CHDN

2026 Kentucky Derby Week Performance

• Delivered record operational results: total Derby Week attendance reached 386,000 guests after adding an extra Sunday race day. Newly renovated mansion and upgraded finish line suites received extremely positive guest feedback.
• Record broadcast performance: under the new NBC agreement, broadcast revenue increased $10 million, peak Kentucky Derby viewership reached 24 million (12% above 2025's record). The Kentucky Oaks aired in primetime for the first time, drawing an average audience of 2.4 million viewers, creating a strong lead-in for the Derby and expanding event awareness. Social media impressions exceeded 500 million, up 84% year-over-year.
• All-time records set for total Derby Week wagering: the Kentucky Derby remains the highest wagering horse racing event in the US by a large margin, while the Kentucky Oaks ranks fourth. Sponsorship and licensing revenue also grew in 2026, demonstrating expanding cultural relevance and value.

Major Capital Development Projects

• Churchill Downs Racetrack projects: The $285 million Victory Run hospitality project on the first turn remains on time and on budget for completion before the 2028 Kentucky Derby, with temporary premium seating and amenities available for the 2027 Derby. The Homestretch Club interior expansion is scheduled for completion ahead of the 2027 Derby. Infield redevelopment near the historic Winners Pagoda will add 1,400 temporary seats and test a new 500-guest cabana offering for 2027, to enable experience segmentation and broader price point options, alongside underground infrastructure improvements to support future permanent entertainment venues.
• New Hampshire project: Rockingham Grand Casino in Salem remains on track for a mid-2027 opening, expected to draw guests from across New England.

Strategic Update & Portfolio Realignment

• Management initiated a strategic review of the company's 9 wholly owned regional gaming properties, and is exploring selling these assets individually or in small groups to maximize shareholder value (Calder Casino (FL), Terre Haute Casino (IN), Hard Rock Casino (IA), Oxford Casino (ME), Ocean Downs (MD), Harlow's and Riverwalk Casinos (MS), Del Lago (NY), Presque Isle (PA)). The company will retain all Fairgrounds Louisiana properties due to their strategic importance to the US horse racing industry as host of the Louisiana Derby (a key Kentucky Derby prep race) and one of the few winter turf courses in the eastern US.
• Proceeds from any asset sales will be used to significantly reduce leverage, selectively reinvest in high-return projects focused on the Kentucky Derby and core HRM operations, and fund share repurchases.
• The company's new focused strategy is anchored on three core high-value cornerstones: the Kentucky Derby, HRM venues, and the Twin Spires wagering business, all aligned to support the horse racing ecosystem and drive profitable long-term growth.

Core Growth Strategies for Anchor Assets

• Kentucky Derby: The company aims to expand the event's national and international reach, growing attendance, wagering, viewership, sponsorship, and EBITDA through continued strategic capital investment to elevate guest experiences, expand premium inventory, and deepen sponsorship opportunities.
• HRM Business: The company will continue developing and optimizing high-quality HRM venues in Kentucky, Virginia, and New Hampshire, and pursue expansion into additional US states that authorize HRM. It will leverage ExactDebt technology to improve returns, expand the platform to other domestic and international operators, and develop electronic table games (ETGs) to broaden product offerings. In Virginia, the company holds the exclusive right to 10 HRM licenses and 5,000 total machines, and is planning referendums for new locations in Pulaski and Amherst County (western Virginia) to expand into underserved growing markets. In Kentucky, 8 HRM venues operate ~5,300 machines and have delivered sustained strong growth, increasing Churchill Downs purses from under $40 million to over $100 million since 2018. The Chasers Salem HRM license in New Hampshire will be repurposed for attractive alternative uses after Rockingham Grand Casino opens.
• Twin Spires: The business continues to expand horse racing wagering participation through innovation and broader direct-to-consumer and business-to-business distribution, setting records for wagering, new registrations, first-time deposits, and active players during 2026 Derby Week.

• Full-year 2026 project capital spending is maintained at a range of $180 million to $220 million, with maintenance capital spending maintained at a range of $90 million to $110 million.
• The company expects 2026 full-year incremental adjusted EBITDA contribution from Derby Week to be $15 million to $18 million compared to 2025.
• Bank covenant net leverage is expected to remain in the 3.6x to 3.8x range through the end of 2026. Leverage is projected to decline in 2027 based on existing operating cash flow projections and the completion of regional gaming asset sales.
• The company intends to execute the regional property sale process over the coming months, with a targeted opening of Rockingham Grand Casino in mid-2027, and full completion of the Victory Run project ahead of the 2028 Kentucky Derby.

Churchill Downs delivered all-time record net revenue of $980 million and all-time record adjusted EBITDA of $477 million for Q2 2026, marking the sixth consecutive record second quarter for both metrics.

1. Live and Historical Racing Segment: Achieved all-time record results, with adjusted EBITDA increasing 7% year-over-year. Churchill Downs Racetrack adjusted EBITDA was up $16 million for the quarter, driven by the 152nd Kentucky Derby. Kentucky HRM properties delivered 10% year-over-year adjusted EBITDA growth, benefiting from the February 2026 opening of Marshall Yards, with resilient sustained demand. Virginia HRM adjusted EBITDA increased 1% year-over-year, with continued sequential growth at the Rose property; overall Virginia margins remained stable at 46% consistent with prior year, while central Virginia properties faced near-term competitive pressure from new market entry.
2. Wagering Services and Solutions Segment: Achieved all-time record results, with adjusted EBITDA increasing over 8% year-over-year, driven by growth in Twin Spires horse racing wagering, continued expansion of the Xacta platform, and lower legal expenses compared to Q2 2025.
3. Gaming Segment: Adjusted EBITDA increased 5% year-over-year. Performance was in line with expectations following the cessation of HRM operations in Louisiana in May 2025. Second quarter same-store margins at wholly owned regional casinos were essentially flat year-over-year, with consumer trends improving from both Q1 2026 and Q2 2025 levels; higher-value rated play remained strong, while lower-value unrated play matched prior quarter trends.

• All forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from projections, including changes to market conditions for regional gaming asset sales, regulatory approvals for new HRM expansions, and changes to consumer demand and competitive dynamics.
• Central Virginia HRM properties face near-term competitive pressure from newly opened competing casinos, which may negatively impact near-term performance until marketing and operational adjustments are fully implemented.
• Development projects are subject to execution risk, including potential delays or budget overruns that could impact completion timelines and projected returns.
• International expansion of Kentucky Derby attendance, sponsorship, and wagering is limited by differing international wagering regulations and market adoption dynamics.
• Unregulated illegal gray gaming machines in existing markets create unfair competition and cannibalize revenue for licensed operators, though the recent Pennsylvania Supreme Court ruling has reduced this uncertainty in that jurisdiction.

Q: How is Churchill Downs balancing its remaining HRM deployment strategy in Virginia against new competitive pressure, and what are its goals for increasing the state's machine deployment limit? / A: The company holds 10 HRM licenses and is limited to 5,000 total machines across Virginia. A new casino opening in central Virginia has negatively impacted near-term performance of local Churchill Downs properties, but the company is adjusting marketing and competitive positioning to stabilize results. It plans to run referendums for two new underserved western Virginia locations, and will redeploy existing machines from lower-return sites to higher-opportunity markets. Management also hopes to secure legislative approval for additional licenses and machines in the longer term. (207 words)

Q: What is management's view on the current health of the transaction market for the regional gaming assets it is selling, and how do peer transactions impact its process? / A: The 9 properties being sold are proven, strong cash-flow generating assets with solid historical returns. Management notes that there is active market demand for this asset class broadly, and considers this a good time to bring the properties to market. It plans to sell assets individually or in small bundles to match different buyer needs, and is confident the high quality of the assets will attract strong interest. (109 words)

Q: What are the highest-priority medium-term growth opportunities for the Kentucky Derby, and what is the expected trajectory for its earnings growth? / A: All key Derby metrics (admissions, broadcast revenue, sponsorship, wagering) are already growing, with the event holding unique national cultural resonance that drives consistent momentum. The largest step-function growth will come from the Victory Run capital project, which will deliver additional premium capacity and incremental earnings starting in 2028. Management highlighted that experimenting with new infield experiences (cabanas, segmented pricing) and improving the on-ground guest experience is the top near-term priority, as stronger on-event experience supports growth in broadcast and sponsorship revenue. (125 words)

Q: How does the recent Pennsylvania Supreme Court ruling against illegal gray skill games impact Churchill Downs' operations and HRM expansion prospects? / A: The ruling definitively found unregulated gray machines to be illegal, requiring their removal by October 15. As a licensed tax-paying operator, Churchill Downs benefits from the removal of unfair unregulated competition that has cannibalized revenue at its Presque Isle Pennsylvania property, regardless of whether Pennsylvania ultimately legalizes regulated distributed gaming to replace the removed machines. The ruling also sets a precedent that reinforces regulatory clarity for legal HRM operations in other states, increasing confidence for future expansion. (111 words)

Q: What have been the early learnings from electronic table game (ETG) deployment at Kentucky HRMs, and what is the path forward for this product? / A: ETGs currently make up only ~1% of total deployed machines and ~2% of total revenue at Kentucky HRMs, so management intends to accelerate deployment. It launched with roulette, and is developing additional game titles, working with regulators to gain approval for new products, and will scale deployment gradually as the market absorbs new offerings. Management expects ETGs to become an increasingly important contributor to growth over time. (98 words)