Churchill Downs Incorporated (CHDN) delivered an exceptional Q2 2025, shattering records across its diverse portfolio. The company reported an all-time high net revenue of $934.4 million, up 5% year-over-year, alongside a record adjusted EBITDA of $450.9 million. Diluted EPS came in at $2.99, slightly above some market estimates. Generating a significant $455 million in free cash flow in the first half, CHDN authorized a new $500 million share repurchase program after buying back $250 million in Q2, signaling strong confidence in its future growth and commitment to shareholder value. This robust financial performance highlights the company's ability to drive sales and profitability even against tough comparisons, continuing a five-year streak of Q2 records.
The iconic Kentucky Derby remains a core growth driver, with management outlining five key catalysts for "step function growth" starting in 2026. This includes record-breaking attendance, surging demand for premium experiences like the Starting Gate Pavilion, and a landmark 7-year NBC broadcast deal projected to add $10 million in adjusted EBITDA in its first year. The strategic move to broadcast the Kentucky Oaks in prime time on NBC from 2026 aims to significantly boost viewership and wagering, which already set all-time highs for the Derby race (+11%). Beyond racing, the Historical Racing Machine (HRM) segment is now nearly two-thirds of adjusted EBITDA, driven by expansion in Kentucky and Virginia, including new facilities like the Rose Gaming Parlor and Marshall Yard. The mid-July acquisition of a 90% stake in Casino Salem for $180 million marks a strategic entry into the lucrative New England market, diversifying CHDN's gaming map and highlighting ambitions beyond its traditional strongholds. CEO Bill Carstanjen and CFO Marcia Dall expressed strong optimism for these strategic initiatives.
Financially, Churchill Downs maintains a disciplined capital plan, prioritizing Derby investments and high-return HRM projects while managing leverage. The company expects bank covenant net leverage to drop below 4.0x in 2026 as new investments mature. A significant tailwind comes from a federal tax bill, projected to reduce cash taxes by $50-60 million annually in 2025 and 2026, boosting free cash flow. Market reaction was positive, with analysts largely maintaining "Strong Buy" ratings. The long-term growth story is compelling, fueled by continued Derby enhancements, aggressive gaming expansion, technological innovation with Exacto, and favorable tax policies. This multi-year roadmap, leveraging its heritage while driving new growth, positions CHDN for sustained success, offering potential upside for investors.
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