Summary of Churchill Downs Inc. (CHDN) Q2 2026 Earnings Call

1Key Financial Results and Metrics

Net Revenue: Achieved a record $980 million for Q2 2026.

Adjusted EBITDA: Reached an all-time high of $477 million, marking the sixth consecutive record for both metrics.

Free Cash Flow: Generated $474 million or $6.70 per share in the first half of 2026.

Leverage: Bank covenant net leverage stood at 3.7x at the end of June, with expectations to remain between 3.6x and 3.8x through year-end.

2Strategic Updates and Business Highlights

Kentucky Derby Success: The 152nd Kentucky Derby saw enhancements, including the addition of Sunday Racing, resulting in over 386,000 guests during Derby Week. Broadcast revenue increased by $10 million due to a new NBC agreement, with peak viewership exceeding 24 million.

Capital Investments: Focused on major projects like the $285 million Victory Run at Churchill Downs, set for completion before the 2028 Derby. Other projects include expanding the Homestretch Club and redeveloping infield areas.

Gaming Segment Review: A strategic review of nine regional gaming properties is underway, with plans to sell these assets to reduce leverage and fund share repurchases and reinvestments.

HRM Expansion: Continued development of high-quality HRM venues in Virginia, Kentucky, and New Hampshire, with plans for further expansion and new gaming offerings.

3Forward Guidance and Outlook

Derby Week Contribution: Expected to contribute $15 million to $18 million in incremental adjusted EBITDA in 2026 compared to the previous year.

Capital Expenditure: Anticipated full-year capital spending between $180 million and $220 million, focusing on high-return growth projects.

Long-term Strategy: Emphasis on the Kentucky Derby, HRM businesses, and TwinSpires as cornerstones for future growth, aiming to enhance guest experiences and expand market reach.

4Challenges and Points of Concern

Competitive Pressures: In Virginia, the introduction of new competitors has impacted performance at some properties, necessitating adjustments in marketing and guest engagement strategies.

Market Dynamics: The company acknowledges that recent share price performance does not reflect the quality of its assets, prompting a strategic review of its gaming properties.

Regulatory Risks: Potential changes in gaming regulations and market conditions could impact future growth and operational strategies.

5Notable Q&A Insights

Virginia HRM Strategy: The company is exploring opportunities to increase HRM deployment limits and is running referendums in underserved markets.

Transaction Market Health: Management expressed confidence in the current market for selling regional gaming properties, emphasizing the strong cash flow generation of these assets.

Focus on International Markets: There is a growing emphasis on attracting international horse racing fans, with strategies to enhance global attendance and sponsorship opportunities.

Midweek Derby Strategy: Management highlighted the importance of developing each day of Derby Week, with initiatives to create a festival atmosphere and increase attendance on non-Derby days. Overall, CHDN reported strong financial performance driven by the Kentucky Derby and ongoing investments in gaming and racing, while navigating competitive pressures and exploring strategic asset sales to enhance shareholder value.