CHDN - Earnings call 3 2023 | Churchill Downs Incorporated

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Operator

Good day, ladies and gentlemen, and welcome to the Churchill Downs Incorporated 2023 Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Phil Forbis. Vice President, Financial Planning and Analysis and Treasury.

Philip Forbis

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

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

Carstanjen. and over non-GAAP Bill Officer, release this turn the is press included I'll both will Chief measures. earnings to website XX-Q GAAP to release. at present our Executive of on call, our The GAAP measures now we A in During and are call non-GAAP Mr. reconciliation churchilldownsincorporated.com. And financial press available yesterday's Form

William C. Carstanjen

Officer; adjusted will provide our are an Marcia will management take share Bill update team, After and she our our as on Phil. I Chief thoughts several Blackwell, insight we strategic high-level Marcia financial Operating revenue finishes, strategy. Counsel. Financial Good General record Mudd, today Dall, quarter several of on and delivered topics, members our on morning, and third results our including Thanks, capital third our and With net will some EBITDA. everyone. President Officer; quarter your Chief Brad then questions. We well as record me

record segments. We quarter across our delivered third all adjusted reporting of X also EBITDA

opened HRM of addition, Systems. strong Virginia results, These prior year. and strategic In in environment unfavorably new venue the entertainment a completed that to in Exacta particularly we a macro acquisition compares are

Looking of overview projects forward, our the for with Derby let's an at Downs XXXth underway next year have the preparation Kentucky Churchill Racetrack. and start we

progress as Renovation made have prior impactful Kentucky XXX. project project. highly This are in Suites We projects. significant just Derby April, planned our budget a executing will and well experience on end Both Derby transformative have our are to Jockey Club on completed as Paddock these testament of the dedication of time to our Week for and the and team is carefully members, we and capital be

compelling to other to are Downs Derby once-in-a-lifetime the grow Kentucky Churchill opportunities provide There extraordinary, experiences. and Racetrack

the consistent long with our Our historic of risk over nominal economic various EBITDA reflects investing through proven levels adjusted term. generate in ability to commitment to growth cycles our asset

the that spectacular May Our projects the these lead XXX, the Saturday focus coming until to as unique a the delivering as when It's right of which day major now in Downtown, in unveil exciting Stay future. as then Kentucky to Gaming anticipate, the and City Derby the Kentucky is of we worth opening we as XXXth we Derby. and celebrate the running will grand tuned projects XXXX. of December first will we count X the XXX done noting X, months days down same details Derby on

pace sales year. significantly of any ahead previous the are We for

a existing have premium is seating our of We all sold. only and almost left few suites

job selling great has a team also Our new sections. done the Paddock

sell in to this the moving hardest the encourage briskly are of right it's year's in the are testimonials. advantage case, while customer some anticipation year areas In areas purchase Derby and I always because next the of new and your first to the planning without note, XXX. On previous site-unseen excitement still you away that to there if is you tickets inventory. Derby, New milestone were attend

venues. to Turning our entertainment HRM

ceiling. Turfway quarter new Oak First Steakhouse the in expansive new gaming continue third Kentucky. Grove and of as to also this The all-time propelled EBITDA in We property September further highly This marked adjusted Nashville are to has but is delivered Cincinnati the growth quarter. at we where Derby record this continues and adjusted expanded X-year it of yet record improvement. we we approach Park see region to anniversary heights. still Northern City venue competitive market. Gaming in delivered the be, floor, and state-of-the-art its third growing market. penetrate to we not EBITDA Kentucky, before hotel expect improve a by steady encouraged property beginning lots the at

both play most because tavern offense. the market. Kentucky Ellis operating. game operations. HRM variables Kentucky impact have a Kentucky other begun became game strongly June on XX,XXX XX and It's makes stop, facility nicely are no and in or that other believe illegal which estimated smaller turned expected the bar, year. Gaming or criminal passage restaurant, benefit those now HRM across are truck X hard had there Kentucky there in at off We to Association longer but to properties, over the performing games were of from ban American the legislation effective essentially slot been a skilled we quantify a machine our of Newport games, and venues grade to HRM operating Park of Our as gray have this This entertainment contributing banning are

segment. venue completion. venue TwinSpires to Derby our sixth on X. certainly positive of our contribution included relatively nearing benefit from the from additional traffic sports The opening sports the entertainment September books EBITDA City HRM is related also betting of retail should is direct is our Kentucky foot modest, Our on site each Downtown, Gaming HRM properties and at Kentucky in but

mentioned, adjacent sporting downtown in is residents. the December. I and downtown urban driven focus other will early events, on center, urban grand the facility capturing convention This opening tourism by and Louisville market, As the

We and betting, and will bar sports and with along entertainment derby a several a cigar Speakeasy theme HRM bourbon machines XXX spectacular wine including of course, a sports have for approximately areas, retail bar.

the We primary are the the entertainment design Kentucky. for Park our seventh facility This site on of XX-acre will associated finalizing venue and just construction Owensboro, license. Kentucky plans a be HRM with Ellis HRM East

resulting largest the is growing economic Highway off new site Owensboro area and reminder, a is the sits This in just improvements an the with infrastructure that access last over region. the years right few developments, miles commercial away. from in road of Ohio and River As to XX because greenfield and work bridge city short fourth the a in residential Indiana commercial hub the Kentucky and over great and XX

spend to the to a XXXX of $XXX total of open in million. targeting quarter $XXX with first are We million

call We will at already will point definitive timing have begun provide we year-end and construction. more in cost February, our on which earnings estimates

Interstate to venues North Emporia our seventh entertainment near Virginia. September Rosie's and right HRM border on Turning in the HRM off XX. XX We Carolina our site in opened

property. early results $XX from this are HRM quite the new pleased We million with XXX

to is deploy the X,XXX to HRM quickly X,XXX goal licenses permitted all under machines of HRM takes approximately potential and as machines. utilize as Our our all us law Virginia XX practicable. Emporia

HRM state. expansion us progress which We venue, represents a the in great on Dumfries significant for are our making

As XX a of in South reminder, miles Washington, Northern is Dumfries Virginia, approximately D.C.

right XX is fantastic site highway. and the access off Our from Interstate with visibility

plan spaces, facility. the machines X,XXX We XXXX. We hotel, quarter a we with parking transitioning several location to and open least our event at XXX-room over in with of second a expect XXX from will much bars to X,XXX be restaurants existing open an larger HRM and Phase I be Dumfries center to HRMs,

Park During Virginia, third Park Manassas miles of XX is eighth of approximately to a in XXX D.C. entertainment Dumfries. northwest with XX-plus launched approval HRMs. quarter, we the also HRM Northern in and west miles win site to approximately open Washington, campaign our referendum Manassas

referendum, the be pursue project referendum November voters We this about to execution this in successful smaller proximity about the in well making a the an This voters by of an a exciting is we community population, a X,XXX in position situated immediately talk Richmond to will assuming I city passage large minutes. center. There Park hard with in making are commercial are in few of will registered the it and Manassas existing significantly on X, working opportunity us. which a than exercise for

games have operate games to strengthened in As continue existing you the Gray activity. that temporarily the many that law seen stating clearly Court overturned just last further injunction Supreme to state of are the allowed recently gaming had by legislature, gray despite illegal Virginia the in may the week,

have rules, the oversight to of in Commonwealth and projects. removed, process all ban New will next to our of play We significant games and Virginia, as pay impact Games month. Switching the over that Virginia submit are on time properties by think who jobs Gray believe its think earnest the and of Virginia sometime to a we the citizens their begin the that of the those We a elimination regulatory will create invest capital meaningful in will Hampshire. HRM taxes, benefit performance

HRM to ready provide our to related not are plants. We Salem details yet

right. us to Salem can We offering patience substitutive excited be our make We able contribution regard has this commitment doing That investment to are soon, are to with lot suburbs a being forward look unique confident and and optimistic an to create company. of very I'm that to doing for our long-term close the will to required planning, Salem attractive to the we shareholders. HRM show I entertainment will and a project it about share that we a getting but the update. so committed very also area Boston about for remain

our in and demonstrated, as of led an our As we our expand will disciplined time each on excellent we our over further to has return to markets. capital, key performance investments approach remain has HRM disciplined

in TwinSpires closed the We segment. August. our Exacta transaction late Regarding

systems As provider other horse and a racing Exacta technologies a country. is the major across historical of to related determinant operations central reminder,

by of being further in continue were reduce Ellis improve development, and costs the further in entertainment on Hampshire. will as able We our will Exacta top the well our HRM HHR our venues. management diversify Kentucky. Virginia growing Our HRM believe Wyoming to its industry Exacta, strategic in third-party the this for high-margin at legacy Virginia gains Park operations HRM to and we service at our leader Kentucky, team acquisition high-growth, for as in focus facilities New and and Exacta operators portfolio margins. Exacta our supports Also services line acquiring

pursue will games. to jurisdiction each to the get Once continue development HRM-based developed, the platform legal regulators and intend parameters deployed. with of them to we improve in Exacta We within work technology electronic regulatory the table and

horseracing for that and over the in Our extreme mostly they're particularly the off substantially the with continuing with severe course players, have experience heat TwinSpires as very the third racing starts and offer strategy cases with of to of their remain both result retain business players. unusually have best-in-class of respect in to ability a that quarter pleased we variations heavy in removal cohorts calendars seen weather, and players a our some our grow core reductions strong of committed rains including and been VIP XXXX, graph handle and races to our wagering and by in driven We others.

in quarter third X%. handle was TwinSpires U.S. driven prior the retail down total X% X%, days. by year's increasing over while saw decline racing on handle Total quarter, race U.S. players third Our a down was X% active

business our how with XXXX. through disruptions pleased are performed of has the We

competitors grow will This retain our distinguishing is in online a We to from customer to our business. players. offering continue strong invest and

racing content We companies. great wagering wagering horse online horse the acquired and BXB horseracing, are of growth. providing for we sports initial who for surface to We online around audience to of focused partnerships on We're by FanDuel a game TwinSpires broader have to this wagering for area addition, already platforms only and racing the access been horse begun and various sports of important customers scratch believe racing. technology the great proud DraftKings. believe our introducing is we've of sports to In the opportunities with

over You will strength the growth coming In quarters. our of opportunity you see results. unfold now the current meantime, see this continuing the

Turning to our segment. Gaming

in the pursuit Virginia, early hotel X casino see regard the quarter full hotel the First, Richmond, conducting gaming is to our a our can well progressing for in With grand Class line. opening available with Terre Haute We citywide November resort the casino II our Construction Casino Resorts in referendum Virginia the of of are of in second and Indiana. on to win licenses XXXX. planned last and we X. finish campaign

joint radio project. to wonderful this and pursue joint investment couple capital is This venture is Richmond. referendum million. weeks, this to jobs, to XX-XX the a to opportunity in and partnership with media passes focused invest on We Urban of our have company bring a public venture If when One, jointly a over city digital of a $XXX committed and entertainment

of the for world-class million thousands venue approximately X,XXX permanent and careers an revenue In XX-acre a dining, addition estimated gaming the jobs, construction and will to creating while entertainment we [indiscernible] generate tax of annual park. city, $XX with a paying create

We have off for to and of location Richmond it. an of site is impactful convince a of side the selected This project people great the just Interstate the to south XX. we on for community, Richmond vote hope

gaming generally the an equity this X our vote. With March continue property. of segment, pressures outcome manage Half as continues modest April, referendum agree from to on table our affect such and the identified was through in hold economic rate of for in low our in Park driven the rest we unusually November you headwinds after to by the games investments the the as Manassas one decline believe entirely segment resulted customers though, will inflationary this know of very our the first EBITDA regard our early I The late Rivers quarter. team and you let effectively. decline to will this We

we Our the period, drop table actually encouraging. over game increased which find

than it expected. While been we seeing been slot less it impact the thus, has and market, the entering competition of we has new only side are on the

with and keep quarter you another encouraged financial for third summary, are us was strong We we'll record quarter results. posted. In

of deliver team Our our across continues all to segments.

will We whether do investment are it over future. a the align there our I'll the with your our investments We organic Marcia? for flagship one the remaining that in opportunities Kentucky us the EBITDA footprint, and free believe the can new on then in a effectively many asset, increase best transformative the cash our in plans. believe also share pursue growth across we while will questions. we material industry drive sheets numerous our be to of have and we more we to that, plans long flow turn further demonstrated integrate years, balance maintain Marcia, acquisition expansive growth while Derby, have the strategic long-term with in opportunities and to executing We you growth call adjusted over and much these coming take in term. With

Marcia Dall

Thanks, Bill, good morning, and everyone.

quarter As net third Bill shared, adjusted we delivered record EBITDA. quarter revenue and record third

and update adjusted businesses growth basis. collectively results revenue XX% a provide by growth on on an Our capital generated start XX% insights a few on in these EBITDA management. and in sharing financial a quarter-over-quarter then a I'll

importantly, with Racetrack. return of Churchill a meet Racing Downs meet. our support industry horseracing the the for regarding September team and our with successful most First, race safe and race a

first few did we the for to operations third Park have in of a days quarter, the from impact During racing the Ellis shift small July.

million August. day X of Downs the in property expected Outside to our Arlington non-Derby the for moved performed these Racetrack quarter. in also Colonial Virginia as We items, race

one for the beginning this hold Racetrack race Thanksgiving Sunday through and Churchill at will We running final year meet week. Downs

the in our million unique EBITDA in across has and portfolio These first short $XXX of of Second, of expand assets generated brick-and-mortar years, months assets team related that HRM year. a X nearly HRM and adjusted X the diverse technology-related states. built X

historical nearly quarter. live of $XX the HRM year compared the in adjusted Our the EBITDA contributed prior growth properties million to quarter and third in racing for segment

passed adjusted X-year growth again grew results. beginning Grove the from Our the to strong delivered and City live year bringing and with entertainment, benefits to customers once Gaming prior see record its Kentucky HRM Derby milestone new is Turfway properties Oak XX% EBITDA as recently compared collectively property. quarter to

exact XX%, technology. performed Our September benefit during the excluding third quarter. of their the HRM X, that Virginia at Colonial put we impact a lower that utilize rate well with on from horse for Downs does quarter, Racetrack small racing properties in in machines the place the at This margins collectively reflect

our We properties long we gaming margins expect HRM line floors. the over enhance for and as to term Virginia improve the top the

in the long also We term we will HRM properties and improvement line our of ban from margin all the see of Gray top Virginia believe games. over

TwinSpires quarter increased racing our more offset days as quarter in decline declined because our adjusted cancellation turning and Thoroughbred segment. Handle year than business BXB primarily certain horse of handle. the along improved Third, horseracing the as of a compared economics TwinSpires casino from EBITDA of Thoroughbred sports slight of revenue from third business to Exacta racetracks. fewer continued race prior addition and races the and the the the with in to benefit growth the

expansion growth BXB services our online and out and our positive direct racing business quarter. to and horse EBITDA helped to the of generate related year compared technology adjusted casino pivot in to the settlement Our sports continued prior

Our historical margin the realized more in properties the return York from to contributions Iowa we the And fourth, once the business, acquired again as for addition in quarter PXE the significant third TwinSpires New segment we our levels did gaming in the transaction. regarding expected. third and of quarter

the Our Nemacolin in revenues the end Pennsylvania on agreement iGaming. June Games continued of exit and impact and Isle of property Gray at Presque a gaming our; were from by quarter third competitive the management impacted

the All properties and relatively of interest inflationary performing trends our well are the rates. of higher despite impact

in ability Our their teams maximize a operating market operating challenging demonstrate results environment. to continue to

excluding business the slightly claim period third quarter more to same-store same in insurance owned wholly X were recoveries. Our than the of XXXX interruption point casino compared down margins impact

margin of retention comparable a points margins in quarter the in XXXX. the post-COVID to on the third were XXXX, for benefit from compared Our approximately quarter the half X.X our up expansion peak basis of reflecting same

increase free management. share during generated same strong million year. or tax flow of [indiscernible] from months the over reflects period and capital the our diverse refund This XXXX. generated by higher the partially This is cash $X.XX first over the or per million offset $XX million of We cash flow $XXX X paid was $XX to up to per that in cash the nonrecurring taxes a due prior share $X.XX higher Turning interest year businesses rates in XXXX.

spent $XX we expect and to million months maintenance Regarding total in X the year. the first the now capital, year $XX to $XX spend for in of million million

in the million the have million total strong past in $XXX and in the we and will we of we flow expect made the XXXX and expect investments spend Regarding to year. are also that we spent continue to in investors. $XXX few project flow cash $XXX first returns and million collectively deliver The between months beyond years X continue provide cash strong capital, for year, to our making for the returns, investments capital

covenant Exacta, $XX during third the the our leverage net was consistent bank expectations. This organic end of of of reflects investments our repurchases the quarter. Our share at quarter third acquisition with X.Xx, and million

leverage of expect XXXX. and We decline year. this covenant our remain in leverage this the to expect then bank range to our begin We XXXX end covenant net in to net bank through

has dividends our Regarding which year's our Board dividend. our increased dividend last the delivered. very consecutive that represents and are our dividend dividend, share, of year Directors we of higher once Overall, again $X.XXX performance per per pleased than share a XXth results the team with for of company. X% overall is This approved

solid organic for call so call Bill? unique that foundation creating our for of can he With that, diversified shareholder come. We strategically dividends assets with turn remain questions. along our Bill growth value to repurchasing back stock. investments, portfolio open to the sheet, increasing for of the by years committed provides our to I'll over Our balance and long-term shares with a strong

William C. Carstanjen

Thanks, Marcia.

take ready your Okay, fire questions away. everybody, to we're

Operator

[Operator Instructions]

with the question comes line of Jefferies. Katz our And first David from

David Katz

about wanted mixed just wanted to have respect you're public Marcia, And and side others, to I perspective with some we this we just cost side get some the talking the on the started it, I but off to less obviously, what cost seeing numbers, of The with your a in hear revenues, commentary start bit landscape with equation. see to please. season, earnings so.

William C. Carstanjen

But a David, Bill. We're all after or XX in this seeing answer been Marcia you're I'll and it's one, gaming around right having working take Bill and that in beginning, now. experience for go of part it's very where to jump been inflation. ahead it. from Sure. I company manageable the an in free the years economy very

So in watch confident and to and all team corners details, I our effectively. feel abilities all the very watch their ahead the manage just

think margins. don't for there's I concern in So cause much our

we demonstrated in past I quarter. think this that

hinting through I think a -- materially more big I part than we've I been these it think referring don't or you're a things at point. And don't of built of current that. the are are that see this pressures it through us dealing process story. not that to We're others some at to with it's I that for important manage environment. -- our as to and think in And being quarter

David Katz

Okay. of if that And the follow-up, just how going we ratcheting about Have leverage, about role? now down should think fair Or are. we and say I -- forward? to for does and peaking forward we're thinking path kind of where that as my sort we may,

William C. Carstanjen

we cash lot of Well, a flow. generate free

we're next operational year. or in deal into projects the operational that So construction you'll now, see turn next of a of year midst great right

that now, as and forward picture better to right or looked cash flow better going it in projects. a our projects of cash cash that caused we is starts flow use move We use have what's of where down that? for and flow flow, it as use these next it year a online. to variety the We us So flow We come X.Xx because it never shareholders. lot cash our cash of use but invest of things, We the leverage, generate debt. do to to generate use reinvest pay some how we in we some has Xx it gets growth to

Operator

Fargo. Wells our And comes the next question Politzer from Daniel of with line

Daniel Politzer

permanent guys Can So you Virginia gray you confident you maybe prepared commentary are more how this -- remarks. Virginia around up maybe parameters to gray temporary can market about becomes how I And of market in you versus the the talk some you that is Kentucky? type put follow big enforceability that measure? the versus in this a is basically think that the and wanted of gave in on ruling

William C. Carstanjen

market Dan, and them and First, each you. compare hear about then to contrast directly. individually good from I'll talk

Kentucky, the largely in machines So have off. turned been

We certainly, haven't compliance turned law there gone of the where and done with a is to is survey of it's we've state But in and to state the every site has our material every the absolute understanding out to confirm with machine there certainty. off substantial every say the that. land and landscape

There off over where a have time. about challenging law developed seen were the turned for Gray thing just months, case but games the of was but newer they're that Virginia. Kentucky XX,XXX to machines the market off AGA been newly had So last And the gray we've It to turned relatively in near compared machines now. a there the a -- had reported been period court expanding great been was is turned of have reported, also in Games of are a rapidly. term. The in Virginia, expansion, where couple we've manufacturers seen jurisdiction. off. entrenched new the those were a Compared deal

the court case have now in law in the there the while the requiring its that the worked games law lower to been the court, operational court a reversed Court thus machines lower accordance with Virginia, allowed state effect way So remain quarter, had an thus by through gray the injunction court that in are system. Recently illegal. during the in the be Supreme granted

we to and to to starting compliance sometime guidance provided time into general happen. enforcement necessary machines some these that start to attorney for the local So thus, have was mid-November, come in outlets the expect

it But law. a the Court the see a is has it, state. gray of expect There games is you'll spoken It clearly Virginia. big are and it's we So of lot whole land. the in enforcement. on law The Supreme

expand I they to to accurate have say we because were that think continuing it's an rapidly. count don't so fair

directly, bit expect no turned turned of be at take the question enforcement will get to to them time be the legal law a clear works. to permitting machines catch point but we reality answer is of authority to and it very So to your these this how and off, on, up with there

they've the market X that little jurisdictions, turned entrenched of already in been we over up a Gray ironically, versus -- the more or though, So to Virginia off ahead bit much next Virginia, games, but Kentucky's comparing a expect substantially on catch Odyssey Kentucky X. month the and

Daniel Politzer

And follow-up, it. Virginia, the past get the versus of as turned mean else you a negative maybe gray something growth Got altogether? we how I this mean on competition months. softening to I the related of few HRM consumer market much a data state-reported in kind has the would attribute or or maybe

William C. Carstanjen

Yes. Sure.

by us. been the some site, the was anticipated decline expected So the there It's Hampton in our is which was impacted the Casino area. by reported always about state-wide in numbers and Portsmith opening September, in in particular, of XX% of that

gray in Hampton, of the Caesars That clear was impact remains course impacted for our rapid of games very site the is over is So with authorities very some pretty the a as casino in Virginia new of at Portsmith quality by and a saw a We Collinsville games expansion was we've XXXX. of quantity which also, couple there area. of certainly Virginia the because us at made bulk in and large gray seen in was But in forms site, Virginia, project. a the impact the which of small. really But strong jurisdiction. the

in in and change reversed think was that that that together move was the particular into going is Hampton. hit something as be all market, that's lump its site state because next the to in the there quarter. we so And was we now don't sites But by X a ultimately,

Operator

And Jonas comes line from the our with Securities. of next Truist Barry question

Barry Jonas

focused macro geography? you're just I visit more portfolio explicitly in or database or impact maybe on to any segment seeing more visitation? you of the Bill, per wanted about the impacting ask this the Is spend

William C. Carstanjen

about macro part think story. don't a Generally, is when big company, environment I the future of of I the our think our

it to to believe well. is draw through impact, had weakness all, specific don't rated But claim managing play. play. in be again, modest and weakness I trips. some there But The in And we're commentary. decline on really growth more -- still unrated good, I in than significant play really story the the I unrated maybe mentioning don't There's if think trajectory. but has it to really been if worth our more the at a I looks any rated the play in it's pretty our

Barry Jonas

Got it. really That's helpful.

I follow-up, a as wanted Just ask to about Exacta.

the X.X synergies. You deal on talked about a before multiple

is I any guess, is be? there what deal -- for be? the synergies do the may closed, sense an And that you have transaction the wind about to of sort up better do Now case could ultimate what upside a have you multiple

William C. Carstanjen

love I deal. Exacta the really

think was X,XXX to Virginia, in X,XXX. Recall and for that we're really and company working deployed to right expectations an deal to to Exacta exclusive it machines according it's we our do a were bought our I when going Virginia, be it smart now. there had exclusivity going in

out based there, Virginia Exacta quantity to we only of increase third-party Exacta customers of Exacta in number of of of performance have our product the lot and based from as number the application in ultimately, system But they too. the the of roll we that impact we're going the customers Ainsworth product growth on the both also machines. waive as only some and use. current the we've not increases environment, of Now to But exclusivity the but a on elected to see not the Exacta

itself, the strong -- it's strategically, I own business a us, to important and of country. really of impact to development because our real it's HRM always not cost on invest an So of growth structure, hugely only a that eye for on really but technology think but as control our facilities it, across margins and work we improve driven in the towards our direct and ability with the in

Operator

our And Macquarie. from comes question line of with next Chad the Beynon

Chad Beynon

laser-focused all different feels future you've that kind given on of for Paddock, on commitment what there's this the that weekly Bill, that, talked cohort people XXX. regarding kind kind shows the of But ton you about seen with can experience I advanced for of is said paying know XXX, not years? strong of are consumer And probably you we're What indicate clearly, and kind this? the good. and What monthly premium, with Meaning, pretty what you've trends given cohorts. does that for. talked a expand beyond commitment you've that about in

into So And at growth? secondly, of that how property. on the then feeds the one, kind fundamental potential expansion

William C. Carstanjen

Sure. Thanks, Chad. for Thanks the question.

expectation I've of deliver on that been excess It's execution, execution, XXX. spectacular focus tickets. built get so the customer's to Derby a the sales execution, encouraged of So allows time, my and been the on and in meet early expectations and project us by exceed certainly

our but Board us foundation great very confidence the should projects. of delivering every foundation that, part over investing think the XXX, the momentum pursue going the of is Derby. economics, experience happy confidence that a case decade Kentucky it's great the do experience gives on We've the projects. we're in with additional be for on focused plus we the is I successful we time future to and us but continue the team just the That because last the not economics delivering of that's And that had projects. for that to

X Derby for have So we XXX, projects. significant

renovation customer We the in that will of impact all the which we of Paddock guests will of the of really side the of suites, experience property, the racetrack. Jockey have the the directly have, that customers suites. Club group experience large And sit those absolutely that a then project it impact come transform physical appearance will the of front the to course, of

the through the wrinkles feel our intend have that want to of very our additional if time experiences economics lines customers and to Bill around think all don't to as keep with these the do it, we Mudd intricacies we on that that hit we for foundation confident sure are projects. So anything I but going going do granted deliver making team associated laser-focused to his we and and that going execution. that they do if I are we the well, momentum capital with to that, significant is because take we're

Chad Beynon

growth term. you healthy in to be there. laid your within states in about could what Marcia, the own that beyond HRM the great. states opportunities out position. something part expand term. of that you Are That's operate. still growth don't that and there kind With the or on Is in of HRMs this just currently terms back decade then And medium Obviously, near to talked the arena? you've of licenses respect half of

William C. Carstanjen

don't you if Marcia, Well, one. mind, I take could that

we yes, focus those operator see are all states the always number on that And brick-and-mortar a because states. didn't states in there a ourselves. for we So opportunity expanded of gaming are It's considering HRMs. didn't of previously, part discussion

from also operator, direct look perspective, at technology more as services brick-and-mortar states and X being but a we not provider. than being just as Now a

potentially that Exacta. not are think it in further There you'll opportunities discuss also I have in it's passing HRMs. for states expand the states of a So passed to of that us dispute continue to number current footprint see

new focus the have So passed of we they of follow gives type were X because in and before States, that way be that's and happy even development invest more but this that a really of there -- United to states, have in get on us everywhere our we're a for tool. we politically already successful a the part additional than too. growth to we in toolkit new states incentive pockets us states successful That's might on we'll where HRMs HRMs, are to of in legislation. But focused participating of legislation that opportunities have considered,

Operator

JMP Securities. from the with Bender Our Jordan of next comes line question

Jordan Bender

side. stick to HRM on with want well last the question I as of kind the

I go floors way tables regulations build the to as across states maybe were these these a guess, essentially And to facilities big anticipate that across they investment these across sit. or out cables? it of gaming the And cables? floors you like for then, incremental the for the opportunity written as live sit So could here or allow do the pretty you today, tables the laws with are that seems you we guys the operate guys be company. to gaming in HRM back that, would really Or put built facilities off these all

William C. Carstanjen

Jordan. Thanks for Really X question, the predicates.

we we individual companies, we that capabilities technology, of lot we're company a One is do between X to to a in the that. have to and have site with the partnership a -- Before plans. get expansion develop

shortchange and the parameters are to of we then with. And permitted. those within technology. regulators I the we and puzzle, make have sure have parameters HRMs the the perfect to what that in within comfortable of to framework would develop don't where they're with the everything want falls we of piece jurisdictions need So the work states to and work

different success conquering it the We'll meeting can challenges. you markets follow do -- those exactly the a those significant addressed will probably need do talk X both works, depend what and site. face won't we that plans. if appetites. But show of And we I'm know will time a as gets then way challenges, or while on hope, go hope always the are When over see We'll be it those -- I'm company you we'll deployment, to we're different I lot So we really exactly those before confident probably to that expansion our time. I to see on predicates going confident frame have of testing. things think that

that a facility-by-facility region. it data based on from generated take so on approach And we'll

properties between answer so a for will jurisdictions. each a our of different different answer And be it and

Jordan Bender

in day off a the catalysts that then demographic or have your facility? I of months. win picking for both up in you been that sports of gray early of the of the age of Great. kind betting And market those couple into machines But seeing door people for kind Kentucky you point kind days through can to of Are retail either different and my know it's per Kentucky. follow-up, machines those coming offline last more guys pushing walking in

William C. Carstanjen

that introduced state haven't trial. getting the We're was of deal facilities consumer. maturity that is Kentucky to familiarity in didn't seeing a yet. you're that was have reached the what a the we're our fact with, and great product they think It reaching I still

a So the I'm that when of in And still There from continued gray lot it's in invest business. impact general, they at attractive Kentucky, We're those more positive seeing state visitors to are sure. games, in of some turning properties our off growing there. And variables properties variables. they're do all make play too, come. for we've a

one it to I So thing. wouldn't put

any can demographics. then the we story maturity point at or how I think haven't in Kentucky. it gotten haven't capital around facilities our it investment of significant a that the long there to changes facility to it gotten be before to And we customer further. And takes in to assumptions more grow reach takes that dynamics that's

Operator

line comes with of the question next Guglielmo from Capital Securities. Our One Daniel

Daniel Guglielmo

things levels? doing has unit push the gaming room the and of gained continued organic that some few you When what to and that experience thinking there's perspective, expansion current unit last win team the per same-store think do about an the of size the are scale on from are from for over forward? and the portfolio that all you And years, front

William C. Carstanjen

Sure.

and a obviously, yet. gaming is of lot approached lot lot a a an growth versus and think you're investment HRM haven't of maturity of contrasting That HRM, margin. I of our area if high

facilities, maturity. of our are we others maturity And gaming than X If those some closer look in non-HRM this growth you're to as those trajectories. minds, some have different of some of comparing our at it reached to

some gaming, economy watching that and our seeing all can. And otherwise non-HRM traditional we're managing costs attributes we're gaming, of growth-minded our focusing brick-and-mortar running those for the well as those of That's a and as on mean possibly question that business, our I So of people. sure. sure aggressive we sites margins the culture. sites, mindset. impact at they're team that's our well, our the more of making That's then

an and and ideas, the look Racetrack facilities. Downs constantly in that of line seriously improvement those just in look capital in like pitching top they're HRM line they investment Churchill we think new very new drive TwinSpires And facilities. investment, the at our So at bottom which will we and

those margins the teams can grow as give and they they it demonstrate that their top so for their capital and to when facilities. compete And line we well have to

invest see investment market for we've to tears our plans. a a large in gaming. site, to a Class the believe best with do those are team be. and Terre like what environment. III us choices we're make will by gaming, capital our us going class and presentations put lot traditional you make sweat of they're $XXX But we'll III brick-and-mortar us HRM. that's look it, you going company, to just time, And So because we site and go members at on casino you'll to effort, trajectory going Richmond see the huge a close can And their the for you'll see their blood, things million winning of to making Haute And brick-and-mortar brick-and-mortar gaming things referendum traditional that's to see do if for they're

the in we I'd contrast way capital III and business that how So HRM about invest or how and Churchill Racetrack. or Class think to gaming approach question where investment That's to our it compare gaming answer the or level. at whether traditional TwinSpires Downs be we

Daniel Guglielmo

up? you and quarterly or drop that basis. not half that's was dig you player of a of further, style, some quick, games into the kind And a When trend in great. there is on game at then anything Rivers. It's first segment no That change for play of noticed there mentioned showing just peers some table in the that weakness I report win

William C. Carstanjen

No.

Waukegan competition hold I Certainly, story thought, in asset, rate is story. games, side, the Downtown was the that that's we sometimes on the the market the reiterate and that now think the is I having big and was there's really said, really fact The that been it's table think fantastic for the from impact but in what that asset and property. for a I there. the less from than happens and slot Chicago and quarter-to-quarter, that story explanation drop for that's Rivers a I'll us for the

River. as in it's favorite you performing a that's when look has competition. believe open at how for in together our It's team real One experience our the I optimism see now investment fantastic in Sure, the investments it to market. of We And a that been property. strongly. compared are new assets of cause the

on quarter, of games having level our in about story base not decline hold level it's impact at a performance more look of but for impact. And you the some level. the it's material that's table business a if So a than

Operator

any Bill remarks. Carstanjen I'll now turn to back for the call CEO, over closing

William C. Carstanjen

everybody. you, Thank

maximize your As to do time interest always, company. very, return. best very meet and you and your in thank Thank our your investment for We'll expectations for our you your today. to

we'll again, to So you and next thank time. talk you

Operator

Ladies and and you concludes This for gentlemen, thank today's now disconnect. may program, participating. you

Churchill Downs (CHDN) 26 Oct 232023 Q3 Earnings call transcript