10-Q: Churchill Downs Q1 2026 Earnings: Revenue Up, Net Income Grows

Churchill Downs Incorporated reported a modest increase in net revenue and net income for the first quarter of 2026, driven by growth in Live and Historical Racing, despite a decrease in Gaming revenue.

Summary

• Net revenue for the first quarter of 2026 was $663 million, an increase of $20 million compared to $643 million in the same period of 2025.
• Operating income rose to $143 million from $135 million in the prior year's quarter.
• Net income attributable to Churchill Downs Incorporated increased to $83 million ($1.16 per diluted share) from $77 million ($1.02 per diluted share) in the first quarter of 2025.
• Adjusted EBITDA was $257 million, up from $245 million in the prior year's quarter.
• The company's Live and Historical Racing segment saw revenue increase by $24 million, while Wagering Services and Solutions revenue increased by $2 million.
• The Gaming segment experienced a $5 million decrease in revenue, primarily due to the cessation of HRM operations in Louisiana.
• Total assets remained stable at $7.485 billion, while total liabilities decreased by $88 million to $6.341 billion.
• Total equity increased by $86 million to $1.096 billion, driven by net income.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive report, with revenue and net income showing expected growth, driven by key segments, although some segment-specific challenges and future funding considerations temper a more enthusiastic outlook.

Positives

• Net revenue increased by $20 million to $663 million.
• Operating income improved by $8 million to $143 million.
• Net income attributable to Churchill Downs Incorporated grew by $6 million to $83 million.
• Diluted earnings per share increased to $1.16 from $1.02.
• Adjusted EBITDA increased by $12 million to $257 million.
• The Live and Historical Racing segment showed strong revenue growth of $24 million.
• Wagering Services and Solutions segment revenue saw a modest increase of $2 million.
• Total equity increased by $86 million due to net income.
• The company has $430 million in remaining repurchase authority under its stock repurchase program.
• The company announced a definitive agreement to acquire the intellectual property of the Preakness Stakes and Black-Eyed Susan Stakes for $85 million.

Negatives

• Gaming segment revenue decreased by $5 million, primarily due to the cessation of HRM operations in Louisiana.
• Total liabilities decreased by $88 million, largely due to paydowns of the Revolver and dividend payments, but this also reflects a reduction in financial flexibility.
• The company is exploring options to fund upcoming senior note maturities, indicating potential future financing needs.
• The cessation of HRM operations in Louisiana negatively impacted the comparability of Louisiana results to the prior year.

Risks

• The company is subject to risks and uncertainties that could cause actual performance or results to differ materially from forward-looking statements, including economic conditions, public health threats, changes in tax laws, competition, and cybersecurity risks.
• The cessation of HRM operations in Louisiana due to a court ruling poses a risk to revenue streams in that segment.
• The company's ability to fund upcoming senior note maturities is subject to its ability to access debt markets and other economic conditions.
• A one-percentage point increase in the SOFR rate would reduce net income and cash flows from operating activities by $14 million due to variable rate debt.
• Future economic conditions could negatively impact estimates and assumptions used in asset impairment assessments, potentially increasing the risk of future impairment of assets at Presque Isle.

Future Outlook

The company anticipates that cash flows from operations and availability of borrowings under its credit facility over the next twelve months will be adequate to fund its business operations and capital expenditures. Project capital expenditures are expected to be approximately $180 to $220 million in 2026, subject to variations based on timing, delays, and payments.

Management Comments

• Management believes that the use of Adjusted EBITDA as a key performance measure enables management and investors to evaluate and compare operating performance in a meaningful and consistent manner.
• Management believes that the controls implemented with the new financial reporting system are appropriately designed and will continue to evaluate their effectiveness.
• Management believes that the disclosure controls and procedures were effective as of March 31, 2026.

Industry Context

StockSavvy.ai notes that Churchill Downs' performance in Live and Historical Racing, particularly at HRM venues, continues to be a strong growth driver, aligning with broader trends in the gaming industry towards diversified entertainment offerings. However, the decrease in Gaming revenue due to regulatory changes in Louisiana highlights the sector's sensitivity to evolving legal frameworks.

Comparison to Industry Standards

• The company's net revenue growth of approximately 3.1% for the quarter is a moderate increase compared to the broader hospitality and gaming sector, which has seen varied performance depending on regional economic conditions and regulatory environments.
• The increase in diluted EPS to $1.16 from $1.02 demonstrates improved profitability per share, a key metric watched by investors across the gaming and entertainment industries.
• The company's Adjusted EBITDA margin of approximately 38.8% ($257M / $663M) is a strong indicator of operational efficiency within its segments, though direct comparison to industry peers requires detailed segment-level data which is not always publicly disclosed in a standardized format.

Legal Proceedings

• The company is involved in ordinary routine litigation matters incidental to its business. Specific details are referenced in Note 14, Contingencies.

Stakeholder Impact

• Shareholders: Increased net income and EPS may positively impact shareholder value. The stock repurchase program provides a mechanism for returning capital to shareholders.
• Employees: Stock-based compensation expense is noted, impacting employee incentives and company expenses.
• Creditors: The company's debt levels and its exploration of funding options for maturities will be of interest to creditors.
• Suppliers: No specific impact mentioned, but general business operations imply ongoing relationships.

Next Steps

• Continue to monitor and manage the impact of the cessation of HRM operations in Louisiana.
• Explore options to fund upcoming senior note maturities through cash on hand, operations, credit facility, and debt markets.
• Proceed with the acquisition of the intellectual property of the Preakness Stakes and Black-Eyed Susan Stakes.
• Continue development projects including Finish Line Suites, The Mansion, and Victory Run at Churchill Downs Racetrack, and redevelopment of Casino Salem into Rockingham Grand Casino.

Key Dates

Recommendation

The filing shows expected growth in revenue and net income, driven by core segments, which is positive. However, the decrease in the Gaming segment due to regulatory issues, coupled with the need to explore funding for upcoming debt maturities, introduces some uncertainty. The acquisition of Preakness IP is a strategic positive but requires further integration and performance assessment. Therefore, a 'hold' recommendation is appropriate pending clearer visibility on debt refinancing and the impact of the Preakness acquisition.

Keywords

Churchill Downs, 10-Q, Quarterly Report, Financial Results, Gaming, Horse Racing, Wagering, Adjusted EBITDA, Net Revenue, Net Income, Kentucky Derby, Preakness Stakes