CHDN Q3 Deep Dive: Premium Experiences and Expansion Drive Growth, Margins Moderate

Racing, gaming, and entertainment company Churchill Downs (NASDAQ:CHDN) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 8.7% year on year to $683 million. Its non-GAAP profit of $1.09 per share was 10.9% above analysts’ consensus estimates.

Is now the time to buy CHDN? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Churchill Downs delivered a positive third quarter, with results above Wall Street’s expectations and the stock rising significantly after earnings. Management attributed the quarter’s outperformance to record revenue and adjusted EBITDA in both its Live and Historical Racing and Wagering Services & Solutions segments. CEO William Carstanjen highlighted the strong performance of regional gaming properties, noting growth from both high-end and unrated guests. The company’s focus on premium ticketing experiences, successful property investments, and consistent execution across its operations contributed to these results. Carstanjen emphasized, “We have a portfolio of unique and high-performing assets that collectively provide multiple catalysts for growth and free cash flow generation for years to come.”

Looking ahead, management is focused on driving further growth through continued investment in premium experiences at the Kentucky Derby, expansion of historical racing machine (HRM) venues, and new market entries. The development of the Victory Run project, further renovations at Churchill Downs Racetrack, and international expansion of Derby-related events are expected to support future revenue. CFO Marcia Dall pointed to sustainable free cash flow growth, supported by favorable federal tax changes and disciplined capital allocation. Management believes these initiatives, along with deepening digital and international engagement, will position the company for long-term profitability and resilience.

Key Insights from Management’s Remarks

Management attributed the quarter’s strong performance to premium ticketing, HRM property growth, and customer engagement initiatives.

• Premium experiences fuel Derby growth: Enhanced Derby Week offerings, including upgrades to the Starting Gate Pavilion and Courtyard, led to higher ticketing revenue and improved guest satisfaction, setting the stage for ongoing EBITDA growth.
• HRM venue expansion: The Live and Historical Racing segment saw double-digit adjusted EBITDA growth, driven by the addition of new HRM properties in Kentucky and Virginia, as well as successful market penetration in Nashville and Richmond.
• Digital and international expansion: The TwinSpires.com platform experienced continued growth in unique users, while new international qualifying races in Dubai and Saudi Arabia are expected to boost the global profile of the Kentucky Derby.
• Sponsorship and licensing momentum: Increased on-site attendance and digital engagement attracted interest from major brands, broadening Churchill Downs’ sponsorship portfolio and contributing to revenue diversification.
• Sustained margin performance: Management reported best-in-class margins for same-store HRM properties in Virginia and strong margins in Kentucky, attributing this to operational optimization and scaling of new venues, despite increased competition in certain markets.

Drivers of Future Performance

Churchill Downs’ outlook centers on continued investment in Derby Week experiences, HRM expansion, and disciplined capital allocation to balance growth and profitability.

• Kentucky Derby growth initiatives: Management expects incremental revenue from new Derby Week premium seating, the Victory Run project, and enhanced broadcast coverage, with the NBC deal expanding prime time exposure for the Kentucky Oaks and Derby.
• HRM and market expansion: The company plans to open new HRM venues in Kentucky and New Hampshire, complete capital projects in Virginia, and support third-party HRM deployments in new states, aiming to sustain adjusted EBITDA growth. Management highlighted the regulatory and technology journey for electronic table games as a key watchpoint for future differentiation.
• Capital management and tax impacts: Lower cash tax payments from recent federal tax changes are expected to boost free cash flow, while management remains committed to maintaining leverage below 4x and balancing share repurchases with project investments. The company also continues to monitor enforcement against illegal gaming machines, particularly in Virginia.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the ramp-up and guest feedback from new and renovated Derby Week premium seating, including the Victory Run project; (2) progress on HRM venue openings in Kentucky, Virginia, and New Hampshire, along with Exacta’s expansion into new markets; and (3) sustained margin performance amid competitive pressures and regulatory developments, particularly in electronic table games and enforcement against illegal gaming. Execution on these milestones will be critical to sustained growth.

Churchill Downs currently trades at $103.01, up from $96.49 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

Now Could Be The Perfect Time To Invest In These Stocks

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.