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    Churchill Downs (CHDN)

    CHDN Q2 2025: $500M Buyback, $50–60M Tax Savings Boost Returns

    Reported on Jul 24, 2025 (After Market Close)
    Pre-Earnings Price$113.75Last close (Jul 24, 2025)
    Post-Earnings Price$113.93Open (Jul 25, 2025)
    Price Change
    $0.18(+0.16%)
    • Enhanced Event Experience & Pricing Power: Positive word-of-mouth from the successful debut of the starting gate pavilion is driving pricing improvement for Derby Week, which could translate into higher revenue growth.
    • Robust HRM Growth Outlook: Strong performance in key markets such as Kentucky and Virginia, with ample runway for trial customer acquisition and repeat visitation, supports sustainable top‐line and margin expansion.
    • Strategic International Expansion & Brand Development: Focused initiatives to build global inroads—through international marketing, enhanced social media engagement, and tailored race road programs—are poised to boost premium sponsorship and wagering growth.
    • Regulatory and Execution Risks in New Hampshire: The CEO was cautious about discussing details of the New Hampshire project, indicating that final plans will only be disclosed after regulatory approvals and deal closure. This uncertainty could delay benefits or lead to challenges in execution.
    • Margin Pressure from HRM Expansion: While strong HRM performance is noted, the emphasis on building customer databases and driving trial at properties like The Rose indicates that margins are currently being sacrificed for growth. This heavy investment could pressure short‐term profitability.
    • Capital Project and Execution Challenges: Ongoing and planned capital improvements—such as the project for the area between the First Turn and the Sky Terrace—have uncertain timelines and execution risk. Any delays or cost overruns in these projects could disrupt the Derby experience and affect overall performance.
    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Maintenance Capital Expenditures

    FY 2025

    $90 million to $100 million

    $80 million to $90 million

    lowered

    Project Capital Expenditures

    FY 2025

    $250 million to $290 million

    $250 million to $290 million

    no change

    Bank Covenant Net Leverage

    FY 2025

    4x range

    low four times range

    no change

    Share Repurchase Program

    FY 2025

    up to $500 million

    up to $500 million

    no change

    Free Cash Flow – 2025 Cash Tax Savings

    FY 2025

    no prior guidance

    $50 million to $60 million

    no prior guidance

    Free Cash Flow – 2026 Cash Tax Savings

    2026

    no prior guidance

    $50 million to $60 million

    no prior guidance

    Kentucky Derby Adjusted EBITDA Growth

    2026

    no prior guidance

    $10 million increase

    no prior guidance

    HRM Facility – Henrico County, VA ("The Rose")

    October 2025

    no prior guidance

    Planned to open in October 2025, ahead of schedule and on budget

    no prior guidance

    HRM Facility – Marshall Yards, KY

    2026

    no prior guidance

    Expected to open in 2026, on budget and on time

    no prior guidance

    HRM Facility – Casino Salem, NH

    Q3 2025

    no prior guidance

    Transaction expected to close in Q3 2025, with further development plans to be shared post-closing

    no prior guidance

    TopicPrevious MentionsCurrent PeriodTrend

    Enhanced Kentucky Derby Premium Experience & Pricing Power

    Discussed extensively in Q1 2025 with focus on the Starting Gate Pavilion, pricing adjustments, and high-end guest experiences ( ); further detailed in Q4 2024 with multi‐phase renovation plans and in Q3 2024 with additional seating and amenities improvements ( )

    Emphasized in Q2 2025 with renewed focus on premium experiences (including the Starting Gate Pavilion and strategic renovations) and pricing power to drive adjusted EBITDA growth ( )

    Consistent focus with evolving initiatives and sustained positive sentiment regarding premium offerings.

    HRM Growth, Expansion, and Margin Pressures

    Q1 2025 highlighted new venue openings like Owensboro and Richmond expansion ( ); Q4 2024 detailed robust HRM performance in Virginia and Kentucky ( ); Q3 2024 stressed large-scale HRM expansion in Virginia and Kentucky along with margin insights ( )

    Q2 2025 reported solid growth in Kentucky and Virginia HRM venues with some margin pressure in Virginia (e.g. tax rate effects) ( )

    Steady expansion with persistent, albeit localized, margin pressures; overall robust outlook.

    Regulatory Uncertainty and Expansion Limitations

    Q1 2025 discussed the regulatory challenges for HRM-based electronic table games and expansion constraints ( ); Q4 2024 addressed gray market enforcement and supportive regulatory actions ( ); Q3 2024 made limited mention ( )

    Q2 2025 emphasized the risk of obtaining state approvals for HRM-based electronic table games and noted regional project regulatory considerations ( )

    Ongoing regulatory challenges remain a common theme with consistent caution on new product roll‐out.

    Capital Investment and Project Execution Risks

    Q1 2025 described pausing the $900 million multiyear project and highlighted low‐risk refurbishment projects ( ); Q4 2024 and Q3 2024 discussed extensive capital spending on projects like the Starting Gate Pavilion and HRM expansions, with execution risks managed by strict scheduling and budgeting ( )

    Q2 2025 reported projects progressing on time and on budget, underscoring effective capital management and execution ( )

    Movement from cautious tone (pausing large projects) to improved confidence in project execution and disciplined capital management.

    Macroeconomic Pressures Affecting Costs and Project Timelines

    Q1 2025 detailed significant macroeconomic uncertainty, inflation risks, and tariff impacts leading to project pauses ( ); Q4 2024 briefly noted monitoring inflation and wage data ( ); Q3 2024 did not highlight this topic

    No mention in Q2 2025 ([N/A])

    Topic is no longer highlighted; suggests reduced emphasis or stabilization in this area.

    International Expansion and Global Brand Development

    Q4 2024 discussed leveraging global trends and expanding international customer bases ( ); Q3 2024 mentioned an initial international deployment with Exacta in Malta ( ); Q1 2025 had only minimal references ( )

    Q2 2025 provided detailed discussion on global familiarity with thoroughbred racing and a multiyear process for international expansion and marketing of the Kentucky Derby ( )

    Increased emphasis on international opportunities with a more strategic, positive outlook for global brand growth.

    Consumer Demand Variability and Gray Market Competition

    Q4 2024 focused on variability with strong rated play but weakness in unrated play plus challenges with gray games enforcement ( ); Q3 2024 elaborated on segmented demand between rated and unrated play and noted enforcement progress on gray games ( ); Q1 2025 highlighted softer demand among lower-tier segments ( )

    Q2 2025 mentioned variability in growth among Virginia HRM venues, with strong rated play and some competitive pressures ( )

    Consistent recognition of demand segmentation with ongoing, moderate competitive challenges; overall sentiment remains steady.

    New Product Initiatives (Electronic Table Games) Risks

    Q1 2025 covered regulatory and tax challenges for introducing electronic table games, emphasizing a cautious approach ( ); Q3 2024 made a brief mention within the context of broader growth strategies ( ); Q4 2024 did not mention this topic

    Q2 2025 reasserted the development of an HRM-based electronic roulette product and the associated risk of obtaining necessary state approvals ( )

    Persistent regulatory hurdles for new product initiatives maintain a cautious tone across periods.

    The Rose Gaming Resort Performance and Ramp-Up

    Q3 2024 provided initial ramp-up details and a planned grand opening ( ); Q4 2024 expressed confidence in its long-term performance despite early short-term noise ( ); Q1 2025 noted sequential revenue growth and early-stage ramp-up with strong EBITDA contributions ( )

    Q2 2025 highlighted continued early ramp-up with meaningful month-over-month growth and optimistic performance metrics in Northern Virginia ( )

    Consistent optimism with progressive ramp-up and strong performance indicators, reflecting a positive trajectory over time.

    Underperformance of Derby City Gaming Properties

    Q3 2024 noted underperformance of the Derby City Gaming Downtown property due to a slow post-COVID ramp-up and challenges in downtown Louisville ( ); Q1 2025 and Q4 2024 did not highlight issues with Derby City Gaming

    Not mentioned in Q2 2025 ([N/A])

    Topic has been dropped from current discussions, suggesting improvement or a lower prioritization of concerns.

    1. Tax & Returns
      Q: Impact of tax savings and repurchases?
      A: Management expects $50M–$60M in cash tax savings in 2025 with similar benefits in 2026, and a disciplined approach to capital returns via a $500M repurchase program, underscoring a long‐term focus on shareholder value.

    2. HRM Growth
      Q: How long is HRM growth runway?
      A: The team sees substantial growth potential in both Kentucky and Virginia HRM markets, with strong early results and continued investments promising long-term expansion.

    3. Gate Pricing
      Q: What are pavilion pricing expectations?
      A: Positive word-of-mouth from the revamped Starting Gate Pavilion is expected to drive increased demand and improved pricing, echoing past successful launches of new sections.

    4. New Hampshire
      Q: How will the New Hampshire market evolve?
      A: The Salem project is poised as a unique, accessible opportunity that taps both New Hampshire and Massachusetts markets, with additional details to be shared once the transaction closes.

    5. International Growth
      Q: How will international attendance grow?
      A: Building on the global appeal of thoroughbred racing, management outlined a multiyear plan to engage high-end consumers via tailored marketing and sponsorship efforts.

    6. Prediction Markets
      Q: Will prediction markets affect the Derby?
      A: With the strength of the pari-mutuel system and legal protections like the Interstate Horse Racing Act, prediction markets are not expected to disrupt the Derby’s established wagering model.

    7. M&A Outlook
      Q: Is New Hampshire part of an M&A trend?
      A: While the Salem acquisition represents a strategic, focused play in the region, management does not anticipate a broader M&A wave in that market at present.

    8. Oaks Timing
      Q: Why change the Oaks schedule?
      A: Shifting the Oaks to prime time is designed to boost national exposure, driving both ticket sales and wagering by setting a strong lead-in to the Kentucky Derby.

    9. Track Project
      Q: What’s the plan for the track gap area?
      A: Detailed plans for the space between the First Turn and Sky Terrace are being refined, with expectations that the project will not disrupt the 2026 Derby and more details coming next quarter.

    10. Sponsorship Strategy
      Q: How are sponsorships evolving?
      A: Sponsorships are now being curated as intentional, win–win partnerships to enhance the overall Derby experience and support international growth, reflecting a more sophisticated approach.

    11. The Rose Initiative
      Q: How is The Rose enhancing engagement?
      A: Despite a competitive market, management is focused on long-term brand building at The Rose, prioritizing trial and repeat visitation over immediate margin maximization.

    Research analysts covering Churchill Downs.