financial Statements and Supplementary Data. The following discussion provides an analysis of our results of operations and reasons for material changes therein for 2025 as compared to 2024. Discussion regarding our financial condition and results of operations for 2024 as compared to 2023 is included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025.
Our Business
Churchill Downs Incorporated ("CDI" or the "Company") has been creating extraordinary entertainment experiences for over 150 years, beginning with the Company’s most iconic and enduring asset, the Kentucky Derby. Headquartered in Louisville, Kentucky, CDI has expanded through the acquisition, development, and operation of live and historical racing entertainment venues, the growth of the online wagering businesses, and the acquisition, development, and operation of regional casino gaming properties.
2025 Transactions and Expansions
Owensboro Racing and Gaming
Owensboro Racing and Gaming ("Owensboro") opened in February 2025 in Owensboro, Kentucky with 600 historical racing machines ("HRMs"), a retail sportsbook, a simulcast wagering area, and multiple food and beverage offerings.
Casino Salem
The Company acquired 90% of the outstanding equity interests related to Casino Salem (the "Salem Transaction") in Salem, New Hampshire in August 2025. The Company announced in January 2026 that Casino Salem will be redeveloped as Rockingham Grand Casino ("Rockingham"). Rockingham will occupy a 160,000 square-foot facility at Rockingham Mall. The venue will feature 825 historical racing machines, 32 table games, 12 electronic table game seats, a 900-seat live entertainment venue, food and beverage offerings, including a center bar and full-service sports bar and restaurant. The Company plans to open Rockingham in mid-2027 with an expected capital investment of $180-200 million.
Rosie's Richmond
The Company completed the expansion of Rosie's Richmond in Richmond, Virginia, with the addition of 450 HRMs in August 2025. Rosie's Richmond now has 1,200 HRMs, food and beverage offerings, a center bar, and a simulcast wagering area.
Roseshire Gaming Parlor
Roseshire Gaming Parlor in Henrico County, Virginia opened in September 2025 with 175 HRMs, food and beverage offerings, and a simulcast wagering area.
2024 Transactions and Expansions
The Rose Gaming Resort Opening
In November 2024, the Company opened The Rose Gaming Resort approximately 30 miles south of Washington D.C. The Rose Gaming Resort opened with 1,650 HRMs, a hotel, food and beverage offerings, and a simulcast wagering area.
Terre Haute Casino Resort Opening
In April 2024, the Company opened the Terre Haute Casino Resort in Terre Haute, Indiana. Terre Haute Casino Resort opened with 1,040 slot machines, 36 tables games, a hotel, food and beverage offerings, and a retail sportsbook.
NYRA Transaction
In April 2024, the Company closed on the sale of 49% of the United Tote Company ("United Tote"), a wholly owned subsidiary of CDI, to NYRA Content Management Solutions, LLC ("NYRA"), a subsidiary of the New York Racing Association, Inc.
Other Business Activities
Impairments
During the third quarter of 2025, the Company concluded that the completion of the Salem Transaction qualified as a trigger event for impairment testing related to the Chasers Poker Room ("Chasers") indefinite-lived gaming rights intangible. At the time the Company acquired Chasers, the valuation of the gaming rights contemplated a future expansion of the existing operations in Salem, New Hampshire. Given the completion of the Salem Transaction, the Company now intends to open Rockingham and does not plan to expand Chasers.
Because the Company does not currently intend to expand Chasers, the Company settled an outstanding liability owed to the former owners of Chasers, related to the Chasers' gaming rights, in the amount of $10.0 million. The settlement of the noncurrent liability resulted in a gain of $40.0 million in the third quarter of 2025. Given the completion of the Salem Transaction and the settlement of the liability related to the Chasers' gaming rights, the Company evaluated and subsequently updated the projected cash flows and discount rate related to the Chasers' gaming rights. As a result of this assessment, the Company recognized a non-cash impairment charge of $85.1 million in the third quarter of 2025 for the entire value of the Chasers' gaming rights, which are included in the Live and Historical Racing segment. The $40.0 million gain on settlement of the noncurrent liability and the $85.1 million impairment charge of the gaming rights intangible are included in Asset impairments, net in the Consolidated Statements of Comprehensive Income. For additional information, refer to Note 7, Asset Impairments to the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Key Indicators to Evaluate Business Results and Financial Condition
Our management monitors a variety of key indicators to evaluate our business results and financial condition. These indicators include changes in net revenue, operating expense, operating income, earnings per share, outstanding debt balance, operating cash flow and capital spend.
Our consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP"). We also use non-GAAP measures, including EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA. We believe that the use of Adjusted EBITDA as a key performance measure of results of operations enables management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Our chief operating decision maker utilizes Adjusted EBITDA to evaluate segment performance, develop strategy, and allocate resources. Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (as determined in accordance with GAAP) as a measure of our operating results.
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, adjusted for the following:
Adjusted EBITDA includes our portion of EBITDA from our equity investments and the portion of EBITDA attributable to noncontrolling interests.
Adjusted EBITDA excludes:
• Transaction expense, net which includes:
– Acquisition, disposition, and property sale related charges; and
– Other transaction expense, including legal, accounting and other deal-related expense;
• Stock-based compensation expense;
• Rivers Des Plaines' impact on our investments in unconsolidated affiliates from legal reserves and transaction costs;
• Asset impairments, net;
• Gain on property sales;
• Legal reserves;
• Pre-opening expense; and
• Other charges, recoveries and expenses
The property associated with Arlington International Racecourse ("Arlington") was sold on February 15, 2023 to the Chicago Bears. Arlington's results and exit costs in 2023 are treated as an adjustment.
On June 26, 2023, the Company's management agreement for Lady Luck in Farmington, Pennsylvania expired and was not renewed.
For segment reporting, Adjusted EBITDA includes intercompany revenue and expense totals that are eliminated in the Consolidated Statements of Comprehensive Income. See the Reconciliation of Net Income to Adjusted EBITDA included in this section for additional information.
Business Highlights
In 2025, we delivered strong performance and made investments in the Kentucky Derby and new entertainment venues that we believe will provide long-term sustainable value creation for our shareholders.
• Record net revenue was $2.9 billion, up $191.6 million or 7.0%;
• Net income was $383.0 million, down $43.8 million or 10.3%;
• Record Adjusted EBITDA was $1.2 billion, up $46.1 million, or 4.0%;
Live and Historical Racing Segment:
• Adjusted EBITDA was $637.0 million, up $62.4 million or 10.9% from fiscal year 2024.
• Churchill Downs Racetrack:
◦ Churchill Downs Racetrack ran the 151st Kentucky Derby on the first Saturday of May, generating all-time handle record for the Kentucky Derby Race, Kentucky Derby Day Program, and Kentucky Derby Week races with nearly 147,00 fans gathered in person to watch the most exciting two minutes in sports.
◦ The Starting Gate Pavilion and Courtyard was completed for the 151st running of the Kentucky Derby. The renovations updated seating options and created a more upscale social environment with new concessions, bars, and wagering windows.
◦ We announced NBC Sports will showcase the Kentucky Oaks in prime time for the first time ever in 2026.
◦ We are investing up to $30.0 million to renovate the existing Finish Line Suites and The Mansion for the 152nd Kentucky Derby in May 2026.
◦ We are investing $280.0 to $300.0 million to build a new building on the first turn of the Churchill Downs Racetrack between the First Turn Club and the Skye Terrace. The Company anticipates construction of this new building will begin following the 2026 Kentucky Derby and will be completed by the 2028 Kentucky Derby.
• Kentucky:
◦ Western Kentucky: Opened Owensboro Racing & Gaming ("Owensboro") in Owensboro, Kentucky in February 2025 with 600 HRMs, food and beverage offerings, a retail sportsbook, and a simulcast wagering area.
◦ Southwestern Kentucky: Held the grand opening for Marshall Yards Racing & Gaming ("Marshall Yards") on February 25, 2026 in Calvert City, Kentucky. The new HRM entertainment venue has 225 HRMs, a sports bar, a retail sportsbook, and a simulcast wagering area.
• Virginia:
◦ Northern Virginia: Continued to grow The Rose Gaming Resort ("The Rose") in Dumfries, Virginia during its first full year of operation. The Rose has 1,610 HRMs, a 102-room hotel, food and beverage offerings, a simulcast wagering area, and event space .
◦ Central Virginia:
▪ Completed the expansion of the Richmond, Virginia HRM in August 2025.
▪ Opened Roseshire Gaming Parlor ("Roseshire") in Henrico County in September 2025 with 175 HRMs, food and beverage offerings, and a simulcast wagering area.
• New Hampshire: Acquired 90% of the outstanding equity interests related to Casino Salem in Salem, New Hampshire in August 2025. The Company announced in January 2026 that Casino Salem will be redeveloped as Rockingham Grand Casino ("Rockingham"). Rockingham will occupy a 160,000 square-foot facility at Rockingham Mall. The venue will feature 825 historical racing machines, 32 table games, 12 electronic table game seats, a 900-seat live entertainment venue, and several food and beverage concepts, including a center bar and full-service sports bar and
restaurant. The Company plans to open Rockingham in mid-2027 with an expected capital investment of $180.0 to $200.0 million.
Wagering Services and Solutions Segment:
• Adjusted EBITDA was $177.3 million, up $11.7 million or 7.1% from fiscal year 2024.
• We expanded Exacta technology and product offerings to customers in new states.
Gaming Segment:
• Adjusted EBITDA was $483.0 million, down $23.9 million or 4.7% from fiscal year 2024.
• Terre Haute Casino Resort ("Terre Haute"): Continued to grow the Terre Haute Casino Resort during its first full year of operation. Terre Haute has over 1,000 slot machines, table games, a 400,000 square-foot entertainment venue, food and beverage offerings, and a retail sportsbook.
All Other:
• We repurchased $425.3 million of shares under our share repurchase programs in 2025, based on trade date.
• We continued in our ESG efforts with the ongoing promotion of responsible gaming; initiatives at our properties to lessen energy and water usage, to decrease carbon emissions, and to responsibly manage waste; increasing investments in the communities in which we operate and supporting our teams through educational and leadership development; and increasing engagement with our shareholders.
We remain committed to delivering strong financial results and long-term sustainable growth. Our businesses generate strong cash flow, and we have a solid balance sheet that supports our organic growth as well as strategic acquisitions that we believe will create long-term value for our shareholders.
Our Operations
We manage our operations through three reportable segments: Live and Historical Racing, Wagering Services and Solutions, and Gaming.
Refer to Part I, Item 1. Business, of this Annual Report on Form 10-K for more information on our segments and a description of our competition and government regulations and potential legislative changes that affect our business.
Consolidated Financial Results
The following table reflects our net revenue, operating income, net income, Adjusted EBITDA, and certain other financial information:
Years Ended December 31,
Change
(in millions)
Net revenue
Operating income
Operating income margin
Net income attributable to Churchill Down Incorporated
Adjusted EBITDA
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
• Net revenue increased $191.6 million driven by a $169.1 million increase from the Live and Historical Racing segment primarily due to the opening of The Rose in November 2024, the opening of Owensboro Racing and Gaming in February 2025, the opening of Roseshire in September 2025, the acquisition of Casino Salem in August 2025, and growth at our other HRM properties, a $18.7 million increase from the Wagering Services and Solutions segment primarily due to increased Derby Week wagering at TwinSpires Horse Racing and Exacta, and a $3.8 million increase from the Gaming segment primarily driven by the opening of the Terre Haute in April 2024, partially offset by net decreases at our nine other wholly owned gaming properties.
• Operating income decreased $25.2 million driven by an increase in impairment expense of $43.6 million primarily related to the net impairment of Chasers' gaming rights, a $17.2 million increase in transaction expenses, a $10.3 million decrease from our Gaming segment, an $8.5 million increase in SG&A expense, and a $2.6 million decrease from All Other. These decreases were partially offset by a $43.1 million increase from the Live and Historical segment
driven by the opening of The Rose in November 2024, the opening of Owensboro in February 2025, Casino Salem in August 2025, and Roseshire in September 2025, and an $13.9 million increase from Wagering Services and Solutions.
• Net income attributable to Churchill Downs Incorporated decreased $43.8 million. A $33.0 million after-tax increase in impairment charges in the current year primarily due to the impairment of the Chasers' gaming rights, a $3.8 million after-tax increase of other charges and recoveries, net, a $3.5 million after-tax increase in transaction, pre-opening, and other expenses, and a $3.0 million valuation allowance established primarily for unrealizable state deferred tax assets impacted the comparability of the Company's net income for the year ended December 31, 2025 compared to the year ended December 31, 2024. Excluding these items, net income attributable to CDI decreased $0.5 million due to a $2.4 million after-tax increase in interest expense associated primarily with higher outstanding debt balances and higher interest rates, and a $0.2 million after-tax decrease related to the income attributable to the noncontrolling interest of United Tote and Casino Salem, partially offset by a $2.1 after-tax increase driven by the results of our operations.
• Adjusted EBITDA increased $46.1 million driven by a $62.4 million increase from the Live and Historical Racing segment primarily due to the opening of The Rose in Northern Virginia in November 2024, and a $11.7 million increase from the Wagering Services and Solutions segment primarily due to Exacta. These increases were partially offset by a $23.9 million decrease from the Gaming segment driven by net decreases at our wholly owned gaming properties and equity investments, offset by the opening of the Terre Haute in April 2024, and a $4.1 million decrease from All Other.
Revenue by Segment
The following table presents net revenue for our segments, including intercompany revenues:
Years Ended December 31,
Change
(in millions)
Live and Historical Racing
Wagering Services and Solutions
Gaming
All Other
Eliminations
Net Revenue
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
• Live and Historical Racing revenue increased $175.4 million due to an $88.3 million increase from our Virginia HRM venues, a $72.6 million increase from our Kentucky HRM venues, an $8.4 million increase from Churchill Downs Racetrack, and a $6.1 million increase primarily from our New Hampshire venues. The Virginia HRM increase was primarily due to an $82.7 million net increase from our Northern Virginia venues and a $10.6 million net increase from our Central Virginia venues primarily from the September 2025 opening of our Roseshire HRM venue, partially offset by a $5.0 million net decrease primarily from our Western and Southern Virginia venues. The Kentucky HRM increase was primarily due to a $40.1 million net increase from our Western Kentucky venues, a $14.5 million increase from our Northern Kentucky venues, a $10.0 million increase from our Southwestern venue, and an $8.0 million increase from our Louisville venues.
• Wagering Services and Solutions revenue increased $25.6 million due to an $11.8 million increase in TwinSpires Horse Racing primarily due to Derby Week wagering, an $11.1 million increase from Exacta attributable to incremental HRMs in our owned HRM venues, and a $2.7 million increase from our sports betting business.
• Gaming revenue increased $3.9 million due to a $33.3 million increase primarily attributable to the opening of the Terre Haute Casino Resort in April 2024, partially offset by an $18.9 million decrease from the cessation of HRM operations in Louisiana, a $5.1 million decrease in Mississippi primarily from temporary roadwork impacting Riverwalk and the impact of a local curfew on Harlow's, and a $5.4 million net decrease at our six other wholly owned gaming properties.
• All Other revenue increased $2.1 million primarily due to intercompany revenue related to the captive insurance company that was established in April 2024. All captive revenue is eliminated in consolidation.
Consolidated Operating Expense
The following table is a summary of our consolidated operating expense:
Years Ended December 31,
Change
(in millions)
Taxes and purses
Content expense
Salaries and benefits
Selling, general and administrative expense
Depreciation and amortization
Marketing and advertising expense
Maintenance, insurance and utilities
Property and other taxes
Asset impairments, net
Transaction expense (benefit), net
Other operating expense
Total expense
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Operating expenses increased $216.8 million for the year ended December 31, 2025 compared to December 31, 2024 primarily due to the openings of Terre Haute in Indiana in April 2024 and the hotel in May 2024, The Rose in Virginia in November 2024, Owensboro in February 2025, and the Roseshire in September 2025, as well as the renovation and expansion of our Richmond venue and the addition of the temporary facility at Casino Salem in New Hampshire. Asset impairments for the year ended December 31, 2025 include a $2.4 million write-off in the second quarter of 2025 of HRMs in Virginia that are no longer in use and a $45.1 million net impairment of the gaming rights for Chasers Poker Room in the third quarter of 2025.
Adjusted EBITDA by Segment
We believe that the use of Adjusted EBITDA as a key performance measure of the results of operations enables management and investors to evaluate and compare from period to period our operating performance in a meaningful and consistent manner. Adjusted EBITDA is a supplemental measure of our performance that is not required by or presented in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (as determined in accordance with GAAP) as a measure of our operating results.
Year Ended December 31,
Change
(in millions)
Live and Historical Racing
Wagering Services and Solutions
Gaming
Total segment Adjusted EBITDA
All Other
Total Adjusted EBITDA
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
• Live and Historical Racing Adjusted EBITDA increased $62.4 million due to a $41.4 million increase from our Kentucky HRM venues, an $18.7 million increase from our Virginia HRM venues, a $1.6 million increase primarily from our New Hampshire venues, and a $0.7 million increase from Churchill Downs Racetrack. The Kentucky HRM increase was primarily due to a $13.6 million net increase from our Western Kentucky venues, an $11.8 million increase from our Northern Kentucky venues, a $10.1 million increase from our Louisville venues, and a $5.9 million net increase from our Southwestern Kentucky venues. The Virginia HRM increase was primarily due to a $24.1 million net increase from our Northern Virginia venues, which includes $3.5 million of one-time business interruption insurance recovery related to the delayed opening of The Rose Gaming Resort in fourth quarter 2024, and a $1.8 million decrease in government relations expense, partially offset by a $7.2 million net decrease primarily from our Western and Southern Virginia venues.
• Wagering Services and Solutions Adjusted EBITDA increased $11.7 million due to a $9.2 million increase from Exacta attributable to incremental HRMs in our owned HRM venues, and a $4.2 million increase from our sports betting business, partially offset by a $1.7 million decrease attributable to TwinSpires Horse Racing due to increased legal expenses.
• Gaming Adjusted EBITDA decreased $23.9 million. Our wholly owned gaming properties decreased $15.5 million primarily due to an $8.1 million decrease from the cessation of HRM operations in Louisiana, a $4.6 million decrease in Mississippi from temporary roadwork impacting Riverwalk and the impact of a local curfew on Harlow's, a $6.9 million net decrease at our six other wholly owned gaming properties, partially offset by a $4.1 million increase primarily attributable to the opening of the Terre Haute Casino Resort in April 2024. Our equity investments decreased $8.4 million due to a $7.8 million decrease from Rivers Des Plaines due to increased competition and a $0.6 million decrease from Miami Valley Gaming.
• All Other Adjusted EBITDA decreased $4.1 million driven primarily by increased corporate administrative expenses offset by income related to our captive insurance company.
Reconciliation of Net Income to Adjusted EBITDA
Years Ended December 31,
Change
(in millions)
Net income attributable to Churchill Downs Incorporated
Net income attributable to noncontrolling interests
Net income
Adjustments:
Depreciation and amortization
Interest expense
Income tax provision
Stock-based compensation expense
Pre-opening expense
Other expense, net
Transaction expense (benefit), net
Asset impairments, net
Other income, expense:
Interest, depreciation and amortization expense related to equity investments
Rivers Des Plaines' legal reserves and transactions costs
Other charges and recoveries, net
Total adjustments
Adjusted EBITDA
Consolidated Balance Sheet
The following table is a summary of our overall financial position:
As of December 31,
Change
(in billions)
Total assets
Total liabilities
Total shareholders’ equity
• Total assets increased $0.2 billion driven by increased other intangible assets due to the acquisition of Casino Salem and capital expenditures primarily due to the Churchill Downs Racetrack Starting Gate Pavilion and Courtyard, Roseshire Gaming Parlor, completed expansion of Rosie's Richmond, Marshall Yards Racing & Gaming, and Owensboro Racing & Gaming in Western Kentucky. These increases are partially offset by Chasers' gaming right non-cash impairment.
• Total liabilities increased $0.2 billion driven primarily by an increase in the outstanding balance on the Revolver, which is included in long-term debt, and increases in deferred income taxes. These increases were partially offset by decreased other noncurrent liabilities related to the settlement of the liability associated with Chasers' gaming rights.
• Total shareholders’ equity decreased $0.1 billion driven by share repurchases and cash dividends, partially offset by net income from operations.
Liquidity and Capital Resources
Our primary sources of liquidity and capital resources have been and will continue to be cash flow from operations, borrowings under our credit facility, and proceeds from the issuance of debt securities. Our ongoing liquidity will depend on a number of factors, including available cash resources, cash flow from operations, acquisitions or equity investments, funding of construction for development projects, and our compliance with our covenants under our credit facility.
The following table is a summary of our liquidity and cash flows:
Year Ended December 31,
Change
(in millions)
Cash Flows from:
Operating activities
Investing activities
Financing activities
Operating Cash Flow
Cash flows from operating activities decreased $1.9 million driven by a decrease in other assets and liabilities and decreased distributions from our unconsolidated affiliates. We anticipate that cash flows from operations and availability of borrowings under our credit facility over the next twelve months will be adequate to fund our business operations and capital expenditures.
Investing Cash Flow
Cash flows used in investing activities decreased $73.7 million primarily driven by a decrease in capital expenditures in 2025, partially offset by the Salem Transaction.
Financing Cash Flow
Cash flows used in financing activities increased $65.9 million primarily driven by the increase in share repurchases in 2025, partially offset by an increase in borrowings on the Revolver to fund the Salem Transaction.
Capital Expenditures
Included in cash flows from investing activities are capital maintenance expenditures and capital project expenditures. Capital maintenance expenditures relate to the replacement of existing fixed assets with a useful life greater than one year that are obsolete, exhausted, or no longer cost effective to repair. Capital project expenditures represent fixed asset additions related to land or building improvements to new or existing assets or purchases of new (non-replacement) equipment or software related to specific projects deemed necessary expenditures.
We spent $204.7 million in 2025 on project capital investments including: Churchill Downs Racetrack, Roseshire, Owensboro, Marshall Yards, and Rosie's Richmond. We currently expect our project capital to be approximately $180.0 to $220.0 million in 2026, although this amount may vary significantly based on the timing of work completed, unanticipated delays, and timing of payments to third parties.
Common Stock Repurchase Program
On July 22, 2025, the Board of Directors of the Company approved a common stock repurchase program of up to $500.0 million (the "July 2025 Stock Repurchase Program"). The July 2025 Stock Repurchase Program includes and is not in addition to the $169.2 million previously remaining under the prior March 2025 Stock Repurchase Program and is also not in addition to the $125.6 million previously remaining under the prior 2021 Stock Repurchase Program. Share repurchases may be made at management’s discretion from time to time in the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions. The repurchase program has no time limit and may be suspended or discontinued at any time. We had approximately $429.5 million of repurchase authority remaining under the July 2025 Stock Repurchase Program at December 31, 2025, based on trade date.
Dividends
On October 21, 2025, the Company's Board of Directors approved an annual cash dividend on our common stock of $0.438 per outstanding share, which represented a 7% increase over the prior year. The dividend was payable on January 6, 2026 to shareholders of record as of the close of business on December 5, 2025. The 7% increase marked the fifteenth consecutive year that the Company has increased the dividend. The payment and amount of future dividends will be determined by the Board of Directors and will depend upon, among other things, our operating results, financial condition, cash requirements and general business conditions at the time such payment is considered.
Credit Facilities and Indebtedness
The following table presents our debt outstanding, bond premium and debt issuance costs:
As of December 31,
Change
(in millions)
Term Loan B-1 due 2028
Term Loan A due 2029
Revolver
2027 Senior Notes
2028 Senior Notes
2030 Senior Notes
2031 Senior Notes
Total debt
Current maturities of long-term debt
Total debt, net of current maturities
Issuance cost and fees
Total debt
Credit Agreement
At December 31, 2025, the Company’s senior secured credit facility (as amended from time to time, the "Credit Agreement") consisted of a $1.2 billion revolving credit facility (the "Revolver"), $285.8 million senior secured term loan B-1 due 2028 (the "Term Loan B-1"), $1.1 billion senior secured term loan A due 2029 (the "Term Loan A"), and $100.0 million swing line commitment. Certain amendments to the Credit Agreement entered into during 2023, 2024, and 2025 are described below.
On February 24, 2023, the Company closed an amendment of the Credit Agreement to increase the loans under the Term Loan A from $800.0 million to $1.3 billion and made certain other changes to the existing credit agreement. The Company used the net proceeds from the borrowings under the increased Term Loan A to repay outstanding loans under its Revolver, pay related transaction fees and expenses, and for general corporate purposes.
On July 3, 2024, the Company closed an amendment of the Credit Agreement to extend the maturity date of the Revolver and Term Loan A from 2027 to 2029 and amend certain other provisions of the Credit Agreement. The Company has $4.4 million of capitalized unamortized debt issuance costs associated with the Term Loan A which are being amortized as interest expense over the remainder of the term.
On February 14, 2025, the Company announced that it closed the seventh amendment of the Credit Agreement. The seventh amendment to the Credit Agreement (i) reduced the interest rate for the Term Loan B-1 from Secured Overnight Financing Rate ("SOFR") plus 200 basis points to SOFR plus 175 basis points, (ii) eliminates the 0.10% credit spread adjustment, and (iii) makes certain other amendments to the Credit Agreement.
The Term Loan B-1 requires quarterly payments of 0.25% of the original $300.0 million balance and may be subject to additional mandatory prepayment from excess cash flow on an annual basis per the provisions of the Credit Agreement.
The Revolver and Term Loan A bear interest at SOFR plus 10 basis points, plus a variable applicable margin which is determined by the Company's net leverage ratio. As of December 31, 2025, that applicable margin was 150 basis points which was based on the pricing grid in the Credit Agreement. The Company had $534.8 million available borrowing capacity, after consideration of $8.2 million in outstanding letters of credit, under the Revolver as of December 31, 2025.
The Company is required to pay a commitment fee on the unused portion of the Revolver as determined by a pricing grid based on the consolidated total net secured leverage ratio of the Company. For the period ended December 31, 2025, the Company's commitment fee rate was 0.25%.
The Company completed the transition of its financing from London Interbank Offered Rate to SOFR during the second quarter of 2023. These transition activities did not have a material impact on the Company’s financial statements.
The Credit Agreement is collateralized by substantially all the wholly owned assets of the Company. The Credit Agreement contains certain customary affirmative and negative covenants, which include limitations on liens, investments, indebtedness, dispositions, mergers and acquisitions, the making of restricted payments, changes in the nature of business, changes in fiscal year, and transactions with affiliates. The Credit Agreement also contains financial covenants providing for the maintenance of a maximum consolidated secured net leverage ratio and maintenance of a minimum consolidated interest coverage ratio.
Actual as of
December 31, 2025
Requirement
Interest coverage ratio
Consolidated total secured net leverage ratio
The Company was compliant with all applicable covenants on December 31, 2025.
2027 Senior Notes
On March 25, 2019, the Company completed an offering of $600.0 million in aggregate principal amount of 5.50% Senior Unsecured Notes that mature on April 1, 2027 (the "2027 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The Company used the net proceeds from the offering to repay the then-outstanding balance on the Revolver. In connection with the offering, we capitalized $8.9 million of debt issuance costs which are being amortized as interest expense over the term of the 2027 Senior Notes.
The 2027 Senior Notes were issued at par, with interest payable on April 1st and October 1st of each year, commencing on October 1, 2019. T he 2027 Senior Notes will vote as one class under the indenture governing the 2027 Senior Notes.
The Company may redeem some or all the 2027 Senior Notes at redemption prices set forth in the 2027 Indenture.
2028 Senior Notes
On December 27, 2017, the Company completed an offering of $500.0 million in aggregate principal amount of 4.75% Senior Unsecured Notes that mature on January 15, 2028 (the "Existing 2028 Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The Existing 2028 Notes were issued at par, with interest payable on January 15th and July 15th of each year, commencing on July 15, 2018. The Company used the net proceeds from the offering to repay a portion of our $600.0 million 5.375% Senior Unsecured Notes due in 2021. In connection with the offering, we capitalized $7.7 million of debt issuance costs which are being amortized as interest expense over the term of the Existing 2028 Notes.
On March 17, 2021, the Company completed an offering of $200.0 million in aggregate principal amount of 4.75% Senior Unsecured Notes that mature on January 15, 2028 (the "Additional 2028 Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The Additional 2028 Notes were offered under the indenture dated as of December 27, 2017, governing the $500.0 million aggregate principal amount of 4.75% Senior Unsecured Notes due 2028 and form a part of the same series for purposes of the indenture. In connection with the offering, we capitalized $3.4 million of debt issuance costs which are being amortized as interest expense over the term of the Additional 2028 Notes. Upon completion of this offering, the aggregate principal amount outstanding of the Existing 2028 Notes, together with the Additional 2028 Notes (collectively, the "2028 Senior Notes"), is $700.0 million.
The Additional 2028 Notes were issued at 103.25% of the principal amount, plus interest deemed to have accrued from January 15, 2021, with interest payable on January 15th and July 15th of each year, commencing on July 15, 2021. The 2028 Senior Notes will vote as one class under the indenture governing the 2028 Senior Notes. The 3.25% premium is being amortized through interest expense, net over the term of the Additional 2028 Notes.
The Company may redeem some or all the 2028 Senior Notes at redemption prices set forth in the 2028 Indenture.
2030 Senior Notes
On April 13, 2022, a wholly owned subsidiary of the Company completed an offering of $1.2 billion in aggregate principal amount of 5.75% Senior Unsecured Notes that mature on April 13, 2030 (the "2030 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that was exempt from registration under the Securities Act, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The offering of the 2030 Senior Notes was part of the financing utilized for the acquisition of substantially all of the assets of Peninsula Pacific Entertainment LLC. In connection with the offering, we capitalized $18.3 million of debt issuance costs which are being amortized as interest expense over the term of the 2030 Senior Notes.
The 2030 Senior Notes were issued at 100% of the principal amount, plus interest deemed to have accrued from April 13, 2022, with interest payable in arrears on April 1st and October 1st of each year, commencing on October 1, 2022. The 2030 Senior Notes will vote as one class under the indenture governing the 2030 Senior Notes.
The Company may redeem some or all the 2030 Senior Notes at redemption prices set forth in the 2030 Indenture.
2031 Senior Notes
On April 25, 2023, the Company completed an offering of $600.0 million in aggregate principal amount of 6.75% senior unsecured notes that mature on April 25, 2031 (the "2031 Senior Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A that is exempt from registration under the Securities Act, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. The Company used a portion of the net proceeds from the offering to repay indebtedness outstanding under its Term Loan B Facility due 2024, and to fund related transaction fees and expenses, working capital and other general corporate purposes. The Company recognized a loss on extinguishment on Term Loan B of $1.3 million, which is included in miscellaneous, net in the accompanying Consolidated Statements of Comprehensive Income. The Company capitalized $10.5 million of debt issuance costs associated with the 2031 Senior Notes which are being amortized as interest expense over the remainder of the 8-year term.
The 2031 Senior Notes were issued at 100% of the principal amount, plus interest deemed to have accrued from April 25, 2023, with interest payable in arrears on May 1st and November 1st of each year, commencing on November 1, 2023. The 2031 Senior Notes will vote as one class under the indenture governing the 2031 Senior Notes.
The Company may redeem some or all the 2031 Senior Notes at redemption prices set forth in the 2031 Indenture.
Contractual Obligations
Our commitments to make future payments as of December 31, 2025, are estimated as follows:
(in millions)
Thereafter
Total
Dividends
Revolver
Interest on Revolver (1)
Term Loan B-1
Interest on Term Loan B-1 (1)
Term Loan A
Interest on Term Loan A (1)
2027 Senior Notes
2028 Senior Notes
2030 Senior Notes
2031 Senior Notes
Interest on 2027 Senior Notes
Interest on 2028 Senior Notes
Interest on 2030 Senior Notes
Interest on 2031 Senior Notes
Operating and Finance Leases
All other
Total
(1) Interest includes the estimated contractual payments under our Credit Facility assuming no change in the weighted average borrowing rate of 5.34%, which was the rate in place as of December 31, 2025.
As of December 31, 2025, we had approximately $2.4 million of unrecognized tax benefits.
The Company is exploring options to fund upcoming senior note maturities through a combination of cash on hand, cash generated from operations, available capacity under its revolving credit facility, and capital markets to fund the obligation. Access to capital markets and the terms under which we would fund the obligations are subject to our ability to access the market and other market conditions.
Critical Accounting Policies and Estimates
Our significant accounting policies and recently adopted accounting policies are more fully described in Note 2, Significant Accounting Policies to the notes to consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Our consolidated financial statements have been prepared in conformity with GAAP, which requires management to make
estimates, judgments, and assumptions that we believe are reasonable based on our historical experience, contract terms, observance of known trends in our Company and the industry as a whole and information available from other outside sources. Our estimates affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ from those initial estimates.
Our critical accounting estimates relate to goodwill and certain indefinite-lived intangible assets.
Goodwill and certain intangible assets
Acquisition of certain identifiable intangible assets
In conjunction with the acquisition of a business, the Company records identifiable intangible assets acquired at their respective fair values as of the date of acquisition. Our indefinite-lived intangible assets primarily consist of gaming rights and trademarks. Certain of our gaming rights and trademarks are considered indefinite-lived intangible assets that do not require amortization based on our future expectations to operate our gaming facilities and use the trademarks indefinitely, and our historical experience in renewing these intangible assets at minimal cost with various state gaming commissions. Our definite-lived intangible assets primarily consist of technology and other assets.
We use various valuation methods to determine initial fair value of our intangible assets, including the Greenfield Method and relief-from-royalty method of the income approach, all of which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. The use of these valuation methods requires us to make significant estimates and assumptions about future revenue and operating expenses, expected start-up costs, capital expenditures, royalty rate, and the discount rate. The fair values of gaming rights are generally determined using the Greenfield Method, which is an income approach methodology that calculates the present value based on a projected cash flow stream. This method assumes that the gaming rights provides 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 of the acquired business, and the discount rate are the primary assumptions and estimates used in these valuations. The fair values of trademarks are generally determined using the relief-from-royalty method of the income approach, which estimates the fair value of the intangible asset by discounting the fair value of the hypothetical royalty payments a market participant would be willing to pay to the benefits of the trademarks. The estimated future revenue, royalty rate, and the discount rate are the primary assumptions and estimates used in these valuations. The fair value of technology assets are generally determined using the relief-from-royalty method of the income approach, which estimates the cost savings that accrue to the owner of the intangibles asset that would otherwise be payable as royalties or license fees on revenues earned through the use of the asset. The estimated future revenue, royalty rate, and discount rate are the primary assumptions and estimates used in the valuations. The discount rates used to discount expected future cash flows to present value are generally derived from the weighted average cost of capital analysis and adjusted for the size and/or risk of the asset. Changes in estimates or the application of alternative assumptions could produce significantly different results.
Assessments of goodwill and intangible assets
We perform our annual review for impairment of goodwill and indefinite-lived intangible assets on April 1st of each fiscal year, or more frequently if events or changes in circumstances indicate that it is more likely than not the asset is impaired. Adverse industry or economic trends, lower projections of profitability, or a sustained decline in our market capitalization, among other items, may be indications of potential impairment issues which are triggering events requiring the testing of an asset’s carrying value for recoverability.
Goodwill and indefinite-lived intangible assets are required to be tested annually or more frequently if events or changes in circumstances indicate that it is more likely than not that an asset is impaired. An entity may first assess qualitative factors to determine whether it is necessary to complete the impairment test using a more likely than not criteria. If an entity believes it is more likely than not that the fair value of a reporting unit is greater than the reporting unit's carrying value, including goodwill, the quantitative impairment test can be bypassed. Alternatively, an entity has an unconditional option to bypass the qualitative assessment and proceed directly to performing the quantitative impairment test. If a quantitative impairment test of goodwill is required, we generally determine the fair value under the market and income valuation approaches using inputs primarily related to discounted projected cash flows and price multiples of publicly traded comparable companies. If a quantitative impairment test of our indefinite-lived intangible assets is required, we generally determine the fair value using the Greenfield Method for gaming rights and relief-from-royalty method of the income approach for trademarks. Qualitative factors include macroeconomic conditions, industry and market conditions, cost factors, and overall financial performance, among others. These factors require significant judgments and estimates, and application of alternative assumptions could produce materially different results. Evaluations of possible require us to estimate, among other factors, forecasts of future operating
results, revenue growth, operating expense, tax rates, start-up costs, capital expenditures, depreciation, working capital, discount rates, long-term growth rates, risk premiums, royalty rates, terminal values, and fair values of our reporting units and assets. The impairment tests for goodwill and indefinite-lived intangible assets are subject to uncertainties arising from such events as changes in competitive conditions, the current economic environment, material changes in growth rate assumptions that could positively or negatively impact anticipated future operating conditions and cash flows, changes in the discount rate, and the impact of strategic decisions. If any of these factors were to materially change, such change may require a reevaluation of our goodwill and indefinite-lived intangible assets. Changes in estimates or the application of alternative assumptions could produce significantly different results.
