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Churchill Downs Inc (CHDN)·Q3 2025 Earnings Summary

Executive Summary

  • Record Q3 net revenue of $683.0M (+9% YoY) and record Adjusted EBITDA of $262.3M (+11% YoY); GAAP diluted EPS fell to $0.54 on a one-time impairment, while adjusted diluted EPS was $1.09 .
  • Revenue and adjusted EPS beat Wall Street consensus (Revenue $672.7M*, EPS $0.98*), while S&P Global EBITDA consensus ($245.8M*) diverged from CDI’s reported Adjusted EBITDA ($262.3M), reflecting non-GAAP add-backs; S&P’s EBITDA “actual” prints at $201.5M*, implying a reported miss on that basis .
  • Board approved a 7% dividend increase to $0.438 per share and repurchased $53.5M of stock in Q3; net bank leverage was 4.1x, with management guiding below 4x in 2026 .
  • Strategic catalysts: announced “Victory Run” ($280–$300M) for Derby Week facilities with a 20% unlevered IRR target (year-3 focus), NBC primetime Kentucky Oaks in 2026 (+$10M Adjusted EBITDA), and HRM expansion across VA/KY/NH .

What Went Well and What Went Wrong

  • What Went Well

    • Record net revenue ($683.0M) and record Adjusted EBITDA ($262.3M); adjusted net income up 7% YoY to $77.1M .
    • Live & Historical Racing drove growth: VA HRM +$30.1M, KY HRM +$20.9M; segment Adjusted EBITDA +$23.4M; TwinSpires handle rose to $501.7M (+7%) .
    • Management on capital ROI: “We target a 20% unlevered IRR…really focused on year three” for Victory Run .
    • Derby media upside: “Our NBC deal will deliver a $10 million increase in adjusted EBITDA for 2026” and Kentucky Oaks primetime in 2026 .
    • HRM footprint expanding: “We currently have 4,875 HRMs deployed in Virginia” (Richmond expansion +450, Henrico Roseshire opened) .

  • What Went Wrong

    • GAAP EPS compressed (to $0.54) and net income down 42% YoY to $38.1M on a $31.0M after-tax impairment of Chasers’ gaming rights and higher transaction/pre-opening costs .
    • Gaming revenue fell $4.8M YoY (cessation of HRM operations in Louisiana), with segment Adjusted EBITDA flat YoY .
    • Regulatory/competitive headwinds: continued enforcement “whack-a-mole” vs illegal machines in VA; management views impact as not material but requiring vigilance .
    • EBITDA consensus mismatch: S&P’s EBITDA “actual” is $201.5M*, below consensus $245.8M*, due to differences vs CDI Adjusted EBITDA methodology (CDI excludes impairments, adds equity EBITDA, etc.) .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$628.5 $934.4 $683.0
GAAP Diluted EPS ($)$0.86 $2.99 $0.54
Adjusted Diluted EPS ($)$0.97 $3.10 $1.09
Net Income Attributable to CDI ($USD Millions)$65.4 $216.9 $38.1
Adjusted EBITDA ($USD Millions)$235.3 $450.9 $262.3

Segment performance (includes intercompany revenue per CDI segment reporting):

SegmentRevenue ($M) Q3 2024Revenue ($M) Q3 2025Adjusted EBITDA ($M) Q3 2024Adjusted EBITDA ($M) Q3 2025
Live & Historical Racing$252.4 $305.7 $93.0 $116.4
Wagering Services & Solutions$118.7 $127.2 $42.5 $46.0
Gaming$270.3 $265.5 $123.3 $123.3

KPIs (Q3 2025):

KPIQ3 2025
TwinSpires Horse Racing Total Handle ($USD Millions)$501.7
Share Repurchases ($USD Millions)$53.5
Net Bank Leverage (x)4.1x
Annual Dividend per Share$0.438
Free Cash Flow per Share$2.34
HRMs Deployed in Virginia (units)4,875
Cash & Equivalents ($USD Millions, 9/30/25)$180.5

Estimates vs Actual (S&P Global):

MetricQ3 2025 Consensus*Q3 2025 Actual*Surprise*
Revenue ($USD)$672.7M*$683.0M*+$10.3M (beat)*
Primary EPS ($)$0.98*$1.09*+$0.11 (beat)*
EBITDA ($USD)$245.8M*$201.5M*−$44.3M (miss)*

Forward consensus (S&P Global):

MetricQ4 2025 Consensus*Q1 2026 Consensus*
Revenue ($USD)$655.0M*$660.1M*
Primary EPS ($)$0.92*$0.92*
EBITDA ($USD)$243.8M*$250.4M*

Note: Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Maintenance Capex ($M)FY 2025$80–90 $75–85 Lowered
Project Capex ($M)FY 2025$250–290 $200–240 Lowered
Project Capex ($M)FY 2026N/A$160–200 Introduced
Cash Tax Savings ($M)FY 2025$50–60 $50–60 Maintained
Cash Tax Savings ($M)FY 2026N/A$50–60 Introduced
Bank Covenant Net Leverage (x)FY 2025 / 2026“Low 4x in 2025; <4x 2026” “≈4.1x end-2025; <4x 2026” Maintained
Dividend Growth RateFY 2025Target ~7% per year 7% increase to $0.438 Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (Previous Mentions)Q2 2025 (Previous Mentions)Q3 2025 (Current Period)Trend
Derby media rights & pricingPaused $900M multi-year plan; focus on Finish Line Suites/The Mansion; 2025 Derby EBITDA “comparable” NBC 7-year deal adds ~$10M adjusted EBITDA in 2026; Oaks in primetime; record viewership and social Announced Victory Run ($280–$300M); capacity +2% track; 20% IRR target Accelerating
HRM expansion (VA/KY/NH)Owensboro opened; Richmond expansion underway; Henrico Roseshire planned Q4 Richmond expansion completed; Henrico opening Oct; Calvert City 2026; Casino Salem (90%) Richmond +450 HRMs; Roseshire opened; Salem temporary ops (100 HRMs + 13 tables) Progressing
Exacta tech & ETGsPlan to implement HRM-based ETGs in 2025 New HRM roulette with Interblock; approvals pursued Advancing ETG approvals; reiterated opportunity Advancing
Macro/tariffsTariff uncertainty; lower-tier softness Consumer trends improved; rated spend up Not a major focus; continued discipline Stabilizing
Tax legislation (H.R.1)N/A2025 cash tax −$50–60M, 100% bonus depreciation; 30% EBITDA interest cap Reiterated similar benefit in 2026 Sustained tailwind
Illegal machines in VAN/AN/AOngoing enforcement; not material but persistent Ongoing
Prediction marketsN/AView: not a risk given Interstate Horse Racing Act Reiterated legal stance; will engage operators Monitoring
M&A environmentN/ANH acquisition signed Activity pickup; flexible buyer/seller stance Active
FinTech/PaymentsN/AN/AEveri 7-year FinTech agreement (CashClub, AML, compliance) Upgrade ops

Management Commentary

  • “We target a 20% unlevered IRR…focused on year three” (Victory Run ROI approach) .
  • “Our NBC deal will deliver a $10 million increase in adjusted EBITDA for 2026” (Derby media catalyst) .
  • “We currently have 4,875 HRMs deployed in Virginia” (scale and growth runway) .
  • “We estimate…lower cash tax payments…$50 to $60 million in both 2025 and 2026” (FCF tailwind) .
  • “Free cash flow yield…approximately 10%” (capital returns context) .

Q&A Highlights

  • Capital ROI and pacing: Victory Run targeted at 20% unlevered IRR by year 3; capacity adds are measured with focus on premium mix .
  • ETGs opportunity: Regulator approvals are the gating factor; management views ETGs as “important frontier” for HRMs, cautious on quantifying lift until frameworks set .
  • Capital allocation: Leverage tracked to <4x by 2026; balanced buybacks with project pipeline; dividend growth at 7% per year .
  • M&A environment: Activity picking up; CDI flexible across OpCo/PropCo/HoldCo dynamics; NH is a key regional platform .
  • VA illegal machines: Enforcement progresses; remains “whack-a-mole” but not material currently; continued vigilance .
  • The Rose ramp: Heavy near-term marketing to build awareness; expect margin improvement as win per unit rises .

Estimates Context

  • Q3 2025 delivered beats on revenue ($683.0M vs $672.7M*) and adjusted EPS ($1.09 vs $0.98*). S&P’s EBITDA consensus ($245.8M*) vs “actual” ($201.5M*) suggests a miss on their defined EBITDA, while CDI’s non-GAAP Adjusted EBITDA was $262.3M; differences reflect CDI’s add-backs (impairments, pre-opening, equity EBITDA) and S&P’s methodology .
  • Near-term estimates imply stable topline and EPS into Q4 2025 and Q1 2026 (Revenue ~$655–660M*, EPS ~$0.92*), with EBITDA consensus ~ $244–250M*; upside catalysts may drive revisions if Derby/Oaks media economics, Virginia HRM scaling, and NH ramp exceed expectations.*

Note: Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Q3 quality: Underlying operations strong (record revenue/Adjusted EBITDA), with GAAP EPS depressed by a non-cash impairment; adjusted EPS beat supports estimate revision upward near term .
  • Segment trajectory: Live & Historical Racing is the engine; VA/KY HRMs and Exacta continue to scale; Gaming stable with LA HRM cessation offset elsewhere .
  • 2026 setup: NBC Oaks primetime (+$10M Adjusted EBITDA), Victory Run premium expansion (20% IRR target), and Derby pricing power point to step-up in medium-term EBITDA/FCF .
  • Capital framework: Lower capex guides (2025 project $200–240M; 2026 $160–200M) plus $50–60M annual cash tax relief underpin strong FCF, dividend growth, and opportunistic buybacks .
  • Regulatory watch: ETGs could be a meaningful HRM enhancement pending approvals; illegal machine enforcement in VA remains a managed, non-material headwind .
  • Narrative movers: Progress at The Rose/VA portfolio (expansions, margins), NH Casino Salem development milestones, and sponsorship/licensing breadth tied to Oaks/Derby media reach can catalyze sentiment .
  • Positioning: With leverage guided sub-4x and diversified growth drivers, estimate risk skews positive on adjusted metrics; investors should anchor on CDI’s Adjusted EBITDA/FCF lens vs GAAP volatility from non-cash items .