Churchill Downs, Incorporated (CHDN) Earnings & Analysis

Latest quarter

Churchill Downs reported third-quarter revenue of $696.0 million, above the $694.2 million consensus, while adjusted earnings per share of $1.23 matched the consensus. Revenue rose from $683.0 million a year earlier, and diluted earnings per share increased to $1.14 from $0.54.

The company’s filing attributed the revenue increase to gains in Live and Historical Racing and Gaming, partly offset by a decline in Wagering Services and Solutions. The filing said operating income benefited from a non-cash impairment of Chasers’ gaming rights that did not recur in the current quarter. Adjusted EBITDA increased $2 million, as gains in Gaming and Wagering Services and Solutions offset a decline in Live and Historical Racing.

Churchill Downs reported an operating margin of 20.5%, compared with 14.3% a year earlier, while gross margin was 29.7%, compared with 29.9%. The company reported free cash flow of $89.0 million, compared with −$58.3 million in the prior-year quarter.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO William Carstanjen said Churchill Downs expects to announce executed transactions for nine regional gaming properties by year-end. He said the company intends to use proceeds to reduce leverage, repurchase shares and invest selectively in the racetrack and other growth opportunities. Asked about the sales, Carstanjen said the properties had been “marketed individually” and could go to the same buyer or to separate buyers.

CFO Marcia Dall said Kentucky historical racing machine properties increased adjusted EBITDA by 10% year over year, helped by revenue growth and cost management. In Virginia, she said adjusted EBITDA fell $6 million from the prior-year quarter, excluding a one-time insurance recovery. Dall attributed pressure on Central Virginia venues to competition and approximately $5 million of expense from a new tax on live racing days.

Carstanjen told analysts that the company can move machines and licenses around Virginia as it responds to demand. He said the company would adjust marketing and machine numbers in Central Virginia and look for opportunities elsewhere in the state. Dall said gaming margins at wholly owned casinos were consistent with the prior-year quarter, and that higher-value rated play contributed to growth.

At Churchill Downs Racetrack, Carstanjen said Derby 153 ticket sales were ahead of the comparable pace for Derby 152. He said Victory Run construction was on schedule for Derby 2028, with upgraded temporary seating planned for Derby 2027. Asked about racetrack investment returns, he said the company has generally been willing to accept a longer payback period there than for a gaming property because of its ability to increase pricing over time.

Carstanjen said roulette electronic table games were attracting new and returning customers in Kentucky, with craps planned around year-end and blackjack development targeted for 2027. In response to an analyst’s question, he said game development also involves regulatory work. Dall said the board authorized a new $750 million share repurchase program.

Guidance

CFO Marcia Dall said Churchill Downs now expects to spend $90 million to $100 million on maintenance capital in 2026. She also said the company now expects full-year project capital spending of $160 million to $180 million in 2026.