8-K: Churchill Downs Reports Record Q3 Revenue & EBITDA

Churchill Downs Incorporated achieved record third-quarter net revenue and Adjusted EBITDA, despite a one-time non-cash impairment impacting net income.

Summary

• Reported record third quarter net revenue of $683.0 million, an increase of 9% or $54.5 million compared to the prior year quarter.
• Net income attributable to CDI was $38.1 million, a decrease of 42% or $27.3 million, primarily driven by a one-time, non-cash impairment charge.
• Adjusted net income attributable to CDI increased by 7% or $5.0 million to $77.1 million.
• Achieved record third quarter Adjusted EBITDA of $262.3 million, up 11% or $27.0 million from the prior year quarter.
• Completed the expansion of Rosie's Richmond in Virginia with 450 incremental historical racing machines on August 6, 2025.
• Acquired 90% of Casino Salem for $180 million on August 27, 2025, and commenced operation of a temporary mini casino in New Hampshire.
• Opened Roseshire Gaming Parlor in Henrico County, Virginia, with 175 historical racing machines on September 29, 2025.
• The Board of Directors approved a $0.438 per share dividend on October 21, 2025, marking the fifteenth consecutive year of increased dividend per share.
• Repurchased 515,527 shares of common stock at a total cost of $53.5 million during the third quarter of 2025.
• Ended the third quarter of 2025 with net bank leverage of 4.1x.
• New federal tax legislation (H.R. 1) enacted on July 4, 2025, is expected to significantly reduce current year cash tax expense and increase cash flow from operating activities, primarily due to the reinstatement of 100% bonus depreciation rules and a 30% of EBITDA-based interest expense deduction limitation.

Sentiment

Score: 8

Explanation: Despite a non-cash impairment impacting GAAP net income, the company delivered record net revenue and Adjusted EBITDA, demonstrating strong operational growth. Strategic expansions and acquisitions, coupled with a consistent dividend increase and share repurchases, indicate robust performance and a positive outlook. Favorable tax law changes further enhance cash flow prospects.

Positives

• Achieved record third quarter net revenue of $683.0 million, a 9% increase year-over-year.
• Reported record third quarter Adjusted EBITDA of $262.3 million, an 11% increase year-over-year.
• Adjusted net income attributable to CDI grew by 7% to $77.1 million.
• Successfully expanded Rosie's Richmond with 450 additional historical racing machines, contributing to a $30.1 million increase in Virginia HRM revenue.
• Completed the strategic acquisition of 90% of Casino Salem for $180 million, expanding the company's presence in New Hampshire.
• Opened Roseshire Gaming Parlor with 175 historical racing machines, further growing the Virginia market.
• Approved a $0.438 per share dividend, representing the fifteenth consecutive year of dividend increases, demonstrating consistent shareholder returns.
• Repurchased $53.5 million of common stock, returning capital to shareholders.
• Favorable federal tax law changes (H.R. 1) are expected to significantly reduce current year cash tax expense and increase cash flow from operating activities.
• Live and Historical Racing segment revenue increased $53.3 million, driven by strong performance in Virginia and Kentucky HRM venues and the new Casino Salem facility.
• Wagering Services and Solutions revenue increased $8.5 million, primarily from TwinSpires Horse Racing and Exacta.

Negatives

• Net income attributable to CDI decreased by 42% to $38.1 million, primarily due to a $31.0 million after-tax non-cash impairment charge related to Chasers' gaming rights.
• Diluted EPS attributable to CDI decreased to $0.54 from $0.86 in the prior year quarter.
• Gaming segment revenue decreased $4.8 million, mainly due to a $6.1 million decrease from the cessation of HRM operations in Louisiana.
• Net bank leverage of 4.1x indicates a moderately leveraged position.

Risks

• The occurrence of extraordinary events, such as terrorist attacks, public health threats, civil unrest, and inclement weather, including as a result of climate change.
• The effect of economic conditions on consumers' confidence and discretionary spending or access to credit, including the impact of inflation.
• Changes in, or new interpretations of, applicable tax laws or rulings that could result in additional tax liabilities.
• The impact of any pandemics, epidemics, or outbreaks of infectious diseases, and related economic matters on results of operations, financial conditions and prospects.
• Lack of confidence in the integrity of core businesses or any deterioration in reputation.
• Negative shifts in public opinion regarding gambling that could result in increased regulation of, or new restrictions on, the gaming industry.
• Loss of key or highly skilled personnel, as well as general disruptions in the general labor market.
• The impact of significant competition, and the expectation that competition levels will increase.
• Changes in consumer preferences, attendance, wagering, and sponsorships.
• Risks associated with equity investments, strategic alliances and other third-party agreements.
• Inability to respond to rapid technological changes in a timely manner.
• Concentration and evolution of slot machine and historical racing machine ('HRM') manufacturing and other technology conditions that could impose additional costs.
• Failure to enter into or maintain agreements with industry constituents, including horsemen and other racetracks.
• Inability to successfully focus on market access and retail operations for the sports betting business and effectively compete.
• Online security risk, including cyber-security breaches, or loss or misuse of stored information as a result of a breach including customers' personal information could lead to government enforcement actions or other litigation.
• Costs of compliance with increasingly complex laws and regulations regarding data privacy and protection of personal information.
• Reliance on technology services and catastrophic events and system failures disrupting operations.
• Inability to identify, complete, or fully realize the benefits of proposed acquisitions, divestitures, development of new venues or the expansion of existing facilities on time, on budget, or as planned.
• Difficulty in integrating recent or future acquisitions into operations.
• Cost overruns and other uncertainties associated with the development of new venues and the expansion of existing facilities.
• General risks related to real estate ownership and significant expenditures, including risks related to environmental liabilities.
• Personal injury litigation related to injuries occurring at racetracks.
• Compliance with the Foreign Corrupt Practices Act or other similar laws and regulations, or applicable anti-money laundering regulations.
• Payment-related risks, such as risk associated with fraudulent credit card or debit card use.
• Work stoppages and labor problems.
• Risks related to pending or future legal proceedings and other actions.
• Highly regulated operations and changes in the regulatory environment could adversely affect the business.
• Restrictions in debt facilities limiting flexibility to operate the business.
• Failure to comply with the financial ratios and other covenants in debt facilities and other indebtedness.
• Increases to interest rates (due to inflation or otherwise).
• Disruption in the credit markets or changes to credit ratings may adversely affect the business.
• Increase in insurance costs, or inability to obtain similar insurance coverage in the future, and any inability to recover under insurance policies for damages sustained at properties in the event of inclement weather and casualty events.

Future Outlook

NBC Sports will showcase the Kentucky Oaks on primetime for the first time ever in 2026, indicating enhanced visibility for a key racing event. The company has several capital projects planned, including the Finish Line Suites / The Mansion at Churchill Downs Racetrack targeting April 2026, Marshall Yards Racing and Gaming in Southwestern Kentucky targeting Q1 2026, and the full Casino Salem development targeting 2027.

Management Comments

• Reported record third quarter net revenue and Adjusted EBITDA, reflecting strong operational performance.
• Highlighted strategic growth initiatives including the expansion of Rosie's Richmond, the acquisition of Casino Salem, and the opening of Roseshire Gaming Parlor.
• Emphasized commitment to shareholder returns through the fifteenth consecutive year of increased dividend per share and ongoing share repurchases.
• Acknowledged the significant favorable impact of new federal tax provisions (H.R. 1) on current year cash tax expense and cash flow from operating activities.

Industry Context

The company's strategic expansions in historical racing machines (HRM) in Virginia and Kentucky, along with the acquisition of Casino Salem in New Hampshire, align with a broader industry trend of expanding gaming footprints and diversifying revenue streams beyond traditional pari-mutuel wagering. The increased visibility for Kentucky Oaks through NBC Sports primetime coverage in 2026 also reflects efforts to elevate horse racing's appeal and reach a wider audience, potentially boosting wagering services. The growth in HRM venues suggests a strong market for these hybrid gaming options.

Corporate Governance

Stakeholder Impact

• Shareholders are positively impacted by the fifteenth consecutive year of increased dividends ($0.438 per share) and ongoing share repurchases ($53.5 million in Q3 2025), indicating strong capital returns.
• Customers are benefiting from expanded gaming options (Rosie's Richmond, Roseshire Gaming Parlor, Casino Salem) and increased visibility for key events like the Kentucky Oaks.
• Creditors face a moderately leveraged company (4.1x net bank leverage), but favorable tax law changes are expected to improve cash flow, potentially strengthening creditworthiness.
• Employees face general risks related to the labor market, as noted in the forward-looking statements.
• Regulatory Authorities continue to oversee the company's highly regulated operations, with changes in the regulatory environment posing a risk.

Next Steps

• Conference call on October 23, 2025, to discuss Q3 2025 results.
• Dividend payment of $0.438 per share on January 6, 2026, to shareholders of record as of December 5, 2025.
• Completion of Finish Line Suites / The Mansion project at Churchill Downs Racetrack by April 2026.
• Completion of Marshall Yards Racing and Gaming (HRM Venue) in Southwestern Kentucky by First Quarter 2026.
• Full development of Casino Salem by 2027.
• Completion of Victory Run project at Churchill Downs Racetrack by April 2028.

Key Dates

Recommendation

The company demonstrated strong operational performance in Q3 2025 with record net revenue and Adjusted EBITDA, alongside a healthy increase in Adjusted Net Income. The reported decrease in GAAP net income was due to a one-time, non-cash impairment, which does not reflect a deterioration in core business fundamentals. Strategic expansions and acquisitions are driving future growth, and the consistent, increasing dividend payout for 15 consecutive years, coupled with share repurchases, underscores a strong commitment to shareholder value. Favorable tax law changes are also expected to boost cash flow. These factors collectively present a compelling investment case.

Keywords

Churchill Downs, CHDN, Gaming, Horse Racing, Historical Racing Machines, HRM, Casino, Kentucky Derby, TwinSpires, Financial Results, Q3 2025, Adjusted EBITDA, Dividend, Share Repurchase, Acquisition, Expansion, Virginia, New Hampshire, Salem, Richmond, Henrico, Louisville, Tax Law