Churchill Downs Is Selling Its Casinos to Buy Back a Trophy

Nine regional properties out, a five-month Thoroughbred Championship Series in, and a fresh $750 million authorization — management is betting the shrunken portfolio deserves a better multiple than 2.1x revenue.

CHDN · Earnings Call · 2026-10-29

Shrinking into a better company

Churchill Downs posted record third-quarter net revenue of $696 million and record adjusted EBITDA of $264 million, with record adjusted EBITDA in both the Wagering Services & Solutions and Gaming segments. That is not the story. The story is the subtraction: nine wholly owned regional gaming properties are in the market with Macquarie Capital, and Bill Carstanjen expects to sign by year-end. “It's a series of smaller transactions. These properties has been marketed individually.” — William C. Carstanjen, Chief Executive Officer · 2026-10-29 The regional gaming exit has been building for three quarters — it topped this company's keyword list in Q3 as the regional gaming asset sale — but the capital-markets mechanics only became concrete this week. Proceeds go to debt paydown, buybacks and selective reinvestment at Churchill Downs Racetrack. Marcia Dall guided bank leverage from 3.8x today to “decline below 3.0x following completion of the regional gaming asset sales.” — Marcia Dall, Chief Financial Officer · 2026-10-29 That de-levering is already visible in the trend: interest coverage of 5.1x versus 1.3x a year ago. Then the tell. A new $750 million share repurchase authorization, roughly 12% of the $6.35 billion market cap, on top of $48 million bought in Q3 and $76 million between October 1 and October 27. Compare that to the common stock repurchase line, which printed zero in the June quarter. Add a 7% dividend raise, the 16th consecutive annual increase. Management is not waiting for the market to agree with it.

A league for horse racing

The genuinely new idea is the Thoroughbred Championship Series, which took the top slot in this company's keyword set as Championship Series. Six races for colts beginning with the 2027 Kentucky Derby, through Belmont and Saratoga in partnership with the New York Racing Association, ending with a championship back at Churchill in September. Four races for fillies in the Oaks Division, whose winner gets invited into the colts' championship race. A $5 million bonus pool layered on $22 million of purses. The strategic logic is content duration — converting one week of relevance into five months. “We want that longer period of time to use these skills to build that TCS series into something that can be comparable to the Derby over time.” — William C. Carstanjen, Chief Executive Officer · 2026-10-29 Monetization ordering is explicit: wagering "right away," then admissions and ticketing, then sponsorship and licensing, with media rights still a work in progress. It is a capital-efficient way to sweat an asset rather than build one. A year ago this was a defensive posture. On the July call, asked about a rival horse racing league, Carstanjen noted “every potential league that's out there, I think one of their first calls is always to us.” — William C. Carstanjen, Chief Executive Officer · 2026-07-30 Now Churchill has built its own — with the flywheel language carried straight over from Derby Week. The awkward part is that the flywheel is partly unmonetizable.

You don't always monetize social media impressions. You don't always directly monetize within a television contract increase in ratings. But you still have to work very hard to drive those things because those are some of the most impressive statistics about what we have with the Kentucky Derby.
William C. Carstanjen, Chief Executive Officer · 2026-10-29

Twenty-four million peak viewers is a sponsorship and rights argument, not a revenue line this year. Derby 153 ticket sales are pacing about 25% ahead of last year, with roughly 40% of allocated inventory sold — and management is deliberately “throttling back because we want to make sure we keep sufficient inventory for later in the season.” — William C. Carstanjen, Chief Executive Officer · 2026-10-29 That is pricing power being rationed, which is the best kind.

What management quietly stopped saying

For five consecutive quarters, Churchill's calls featured Prediction markets as a live strategic threat, complete with Interstate Horseracing Act language. In October 2025: no deal, and the company would pursue all rights and remedies. In February 2026: “we haven't agreed to provide our content to prediction markets.” — William C. Carstanjen, Chief Executive Officer · 2026-02-26 On this call — not a word, in prepared remarks or Q&A. That silence lands differently now. The broader market is leaning in: S&P Global described itself to investors this week as the largest prediction market, and the Prediction Market theme has been a persistent global keyword across recent quarters. Churchill owns the scarce content and is choosing to sit out the fastest-growing wagering distribution channel. That is a defensible legal position. It is also an option value management no longer wants to advertise. The second recurring theme is table game product. Electronic table games have appeared in Churchill's keyword set since 2024, and the punchline has not moved. Craps arrives "around the end of the year," blackjack in 2027, and the CEO concedes “in our journey, we're still very much on the early end with electronic table games.” — William C. Carstanjen, Chief Executive Officer · 2026-10-29 In July the disclosed penetration was damning: “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 Class III title-conversion treadmill is real work, but two years of promise is now a pattern, not a catalyst. Virginia remains the messy one. Central Virginia faced the Petersburg casino plus roughly $5 million of new live-racing tax, and adjusted EBITDA there fell $6 million excluding last year's insurance recovery. Management argues Petersburg is expanding the market rather than cannibalizing it — plausible, unproven. The offset is optionality: a Collinsville relocation toward the North Carolina border, two referendums next week, and 415 incremental machines that can be shuffled around the state's 5,000-HRM cap.

The multiple is the whole argument

The stock sits 38.9% below its 2023 peak of $149.08, up only 7.7% over the last 90 trading days. Price to revenue of 2.1x against a 9.8x peak; price to free cash flow of 13.0x; 15x earnings. Meanwhile effective net cash of -$4.5 billion is the reason the buyback needs the sale to close. And the reinvestment math is soft by design. On Derby projects, “we're willing to accept a little longer payback time frame than on other assets we develop in the company, say, a gaming property,” — William C. Carstanjen, Chief Executive Officer · 2026-10-29 against a stated 20% unlevered IRR target. Victory Run — private suites, indoor-outdoor dining, covered boxes, live for Derby 2028 — is the largest of those bets, with an interim upgraded product for 2027. So the trade is simple and it is a bet: a smaller, higher-margin, more seasonal company concentrated in one iconic event, one growing HRM franchise and one distribution platform, bought back aggressively at a multiple that has already compressed by three-quarters. If the nine sales sign by year-end and leverage breaks below 3.0x, the buyback compounds into a re-rating. If the auction slips, the same buyback is fighting a $4.5 billion net debt position — and Derby Week becomes an even larger share of a smaller P&L. Management has put $124 million of its own money behind the first outcome in the last four months.