Churchill Downs ((CHDN)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Churchill Downs’ latest earnings call struck an upbeat tone as management highlighted record net revenue, record adjusted EBITDA and a powerful $700 million in free cash flow for 2025. While earnings came in just shy of last year’s peak and some regional pressures surfaced, executives framed these as manageable headwinds against a strong growth and deleveraging story into 2026.
Record Revenue and Adjusted EBITDA Streak Extends
Churchill Downs reported record net revenue and record adjusted EBITDA for 2025, including record fourth-quarter figures. Excluding the pandemic year, this marks nine consecutive years of record top-line and adjusted EBITDA performance, reinforcing the company’s ability to compound growth through both its racing and gaming platforms.
Kentucky Derby and Derby Week Powerhouse
The Kentucky Derby franchise remained the crown jewel, delivering record handle for the race, Derby Day program and Derby Week overall. The company also posted the highest television ratings in nearly four decades and expects the 2026 Derby to generate an additional $15 million to $20 million of incremental adjusted EBITDA.
Robust Free Cash Flow and Shareholder Returns
Free cash flow surged to a record $700 million, or $9.75 per share, underscoring the cash-generative nature of the portfolio. Management deployed this strength by repurchasing over 4.2 million shares, returning more than $456 million to shareholders through buybacks and dividends, and extending its streak of annual dividend-per-share increases to 15 years.
HRM Footprint Expansion and New Projects
The company continued to build out its historical racing machine network with new openings in Owensboro, Marshall Yards and Roseshire, alongside progress on The Rose project. It also announced a major $180 million to $200 million investment in the Rockingham Grand Casino in Salem, New Hampshire, signaling confidence in long-term regional demand.
Wagering Services Growth Led by Exacta
The Wagering Services and Solutions segment posted a 7% increase in adjusted EBITDA for 2025, driven primarily by growth in Exacta. Management highlighted ongoing momentum in business-to-business deployments, adding new customers in Kansas and Alabama that broaden the distribution of its wagering technology.
Electronic Table Games as a New Growth Avenue
Churchill Downs secured regulatory approval in Kentucky and launched roulette electronic table games in early February, opening a new product channel. While the ETG rollout contributed nothing to 2025 results, the company views the early-stage deployment and potential additions like craps and blackjack as a meaningful long-term earnings lever.
Churchill Downs Racetrack Upgrades and Capacity Gains
At the flagship racetrack, the company completed renovations including the starting gate Pavilion for roughly 8,100 guests and a redesigned Paddock. Ongoing work on the Mansion and Finish Line Suites remains on time and on budget, and the upcoming Victory Run project will add about 1,400 seats, a 22% capacity boost in that premium area.
Disciplined Capital Allocation and Leverage Management
Maintenance capital expenditure totaled $70 million in 2025 with expectations rising to $90 million to $110 million in 2026, while project capex was $205 million and is guided to $180 million to $220 million next year. Bank covenant net leverage stood at 4.1x at year-end 2025, and management anticipates this ratio falling below 4.0x during 2026 as strong cash flow supports further balance sheet improvement.
Earnings Below Peak Amid Tough Comparisons
Despite record revenue and adjusted EBITDA, management acknowledged that overall earnings landed slightly below the prior year’s record level. The company cited challenging year-over-year comparisons and pockets of economic uncertainty earlier in 2025, but stressed that core demand trends and project execution remain on track.
Tariff Volatility and Sales-Cycle Disruptions
Executives flagged that tariff-related volatility and broader macro uncertainty disrupted the sales process for certain events late in the selling cycle. This timing issue weighed on revenue cadence earlier in 2025, but was portrayed as a transitory factor rather than a structural change in demand.
Regional Gaming Margins Face Mild Pressure
Same-store wholly owned casino margins, excluding racing, slipped by 0.8 percentage points versus 2024, with softness concentrated in Mississippi. Management linked this modest compression to local market challenges and emphasized that the overall regional portfolio remains resilient and profitable.
Weather and Local Issues Temporarily Impact Operations
Significant January weather events and localized disruptions, including roadwork and curfews in Mississippi plus adverse conditions in December, created short-term revenue headwinds. The company noted that underlying customer demand held up well once these temporary obstacles eased.
Deliberate ETG Rollout Strategy
The ETG initiative remains in a measured ramp-up phase, starting with roulette and expanding only as products prove themselves with customers and regulators. Management stressed that ETGs provided no incremental benefit to 2025 results and are being managed as a multi-year earnings opportunity rather than a quick fix.
Regulatory and Legislative Uncertainty
The company continues to monitor legislative developments around iGaming and other competitive shifts, calling out Virginia discussions as a potential risk to its operations there. While management views iGaming as unfavorable for its Virginia properties, it framed this as an ongoing policy watch item rather than an immediate financial shock.
Guidance Signals Confident 2026 Outlook
Looking ahead, Churchill Downs expects the 2026 Kentucky Derby to contribute $15 million to $20 million of incremental adjusted EBITDA as Derby Week expands to seven live race dates across eight days with attendance around 75,000 and pacing already ahead of prior years. Project capex is projected at $180 million to $220 million, maintenance capex at $90 million to $110 million and leverage is expected to drop below 4.0x, supported by continued strong cash generation after 2025’s $700 million free cash flow.
Overall, the earnings call painted the picture of a company leaning into its marquee Derby brand, expanding HRM and ETG platforms and returning significant capital while keeping leverage in check. Short-term margin and macro bumps were acknowledged but framed as manageable, leaving investors with a narrative centered on sustained cash flow, disciplined investment and a constructive growth trajectory into 2026 and beyond.