CHDN - Earnings call transcript Q3 2019 | Churchill Downs Incorporated

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Operator

Good day, ladies and gentlemen, and welcome to the Churchill Downs Incorporated 2019 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time.

As a reminder, the conference call is being recorded.

I would now like to introduce your host for today’s conference, Mr. Treasury, and President, Relations. Vice Zangari, Risk Investor Management Nick

You may begin.

Nick Zangari

is we Good Katrina. After to in required remarks, quarter call statistical churchilldownsincorporated.com business morning results afternoon. XXXX our released copy The you, about the your the the News, G, presented financial by be information including open questions. and titled information for Investors third at website’s of this prepared results other as call. welcome third section conference call, of and Thank and to this company’s announcing conference the website in earnings the the available quarter Regulation period company’s section. well company’s yesterday were as will A XXXX at release located

release based the result recent that today, on new and filings XX-Q like risks get These remind in could uncertainties included a of no our the conjunction these in forward-looking may started, some Form of make Any would considered statements be of Form that events. statements. and cause on are information with obligation most include assumptions earnings forward-looking results and forward-looking undertake differ we in the XX-K. as we as report number we that SEC, the make the and I statements factors or update statements statements cautionary with risk specifically our a materially. you we All of today to statements that future to should actual involve to statements Before

press The churchilldownsincorporated.com. our available to of XX-Q Form in financial will press measures. During included release and on reconciliation release. GAAP and earnings is measures we non-GAAP at this call, today’s non-GAAP website GAAP present both are A

Bill now, turn Carstanjen. Mr. Chief over Officer, call our And to Executive I’ll the

Bill Carstanjen

our morning Officer; Mudd, Marcia General including Good Blackwell, Chief members Chief and everyone. Dall, our Financial our President are several our today Officer; With Bill of Brad Nick. me Counsel. and Thanks, team Operating

We projects. updates share to key have of regarding a number

and financials So, on a and for brief strategic is begin your our questions. plans. Marcia capital she relatively will projects. quarter focus then our today take third provide our be we I our on will happy then review After with the quarter finished, more in-depth update an of comments to on will

First, comments a our on quarter. few third

adjusted September net XX% Our from growth revenues and benefited Derby net acquisition up January year. over year this other of the were in Quarter-over-quarter of things, up prior last was and year. the XX% EBITDA Presque opening Gaming in among Isle of City of revenue

of Wagering of and slight will for I properties net performance encouraging growth few about the of a margin high The a our business. and our minutes. low volume, small primarily our the number stable. velocity exit customers Online to more was that Generally, a due drag segment in quarter, talk the revenue was on

growth of adjusted in Our the Derby result the well in this as a Gaming. Gaming, Miami Isle as EBITDA and Casino of Rivers of increased Presque continued March contributions Plaines City of made year, growth that investment XX% Des quarter we for as the Valley equity

Wagering. Now, I’m Gaming Valley Churchill opportunities, initiatives: brick-and-mortar five organized an Racetrack, Wagering going Downs and growth around Sports of Illinois Miami in to overview and organic provide Kentucky, HRMs Projects expansion Online at

Let’s start with Churchill projects. team major Downs on Racetrack, capital where is working our three

making part quarantine to as year strategy barns increase quarantine construction is of state-of-the-art project veterinarian international well to equine ship completed during of it year and regional easier are will our barns The enable the the to the Louisville, million as care investment medical projects The racetracks. to earlier other the together we quarantine international enable horses participation athletes. will owners. horses medical week, be and Kentucky barns are and XXXX be barns our Park to the equine The Kentucky part will quarantine The equine The our the and at an $X Churchill track expensive of to provided on equine Derby owners during and of less as the center prior rest directly for safety horse this first Downs, announced medical center Derby. initiatives. that Turfway center their

This most finish The be of second sold to seating has guests. for building the another currently that upscale, Running grown line renovation world-class XXX not one main create and area, is also are of the ready completely we for was our significantly of $XX could view special the timing sixth of is in and The for unique exclusive experience opportunity of out time Six most the an now, is XXXX. our in capital tickets a for million project early as premium XXX Row will have experiences all Derby. Interest to and the the on already of call the area the just we Mansion the and yesterday, our XXXX Millionaire’s year, exclusive and May next Kentucky we since announced the Derby with exclusive created Mansion better be area floor amazing Mansion. next to

The most project have third capital undertaken we is at the significant the construction that project track.

track on anticipate a kind along by be term. end seating, the around based and permanent a the and race we covered build and first one outside expect $XXX We stadium cost its that to approximately of hotel complexity the it racing project completed XXXX. a scope million historical We of the facility experience will the machine of will

Kentucky time for original completion XXXth XXXX Derby. called for Our objective May by early in the

extensively However, with time. as we more worked in realized build the needed we to firm, construction architect and we

demand HRM these organic provides a the contemplate hotel growth for obtain a as imagine, future and long-term experiences a the our permits addition The approvals process. we might Derby. to there It plans of This also facility also need for grow. in prerequisite that the company. construction are strong the Kentucky very you for physical for of construction project to foundation for unique potential expansion and host As important is

From bottom way components the top and to seven-storey this describe of to ground our the top floor the the from will the a floor. starting working I is the hotel, project. key up

other will sports covered but will floor, seating to the the First, machine higher sections there price seating, XXXX the adjacent on build point will for X,XXX a will Derby. are replace that capacity temporary the be we in Also than for approximately This existing lower an new priced temporary have ground bar. outdoor facility than new is will built constructing. and we track a approximately with with gaming HRM the that stadium seating which year the improved be guests, location amenities every in

who Kentucky facility provide seats itself, not on or amenities a gaming the the our Derby, by the the and of area affected During otherwise floor this are existing guests, hospitality and X,XXX that project. will have approximately also

facing a Also On ballroom a hold on dining balcony the XXX will second deck tiered be will square XX,XXX for floor, floor, spectacular hospitality covered and party providing there track. the these guests there the track. with X,XXX can two views foot be of the areas Collectively, second additional the a guests. room than more in

the be third there the will XXX for guests. On another race balcony overlooking track floor,

hotel facing through there third be the with track sixth XX balconies. private suites floors, On will

space XX to that the if For allow for will during access with come will the desired. accommodations day suite sleeping Derby, guests each serve and at passes suite the entertainment night

non-track suites sixth eight per passes through be third the floors, there will also facing with access XX On suite.

experience penthouse of panoramic the stretch be up will Derby. entertaining building. XXX dining, there views on the with with on bar the entire through and length sides for presidential balcony balconies. to And seventh finally, a a at there three the six on that suites for will be each floor, windows facing of guests addition, One from track guests four In the floors, will two and the suite the private floor XX

reserved XXX In for and total, approximately available new X,XXX there will rooms be seats Derby. hotel

of other north-south to country, in customers Center, Downs, through Louisville, existing I-XX Derby. our during Churchill the rooms stay have visit City enjoy the will or Week, major our university, and amenities. want will the of of and for of available who at the wonderful Fairgrounds passing X,XXX amenities Outside guests, Convention addition, the facility the additional who hotel access Highway this to just the Derby be hotel Interstate region HRM on a In

excited phase really Obviously, expansion. critically and carefully our correctly execute this We it of major on important. project. is We’re about of this next phases all

to experienced team the that. have do We

quarter Now, let’s Derby the Kentucky. turn organic our adjusted $X.X growth Gaming million City above third expansion our initiative, second perform elsewhere facilities generating to investment. of EBITDA our $XX million the of in in to initial expectations continues from HRM

our preparations what Oak million and build in has are invest team and knowledge at additional our Racing an We and Gaming our Park. are million this of and we City HRM facility, begin Derby building Turfway Grove proud learnings we as applying $XXX $XXX to accomplished

facility terms the couple of began our racetrack of harness and license, Oak racing As area. the ago racing at Grove barn we a under of after completion in promised, the ship weeks our

HRM continuing X,XXX to X,XXX. approval approximately and the regulatory summer facility machines to are build facility HRM targeting We completion. have and open plan to hotel, XXXX are XXX We a for with room the and up

HRM we our XXXX. area. to planned targeting including improvements The Regarding are Thoroughbred per other of construct and begin grandstand a this and other project we of of well quality the of of as addition simulcast of up are to at circuit. Turfway Kentucky the entire ends April the million sports structure by HRM going will facility We across Turfway Park, as acquisition and machines Park indirectly to bar the an summer X,XXX to the and property and $XX increase the demolition facility completion racing recent amenities meet in with

we track the we and upgrade will Downs prep more City Grove, profile area. the and to road add roads Turfway of Park, Derby Derby and We Track, dirt to at Churchill deal will great current new the the additional to one the Race Across barn opportunity. surface Oak Turfway existing look or add have Gaming, races. of Kentucky the a Park perhaps at prep After complement synthetic we’ll race completion, a upgrading Derby

and of to challenge. We full have a to do our potential work forward lot look that to we maximize

growth third of year. law rolls of around Illinois June our Our as this organic a gaming result in projects initiative in expanded that bill three became the

and the third if during payments reconciliation Park the and were that the a have post-contributions would challenging not in the economic to competitive light a to Arlington announced quarter pay environment we for taxes, casino that additional license it returns obtained Arlington increased pursuing license. Park of casino due we First,

at period. for We XXXX awarded committed committed dates and race are if been race race at we to have Arlington also We’ve awarded that to have race dates. XXXX Arlington in in

be to to of other Chicago and other the regulations license Park the there potential to continue Arlington all license be utilized be of more respect Illinois, to for land the are future will with may potential in including where the areas We sports options area economically racing explore the We or for to Illinois locations sports of issued the Arlington Thoroughbred betting by viable. betting it for awaiting plan Board. racing Gaming apply and

Plaines, through gaming expansion. Midwest the own we positions an Second, its in add additional XX% to first gaming of approximately expanded in applied Des permitted has Rivers currently approximately the XXX XXX and do which Casino phase as of is phase for is investment positions second Gaming it equity the in bill. positions Rivers planning in our to under XXX

in of the existing new The land-based including request efforts of is the Gaming phase whereas bill. completion the with first amenities. expansion working utilizing of as an the construction positions pursuing to commence expanded gaming gaming by obtain second requires a to phase the garage parking Rivers space Illinois is for Board renovation permitted approvals, and involves and related required space,

obtains gaming By XXX totaling of of Illinois approval, to out sports the add of Gaming to planning of build is add fourth book, positions to Phase of which and book Illinois do a approval X. is though part sports slot to buildings floor. the positions the incremental machines of so continues fourth eight end bar expected to from end has as unclear. to a the by opportunities will the XXX sports apply table as into to Board Rivers begun evaluate the expansion. betting the existing for Rivers its be subject sports to converted Rivers that also license approximately footprint X Board and as part its the will quarter brewers is games open quarter Phase as Gaming timing approval The soon

end conceptual garage the $XX or will the cash expansion design Construction otherwise parking parking paving by out the facility completed of be for venture. the and be July The million the expansion stages. expansion to will property. credit expected in joint existing of X the the XXXX. the commence is early in of and garage at parking the remains Phase way Phase November funded the X phase of X garage

with is project our Plaines Rivers Illinois third Gaming, with The in Waukegan. in Des in license our Casino partner the Rush joint bid Street

Our of the three Gaming from Gaming to Illinois Waukegan. by bids to bill, bids city was of to by the one to license bill date joint XX of gaming the signed, XXXX, the the that the submitted months bid the Board award has was one Board. forwarded Illinois gaming city the June Waukegan XX, According of the

floor well Our of XXX gaming venture announced expansion gaming and as as and XXX-room floor Valley our Ohio Delaware include our The an $XXX XXXX-car and between garage Cincinnati at million and we the yesterday hotel construction joint with involves growth the which the parking garage hotel expanded fourth to initiative, facility, the of organic North additional VLTs. is Miami Gaming parking a Dayton. project

quarter in years. The are successful support growth in and coming be a its targeting the at the will joint We built completion we It currently which Greenfield XXXX financed the venture no Valley facility XXXX. has Miami continued has expansion it very will debt. since gaming of second level, this in project been

iGaming relates Betting fifth our the legalize of and continue last, growth as to Sports And initiative organic States to it. expansion

through retail wagering Pennsylvania. play. table our and having both operations one and through returns are the slot at sports We mortar two bricks Mississippi generated by and directly betting We pleased in sports and currently retail increased impact premises game Presque the with have is Isle casinos, on in that on

Rising In pending mid-November betting regulatory a Casino with addition, we retail in our launch are going in to sports final Star partnership Indiana approval. through

not this New as systems Jersey being Our multiple Online went our BetAmerica mortar We’ve extremely are market, operators separate and Jersey making XX offers. a used to with any online result each New New skins are our are of Jersey is where test market, saturated the brick strategies. refine the operators platform in I there we a believe for live regulations aggressive year. in permitting and casino. acquisition player earlier It some money.

will not like lifetime and be If may careful. customers we a see it. this Some an below be their States value, to we very we consistently way we where acquire see that will do at don’t amount

return a cannot You up volume. with make per negative cap

each Jersey regulatory believe we’ll Indiana spending our to We and on We have subsequently marketing based focus and online spend for of online offerings and less right rewards in retain pending our and reduced markets saturated, node, our an and markets in needed Pennsylvania online online acquire We to period the approval. the spending profitable in it brick player now the fourth upfront New more time take markets. quarter late extended launching currently in state profitable the mortar not and marketing become may customers. anticipate

to the long-term. as this our build very, in forward business will spending work we be very going We judicious over

we we of did asked to our if City Gaming, years we would the With working to opportunities. that past strategy out That always in organizational resources initiatives. initiatives, supplement Greenfield to our fighting support for chance said, pursuing have and growth been yes. saw Greenfield add that being several to all had we simply is capacity We’ve is of Greenfield Greenfield a build couple our The because acquisitions team of increase land we’ve occasionally additional both over activities well answer our of a question to Derby us. investments. capacity all like to It the have

pursue early brick these sports changes relatively expanded environment the have opportunities. team the new online anticipated our mortar also and and and to to We

grow Our to is feel and up company. ways have we so fortunate to many fired the team

an I’d call Marcia? to management. Now, will Marcia on questions may additional and the update Thank we third have. any the like turn to answer you. on details provide some capital After over to that, you quarter

Marcia Dall

everyone. good morning and Thanks, bill

revenue up $XXX provide financial results, will our and our its Gaming this quarter. an opening or the million in quarter, management then prior $XX provide As quarter increase. in plans. some with bill contributed third City reported to Beginning third gaming million quarter said, capital one September. anniversary year of XX% our net the year City on details of I celebrated its we update on of Derby compared $XX Derby third results XXXX million

the So, a full reflects results to partial last a quarter quarter results of month compared of year.

as by from addition gaming benefit revenue last of the ownership additional we Lady past, have of including Nemacolin in future. the acquiring of continues this growth City year. year Derby year will to as of increase January revenue the of The it the market end the and driven growth segment, August the demonstrate strong XXX% in a in of management property in Downs our of the new in titles game Ocean from the Isle was from remainder primarily to consolidation for supplier a the Casino Presque of gaming assumption March of at result this mentioned agreement Luck

quarter adjusted year very by city Churchill driven XX% gaming or the strong segment third $X of million nearly $XX million third continued the growth up $X Our margins. approximately Derby prior compared of Downs million with coming EBITDA was to growth for our adjusted from the quarter, quarter with EBITDA was

Nemacolin June. benefited the in Rivers the and million for investment casino fee collectively approximately from equity in of we entrance third of growth resources in in Churchill expected by downs’ contributed of the year in quarter this adjusted Approximately, to growth the generated of EBITDA of elimination was the Racetrack had year. to slight increase. Presque the coming a million of Nemacolin addition our gaming The Des related March its adjusted support primarily Plaines segment. over $XX for as decline the EBITDA addition Isle $XX our

in at from adjusted a growth two saw retail increased gaming betting of August properties last in of Mississippi primarily the of as EBITDA launch year. We our result attendance sports

quarter in offset related operating of benefited third solid gaming area. and to new decrease we the entrance Miami and the decline Boston from a from Ocean by at expected by in a driven Valley were the also alai expenses primarily the We as partially performance market impact in Oxford Downs. These in benefits operation from Calder jai

compared down our can quarter was see the press XX.X% increased information As and and to basis revenue the to our and XXX release, points attributable casino Oxford jai you pressure margin XXXX from prior-year for the wholly-owned from quarter was Calder solely expenses supplemental third same-store the to alai operation. related

properties, wholly-owned casino have Excluding up these two would been basis same-store margin points. XX

margin Spires regarding and Twin business Velocity our $X.X the customers Betting the million Online in $X.X decrease Online the decreased primarily includes of iGaming. wagering revenue group Twin certain was driven Spires the revenue for to the business, in Wagering group. the The volume, segment. which Sports low million velocity and exit high related by

As the business Jersey slight the revenues than we net bonuses New bill and iGaming that that for during state sign-up offered in the on the was to the more growth discussed, that was offset quarter, Sports our primarily the a drag quarter. due market Betting revenue in generated

industry race during racing Spires due Velocity group, our excludes of by core the business, weather cancellations by declined The week impacted was X.X% at growth while handled of less Our the X.X% Belmont. industry one to which and quarter. Twin had

the a revenue a player in business X.X% players compared quarter increase and in prior Spires had the decrease active per year. to Our Twin core X.X% for

iGaming our in EBITDA wagering Betting launch the we due of adjusted business expected and the our online perspective, declined million increased associated to with spend $X.X operations an New marketing from Sports and costs Online Jersey. primarily as

good our going profitable business and our players for maintain the Twin will we forward. We more feel Twin outlook about Spires on Spires growing focus

in Online to As with iGaming spend Sports we be the bill prudent will our stated, Betting and space. continue marketing

continuing Turning $XX quarter. from to prior income, compared third million net the quarter operations in to million net income was $XX year

$X from our million after impacted our third comparability operations items $XX on proposed legal highlights Our million our XXXX. third the of at quarter press ETA being Grounds. with the net the quarter did settlement due of release Ocean the tax reserves continuing in the third We income five transaction that a legacy to item Fair increase a of in primary gain the by primarily quarter issue approximately Downs/Saratoga

of million and Excluding we higher a $X.X expense to income and higher as increase in to increase was operations interest States rates. equity million result after-tax tax after-tax due tax offset attributable effective these higher items, with investments in debt partially $X.X a a had outstanding by income from $X.X that higher to a balances of an million rate related

from distributions EBITDA growth flow prior-year significant $XX growth driven $XX quarter. and We’ve in taxes. in cash and and million, operations cash was paid by our quarter up from cash equity increase the benefited flow million an adjusted from Third primarily operating investments lower from

to in million regarding properties. management, quarter, we expect the of to We’ve related maintenance We and third $XX spend newly for $X to million our of capital $XX to finally, prior-year $XX than due slot to in this payments And continued capital on timing capital which acquired purchases be maintenance anticipate the higher quarter, and currently XXXX capital range. $XX year. capital was the sent capital spent capital maintenance year-to-date same maintenance maintenance million in primarily million to million for

the quarter, and equine at Churchill third Grove Oak medical and Capital, spend million racetrack. downs in Project facility $XX on construction primarily quarantine Regarding barn at we the

million paid our based expect $XXX to million $XXX $XX Project quarter payments build Capital Oak third updated range the related million XXXX in We to through to on of Project total of out. have cash the Grove the to timing and be Capital related

Capital million to anticipate be spend the Project ahead Looking to will $XXX XXXX, $XXX million. we

hotel drive Our initial nearly Project facility. new a Grove our reserve Park of Kentucky is thirds at the spent machine premium and Churchill Capital expansion investment racetrack in six-floor area two the primarily remainder downs to with Oak the for this seating and of historical Turfway phases in of and projected racing

XXXX. other some our properties as projects smaller have well will in at We other

the expansion Casino respective Plaines at the those gaming ventures. be and mentioned, funded bill will Rivers Miami Valley expansion joint As by Des at

increase shareholder X, XXXX, on record of million of in authorized X% capacity board $XX quarter have stock $XXX to X, annual a existing million has repurchased remaining share holders returns, dividend in our repurchase our We and third regarding under be our January XXXX. for our of paid program. on we December

dividend our capital Our to in shareholders. to return commitment continued programs and our reflect share repurchase

on Our basis, months completed a XX in at the at net pro which XX reported basis that for times, leverage relatively acquisitions On September remains low times. adjusted were forma it’s trailing EBITDA three X.X a X.X includes the first quarter.

capacity hand, We continued through cash unused on based generated relatively, dividends and from and have to significant leverage our facility, as as on credit acquisitions ongoing investments share operations, opportunistic growth repurchases. organic cash low well support our and

the over call With turn that can he that, for I open bill? questions. will so the to call bill, back

Bill Carstanjen

time, at going questions, line for up fire Marsha. you, Thank Everybody open we’re away. this to Okay. the

Operator

[Operator have question, For David first Jefferies. Instructions] we your Katz from

Your line is open.

David Katz

Hi, good morning everyone.

Bill Carstanjen

Good David. morning,

David Katz

Good morning.

be not it actual, a where can earnings. it about would so us have to that’s as How something about profitability is much want because about really and neutral, I don’t we about that? be of not consequential, is talk that should revenues leading current investments that quarter, are get And be totality iGaming commentary, thinking Sports something we thinking drag the should down I on that’s investment or where of the to and do costs – Betting. spending I heard that thinking your I don’t meaning, bogged something So, there on all sort as you to that but want in

Bill Carstanjen

down similar, investments it’s stage investment respect with until and to be online the recollection been until we it the there’s settles made. going to Spires, my I clarity started until some market when think have the until in Twin –

to the recognized built up recognized in showing front. customer online some a customer is stages. early where as the the you. with is respect your with So wager some particularly for in time that This losses a expense But is business space and of value recruiting over they investment

the to period So, this I space any a of of investment. think we’re have in context, nature going

like strongly over through and to Doesn’t to I there rational careful seem time. irrational irrational point a think that and have time. because you doesn’t some to the was we now, trying over really I are Jersey, see make process be market going Right in behavior on, rational become behavior was New

want always And very don’t that fundamentally models by that we drift we time. down So to acquire about that than worth and I don’t to in. down in careful drift don’t want models we Spires. customers been us those mean, we We don’t spend business be Twin to to can we be careful believe more we’ve this over customers business think

Spires, get learn there’s a So worth. this lessons Twin experience how and are data, previously we now much lot right our can view a sharpen from on as that’s we But customers a of us, about to are we space, lot still in there take but for there’s our there’s, lot new here.

learn. we to to invest have So

markets it, we money be balance we if will we in. think the it you takes But we that to long-term don’t because front this that in have invest won’t patients means invest to irrational nature and also of while have get making to against to said, a behavior see long-term invest we we a business with that gain to and have We experience, return. participate up

David Katz

you Downs agree is Churchill racino the And among Right. for I the appreciate with that project provided. hotel to that the you’ve most the detail I company exciting and

figure of like think the some assign are trying to how for future. to this out value it we trying I model might us and to many something

is a necessarily results that’s while model Churchill you ramp see know or looking should you at be guidance ask going or question, best XXXX not us how So up to two out the how And the questions, one, construction payback can – we or some a on guidance, is not I could the this impact you but figure to give may how way what – or could Kentucky something us help XXXX return that. period and that on. between secondarily Derby Downs

are think two the I there. those biggest issues

Bill Carstanjen

On first the there. question, there two questions are

have question, to On say I investment. of a we’re points return expected in. capital in the that response two to how be and the the first think is I would to about which of because construct general that

that we’ve construction First, I a target general, identified multiple. five market say internally would projects to the with in we time

to, to we more So mature try about rate. than not we spend we a EBIDTA think contributions, try EBITDA year when three run times five that

So a multiple. times five

to but Kentucky when than say not willing would go always I higher we’re that. the that, it massively higher Derby, than comes to

time internal had or experience experience to tried do five better we return, our again, and disciplined we’ve plan the we’ve positive Generally and a a in when and projections for pretty So more about That’s Derby, non-Derby projects. for about how planning, providing a our future. these previous when we be to but projects. the more without promises it comes positive results stuff

And feel higher strength comfortable team. and going there our investments we track the record of because our the so somewhat of of

trajectory plan. function of carefulness of facility With years, respect while I period the don’t around, doing doing impact strength construction We’ll this the next we’re and and the – the be in of two during the that. and team over I there flow we’ll to really change the of that’s plan that which the a construction. construction performance expect the they to of think while a of manage we’re

bottom line. any not flowing construction that We’re is to anticipating real the disruption

David Katz

exciting primarily and way. we of to our know, earn within what about the last Got figure job right? is start out similarly could XX how these opportunities it. to Arlington And off XXXX. there we months, rivers it’s for are some should to And we around of but I where reasonably to question And that there models that be our next to Illinois, of that number know prospects of. can with hard the Park, XX we sort doing got around timing do for Arlington is again a then that it opportunities, say think my the challenged

Bill Carstanjen

have the challenges really issue we don’t Well, here control really our the have businesses, and the regulatory internally we same we the or regulated that timing isn’t even change or of behavior. process. regulatory fact It’s influence

to about for make occur us So it business changes we think to models. predict our can when hard in to how

could something figuring responsible and out for we’ll time. that there that gaming But, just something play we’re should at to proceed we If we say and I – think that’s I’ve good think it’s result at to respect have on I Arlington, our And because right. are all about said So, cards we to this with work a everybody. powerful with responsibly and think we committed bill see. can be and facility

So really Running we define racing we’re at this two period that future. next anticipating that over the hope that the there point. there is years, over news although long-term

can’t determine With laws views the talked have can approval nor tax Illinois same when previously. some very our will Chicago the respect to the we’ve predict the changes event we happens completely of the plans think is expansion for It’s there, another casino in that around or want rivers. but strong thing, we regulatory to for what plans in happen see which at we and we I open market, triggering what about

the So, I I along, think the process in to market. more state think wants state incented the is the see casinos move to

gaming. hope from you more learn the work to and the But see all maximization to think But, I at time. I update give insight that’s with you wants think speed, as you give income to deliberate the we ourselves. but best can of this more I state they

David Katz

Thank you it. very Got much.

Operator

from from question Susquehanna. next is sir Stauff Joe Your

open. is Your line

Joe Stauff

Thank that you. any machines City the if and in as of basically make Oak you what different? is ask would launch I them make summer, are against characteristics comparison that Kentucky in obviously with Derby the to Grove, comparison wondering Good market, that of are the analog the you’ll and I any HRM comparing there morning. or was facilities market about particular that characteristics suggested there wanted that

Bill Carstanjen

size would the Clarksville, that think it region population et Nashville, at the say to to of I the cetera. way look of about is Sure.

in wealth the population also then of the factor terms the profile in of demographics at look So in age, driving distance. the but to

distance. when Steakhouse in please of get So consider. why the hotel, Oak we That’s when Grove things big Oak Derby but advantage car market the a a movable surrounding closer these Derby for comparison, are in wealth, City is willing and think about we’re key to driving demographics And think people population to drive in also age, Derby the the destination. that Gaming, Grove. being adding additional then their the then ballroom to then Louisville Those travel competition That’s about amenities the clearly some we of population, about also City drivers think it Gaming. for terms

know we XX some by we’re we you of they’re and course on there So as are carefully. Oak first side it’s the are about the the some When Grove, from of up Nashville. factors then well. a combination interstate as There Kentucky are comparison I factors on distance we it do exit all But you those about positive. very of guys namely border model and or you come miles that are positive, the XX. not are so do as the the

market size help us. So, parameters will that determine for are us be the those the what of the

Joe Stauff

Okay, Thank you. a to questions. I ask fair also couple enough. you wanted of

take to different the have a or possibly whether on ramping I In bidding just a online wanted iCasino. Sports ask Twin think offering, maybe time they’re in and how work business, on saying about going strategic able app you terms Betting side not of will to or to technology products scale existing certainly the and say Spires much just you, given dual three or But startup But your that be of overall question mode it wondering necessary you’re amount products to I’m both know the or how using I have forward. with a when – you all systems. you

Bill Mudd

a Thanks, Mudd. is Joe; question. that’s Bill good This

Jersey. did comments, Bill’s think that space enter ones were I last to on We back first of all, of going we in. New the one

we ability to year because Super games do and the on football then with cycle. games, we of ability And of the have and do way into NBA we the Bowl have in the the our Houston we relationship take sport. exception early that owners only the with is last the think the now, on NBA didn’t rolled of took I the Rockets

is thing Jersey we don’t about Twin there. other Spires operate The New

didn’t and into can we cost. tap we reasonable Jersey, that in New have database customers of So a very acquire customers a at

So spending occurring – New some jumped very as Jersey market when Bill in rational. we said, the in that’s and is the of

robust base other offering do database Twin we of we to market ramp would customers very to to up Spires states. have the So profits allow sending. hopefully to help intend business do as us enter spin business and to these that our a leverage provide brand good online a that We and to

sports I to our two has art. is has the within think to of certainly a now of technology their occur adding about wagering with is same businesses the these right of together now. I focus be, the have now of because those the system do there own we infrastructure, would states building the of kind one that’s adding say app right not But lot to racing horse that wire right long-term state roadmap. every As part out

it’s it’s right the now. So quickly not the in priority road but map,

important will in We get live eventually but a these as it’s there, being and now us getting right to more mover. focus that on markets for first

course, being acquire with spending So customers. to different retail completely that said, retail and of is

question. actually numbers casino business and I hope So it’s cycling Marcia profitable already stated so. very our answer into those are your built a very that nice and as

Joe Stauff

currently and mean Just to is? least Indiana at correct you offered that Pennsylvania is or to clarify, inspires historically in I

Bill Mudd

in we Pennsylvania in absolutely Indiana we’re and we’re absolutely There in are Illinois.

Joe Stauff

amount question respect one that Mississippi the in this, traffic additional least representative book, early, know here, retail to is least, there or is sorry delta if talked can at representative example the hug you about or able some has reference meaning traffic since most seeing rate offering wondering, Sportsbook, squeeze it’s been market your to the I setting most kind assess And Again, patterns references And launch. but at traffic have up I that also of with you’re Mississippi others the that Sports traffic. maybe your is mic the but have I’m the I sustainable. initially to basically been consistent and adds retail be guess basically your if that like of it I to

Bill Carstanjen

can answer now. short basis, is, finally of absolutely. a been It they eclipsed Yes, have we kind We year-over-year has it sustainable. see

I thing the little is would behaves is that sporting second sport say versus The seasons, differently every – though the a baseball NBA. obviously there to NFL

terms a little is it the events. well based sporting of on in So calendar bit as

Joe Stauff

Sure.

Bill Carstanjen

The to ways two there’s that say sustainable. absolutely would think that. traffic about I is So

Joe Stauff

Okay. Thanks a lot.

Bill Carstanjen

And bet being on average people they’ve versus based little more bet and we’re geography. different the Isle And is singles impact where size the bet seeing of teams we been felt The and heavily a parlays on certainly as yeah, they the Presque in well. what south. then and Northeast

well. dynamics of follow to the interesting So regional it’s very some as

Joe Stauff

Makes sense. Thanks a lot.

Bill Carstanjen

you. Thank

Operator

JPMorgan. open. question Politzer from next is Line Dan Your is from

Dan Politzer

and everyone thanks morning taking my good Hey, for questions.

Bill Carstanjen

morning. Good

Dan Politzer

another but obviously of in one profitability over on about dead but competition next the seasonality lot there so? Jersey, of months I is online guess cadence but the that know it’s the one, To in I think XX we business is here obviously not this element first promotion there and growing to wagering a horse be here, how think balance the there do going about here the lot there’s versus the on an you of of infancy here, also a or and and how stages do spend New

Bill Carstanjen

Sure.

seasonality is one. country wagering that in biggest Yes, take I’ll our Dan, football the in is there So, online driver.

like just racing. generally, horse in So

excellent and an that. are acquire time the look is best to football figure best want opportunity customers so at You in to out do calendar a when the season opportunities to

terms of about don’t information worth. you we into how market, as to of given perfect want going you model New time. are have think much Jersey how you how and the understanding And customers customers a In any a to in behave again, to build jurisdiction over an get

certain those New to customer a spend above we spending think means just see like quickly as we’re have on value So If your justified as support and you per going doesn’t do the model customers. change we don’t not of customer level it because the given that actual so in don’t our is it data quickly Jersey, based other build if in any to model possible state.

modeling. things, always assumptions going going not need and disciplined because are our and the other and learn careful we to because modeling learning always and in wrinkle is off our populate data to our we we’re to So our we’re be doing the what market be but to going move people we’re different just always

and for do better you’ll New states of and us I that not ton we’ll even that’s states a dichotomy us the that’s learned make profitable but It country other Jersey. the this, think be seem will those we’ve term will do other in or the follow So, see see across and states how, much in to are states. prepared a jurisdictions run, will across midterm different short differently where long the profitable you’ll or is behave some the how

Dan Politzer

just, amount. on then above terms And that. guys think for some for think press there lot you reports authorized additional Kentucky thanks as in going Understood, And in a projects, both think certainly, I in how had the the initially HRMs to and Churchill it. at were And guess your you that is I I Got you, of were adding and Park. the gets think how right plan said build of you do number profitability do the at the you about kind return of do Downs Turfway how you Racetrack there. machines facility, there you

Bill Carstanjen

We’re, we start conservatively.

machines, machines. experience always our the will on be support that MS information demographic the the number start careful Based market comfortable. that very be want to want we’re HR we we to have So confident we that and of when we with very

the to within from ourselves add that that. tend the we have market upsizing then within also our more and as proved the some conservative market capability regulatory off will and utilization machines, to go we authorities to facility support the as So

announcements at generally you easy so. to us our be it’s very so do conservative start, look planning in long when when and to you we we machines, approval you have look as at because So regulatory tend to our add

we authority. So the the Get this is sort approval, of take. get approach the

do can free. start get conservatively are and you you the But deserve team go in approval more can if because prove so. these ahead you machines add So authority your to to more the that

market make the additional the machines. start go add, have conservatively, of and ROI support then and You the them good there to have so discovering the you that will pay is sure for if fortune

Dan Politzer

it. Great, so got Okay, much thanks guys.

Operator

like further no the would Bill showing turn back am I time, now at this questions to Mr. Carstanjen. I to conference

Bill Carstanjen

you. Thank

your company. always, our really and our your appreciate in company interest investment in As we

special the time. very obviously right particularly making is a Kentucky We’re around the that this about now, we’re investments excited Derby

will we’re growth the hope we’re we’re disciplined greater we’ve outlook, We’re careful a disciplined going time we over think make proven organic I that to company in help long even opportunities forward. company, our term our we’re pursuing you

mid-term be the in going we’re the to work will in do term. long the the in So payoff now

to Thanks your be you try stewards us in next of of time. very to your and your, we’ll investment look good of So much. and I forward capital to talking

Operator

Ladies your and this Thank concludes conference. today’s gentlemen, a you day. for wonderful have and participation

disconnect. all may You

Churchill Downs (CHDN) 1 Nov 192019 Q3 Earnings call transcript