Churchill Downs Q1 Earnings Call Highlights

Record Q1 results: Churchill Downs reported first-quarter net revenue of $663 million and adjusted EBITDA of $257 million, driven by strong Live and Historical Racing and Wagering performance (Live & HRM adj. EBITDA +11%; Kentucky HRMs +17%; Wagering adj. EBITDA +8%), and generated $276 million of free cash flow with bank covenant net leverage of 3.9x.

Expansion and product rollouts: The company opened the Marshall Yards HRM in Kentucky and began rolling out roulette electronic table games at six Kentucky HRMs (calling early results “very encouraging”), with plans to expand ETGs and add new HRM-based games like craps and blackjack.

Strategic assets and Derby outlook: Churchill Downs signed a deal to acquire the Preakness and Black‑Eyed Susan IP with a $3 million base fee (growing 2.5% annually from 2028) plus a 2% handle fee for the two days, and reiterated confidence in $15–20 million of incremental Derby EBITDA this year while investing $180–220 million in project capex for 2026.

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Churchill Downs (NASDAQ:CHDN) reported record first-quarter 2026 net revenue and adjusted EBITDA, citing strong execution across its portfolio, continued growth in historical racing machine (HRM) venues, and momentum heading into Kentucky Derby week.

Record quarter driven by Live and Historical Racing and Wagering

CEO William C. Carstanjen said the company delivered “record first quarter net revenues of $663 million and record adjusted EBITDA of $257 million,” calling the quarter a “strong start to 2026.” CFO Marcia A. Dall added that both the Live and Historical Racing segment and the Wagering Services and Solutions segment achieved record performance for the period.

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In Live and Historical Racing, Dall said adjusted EBITDA rose by more than $11 million, or 11%, versus the prior-year quarter. She attributed much of the increase to Kentucky HRMs, where adjusted EBITDA grew by more than $9 million, or 17%, supported by performance in both Western and Northern Kentucky and the February opening of Marshall Yards.

In Virginia, Dall said adjusted EBITDA increased by $3 million, or 6%. She highlighted The Rose, noting it posted sequential increases in average gaming revenue per machine per day in each month of the quarter. “We’re encouraged by the continued top-line growth and increase in the margins at The Rose and believe the property remains in the early stages with a long runway for growth,” she said.

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At Colonial Downs Racetrack, Dall said the company hosted the Virginia Derby in March with sold-out attendance and a 19% year-over-year increase in handle, making it the third-highest wagering day in Colonial Downs history. She added that other Virginia properties were impacted by weather and increased competition, and said the company is “actively optimizing” marketing and operating strategies.

In Wagering Services and Solutions, Dall said adjusted EBITDA increased 8%, driven by retail sports betting, online sports betting market access agreements, and the “continued expansion” of the company’s Exacta platform. She also said TwinSpires delivered modest adjusted EBITDA growth, primarily due to lower legal expenses.

For the Gaming segment, Dall said wholly owned regional gaming properties performed in line with expectations given the cessation of HRM operations in Louisiana in May 2025 and $2 million of weather-related disruption in January. She said same-store margins were relatively consistent year-over-year, with improved customer trends compared to the prior year. Dall noted strength among higher value-rated players and “some softness outside Kentucky in lower value unrated segments,” adding that the company is refining marketing to address both cohorts.

New HRM venue opens in Kentucky; ETGs roll out begins

Carstanjen said Churchill Downs opened its Marshall Yards HRM venue in Calvert City, Kentucky, “on time and on budget,” marking the company’s eighth HRM facility in the state. He said early performance has been encouraging and that the venue is already contributing to job creation and purse funding for Kentucky’s horse racing industry.

The company also began rolling out electronic table games (ETGs) based on historical horse races in Kentucky. Carstanjen said roulette ETGs were introduced at six Kentucky HRM properties during the quarter, and described early indications as “very encouraging,” adding that the machines are “certainly accretive” to Kentucky gross gaming revenue. He said the company plans to roll out additional machines throughout 2026 and beyond and is developing additional HRM-based ETGs, including craps and blackjack.

In response to analyst questions, Carstanjen said the roulette introduction has brought in new customers and contributed to database growth. He also said the company only began marketing the product in April after working through operational “kinks,” and that “every metric” the company tracks has been positive so far. When asked about longer-term mix targets for tables versus slot-like positions, Carstanjen said the company is not setting an 80/20-type target and will make decisions based on customer behavior and data.

Virginia legislative outcomes and ongoing investment

Carstanjen said the company remains committed to Virginia’s thoroughbred racing “renaissance,” stating it will host 48 race dates in 2026 and expects “significant purse funding” from HRM operations across the state to be distributed during the Colonial Downs meet.

He also pointed to late-session legislative outcomes as supportive for the operating environment, saying the governor vetoed legislation related to skill games and a proposed new casino in Fairfax County, and that iGaming did not receive approval. In Q&A, Carstanjen characterized the process as a “healthy democratic process” and said he was encouraged by dialogue and discussion in the state. He added that Virginia has “elements of a very stable environment” and said the company would continue to evolve its strategy as conditions change.

Asked about the possibility of digital expansion such as iGaming, Carstanjen said the company approaches legislative matters with “fallback positions” and strategic flexibility, but he also called iGaming “a terrible public policy choice for states,” arguing states have not reliably protected consumers where it has been introduced.

Preakness intellectual property agreement: fees and potential role

Carstanjen said Churchill Downs signed a definitive agreement to acquire the intellectual property rights to the Preakness Stakes and the Black-Eyed Susan Stakes from a Stronach Group subsidiary, including trademarks and associated rights. In Q&A, he provided additional detail about the fee structure in Maryland, describing a two-part arrangement:

Base fee: $3 million, growing at 2.5% annually beginning in 2028, with Carstanjen noting it “does not apply for the 2027” event and that the purchase had not yet closed.

Handle-based fee: 2% of handle for Black-Eyed Susan Day plus Preakness Day.

Carstanjen said the combined Preakness and Black-Eyed Susan days generated about $140 million in handle last year, offering a reference point for the variable portion of the fee. He called the Preakness an “iconic asset” with “tremendous potential and tremendous history,” and said the company is “happy to participate and work with the state” as it seeks to build the event.

On longer-term ambitions, Carstanjen said Maryland “is in control of the destiny of the Preakness,” noting the state has authorized $400 million of bond proceeds for investment in the property and that an additional $125 million of other government funds are available for Pimlico and Laurel Park. He said the company has begun dialogue with the state and can provide expertise in areas such as construction and design, ticketing, sponsorships, and wagering, but emphasized that discussions are “just beginning” and will proceed at the state’s direction.

Asked about HRMs in Maryland, Carstanjen said there has been a movement among off-track betting parlors to seek HRM authorization, but he declined to comment, saying the company is focused on integrating into the state’s broader racing efforts around the Preakness.

Kentucky Derby upgrades and outlook for Derby-week growth

Carstanjen highlighted several enhancements for the upcoming Kentucky Derby, including renovations of the Mansion hospitality area and upgrades to the Finish Line Suites. He also reiterated plans to accelerate work on the Victory Run project after this year’s Derby week, targeting completion in time for the 2028 Kentucky Derby. The new structure is expected to include premium suites with rail access, covered box seating, and multiple dining experiences across several levels.

He said the company sees opportunities to expand Derby Week further, noting that more than 370,000 guests attended across Derby Week last year. The company is adding Sunday racing on April 26, and Carstanjen said the Kentucky Oaks will be broadcast in prime time on NBC and Peacock for the first time. He also discussed growing global partnerships tied to “experience-driven” activations and premium hospitality.

Addressing ticket sales and demand, Carstanjen said the company has not seen the same “geopolitical corrections” to the sales process that impacted last year amid the initial introduction of tariffs, and described the current sales cycle as “smooth and predictable.” Dall said management remains “very confident” in previously cited expectations for $15 million to $20 million of incremental Derby EBITDA versus last year, adding it would represent a significant increase even over Derby 150 in 2024. Carstanjen said the company anticipates an “exceptional” Derby and Derby week and expects to be fully sold out.

Free cash flow and capital spending plans

Dall said the company generated $276 million in free cash flow during the quarter, or $3.94 per share, which she said supports reinvestment in growth projects and capital returns to shareholders. Project capital expenditures totaled $40 million in the quarter, and Dall reiterated expected full-year 2026 project capital spending of $180 million to $220 million. Maintenance capital expenditures were $19 million in the quarter, with full-year maintenance capex expected to be $90 million to $110 million.

Churchill Downs ended the quarter with bank covenant net leverage of 3.9 times, which Dall said reflects strong operating cash flow generation from recent investments.

About Churchill Downs (NASDAQ:CHDN)

Churchill Downs Incorporated is a leading American entertainment and gaming company best known for operating the Churchill Downs racetrack in Louisville, Kentucky, home of the annual Kentucky Derby. Beyond its signature thoroughbred racing venue, the company manages a diversified portfolio of live racing facilities, casinos, and off-track betting operations. Its services encompass pari-mutuel wagering, historical horse racing machines, and online betting through its TwinSpires platform, reaching horse racing and sports betting enthusiasts nationwide.

In its live racing segment, Churchill Downs oversees a network of racetracks and racing festivals, offering year-round events in multiple states.