Churchill Downs (CHDN) Q1 2026 earnings review
Historical Racing Powers Another Record, But Legacy Gaming Slips
Churchill Downs delivered a solid Q1 2026, pushing net revenue up 3% YoY to a record $663 million and Adjusted EBITDA up 5% to $257 million. The Live and Historical Racing (LHR) segment continues to be the primary engine, offsetting a slight deceleration in the traditional Gaming segment, which continues to lap the cessation of its Louisiana operations. Management improved net bank leverage to 3.8x, fortifying the balance sheet just in time to execute a major strategic coup: the $85 million acquisition of the Preakness Stakes, consolidating two legs of the Triple Crown under the CDI umbrella.
🐂 Bull Case
The LHR segment delivered robust double-digit growth (EBITDA +11%), proving that HRM venue expansions across Kentucky and Virginia are delivering highly accretive returns despite broader macro uncertainties.
Acquiring the Preakness Stakes for $85 million adds immense strategic value to the portfolio, allowing CDI to cross-monetize sponsorships, broadcast rights, and premium ticketing alongside the Kentucky Derby.
🐻 Bear Case
Wholly-owned gaming properties are showing signs of fatigue, with revenue declining $5 million YoY. The loss of Louisiana HRM operations and softness in legacy properties like Florida and Mississippi are capping top-line acceleration.
Overall revenue growth slowed to 3.1% YoY in Q1, down from the 6-8% band seen throughout 2025. Meaningful future acceleration relies heavily on flawless execution of massive capital projects.
⚖️ Verdict: ⚪
Bullish, but reliant on LHR execution. The core Historical Racing expansion thesis remains perfectly intact, and the Preakness acquisition is a masterstroke. However, the legacy Gaming segment requires monitoring as growth rates normalize.
Key Themes
Historical Racing Machines (HRMs) Engine Running Hot
The Live and Historical Racing segment remains CDI's undisputed growth engine. Q1 revenue jumped $24 million (9%), and Adjusted EBITDA grew $11 million (11%). Kentucky venues were the standout, adding $17 million in top-line growth, with broad-based momentum across Western, Northern, and Southwestern Kentucky facilities. Virginia HRMs chipped in a net $5 million increase, validating the company's aggressive multi-state HRM expansion strategy.
Preakness Stakes Acquisition
CDI announced a definitive agreement to acquire the Preakness Stakes intellectual property and associated rights for $85 million. This represents a massive strategic pivot, bringing two of horse racing's three Triple Crown jewels under the same corporate umbrella. It opens significant runway for bundled media rights negotiations, unified sponsorships, and synergistic VIP ticketing strategies.
Retail Sports Betting Boosting Wagering Services
Despite operating in a highly competitive digital wagering landscape, CDI's Wagering Services and Solutions segment quietly delivered a 10% YoY increase in Adjusted EBITDA (+$4 million). This was explicitly driven by lower legal expenses and a notable uptick in retail sports betting, proving the value of integrating sportsbooks into physical racing and gaming properties.
Legacy Gaming Segment Decelerating
While overall earnings were strong, the Gaming segment narrative contradicts the broader growth story. Q1 Gaming revenue fell $5 million (2%) and Adjusted EBITDA declined $1 million. Management cited the cessation of Louisiana HRM operations (which occurred in May 2025) as a primary $9 million headwind, compounded by a $2 million decline at legacy Florida and Mississippi properties. Growth at New York and Indiana properties couldn't fully plug the gap.
Heavy Capital Expenditure Pipeline
CDI continues to operate in a capital-intensive cycle. Planned 2026 project spend targets $180-$220 million, anchored by a $70-$80 million allocation for the Rockingham Grand Casino in New Hampshire (mid-2027 opening) and $20-$25 million for the Churchill Downs Finish Line Suites. These ambitious buildouts carry inherent construction, budget, and timeline risks.
Macroeconomic Sensitivity and Consumer Softness
Although not overtly quantified in this release, weakness in regional gaming pockets like Florida and Mississippi suggests that consumer discretionary spending pressures persist. Management has cited 'consumer hesitancy' in prior quarters, particularly among lower-tier players. The company’s continued reliance on premiumization (e.g., the Preakness purchase, Mansion suites) is a bet that the high-end consumer remains insulated from broader macro inflation.
Other KPIs
CDI successfully deleveraged its balance sheet to 3.8x, down from 4.1x at the end of 2025 and 4.2x in Q2 2025. This disciplined cash flow management provides crucial flexibility as the company integrates the $85 million Preakness acquisition and funds the $180-$200 million Rockingham Grand Casino buildout.
The company returned $31 million via dividends in Q1. The $0.438 per share dividend paid in January represents the 15th consecutive year of an increased per-share dividend, underscoring stable cash generation despite the heavy capital deployment cycle.
Guidance
Stable. This includes a massive $70-$80 million deployment toward the Rockingham Grand Casino HRM venue in New Hampshire, $20-$25 million for Churchill Downs Racetrack Finish Line Suites, and $25-$30 million for the Victory Run project. These investments point to continued future acceleration of HRM and premium ticketing revenue.
Key Questions
Preakness Stakes Strategic Integration
With the $85 million Preakness IP acquisition, what is the specific timeline and strategy for bundling broadcast and sponsorship rights with the Kentucky Derby to maximize leverage against media partners?
Reversing Gaming Declines
As the company laps the cessation of Louisiana HRM operations in May 2026, what are the primary organic levers to return the wholly-owned legacy Gaming portfolio to positive EBITDA growth, particularly in softer markets like Mississippi and Florida?
Rockingham Execution
With $70-$80 million earmarked for Rockingham Grand Casino this year ahead of a mid-2027 opening, are you seeing any persistent construction cost inflation or timeline pressures that plagued large-scale projects in 2025?