Churchill Downs Incorporated

Churchill Downs reported all-time record second-quarter net revenue of $980 million and all-time record adjusted EBITDA of $477 million. Live and Historical Racing segment adjusted EBITDA increased 7% year over year; Churchill Downs Racetrack adjusted EBITDA was up $16 million; Kentucky HRM adjusted EBITDA rose 10%; Virginia adjusted EBITDA increased 1%; Wagering Services and Solutions adjusted EBITDA increased over 8%; and Gaming adjusted EBITDA increased 5%. In the first half, free cash flow was a record $474 million, or $6.70 per share. The company expects Derby Week to contribute $15 million to $18 million of incremental adjusted EBITDA in 2026 versus the prior year. Full-year project capital is expected to be $180 million to $220 million and maintenance capital $90 million to $110 million. Bank covenant net leverage was 3.7x at June 30 and is expected to remain in the 3.6x to 3.8x range through year-end, then decline in 2027 if asset sales close. Management also said $430 million remains under the share repurchase authorization.

Bill Carstanjen emphasized that Derby Week is becoming a broader, more valuable event, with record attendance, viewership, wagering, sponsorship and broadcast revenue. He said the company’s capital investments are expanding long-term demand around the Kentucky Derby, especially through Victory Run and infield redevelopment, and that the Oaks’ first-ever prime-time NBC broadcast helped strengthen the entire week. He also framed the portfolio shift as a deliberate move toward the company’s strongest assets: the Kentucky Derby, HRMs and TwinSpires. His tone was confident and strategic, with a clear focus on quality assets, growth projects and monetizing non-core regional gaming properties.

Marcia Dall said the quarter delivered record revenue and adjusted EBITDA, with strong performance across Live and Historical Racing, Wagering Services and Solutions, and Gaming. She highlighted record first-half free cash flow of $474 million, project capital of $79 million in the first half, and maintenance capital of $38 million, while reaffirming full-year capital spend targets of $180 million to $220 million and $90 million to $110 million, respectively. She said bank covenant net leverage ended June at 3.7x, that the company intends to repurchase shares in the second half, and that it is in active discussions on refinancing alternatives for near-term maturities and its credit facility. She also noted 15 consecutive years of dividend-per-share increases and said any asset sale proceeds would be used to significantly reduce leverage.

Analysts focused on Virginia competition, the strategic review and Derby growth levers. Management said Virginia still has room to grow within its 10 licenses and 5,000-machine framework, but central Virginia is facing pressure from the new Petersburg Casino and will require marketing and deployment adjustments. On the asset sale review, management said it is targeting the nine wholly owned regional gaming properties and expects sales to be individual or in small bundles, not OpCo/PropCo real estate-only structures. On the Derby, management said every key metric is moving in the right direction, with the biggest long-term upside coming from continued physical improvements, broader event-day monetization, sponsorship, broadcast and more international participation.