Churchill Downs (CHDN) Q3 2026 earnings review
Churchill Downs refinances its debt, but Virginia racing profit falls
Churchill Downs, the owner of the Kentucky Derby, grew profit per share while its historical racing machines lost momentum. Net revenue rose 2% from a year ago to $696 million, and profit per share excluding one-offs climbed 13% on lower interest bills and fewer shares. However, profit in its largest racing segment fell as rival casinos and a new $5 million racing tax hit Central Virginia.
| Net revenue | $696M +1.9% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $1.23 +12.8% from a year ago |
| Adjusted EBITDA, excluding 2025 insurance payout | $264M +2.3% from a year ago |
| 2026 capital project spend outlook | Cut $30M middle of the range: $170M |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because balance-sheet progress offset a weaker operating read in historical racing. The company removed its biggest financial risk by paying off its 2027 notes and buying back $124 million of stock across the third quarter and October by our math. On the other hand, Kentucky historical racing revenue growth slowed for a fourth straight quarter to 7% by our math, and the release gave no update on the planned sale of nine regional casinos.
The question now is whether management can still sell its regional casinos at attractive prices while Kentucky and Virginia growth cools. Either buyers pay enough to cut debt below 3 times cash profit, or Churchill Downs keeps the casinos and relies on existing cash flow to fund its new $750 million buyback plan. Signed sale agreements over the next two quarters will settle it.
🐂 Bull Case
Refinancing Eliminates the 2027 Debt Wall
Churchill Downs, the owner of the Kentucky Derby and regional gaming venues, carried $659 million of debt due within a year on its September balance sheet, mostly notes maturing in April 2027. That near-term maturity was a major financial risk because borrowing rates have risen above the old loan coupons.
The company cleared that hurdle through two transactions in September and October. It raised a new $500 million term loan due in 2033 and extended its credit lines to September 2031. Then, "On October 19, 2026, the Company redeemed the 2027 Senior Notes with borrowings from the 2031 Revolver," the racing group said. Net interest expense already fell by $6 million from a year ago to $69 million.
What to watch: quarterly net interest expense in the fourth-quarter report. Drawing on the credit line clears the maturity risk, and the next report will show the exact interest bill of the new loan structure.
Share Buybacks Restarted With a New $750M Plan
After buying back no stock during the first half of 2026 to pay down debt, Churchill Downs resumed repurchases in the third quarter. The Louisville company spent $48 million to buy 570,169 shares by September 30, and its board raised the annual dividend by 7% for a sixteenth straight year.
Buying sped up after the quarter ended. On October 27, the board approved a $750 million buyback plan. "The new authorization includes and is not in addition to the $306 million previously remaining under the prior repurchase program authorization as of the close of trading on October 27, 2026," the company said. Because $382 million remained on September 30, the racing operator spent another $76 million on its own shares in October alone by our math.
What to watch: year-end net bank leverage against the 3.8 times level from September. Spending $124 million on buybacks since June tests whether the business can fund heavy repurchases without pushing leverage back toward 4 times.
Regional Casinos Rebounded After Lapping Louisiana Exit
The Gaming segment runs regional casinos in ten states and holds stakes in two large properties in Illinois and Ohio. For the past year, segment results looked weak because the company shut down its historical racing machines in Louisiana in May 2025.
With that closure now more than a year in the past, the segment grew again. Gaming revenue rose 2.6% from a year ago to $273 million, driven by wholly owned casinos in New York, Pennsylvania and Maine. Segment Adjusted EBITDA — profit before interest, taxes, depreciation and one-offs — rose $5 million to $128 million, helped by $3 million of growth from "strong performance at Rivers Des Plaines in Illinois and Miami Valley Gaming in Ohio".
What to watch: Pennsylvania casino revenue in the fourth quarter following the state's October 15 ban on competing skill games. A pickup above this quarter's 3.4% growth would strengthen the segment while management shops nine casinos to buyers.
Positives this quarter didn't test
Two long-term drivers around the flagship Kentucky Derby had no financial reading in this seasonally quiet racing quarter, though the company announced a new partnership with the New York Racing Association.
- Kentucky Derby ticketing and broadcast expansion: Churchill Downs formed the Thoroughbred Championship Series with New York's racing body starting in 2027, and second-quarter 2027 results will test the revenue lift.
- International Derby demand: the release gave no figures on the overseas race series in Europe, Japan and the Middle East, which next reads out during May's Derby Week.
🐻 Bear Case
Virginia Competition and Live Race Taxes Cut Profit
Churchill Downs operates historical racing machines (HRMs) — slot-style games whose payouts are based on past horse races — across Virginia and Kentucky. While the company highlighted record overall Adjusted EBITDA, profit in its main Live and Historical Racing segment fell by $5 million from a year ago to $111 million.
- Central Virginia Adjusted EBITDA: down $10 million from a year ago, faster than the $5 million drop in the second quarter
- New Virginia racing tax: cost $5 million in the quarter after taking effect on July 1, 2026
- Pari-mutuel taxes and purses: rose 1.4 percentage points of segment revenue by our math, to 27.6%
Rival casinos in Central Virginia took $6 million of revenue away, and "a $5 million new tax expense related to live race days under the new racing and HRM tax structure that became effective July 1, 2026" hit margins. Growth in Northern Virginia and Kentucky was not enough to cover those losses plus the absence of a $4 million insurance payout from last year.
What to watch: Central Virginia revenue in the first quarter of 2027, when the competing Petersburg casino passes its one-year opening mark. Continued revenue drops after that anniversary would show the market share loss is still widening.
Kentucky Historical Racing Growth Slowed Again
Kentucky's historical racing venues have been the company's main growth engine over the past two years as new properties opened in Owensboro and Calvert City. Across its four Kentucky regions, customer revenue rose 6.9% from a year ago to $154 million by our math.
That marks the fourth straight quarter of slowing growth, down from 17.0% a year ago and 8.4% in the second quarter. Louisville venue revenue stayed flat at $54 million, and Western Kentucky added $1 million after more than doubling a year earlier. Southwestern Kentucky did almost all the work, rising $7 million on the February 2026 opening of Marshall Yards.
What to watch: Southwestern Kentucky revenue in the first quarter of 2027, when Marshall Yards passes its first anniversary. Without a new Kentucky venue under construction, overall state growth will rely on existing halls.
Risks this quarter didn't answer
Several standing questions about the portfolio restructuring and industry competition received no update in the third-quarter release.
- Nine-casino sale process: the release made no mention of the plan to sell nine regional gaming properties, so signed deals or conference call updates must show whether buyers are bidding.
- Deleveraging vs buybacks: net bank leverage ticked up from 3.7 times to 3.8 times as buybacks resumed, testing whether debt reduction has paused until a casino sale closes.
- Online casino and prediction-market threats: management's commentary on event-contract wagering and state online casino bills awaits the conference call.
- Casual casino customer spending: the release did not separate lower-tier unrated play from high-tier loyalty play at regional casinos.
👓 Other Themes
United Tote Deal Closes and Virginia Expands
On August 3, Churchill Downs bought the remaining 49% of United Tote, a provider of race-betting calculation systems, from the New York Racing Association and extended its service contract through 2035. The company also won approval to relocate its Rosie's Collinsville venue in Virginia and expand it to 150 historical racing machines.
💲 Other KPIs
Total money bet by customers on the TwinSpires online horse-racing app rose 2.8% from a year ago, improving after a 2.3% drop in the first quarter. Higher horse-racing profit lifted the Wagering Services and Solutions segment's Adjusted EBITDA by $2 million to $48 million, even as sports-betting revenue slipped by $1 million.
Total debt fell 8.0% from $5,130 million at the end of 2025, and slipped $51 million from June's $4,773 million balance by our math. Over the first nine months of 2026, the racing operator repaid $1,673 million of borrowings while taking on $1,266 million of new debt, cutting quarterly net interest costs by $6 million.
Average diluted shares fell 1.4% from 71 million a year ago. For the first nine months of 2026, the share count dropped 4.1% from 73 million to 70 million, which helped lift third-quarter profit per share excluding one-offs by 12.8% to $1.23 even as Adjusted EBITDA grew 0.8%.
🔮 Guidance
Cut. Churchill Downs lowered its full-year project construction budget by $30 million at the middle of the range, to $170 million. Having spent $119 million in the first nine months — including $40 million in the third quarter by our math — the new plan leaves about $51 million for the fourth quarter.
Cut. The gaming group trimmed its 2026 construction budget for the Salem, New Hampshire historical racing venue by $27.5 million at the middle of the range after holding it steady for three quarters. The target opening date remains mid-2027, while the temporary Salem casino stays closed during building work.
Raised. Management lifted 2026 spending on the Victory Run seating and hospitality build at Churchill Downs Racetrack by $15 million at the middle of the range. The project is still scheduled to finish in April 2028 ahead of that year's Kentucky Derby.
Cut. Planned spending on smaller unallocated projects dropped by $22.5 million at the middle of the range. It is the second cut in two quarters, down from $50–55 million in the first quarter.
Raised. Final 2026 cash payments for already finished venues moved up by $5 million at the middle of the range.
❓ Key Questions
Where does the nine-casino sale process stand?
Last quarter management hired advisers to sell nine regional gaming properties, but the third-quarter release did not mention the process. Investors need to know whether buyers are bidding at acceptable prices or if the company has shelved the sales.
Why did 2026 Rockingham construction spending drop by $27.5 million?
The company cut its 2026 spending plan for Rockingham Grand Casino from $70–80 million to $45–50 million while keeping the mid-2027 opening date. Did total project costs fall below the $180–200 million budget, or did payments simply shift into 2027?
How much will the 2031 revolver redemption change interest expense?
Churchill Downs paid off its April 2027 notes on October 19 using its 2031 credit line after issuing a $500 million term loan at SOFR plus 1.75%. Management has not yet stated the blended interest rate on the new debt mix.
Will Virginia live race taxes hit fourth-quarter profit too?
A new Virginia tax rule that took effect on July 1 cost Central Virginia venues $5 million during the third quarter's live racing season. How many live race days fall into the fourth quarter and full year under this tax?