Churchill Downs IncCHDN
Churchill Downs Inc Stock Compensation Disclosure
10. STOCK-BASED COMPENSATION PLANS
Our total stock based compensation expense, which includes expense related to restricted stock awards, restricted stock unit awards, performance share unit awards, and stock options associated with our employee stock purchase plan, was $30.2 million in 2025, $36.1 million in 2024, and $32.9 million in 2023. We recorded a tax benefit related to stock-based compensation expense of $3.2 million in 2025, $2.8 million in 2024, and $2.3 million in 2023. Our stock-based employee compensation plans are described below.
2025 Omnibus Stock Incentive Plan
On February 18, 2025, our Board of Directors approved the replacement of the Churchill Downs Incorporated 2016 Omnibus Stock Incentive Plan (the "2016 Plan") with a new plan, the Churchill Downs Incorporated 2025 Omnibus Stock and Incentive
Plan (the "2025 Plan"). The 2025 Plan was approved by shareholders at the Company's 2025 Annual Meeting of Shareholders held on April 22, 2025, and no further awards will be granted under the 2016 Plan. We have stock-based employee compensation plans with awards outstanding under the 2016 Plan, the 2025 Plan, and the Executive Long-Term Incentive Compensation Plan, which was adopted pursuant to the 2016 Plan. The Plans are intended to advance our long-term success by encouraging stock ownership among key employees and the Board of Directors. Awards may be in the form of stock options, stock appreciation rights, restricted stock awards ("RSA"), restricted stock units ("RSU"), other share-based awards, performance share units ("PSU"), performance units, or performance cash.
Restricted Stock, Restricted Stock Units, and Performance Share Units
The 2025 Plan permits the award of RSAs, RSUs, or PSUs to directors and key employees responsible for the management, growth and protection of our business.
RSUs granted to employees under the 2025 and 2016 Plans generally vest either in full upon three years from the date of grant or on a pro rata basis over a three-year term. RSUs granted to employees are converted into shares of our common stock at vesting or may be settled in cash upon vesting. The RSAs and RSUs granted to directors under the 2025 and 2016 Plans generally vest in full upon one year from the date of grant. RSAs are legally issued common stock at the time of grant, with certain restrictions placed on them. RSUs granted to directors are converted into shares of our common stock at the time of the director's retirement. The fair value of RSAs and RSUs that vest solely based on continued service under the Plan is determined by the product of the number of shares granted and the grant date market price of our common stock.
PSUs granted to key executives have performance periods ranging from to three years and vest depending on the Company’s achievement of predetermined targets related to both performance and market criteria. All PSUs awards are converted into shares of our common stock or settled in cash at the time the award value is finalized.
During the year ended December 31, 2024, the Company modified certain PSU awards to allow for settlement in the form of either cash or stock. The modification required the awards to be recorded as liability-classified awards. Compensation expense related to modified stock-based awards is based on the fair value for those awards as of the modification date with any remaining incremental stock-based compensation expense recognized ratably over the remaining requisite service period. As a result of the modification, the Company recorded stock-based compensation expense of $4.1 million during the year ended December 31, 2024.
At December 31, 2025 and 2024, the Company had $21.0 million and $25.0 million, respectively, recorded as liability-classified awards, which is included in accrued expense and other liabilities in the accompanying Consolidated Balance Sheets.
A summary of the 2025 RSA's, RSU's, and PSUs granted to certain executives, employees, and the Board of Directors is presented below (shares/units in thousands):
| Grant Year | Award Type | Number of Units Awarded(1) | Vesting Terms | |||||||||||||||||
| 2025 | PSU | 87 | -year performance and service period ending in 2027 | |||||||||||||||||
| 2025 | RSU | 161 | Vest equally over service periods ending in 2028 | |||||||||||||||||
| 2025 | RSU | 12 | year service period ending in 2026 | |||||||||||||||||
| 2025 | RSA | 2 | year service period ending in 2026 | |||||||||||||||||
(1) PSUs presented are based on the target number of units for the original PSU grant.
Activity for our RSAs, RSUs, and PSUs is presented below (shares/units in thousands):
| PSUs | RSAs and RSUs | Total | |||||||||||||||||||||||||||||||||
| (in thousands, except grant date values) | Number of Shares / Units | Weighted Average Grant Date Fair Value | Number of Shares / Units | Weighted Average Grant Date Fair Value | Number of Shares / Units | Weighted Average Grant Date Fair Value | |||||||||||||||||||||||||||||
| Balance, December 31, 2022 | 741 | $ | 45.04 | 297 | $ | 80.09 | 1,038 | $ | 55.07 | ||||||||||||||||||||||||||
| Granted | 62 | $ | 134.12 | 142 | $ | 124.89 | 204 | $ | 127.69 | ||||||||||||||||||||||||||
Performance adjustment(1) | 49 | $ | 127.15 | — | $ | — | 49 | $ | 127.15 | ||||||||||||||||||||||||||
| Vested | (305) | $ | 62.10 | (164) | $ | 90.10 | (469) | $ | 71.91 | ||||||||||||||||||||||||||
| Forfeited | — | $ | — | (7) | $ | 99.74 | (7) | $ | 99.74 | ||||||||||||||||||||||||||
| Balance, December 31, 2023 | 547 | $ | 99.64 | 268 | $ | 69.60 | 815 | $ | 139.72 | ||||||||||||||||||||||||||
| Granted | 63 | $ | 115.22 | 148 | $ | 123.37 | 211 | $ | 120.93 | ||||||||||||||||||||||||||
Performance adjustment(1) | 68 | $ | 110.12 | — | $ | — | 68 | $ | 110.13 | ||||||||||||||||||||||||||
| Vested | (343) | $ | 68.11 | (163) | $ | 99.51 | (506) | $ | 78.25 | ||||||||||||||||||||||||||
| Forfeited | — | $ | — | (12) | $ | 122.46 | (12) | $ | 122.46 | ||||||||||||||||||||||||||
| Balance, December 31, 2024 | 335 | $ | 60.83 | 241 | $ | 110.48 | 576 | $ | 81.58 | ||||||||||||||||||||||||||
| Granted | 87 | $ | 111.83 | 175 | $ | 120.45 | 262 | $ | 117.59 | ||||||||||||||||||||||||||
Performance adjustment(1) | 24 | $ | 134.12 | — | $ | — | 24 | $ | 134.12 | ||||||||||||||||||||||||||
| Vested | (293) | $ | 67.90 | (178) | $ | 103.97 | (471) | $ | 81.52 | ||||||||||||||||||||||||||
| Forfeited | — | $ | — | (8) | $ | 123.30 | (8) | $ | 123.30 | ||||||||||||||||||||||||||
| Balance, December 31, 2025 | 153 | $ | 15.32 | 230 | $ | 117.49 | 383 | $ | 76.64 | ||||||||||||||||||||||||||
(1)Adjustment to number of target units awarded for PSUs based on achievement of underlying performance goals.
The fair value of shares and units vested was $48.8 million in 2025, $69.7 million in 2024, and $55.0 million in 2023.
A summary of total unrecognized stock-based compensation expense related to RSAs, RSUs, and PSUs (based on current performance estimates), on December 31, 2025, is presented below:
| (in millions, except years) | December 31, 2025 | Weighted Average Remaining Vesting Period (Years) | |||||||||
| Unrecognized expense: | |||||||||||
| RSU & RSA | $ | 7.2 | 1.30 | ||||||||
| PSU | 1.0 | 1.44 | |||||||||
| Total | $ | 8.2 | 1.33 | ||||||||
Employee Stock Purchase Plan
Under the Employee Stock Purchase Plan (the "ESP Plan"), we are authorized to sell, pursuant to short-term stock options, shares of our common stock to our full-time and qualifying part-time employees at a discount from our common stock’s fair market value. The ESP Plan operates on the basis of recurring, consecutive one-year periods. Each period commences on August 1 and ends on the following July 31. Compensation expense related to the ESP Plan was not material for any year included in our accompanying Consolidated Statements of Comprehensive Income.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.