Churchill Downs pivots: shedding nine regional casinos to double down on the Kentucky Derby ecosystem

Record Q2 revenue and adjusted EBITDA mask a strategic re-foundation — Macquarie is marketing a regional-casino sale, the Preakness talk has gone quiet, and management is concentrating the portfolio on Derby, HRMs and TwinSpires.

CHDN · Earnings Call · 2026-07-30

A record quarter, and a pivot that matters more

The second quarter at Churchill Downs was, by the numbers, another record — all-time record net revenue of $980 million and record adjusted EBITDA of $477 million, the sixth consecutive record second quarter for both. But the headline that matters most came halfway through Bill Carstanjen's opening remarks, when the company announced a full-blown strategic review of its regional gaming portfolio.

We commenced a strategic review of our wholly owned regional gaming properties within our Gaming segment.
William C. Carstanjen, Chief Executive Officer · 2026-07-30

Nine properties are now on the block — Calder, Terre Haute, Hard Rock Iowa, Oxford, Ocean Downs, Harlow's, Riverwalk, del Lago and Presque Isle — with Macquarie Capital engaged and a process management expects to conclude "over the coming months." The company keeps Fair Grounds because of its role in the racing ecosystem. This is not distress: it is a deliberate asset sale to "significantly reduce our leverage, reinvest selectively in Churchill Downs Racetrack and in other high-return projects and fund the repurchase of shares." Carstanjen framed the future around three pillars: the Derby, HRM footprint expansion, and TwinSpires. The market had stopped paying for the regional casinos — the stock still sits ~37% below its 2023 peak. Management is effectively arguing the parts are worth more apart than together.

The Derby flywheel is spinning

Horse racing remains the heartbeat. This year's 152nd Derby drew 386,000 guests across Derby Week, peak viewership topped 24 million (12% above last year's record), Record viewership translated into a $10 million broadcast revenue step-up under the new NBC deal, and the Oaks aired in prime time for the first time. The $285 million Victory Run project on the first turn is on schedule for 2028, with temporary seating under the new roof for 2027, and the infield redevelopment around the winners' Pagoda is explicitly experimental — 1,400 temporary seats plus a 500-guest cabana test to segment the infield experience. “I'm particularly excited about some of the experiments we're running in the infield.” — William C. Carstanjen, Chief Executive Officer · 2026-07-30 The Derby is a genuine moat, and management is confident — “the Derby is firing on all cylinders” — William C. Carstanjen, Chief Executive Officer · 2026-02-26 — but the step-function earnings growth won't be visible until Victory Run delivers in 2028.

The silent retreat from Preakness

One of the most telling changes is what's no longer said. Just one quarter ago, the company closed the purchase of Preakness IP and the 4/23 call was dominated by questions about it, with Carstanjen detailing the two-part fee structure and calling it "an iconic asset." “We are happy to participate and work with the state as they see fit to help build it back to its former glory.” — William C. Carstanjen, Chief Executive Officer · 2026-04-23 This quarter, "Preakness" does not appear in the prepared remarks or Q&A. The keyword trajectory confirms the abruptness — Preakness was a top gainer in Q2-2026 (momentum ~299) and a top decliner in Q3-2026 (momentum fell to –235). The strategic pivot implicitly de-emphasizes the Maryland expansion in favor of the Derby ecosystem.

HRMs: the quiet engine, with an ETG kicker

The real growth engine is HRMs — historical racing machines — and electronic table games are the new lever. Carstanjen was candid about how early it is: “right now in Kentucky, it's maybe 1% of our machines deployed and 2% of our revenues. So we need to go faster.” — William C. Carstanjen, Chief Executive Officer · 2026-07-30 The early read is favorable — new customers, accretive GGR. Virginia remains central: the company holds the sole right to 10 HRM licenses and 5,000 machines, with referendums planned in Pulaski and Amherst County, and The Rose continues to ramp sequentially. Regulation is also turning favorable: the Pennsylvania Supreme Court ruled in June that gray-game skill machines are illegal, which Carstanjen said is “good news ahead for Presque Isle in Pennsylvania” — William C. Carstanjen, Chief Executive Officer · 2026-07-30 — one of the very assets on the sale block.

The financial foundation

The pivot is coming from strength. First-half free cash flow hit a record $474 million ($6.70 per share), and leverage — currently 3.7x — is expected to stay in the 3.6–3.8x range through year-end, then drop in 2027 on cash flow and any sale proceeds. Marcia Dall confirmed the capital-return intent: “we intend to repurchase shares of our stock in the second half of the year, given the current market dynamics.” — Marcia Dall, Chief Financial Officer · 2026-07-30 Net debt of roughly $4.7 billion is the clear constraint — and why debt reduction is the priority for sale proceeds rather than a dividend splurge. **What to watch:** whether Macquarie can execute individual or small-cluster sales at good prices; whether the infield experiment and the mix of price points move attendance for Derby Week 2027; and whether ETGs start showing up beyond the 2% of Kentucky revenue they contribute today. The company has decided to stop doing the boring stuff and concentrate on what makes it special. The market will want to see the sale close and leverage come down before it believes the Derby-alone story.