CHDN — Churchill Downs Incorporated

Summary of Churchill Downs Incorporated Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Revenues: Achieved record net revenues of $663 million for Q1 2026.
• Adjusted EBITDA: Also reached a record high of $257 million, reflecting strong operational execution.
• Free Cash Flow: Generated $276 million or $3.94 per share in free cash flow.
• Capital Expenditures: Project capital expenditures were $40 million for the quarter, with expectations of $180 million to $220 million for the full year. Maintenance capital expenditures were $19 million, with a full-year expectation of $90 million to $110 million.
• Net Leverage: Ended the quarter with a bank covenant net leverage of 3.9x.

2. Strategic Updates and Business Highlights

• Marshall Yards Opening: Successfully opened the Marshall Yards historical racing machine venue in Calvert City, Kentucky, contributing positively to local job creation and purse funding.
• Virginia Operations: Continued support for Thoroughbred racing in Virginia, with 48 race dates planned for 2026 and successful events like the Virginia Derby, which saw a 19% increase in handle.
• Preakness Stakes Acquisition: Signed an agreement to acquire the intellectual property rights for the Preakness Stakes and Black-Eyed Susan Stakes, which includes a $3 million base fee growing at 2.5% annually from 2028, plus 2% of handle on race days.
• Derby Week Enhancements: Investments in hospitality upgrades for the Kentucky Derby, including renovations to exclusive areas, aiming to enhance guest experiences and expand attendance and sponsorship opportunities.

3. Forward Guidance and Outlook

• Derby Week Expectations: Anticipating a significant increase in attendance and revenue during Derby Week, projecting growth of $15 million to $20 million in EBITDA compared to the previous year.
• HRM Expansion: Plans to introduce additional electronic table games (ETGs) and expand the HRM portfolio, with ongoing marketing efforts to increase awareness and customer engagement.

4. Bad News, Challenges, or Points of Concern

• Weather Impact: Performance at some Virginia properties was negatively affected by weather and increased competition.
• Competitive Pressures: Acknowledgment of increasing competition in Virginia and the need to adapt strategies accordingly.
• Legislative Uncertainties: Ongoing discussions regarding gaming legislation in Virginia and Maryland, with potential risks associated with future regulatory changes.

5. Notable Q&A Insights

• Preakness Strategy: Management emphasized the potential of the Preakness Stakes as an iconic asset and their willingness to collaborate with the state of Maryland to enhance the event's stature.
• International Growth: Plans to focus on expanding the international customer base for the Kentucky Derby, with an emphasis on attendance and sponsorships.
• ETG Performance: Initial yields from the rollout of ETGs have been positive, with indications of new customer acquisition and increased gaming revenue.
• Legislative Environment: Management expressed optimism about the stable legislative environment in Virginia, despite acknowledging the unpredictability of future legislative actions.

Overall, Churchill Downs Incorporated reported a strong start to 2026, with record financial results and strategic initiatives aimed at enhancing growth and operational performance, while also navigating challenges related to competition and regulatory environments.