Churchill Downs (CHDN) Q2 FY26 earnings call: guidance and Q&A

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

What is management's view on the current transaction market for regional gaming properties, especially given peer activity?

Management believes it's an excellent time to go to market for their regional gaming assets, which are described as proven, strong, cash-generating properties. They anticipate individual or small bundles of transactions to maximize value, noting general market activity in the space.

“These are great assets. These -- first and foremost, these are assets with long histories of good cash flow generation, good returns on capital and performance. So with that -- starting with that premise of we have good assets.”

asked by Brandt Montour · answered by William C. Carstanjen

Can management rank the biggest growth opportunities for the Derby in the medium term and describe the earnings trajectory given current investments?

All Derby metrics (admissions, broadcast, sponsorship, wagering) are moving positively. The Victory Run project (2028 completion) is expected to drive significant growth. Management is also excited about infield experiments with temporary structures to test new concepts and price points. The focus is on delivering a world-class event, which underpins all other growth avenues.

“For me, I'm particularly excited about some of the experiments we're running in the infield. You may have noticed when we talked about the infield projects, -- we're putting in temporary structures, cabanas, temporary seatings around the winners Pagoda. We need to do some experimenting there.”

asked by David Katz · answered by William C. Carstanjen

Given recent actions, how does Churchill Downs plan to expand within racing, particularly regarding the Triple Crown?

The company is focusing on the 'flight to quality' within horse racing, building on successful assets like TwinSpires and the Derby. They see opportunities in the top end of the sport, including potential involvement with horse racing leagues, to build awareness, continuity, and broader distribution. The strategy involves building events, purses, attendance, and sponsorship.

“So certainly, within horse racing, our focus is on what's best about horse racing, what's most interesting about horse racing and what's resonating about horse racing with the American consumer and the global consumer.”

asked by Daniel Politzer · answered by William C. Carstanjen

What are Churchill Downs' thoughts on newly announced horse racing leagues, and would they consider OpCo/PropCo structures for their regional gaming asset sales?

Management encourages horse racing leagues as they build awareness and distribution for the sport, actively engaging with various league concepts. Regarding M&A, the focus is solely on selling the nine wholly owned regional gaming assets as announced, not other assets or OpCo/PropCo structures, though they are open to buyers proposing such structures.

“So I feel like we've had good exposure and a good chance to learn about these leagues as people contemplate them. And we encourage the leagues. It's -- again, it's like the quality. It's around building more awareness, more continuity and a broader distribution for our sport and for our company.”

asked by Trey Bowers · answered by William C. Carstanjen

How does the recent Pennsylvania Supreme Court decision on 'gray games' affect Churchill Downs' view on opportunities in Pennsylvania and other states for HRMs?

The ruling, which declared skill games illegal and set an October 15 removal deadline, is seen as positive for regulated gaming operators like Presque Isle. It removes unfair competition from an estimated 70,000-100,000 illegal machines. Management believes this will lead to improved operations for Presque Isle, regardless of future distributed gaming policy, reinforcing confidence in regulated models.

“In June, the Pennsylvania Supreme Court definitively ruled that the so-called skill games that are deployed in Pennsylvania are illegal gaming devices, and they established a grace period before those machines needed to be removed from operation. And that period ends October 15.”

asked by Joseph Stauff · answered by William C. Carstanjen