Skip to content
    CHDN
    Earnings call· Jun 2026(Q2 FY26)

    Churchill Downs Q2 FY26 earnings call CHDN

    Jul 30, 2026 Source

    Executive summary

    Churchill Downs Q2 FY26 — Record Performance & Strategic Realignment

    Churchill Downs delivered record Q2 FY26 results, primarily driven by the Kentucky Derby's expanded reach and capital investments. The company announced a strategic review to divest nine regional gaming properties, aiming to reduce leverage, repurchase shares, and reinvest in core assets: the Kentucky Derby, Historical Racing Machines (HRMs), and TwinSpires, signaling a focused shift towards high-return, durable growth opportunities within the horse racing ecosystem.

    Highlights

    5

    • Achieved all-time record net revenue of $980 million in Q2 FY26.

    • Delivered all-time record adjusted EBITDA of $477 million in Q2 FY26.

    • Kentucky Derby broadcast revenue increased $10 million, with peak viewership exceeding 24 million, up 12% YoY.

    • Derby Week generated over 500 million social media impressions, an 84% increase from 2025.

    • Generated record free cash flow of $474 million or $6.70 per share in the first half of FY26.

    Concerns

    2

    • Near-term competitive pressure in Central Virginia HRM properties impacted results following new casino openings.

    • Share price performance has not reflected the quality, durability, and cash-generating characteristics of the company's properties.

    Guidance & targets

    5
    CategoryTargetConfidence
    Derby Week incremental adjusted EBITDA
    $15 million to $18 million
    medium materiality
    High
    Full-year project capital spend
    $180 million to $220 million
    medium materiality
    High
    Full-year maintenance capital spend
    $90 million to $110 million
    medium materiality
    High
    Bank covenant net leverage
    3.6 to 3.8x
    high materiality
    High
    Bank covenant net leverage
    drop
    high materiality
    Medium

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Live and Historical Racing
    Adjusted EBITDA increased 7% compared to the prior year quarter, driven by strong performance from Churchill Downs Racetrack and Kentucky HRM properties.
    		—7%—Adjusted EBITDA
    Churchill Downs Racetrack
    Adjusted EBITDA was up $16 million for the quarter, driven by the successful running of the 152nd Kentucky Derby.
    		———$16 million
    Kentucky HRM properties
    Adjusted EBITDA was up 10% year-over-year, driven by strong growth across both Western and Northern Kentucky, benefiting from the opening of Marshall Yards.
    		—10%—Adjusted EBITDA
    Virginia HRM properties
    Adjusted EBITDA increased 1% compared to the prior year quarter, led by strength at The Rose. Central Virginia properties faced near-term competitive pressure. Overall margins remained consistent at 46%.
    Margins: 46%
    		—1%—Adjusted EBITDA
    Wagering Services and Solutions
    Adjusted EBITDA increased over 8%, driven by growth in TwinSpires horse racing and expansion of the Exacta platform, also benefiting from lower legal expenses.
    		—8%—Adjusted EBITDA
    Gaming
    Adjusted EBITDA increased 5% compared to the prior year quarter. Wholly owned regional gaming properties performed in line with expectations, with same-store margins essentially flat.
    Same-store margins: flat YoY
    		—5%—Adjusted EBITDA

    Operational metrics

    16
    Kentucky Derby Week Guests
    386,000
    Derby Week 2026

    Total guests attending Derby Week, with a breakdown for Derby Day.

    Kentucky Derby Peak Viewership
    24 millionup 12% YoY
    Derby Day 2026

    Peak viewership for the Kentucky Derby broadcast on NBC.

    Kentucky Oaks Viewership
    2.4 million
    Derby Week 2026

    Average audience for the Kentucky Oaks race, aired in prime time for the first time on NBC.

    Derby Week Social Media Impressions
    500 millionup 84% from 2025
    Derby Week 2026

    Total social media impressions generated during Derby Week.

    Project Capital Spend
    $79 million
    H1 FY26

    Capital spent on projects in the first half of the year.

    Maintenance Capital Spend
    $38 million
    H1 FY26

    Capital spent on maintenance in the first half of the year.

    Bank Covenant Net Leverage
    3.7x
    end of June

    Net leverage ratio at the end of June.

    Share Repurchase Program Remaining Authorization
    $430 million
    as of end of June

    Remaining amount authorized under the share repurchase program.

    Total Capital Returned to Shareholders
    $2.4 billion
    since late 2015

    Cumulative capital returned to shareholders over the past decade.

    Virginia HRM Margins
    46%consistent with prior year quarter
    Q2 FY26

    Operating margins for Virginia HRM properties.

    Kentucky HRM Machines
    5,300
    current

    Number of machines operating across 8 HRM venues in Kentucky.

    Kentucky HRM ETG Deployment
    1%
    current

    Electronic table games represent a small but growing portion of machines and revenues in Kentucky HRMs.

    Churchill Downs Racetrack Purses
    $100 millionfrom less than $40 million
    current

    Increase in purses at Churchill Downs Racetrack since Derby City Gaming opened in 2018.

    Victory Run Project Cost
    $285 million
    total

    Total cost of the Victory Run project at Churchill Downs Racetrack.

    TwinSpires Adjusted EBITDA Benefit
    benefited from lower legal expensesthan in the prior year quarter
    Q2 FY26

    TwinSpires adjusted EBITDA saw a positive impact from reduced legal costs.

    Dividend Increases
    15th consecutive year
    January 2026

    The company marked its 15th consecutive year of dividends per share increases.

    Industry KPIs

    1
    MetricValueDetails
    Net unit growth development pipeline10 HRM licenses and 5,000 machines (Virginia); 8 HRM venues and 5,300 machines (Kentucky)units

    Deals & partnerships

    2
    Macquarie CapitalEngagement to assist with strategic review and sale of regional gaming properties

    Macquarie Capital has been engaged to assist Churchill Downs in exploring options to sell nine wholly owned regional gaming properties.

    Various potential buyersExploration of sale for nine wholly owned regional gaming properties

    Churchill Downs is exploring the sale of Calder Casino (FL), Terre Haute Casino (IN), Hard Rock Casino (IA), Oxford Casino (ME), Ocean Downs (MD), Harlow's and Riverwalk Casinos (MS), del Lago (NY), and Presque Isle (PA). Sales are expected to be individual or in small groups.

    Risks & headwinds

    3
    Competitive pressure in Central Virginia HRM propertiesnear-term

    near-term competitive pressure

    Mitigation: Responding with targeted marketing and guest engagement initiatives designed to stabilize performance and improve returns over time.

    Share price not reflecting intrinsic value

    share price performance has not reflected the quality, durability and cash-generating characteristics of our properties

    Mitigation: Strategic review of regional gaming properties to reduce leverage, repurchase shares, and reinvest in core assets.

    Illegal 'skill games' in Pennsylvaniagrace period ends October 15

    70,000 to north of 100,000 of these machines

    Mitigation: Pennsylvania Supreme Court definitively ruled these devices illegal, leading to their removal, which is expected to benefit regulated operators like Presque Isle.

    What to watch in Q3 FY26

    5

    Regional Gaming Property Sales Progress

    over the coming months
    CurrentStrategic review commenced for 9 properties
    TargetAnnouncements of sales or progress in the process

    Why it matters

    These sales are key to reducing leverage, funding share repurchases, and focusing the company's strategy on core assets.

    We are working hard to execute this process over the coming months.

    Q&A highlights

    6

    How is Churchill Downs balancing HRM deployment with evolving competition in Virginia, and what are the goals for increasing deployment limits?

    Management views Virginia as a 'chessboard' for HRM deployment, adjusting marketing to new competition (like Petersburg Casino) and planning referendums in underserved Western Virginia markets (Pulaski, Amherst County) to optimize machine placement within the current 5,000-machine limit, while also seeking to expand licenses and machine count over time.

    “The way it works in Virginia is we're entitled to 10 licenses, so 10 places where we can deploy machines and a total of 5,000 machines across the jurisdiction. And by jurisdiction or by county and town, there can be some limitations that apply to where we can deploy the machines even when we're approved for a license.”

    asked by Barry Jonas · answered by William C. Carstanjen

    2 min read5 chapters

    Detailed Narrative

    01

    Kentucky Derby Enhancements and Performance

    Churchill Downs continues to invest in the Kentucky Derby experience, with the $285 million Victory Run project on track for completion before the 2028 Derby, adding premium suites and dining. For the 2027 Derby, temporary seating and cabanas will be installed in the infield, alongside infrastructure improvements. These investments contributed to record Q2 performance, including a $10 million increase in broadcast revenue, over 24 million peak viewers (up 12%), and 500 million social media impressions (up 84%) for Derby Week, which welcomed over 386,000 guests.

    02

    Strategic Review of Regional Gaming Properties

    The company commenced a strategic review of its wholly owned regional gaming properties, exploring options to sell nine assets: Calder Casino (FL), Terre Haute Casino (IN), Hard Rock Casino (IA), Oxford Casino (ME), Ocean Downs (MD), Harlow's and Riverwalk Casinos (MS), del Lago (NY), and Presque Isle (PA). This move aims to maximize shareholder value by selling properties individually or in small groups, with Macquarie Capital engaged to assist. The Fair Grounds properties in Louisiana will be retained due to their strategic importance to horse racing.

    03

    Core Strategy Pillars and Future Growth

    Churchill Downs is anchoring its long-term strategy on three core pillars: the Kentucky Derby, Historical Racing Machines (HRMs), and TwinSpires. The Kentucky Derby will see continued investment to expand its relevance, reach, and earnings power. HRMs will focus on developing and optimizing venues in Virginia, Kentucky, and New Hampshire, leveraging Exacta technology and electronic table games. TwinSpires aims to expand interest and participation in horse racing wagering through innovation and broader distribution.

    04

    Virginia HRM Market Dynamics and Expansion

    In Virginia, the opening of the Petersburg Casino has created near-term competitive pressure on Central Virginia properties like Richmond and New Kent. The company is responding with targeted marketing and guest engagement initiatives to stabilize performance. Churchill Downs plans to run referendums in Pulaski and Amherst County to further expand its HRM footprint, believing these underserved markets offer attractive growth potential and aiming to optimize its 5,000-machine allocation across the state.

    05

    Pennsylvania Gray Games Ruling Impact

    The Pennsylvania Supreme Court recently ruled that 'skill games' are illegal gaming devices, with a grace period for removal ending October 15. This decision is expected to benefit regulated gaming operators like Churchill Downs' Presque Isle property, which has faced cannibalization from an estimated 70,000 to 100,000 illegal machines. The company views this as a positive development for the regulated gaming industry, ensuring fair competition and adherence to tax and regulatory frameworks.

    AI-generated summary of the company’s earnings call. Not investment advice.