10-K: Churchill Downs Reports Record Revenue Amid Net Income Dip

Churchill Downs Incorporated achieved record net revenue and Adjusted EBITDA in 2025, driven by strategic expansions, despite a 10.3% decrease in net income due to impairment charges.

Summary

• Record net revenue reached $2.9 billion in 2025, an increase of $191.6 million or 7.0% from 2024.
• Record Adjusted EBITDA was $1.2 billion, up $46.1 million or 4.0% from 2024.
• Net income attributable to Churchill Downs Incorporated decreased by $43.8 million or 10.3% to $383.0 million.
• The decrease in net income was primarily driven by a $85.1 million non-cash impairment charge related to Chasers' gaming rights in the third quarter of 2025.
• Live and Historical Racing segment Adjusted EBITDA increased by $62.4 million or 10.9% to $637.0 million.
• Wagering Services and Solutions segment Adjusted EBITDA increased by $11.7 million or 7.1% to $177.3 million.
• Gaming segment Adjusted EBITDA decreased by $23.9 million or 4.7% to $483.0 million.
• The company repurchased $425.3 million of shares under its share repurchase programs in 2025.
• An annual cash dividend of $0.438 per share was declared in October 2025, representing a 7% increase over the prior year and marking the fifteenth consecutive year of dividend increases.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a mixed report. While the company achieved record revenue and Adjusted EBITDA driven by strategic expansions and demonstrated strong dividend growth, the significant decline in net income due to impairment and underperformance relative to broader market indices temper the overall positive sentiment.

Positives

• Achieved record net revenue of $2.9 billion, a 7.0% increase year-over-year.
• Achieved record Adjusted EBITDA of $1.2 billion, a 4.0% increase year-over-year.
• Live and Historical Racing Adjusted EBITDA grew by 10.9%, driven by new venue openings and growth at existing HRM properties.
• Wagering Services and Solutions Adjusted EBITDA increased by 7.1%, supported by Exacta technology expansion and Derby Week wagering.
• Successfully completed the Starting Gate Pavilion and Courtyard for the 151st Kentucky Derby, enhancing guest experience.
• Announced NBC Sports will showcase the Kentucky Oaks in prime time for the first time ever in 2026, boosting event visibility.
• Declared a 7% increase in the annual cash dividend to $0.438 per share, marking the fifteenth consecutive year of dividend growth.
• Maintained strong financial health, complying with all debt covenants (interest coverage ratio 3.9:1.0 vs. >2.5:1.0; secured net leverage ratio 1.4:1.0 vs. <4.0:1.0).
• Federal tax law changes (H.R. 1) are expected to favorably impact current tax expense and increase cash flow from operating activities due to 100% bonus depreciation and a 30% of EBITDA-based interest expense deduction limitation.

Negatives

• Net income decreased by $43.8 million (10.3%) to $383.0 million, primarily due to increased impairment expense.
• Recognized an $85.1 million non-cash impairment charge for Chasers' gaming rights in the third quarter of 2025.
• Gaming segment Adjusted EBITDA decreased by $23.9 million (4.7%), impacted by the cessation of HRM operations in Louisiana and local issues in Mississippi.
• Cessation of HRM operations in Louisiana resulted in an $18.9 million decrease in Gaming revenue, following a Louisiana Supreme Court ruling.
• Mississippi gaming revenue decreased by $5.1 million due to temporary roadwork impacting Riverwalk and a local curfew on Harlow's.
• Equity investment in Rivers Des Plaines saw an $7.8 million decrease in Adjusted EBITDA due to increased competition.
• Total shareholders' equity decreased by $0.1 billion, driven by share repurchases and cash dividends, partially offset by net income from operations.

Risks

• Extraordinary events such as terrorist attacks, public health threats, civil unrest, and inclement weather (including climate change impacts) could adversely affect attendance and operations.
• Economic conditions, including inflation, elevated unemployment, and declines in real estate markets, may reduce consumer confidence and discretionary spending on entertainment and gaming.
• A lack of confidence in the integrity of core businesses or any deterioration in reputation due to fraud, cheating, or negative publicity could impact customer retention and business opportunities.
• Inability to attract and retain key and highly skilled personnel, as well as general disruptions in the labor market, could impact business development and operations.
• Significant and increasing competition from various forms of legalized and illegal gaming, including land-based casinos, online platforms (iGaming, sports betting), and other entertainment options.
• Changes in consumer preferences, attendance, wagering, and sponsorships could adversely affect Churchill Downs Racetrack and the Kentucky Derby.
• Risks associated with equity investments, strategic alliances, and other third-party agreements, including potential disagreements with co-investors or their failure to meet obligations.
• Inability to respond to rapid technological changes in a timely manner, potentially leading to customer dissatisfaction or competitive disadvantage.
• Concentration and evolution of the slot machine and historical racing machine (HRM) manufacturing industry could impose additional costs or limit access to popular games.
• Failure to enter into or maintain agreements with industry constituents, such as horsemen and other racetracks, could disrupt racing and simulcasting operations.
• Cybersecurity risks, including data privacy breaches, IT system operational disruptions, and the evolving threat from artificial intelligence technologies, could lead to litigation, regulatory actions, or reputational harm.
• Costs of compliance with increasingly complex laws and regulations regarding data privacy and protection of personal information.
• Reliance on technology services, where catastrophic events, system failures, errors, defects, or disruptions could cause significant and continued operational interruptions.
• Inability to identify, complete, or fully realize the benefits of proposed acquisitions, divestitures, new venue developments, or expansions on time, on budget, or as planned.
• Difficulty in integrating recent or future acquisitions into operations or transitioning divested assets to third parties.
• Cost overruns and other uncertainties associated with development and expansion projects due to supply chain disruptions and inflationary pressures.
• General risks related to real estate ownership and significant expenditures, including environmental liabilities (e.g., CAFO regulations, hazardous substances).
• Personal injury litigation related to injuries occurring at racetracks, potentially leading to negative publicity and substantial liabilities.
• Violations of the Foreign Corrupt Practices Act, other similar laws, or applicable anti-money laundering regulations could result in severe sanctions.
• Payment-related risks, such as fraudulent use of credit or debit cards and chargebacks, could adversely affect business and profitability.
• Work stoppages and other labor problems, including unionization efforts, could negatively impact properties and limit operational flexibility.
• Risks related to pending or future legal proceedings and other actions, including class action allegations, which can be expensive and time-consuming.
• Highly regulated operations and changes in the regulatory environment (e.g., state legalization of gaming, ADW limitations, iGaming expansion) could adversely affect the business.
• Restrictions in debt facilities limiting operational flexibility, including limitations on incurring additional debt, paying dividends, or making investments.
• Failure to comply with financial ratios and other covenants in debt facilities and other indebtedness could result in an event of default.
• Increases to interest rates, disruptions in credit markets, or changes to credit ratings may adversely affect the business by increasing financing costs and reducing profitability.
• Increased insurance costs, inability to obtain similar insurance coverage in the future, or inability to recover under insurance policies for damages sustained at properties due to inclement weather and casualty events.

Future Outlook

The company anticipates beginning construction of a new building on the first turn of Churchill Downs Racetrack following the 2026 Kentucky Derby, with completion expected by the 2028 Kentucky Derby. It also plans to open the Rockingham Grand Casino in mid-2027 with a significant capital investment. Project capital expenditures for 2026 are estimated to be between $180.0 million and $220.0 million. Colonial Downs aims to increase its live race days up to 50 per year, and NBC Sports will feature the Kentucky Oaks in prime time in 2026. The company is exploring various options, including cash on hand, credit facility capacity, and capital markets, to fund upcoming senior note maturities.

Management Comments

• "We delivered strong performance and made investments in the Kentucky Derby and new entertainment venues that we believe will provide long-term sustainable value creation for our shareholders."
• "We remain committed to delivering strong financial results and long-term sustainable growth. Our businesses generate strong cash flow, and we have a solid balance sheet that supports our organic growth as well as strategic acquisitions that we believe will create long-term value for our shareholders."
• "We anticipate that cash flows from operations and availability of borrowings under our credit facility over the next twelve months will be adequate to fund our business operations and capital expenditures."

Industry Context

StockSavvy.ai notes that Churchill Downs Incorporated's strategic focus on expanding historical racing machine (HRM) venues and regional casino properties aligns with a broader industry trend of diversifying revenue streams beyond traditional live racing. The company's investment in online wagering (TwinSpires) and sports betting also positions it within the rapidly evolving digital gaming landscape, where competition is intensifying from both established players and new entrants. The legal and regulatory challenges faced in Louisiana regarding HRMs highlight the ongoing jurisdictional complexities and risks inherent in the gaming industry's expansion, underscoring the importance of adaptable business models and regulatory compliance.

Comparison to Industry Standards

• The 7% increase in annual cash dividend for the fifteenth consecutive year demonstrates a strong commitment to shareholder returns, potentially outperforming many industry peers who may have more volatile dividend policies.
• The company's interest coverage ratio of 3.9 to 1.0 and consolidated total secured net leverage ratio of 1.4 to 1.0 indicate a healthy financial position relative to debt covenants, suggesting better-than-average financial stability compared to some highly leveraged companies in the capital-intensive gaming sector.
• The stock performance relative to the Russell 1000 Index, S&P Midcap 400 Index, and S&P 500 Index shows underperformance in 2025 (CDI: $118.66 vs. Russell 1000: $189.10, S&P Midcap 400: $154.68, S&P 500: $196.16 from a $100 base in 2020), which could be a point of concern for investors seeking market-beating returns.

Corporate Governance

Legal Proceedings

• A lawsuit in Louisiana challenged the constitutionality of the 2021 Historical Horse Racing Act, alleging it required a voter referendum for historical racing in a parish.
• On March 21, 2025, the Louisiana Supreme Court affirmed the District Court's ruling that the 2021 HHR Act is unconstitutional and requires a voter referendum.
• The Louisiana Supreme Court denied the Company's Application for Rehearing on May 8, 2025, making the opinion final and enforceable.
• As a result of the Louisiana Supreme Court's decision, the company discontinued its HRM operations in Louisiana and moved the HRMs to other venues, primarily in Virginia.
• The company is involved in ordinary routine litigation matters incidental to its business, with reserves established when a loss is probable and estimable.

Related Party Transactions

• Directors and employees may own or have interests in horses racing at the company's racetracks, with all such races conducted under state regulatory agency rules to ensure no extra or special benefits.
• The company may enter into transactions with certain officers and directors for the sale of personal seat licenses, suite accommodations, and tickets for live racing events, on terms believed to be no less favorable than with third parties.
• On December 18, 2023, the company repurchased 1,000,000 shares of its common stock from an affiliate of The Duchossois Group (TDG) for $123.75 per share, totaling $123.8 million, at a 4.03% discount to the closing price on December 15, 2023. This transaction closed on January 2, 2024.

Stakeholder Impact

• Shareholders are impacted by the 10.3% decrease in net income, but also by the 7% increase in annual dividends and ongoing share repurchase programs. The stock's underperformance relative to market indices may concern some investors.
• Customers benefit from enhanced experiences at Churchill Downs Racetrack due to recent renovations and the opening of new gaming and racing venues, as well as expanded online wagering options.
• Employees are supported by the company's commitment to talent acquisition, development, and retention, competitive compensation, comprehensive health and retirement benefits, and established safety programs.
• Communities where the company operates benefit from significant capital investments in new venues and expansions, which create jobs and economic activity. The company also engages in ESG efforts, including responsible gaming and community support.
• Creditors are positively impacted by the company's strong financial position, as evidenced by its compliance with all debt covenants (interest coverage ratio and secured net leverage ratio).

Next Steps

• Renovate existing Finish Line Suites and The Mansion for the 152nd Kentucky Derby in May 2026, with an investment of up to $30.0 million.
• Begin construction of a new building on the first turn of Churchill Downs Racetrack following the 2026 Kentucky Derby, with completion by the 2028 Kentucky Derby, involving an investment of $280.0-$300.0 million.
• Redevelop Casino Salem as Rockingham Grand Casino, planned to open in mid-2027, with an expected capital investment of $180.0-$200.0 million.
• Colonial Downs plans to increase live race days up to 50 per year.
• NBC Sports will showcase the Kentucky Oaks in prime time for the first time ever in 2026.
• Explore options to fund upcoming senior note maturities through a combination of cash on hand, cash generated from operations, available capacity under its revolving credit facility, and capital markets.

Key Dates

Recommendation

While Churchill Downs Incorporated demonstrated strong top-line growth with record net revenue and Adjusted EBITDA, driven by strategic expansions and a commendable 15th consecutive dividend increase, the significant decline in net income due to a large impairment charge and the adverse legal outcome in Louisiana present headwinds. The stock's underperformance against major indices in 2025 suggests investor caution. The company's long-term growth strategy and solid balance sheet are positives, but the near-term challenges and valuation concerns warrant a "hold" recommendation as investors await clearer signs of sustained net income growth and improved market sentiment.

Keywords

Churchill Downs, CHDN, Gaming, Horse Racing, Pari-mutuel Wagering, Historical Racing Machines, HRM, Casino, Sports Betting, Kentucky Derby, TwinSpires, Financial Results, Entertainment, Acquisitions, Capital Investments, Dividends, Share Repurchase