Q1 2025 Churchill Downs Inc Earnings Call
Speaker Change: Good day, ladies and gentlemen, and welcome to the Churchill Downs Inc. 2025 first quarter earnings conference call. At this time, all participants are in a listen only mode. Later, we'll conduct a question and answer session and instructions will be given at that time. We ask all question and answer participants to please limit themselves to one question. As a reminder, this conference call is being recorded.
Speaker Change: I would now like to introduce your host for today's conference, Mr. Sam Ullrich, Vice President
Sam Ullrich: Thank you, Andrew. Good morning, and welcome to our first quarter, 2025, Earnings Toprends Call. After the company's prepared remarks, we will open the call for your questions.
Sam Ullrich: The company's 2025 first quarter business results were released yesterday afternoon [inaudible]
Sam Ullrich: A copy of this release, announcing results, and other financial and statistical information about the period to be presented in this conference call including information required by Regulation G is available at the section of the company's website titled news located at Churchill Downsincorporated.com as well as in the website's investor section.
Sam Ullrich: Before we get started, I would like to remind you that some of the statements that we make today may include forward looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially.
Sam Ullrich: All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release, and the risk factors included in our filings with the SEC, specifically the most recent reports on Form 10Q and Form 10K
Sam Ullrich: Any forward-looking statements that we make are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.
Sam Ullrich: During this call, we present both GAP and non-GAAP financial measures.
Sam Ullrich: A reconciliation of GAP to non-GAAP measures is included in yesterday's earnings press release. The press release and Form 10Q are available on our website at ChurchillDownsincorporated.com. And now, I'll turn the call over to our Chief Executive Officer, Mr. Bill Carstanjen.
Bill Mudd: Thanks, Sam. Good morning, everyone. With me today are several members of our team, including Bill Mud, our President and Chief Operating Officer, Marcia Dall, our Chief Financial Officer, and Brad Blackwell, our General Counsel.
Speaker Change: I will share an update on our growth plans for our company, including with respect to the Kentucky Derby, NRHRM businesses in Virginia and Kentucky, and then Marcia will provide insight into our financial results as well as an update on our capital management strategy.
After she finishes, we will take your questions.
Marcia: We delivered record first quarter net revenue of $643 million and record first quarter or adjusted EBITDA of $245 million.
Marcia: These results reflect strong performance. Given one, the first quarter last year was also a record, two, the material weather events that impacted many of our properties during this quarter, three, the increasingly uncertain economic environment driven by the terrorists and trade war disputes.
Marcia: And four, one less day this quarter compared to last year because 2024 was a leap year.
Marcia: This quarter, we successfully opened our Owensboro HRM venue on time and below budget. This is our seventh Kentucky HRM facility and is located just east of Owensboro, the fourth largest city in the state.
Marcia: It has 600 HRMs, a retail sports book, Simon Cass wadring, and several food and beverage offerings.
Marcia: We are pleased with the first couple of months of performance from this property and it is on track to deliver a great return for our shareholders
Marcia: Churchill is an exceptional company that continues to deliver growth and with a pipeline to a great future.
Marcia: We have demonstrated we can nimbly apply our strategy in any economic environment to effectively manage our capital to create best-in-class value for our shareholders.
Marcia: Given this backdrop, let's talk about the strategic investments we were making in 2025 to drive long-term shareholder value.
First, regarding Churchill Downs' racetrack in the Kentucky Derby
Marcia: We have completed the starting gate pavilion and courtyard project on time and on budget.
Marcia: Our guests at the 151st Kentucky Derby next week will be treated to 8,500 new reserved premium stadium and trackside box seats near the Kentucky Derby starting gate.
Marcia: On our last earnings call at the end of February , we announced a $900 million multi-year project to Churchill Downs Race Track that included tearing down and rebuilding the Sky Terrace, building new permanent structures in the infield for premium ticket holders, and providing improved amenities for our general admissions guests.
Marcia: A lot has changed in the world in the past nine weeks since that earnings call, including increased general economic uncertainty and risk of significant inflation.
Marcia: Driven in part by the new tariffs that the US intends to charge on products from almost every country in the world, this has created unanticipated and currently unquantifiable expected cost increases in most materials.
Marcia: We remain completely committed to growing the Kentucky Derby through the prudent timing of capital investments over the long term.
Marcia: We take very seriously our reputation for delivering long-term best-in-class returns to our shareholders, and it was only after careful evaluation of the current economic climate that we made this decision.
Marcia: We will use the coming months to assess the evolving economic conditions as well as to evaluate any changes that we want to make to the timing and sequencing.
Marcia: This is an opportunity to revisit and to make sure we deliver products that best meet and exceed our customers' expectations as well as those of our shareholders.
Marcia: Over 151 years, the Kentucky Derby has become a testament to the enduring spirit of American sportsmanship, celebration, and the lasting power of our traditions.
Marcia: It's the definition of a long-term asset and it is one that has always demanded discipline as well as innovation and innovation.
Marcia: When the macro environment concerns are better understood, we will move forward with thoughtful decisions on how best to invest material amounts of capital in this iconic asset.
Marcia: Last night we announced two smaller projects at Churchill Downs Race Track, the renovation of the finish line and the mansion.
Marcia: These two projects will cost approximately $25 to $30 million in total and are expected to be completed in time for the 2026 Kentucky Derby
Marcia: We believe that these two low risk and easy to measure projects will generate strong shareholder returns.
Speaker Change: We have 15 finish line suites on the fifth floor directly overlooking the finish line.
Speaker Change: These are reserved for approximately 600 guests and have traditionally been considered one of the most prominent and prestigious areas for sponsors and companies to entertain large groups.
Speaker Change: We will update the finishes and other amenities while also increasing the capacity to a total of 750 guests.
Speaker Change: At the same time, we will renovate the trophy room which sits behind the finish line suites and seats over 300, many of whom are additional guests of the finish line suite holders.
Speaker Change: The improvements to both these areas will create a larger, fully integrated hospitality experience with more energy, better flow, and superior amenities.
Speaker Change: Turning to the mansion, this is one of our most exclusive areas. It is located on the sixth floor and provides stunning views of the finish line and the racetrack as a whole.
Speaker Change: We will introduce updated finishes and amenities along with other enhancements
Speaker Change: We believe that both projects will deliver long-term superior returns for our shareholders.
Speaker Change: Strategic investments have driven the Kentucky Derby experience and financial results to a level few would have imagined just a handful of years ago [inaudible]
Speaker Change: We set records last year in all of our key financial metrics and grew the adjusted EBITDA for the event by $30 million compared to the prior year.
Speaker Change: We expect this year's Kentucky Derby to be comparable to last year's, delivering one of the best results in the history of our company across our key financial metrics.
Next, regarding our HRM progress
Speaker Change: Our track record has demonstrated that we are disciplined in our approach to HRM investments. This has led to excellent returns on capital from our HRM venues and the related technology.
Speaker Change: We will continue to explore further development in each of our key markets. In Virginia, as expected, we have seen good progress during the first quarter from the rose.
Speaker Change: As a reminder, the potential customer base around the Rose is nearly four times larger than our other largest HRM properties in Virginia and Kentucky.
Speaker Change: HRM facilities and new markets like Northern Virginia take time to attract, develop, and retain customers.
Speaker Change: We saw meaningful sequential growth in the gross gaming revenues each month of the first quarter as well as outstanding improvement in rated player metrics.
Speaker Change: This is the result of the ongoing marketing as we build our customer database. We are pleased with the progress to date. We hope to continue to demonstrate improvement as this new facility is miles away from approaching maturity.
Speaker Change: We've also made significant progress in the expansion project that our Richmond HRM venue.
Speaker Change: In 2024, it was our largest contributor of adjusted EBITDA in Virginia and the second most profitable HRM property in our portfolio after Derby City Gaming.
Speaker Change: We've added approximately 100 HRM so far and we'll have an additional 400 games operational for Memorial Day weekend.
This project is a head of schedule and on budget [inaudible]
Speaker Change: Next, we are building the Roe Shire, Gaming Parler, and Henrico County with 175 HRMs and other guest amenities. We made great progress during the first quarter. We now expect to open early in the fourth quarter of this year. This project is ahead of schedule and on budget.
Speaker Change: and Kentucky. We began work on the Marshall Yards HRM venue in Calvert City in late January . This will be our eighth HRM venue in the Commonwealth.
Speaker Change: We are on budget and on track to open during the first quarter of 2026 [inaudible]
Speaker Change: You will know the common theme as we discuss these brick and mortar construction projects. We have a firm grip on the schedules and budgets.
Speaker Change: This has been an important ingredient of our success over time in generating shareholder returns and even in these more volatile economic conditions we are committed and confident we will adhere to our principles of discipline planning and meeting expectations.
Speaker Change: Turning to Executive. The acquisition of the Executive Technology has improved the performance of our Virginia and Kentucky HRN venues by enabling us to better optimize the gaming floors and reduce the technology fees charged to our venues.
Speaker Change: On the B2B front, the exacta team has continued to make strides growing the portfolio of third party HRM operations in Kentucky, Wyoming and New Hampshire.
Speaker Change: For example, we now provide our technology to 11 of the 12 HRN venues that are operational in New Hampshire in New Hampshire.
Speaker Change: As we mentioned during our February call, we are making progress on the development of HRM based electronic table games.
Speaker Change: We currently plan to implement electronic cable games prior to the end of 2025 and certain of our existing HRM locations to support the growth of our properties.
David Katz, John
Speaker Change: Regarding our preparation for the upcoming 151st Kentucky Derby on May 3rd, a week from this Saturday
Speaker Change: We expect this will be another extraordinary experience for our guests. The buzz and energy seems greater every year, and this year promises to deliver once again.
Speaker Change: As I commented a few minutes ago, we anticipate results that are comparable to last year's extraordinary Kentucky Derby 150.
Speaker Change: We have an exciting week of racing infestivities planned and look forward to hosting many of you in person.
Speaker Change: If you cannot join us at the track, please be sure to watch the NBC broadcast, which begins at noon, eastern time, on USA Network, and then moves to NBC starting at 230.
Speaker Change: In summary, the first quarter was another strong one for us with record financial results.
Speaker Change: Yes, a lot has changed in the last nine weeks since our last earnings call. What has not changed is our leadership team's demonstrated track record of managing, adopting, and pivoting during various economic cycles.
Speaker Change: This discipline has positioned our company for strong growth for years to come, with our pipeline of investments in the Kentucky Derby, HRM and other gaming venues, the B2B and B2C expansion of our twin spires and executive businesses and accretive acquisitions.
Speaker Change: Our strategic choices and capital investments over recent years, along with our strong balance sheet and diversified portfolio of assets, have positioned us well to navigate these evolving times. We remain committed to delivering excellent total shareholder return with consistent execution over the long term.
Speaker Change: With that, I'll turn the call over to Marcia, and then we will take your questions, Marcia.
Marcia: Thanks Phil, and good morning everyone. I'll start with a few insights into our financial results and then provide an update on capital management.
Marcia: First regarding first quarter financial results. As Bill shared, we delivered record first quarter revenue and adjusted EBIDA.
Marcia: We also delivered record-first quarter net revenue across all of our reporting segments and record-first quarter are just a debuda for our live and historical racing segment and for our wagering services and solution segment.
Marcia: We are pleased with the first court of performance from our businesses in the live and historical racing segment.
This segment delivered records first quarter revenue and adjusted EVA [inaudible]
Marcia: The live and historical racing segment increased revenue by nearly $28 million, or 11% compared to the prior year quarter, primarily due to the opening of the Rose Gaming Resort in November , 2024, and the Owensboro Racing and Gaming in February , 2025 .
Marcia: Our H.R. and Properties in Kentucky performed extremely well during the first quarter. This was the first quarter.
Marcia: Our Kentucky HRM properties increase suggested EBITDA by $3.1 million or 6% compared to the prior year quarter despite the weather events our HRM venues experience and the impact of one less day in the quarter due to the 2024 lead beer.
Marcia: as well as the impact from the ongoing economic uncertainty that escalated in the first quarter.
Marcia: We've benefited from strong performance from our new Owensboro HRM venue and from our Oak Grove Turfway Park and Newport Kentucky HRM venues.
Marcia: The Virginia HM properties contribution to adjusted EBITDA decreased by $2.2 million or 3% compared to the prior year quarter.
Marcia: Our Northern Virginia HM venues collectively contributed nearly $10 million of adjusted EBITDA during first quarter, up nearly $4 million from the prior year quarter.
Marcia: The rose had a meaningful sequential increase in the GGR per machine per day, for each month of the first quarter, from our continued progress in marketing the property to educate and attract guests.
Marcia: All of our other HM properties in Virginia collectively had a nearly $6 million or 13% decrease in an adjusted EBITDA during the first quarter compared to the prior year quarter.
Marcia: Approximately one-third of the decrease was driven by the impact of weather and one less day in the quarter due to leap year in the prior year.
Marcia: The higher handle tax rate was the result of the increase in the number of HRMs we have in the Commonwealth of Virginia compared to the prior year quarter due to the opening of the rows.
Marcia: The final one-third of the decline was driven by consumer softness and the impact of competition near some of our HM venues that reduce the level of our unrated play.
Marcia: Overall, it is important to note that despite the decline in adjusted EBITDA, we still generated the combined 52% margin during the quarter for our same store of Virginia HRM properties.
Marcia: And our weighting services and solutions segment are just the EBITDA group on nearly $2 million or 4% compared to the prior year quarter [inaudible]
Marcia: The exact business contributed nearly $4 million of increased adjusted EBITDA from both third party customers and growth from our Virginia HRM properties.
Marcia: Our Twin Spires horse racing business saw an increase in revenue and a modest decline in adjusted even in the first quarter, primarily due to incremental legal expenses related to our legal team's successful outcome regarding Twin Spires' right to accept horse racing ragers in the state of Michigan.
Marcia: And last regarding our gaming business, our wholly owned regional gaming properties perform relatively well in the first quarter, given the regional gaming softness.
Increased Competition
Marcia: One less thing in first quarter of this year due to the 2024 leap year and the impact of weather and competition at certain of our properties.
Marcia: Regarding our Tara Hope Casino Resort in Indiana, this property delivered nearly $12 million of adjusted EBITDA in first quarter. Our Tara Hope property continues to form well with margins that are in the top quartile of performance for regional gaming properties.
Marcia: Turning to capital management, we generated $234 million, or $3.15 per share, a free cash flow in the first quarter, primarily from the strong cash flow generated from our businesses.
Marcia: Regarding maintenance capital, we spent $13 million in the first quarter. Based on a review of our maintenance capital plans for the year, we have reduced our 2025 maintenance capital projection by $10 million to $90 to $100 million.
Marcia: Regarding Project Capital, we spent $68 million in the first quarter. [inaudible]
Marcia: Regarding share repurchases and dividends, and March we announced that our board approved a new common stock repurchase program of up to $500 million. We repurchase nearly 800,000 shares in the first quarter under our share repurchase programs.
Marcia: Combined with the annual dividend we paid in January , we have returned nearly $120 million to our shareholders so far this year.
Marcia: At the end of the first quarter, our bank covenant net leverage was 4.0 times, based on our capital investments and anticipated share repurchases, we expect our bank covenant net leverage to remain in the four times range for the remainder of the year.
Marcia: We then expect our bank covenant net leverage to decline in 2026 to between 3.6 times and 3.8 times.
Thank you.
Marcia: Overall, we are pleased with the record results that our team delivered in the first quarter. Our leadership team has a demonstrated track record of leading, managing, adapting and pivoting during various economic cycles. [inaudible]
Marcia: We are well positioned to continue to grow through the remainder of 2025 and into 2026, fueled by the tangible pipeline of growth initiatives that Bill discussed.
Speaker Change: This is truly a special time of the year for our company, who will continue our rich and spectacular traditions at this year's 151st Derby. I look forward to sharing this remarkable experience with many of you in person next week.
Bill Mudd: I'll turn the call back over to Bill so that he can open the call for questions. Bill? Thank you, Marcia. We're now ready to take your questions.
Bill: Certainly, ladies and gentlemen to ask a question at this time, please press star 1-1 on your telephone and wait for your name to be announced. So with draw your question, please press star 1-1 again. And as a reminder, we ask participants to limit themselves to one question. One moment, please.
Speaker Change: Our first question comes from the line of Chad Beynon with Macquarie.
Chad Beynon: A few weeks as we've heard from a lot of your peers. Have you seen that accelerate in terms of the decline or with all the certainty that's been out there, you know, is that been pretty consistent with that low end player, I guess when it's when it started to drop. Thank you.
Thank you for watching. Be safe out there. Be well.
Speaker Change: Sure, thanks, Chad. So, I think what we see across the board is some hesitancy with just...
Chad Beynon: The volatility in the macroeconomic environment and the uncertainty over tariffs and things like that.
Chad Beynon: It's most evident in our lower tiered or unrated play, and that's the segment of play in our casinos over which we have the least amount of control. Of course as you get into the upper tiers, we have a relationship with those people and we have a very...
Chad Beynon: But I think the theme that we think we see out there is…
Chad Beynon: is just some hesitancy in the overall market. It's not that we know or have information that they have less money in their walls.
Chad Beynon: We don't know that for sure, but perhaps just some hesitancy that we're managing through and of course we're best able to manage that with the customers who are in our database because we can incentive and communicate with them .
Barry Jonas: Thank you. And our next question comes from the line of Barry Jonas with truest.
Barry Jonas: Hey guys, good morning. Appreciate the commentary on Derby 151 and expectations for this year to look like last year. Can you maybe talk a little bit about how you see that compositionally? I just want to be clear with the recent macro noise, are you seeing any impact on international visitation? Thanks.
Sure. Thanks for the question, Barry.
Barry Jonas: I'll take those in reverse. No, we're not seeing any material change in international visitation. It's hard to roll that up right at the moment, but I suspect it might even be better, but it certainly isn't worse as far as we're aware of right now.
Barry Jonas: So in general with the Derby, the Derby is a very, very strong event. The Derby is a very strong event.
Barry Jonas: that continues to grow and is getting stronger year to year in general. We had a significant uptick last year with Derby 150 as I commented in my remarks. That was a big step up in all of our financial metrics.
Barry Jonas: and I'm pleased that this year we're going to be comparable to that and I think our growth projectory will continue from there in terms of the customers this year.
Barry Jonas: I don't see any real concerns or weaknesses in the upper tier seats that we have. And I think it's pretty strong throughout. I would say over the last eight or nine weeks.
Barry Jonas: I think in the lowest here which are not inexpensive tickets, it's called them $1,000 plus tickets
Barry Jonas: We've seen less demand for those that we've been we've seen historically, but still strong demand and I think when you see this derby this year it'll look like every other derby it'll be a packed house.
Thank you
Speaker Change: And our next question comes from the line of David Katz with Jeffries
David Katz: Hi, good morning. Thanks for taking my question. I wanted to just continue down that same...
You know, same avenue a bit.
David Katz: So, if we start looking past this year's Derby, and a little longer term, and given the announcement about some of the capital plans being temporarily unhauled
David Katz: How can you help us think about the sort of progression of growth or earnings power?
David Katz: You know, for the Derby as we look out over the next few years, obviously not looking for a firm guide but some qualitative input on how we think it can grow and what the drivers of that are. And you know, some macro assumption, I assume, is required there.
David Katz: Sure. That's a good question, David. Let me do the best I can to...
to help help you through it.
David Katz: So first, you'll see next year the NBC contract kick-in with those economics. And also, as I referenced a moment ago, seeing a strong demand for Derby tickets, but not as much in the lower tier, especially
David Katz: with the new area that we've introduced, the starting gate pavilion.
David Katz: There I think what we've seen over the last number of years when we introduce a new area, we've been able to go right to the price.
David Katz: That we target as our long term price and then grow off that. I think when we look at this year, we weren't able to take that same kind of price that we've taken in previous year where we go right to our three year or at maturity type price for a new area. So I think as people experience.
David Katz: The new section, I think you'll see more pricing power there and as we develop more experiences you'll see us be able to take more price.
David Katz: So part of our plan for the Derby as it's always been is to develop new areas, introduce people to those areas and be able to yield price as they appreciate the value of the experience
Speaker Change: That shame this year in 2025, in my opinion, took a little bit of a jolt because we didn't have the enlist.
Speaker Change: pool of demand that we've seen in prior years. So I think this year we'll prove it, we'll prove it with the new area. And so when you get to 2026 I think you'll be able to see us take more price there. And we'll continue that.
that model.
We see growth in wagering, we see growth in fosterships [inaudible]
Speaker Change: We see smart growth and ticketing based on improving the experiences and yielding those experiences over time so nothing's changed
Speaker Change: Nothing's really changed in the formula. I think what we ran into over the last eight or nine weeks was hesitancy and boy oh boy, I'm proud of our team for how we've adjusted for that as we go into the 2026 Derby were prepared. We understand this market and we'll be going into the market functioning with an understanding of...
Speaker Change: of there was a hit to the coffee American consumer which I think a lot of businesses are seeing most businesses are seeing and will adjust and perform a courting win.
Thank you.
Speaker Change: Morning, everyone. The old implementation of the electronic cable games isn't a surprise, but...
Speaker Change: Does seem fairly significant from a positive perspective with the wheeled-nell in motion in motion.
Speaker Change: Can you maybe just expand on the size and scope of rolling those out as well? Are those going to be subject to a different tax rate across your various jurisdictions? And then I do just want to do one fall up here on the Derby. When you say comparable, are you relating that to revenue or EBITDA? Thank you.
Sure, so I'll take those in order. So.
The challenge around HRM Table Games is not...
a technological one. It's really...
A Regulatory Challenge and a Taxation Challenge
So, I want to be...
Speaker Change: Candid, but also cautious because those are the things we're solving for as we look at what jurisdictions we can enroll these out in and how we do so. From a product perspective, from a technology challenge perspective, we've done a pretty good job of working with key suppliers to...
Speaker Change: But with that takes time to gain.
Speaker Change: Gain acceptance in the marketplace, both from a regulatory perspective and from.
Speaker Change: Our customer perspective.
Speaker Change: With respect to issues like taxation, there are lots of reasons as you know four four.
Speaker Change: Variations in tax rates between table games and and.
Speaker Change: Traditional slot like games.
Speaker Change: That's something we have to take.
Speaker Change: One at a time with with with legislators to to make that case.
Speaker Change: Sorry, what was the other question again.
Speaker Change: Oh Derby comparable yes, sorry.
Speaker Change: Yes, what I speak of comparability.
Speaker Change: Speak of.
Speaker Change: Primarily adjusted EBITDA, but I think pretty consistently across all the major metrics, but certainly adjusted EBITDA and I think I think youll see some higher and some lower but across all of them.
Speaker Change: Comparable in the most critical one the ultimate one is the economic performance as a whole which is adjusted EBITDA. So that's what we're talking about.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Daniel Guglielmo with capital one Securities.
Speaker Change: Okay.
Daniel Guglielmo: Hi, everyone. Thank you for taking my question.
Speaker Change: I know you all are very tactical projects.
Speaker Change: Projects and plans, they're always presented in a very organized way and it shows how serious you I'll take it with last night's announcement, causing much of a pencil spend for 2026 through 2028 can you just talk about any of the other growth opportunities you see at existing properties that maybe you are dusting off at this macro uncertainty plays out.
Speaker Change: <unk>.
Speaker Change: Would you mind repeating that question because for some reason.
I lost a key phrase of it would you mind, just stating that again.
Speaker Change: Yes, sorry about that.
Speaker Change: You guys are very tactical about the growth projects and brands and take it very curious so with late last night's announcement, causing much of a pencil spend for 2026 to 2028 can you just talk about any other growth opportunities you see at kind of other existing properties that maybe youre dusting off as you kind of.
Speaker Change: Wait for the macro to play out.
Speaker Change: Yes so.
Speaker Change: First I just want to remind everybody that.
Speaker Change: We're pausing the big project at Churchill Downs Racetrack.
Speaker Change: Whenever we make investments around Churchill.
Speaker Change: We are we are.
Speaker Change: Tethered to the fact that we hold this event every year on the first Saturday in May So we make these decisions for the year. So you don't delay or pause it for a month you need the delay in posit for a year because every year you have to be ready for the next Kentucky Derby. So starting with the Derby I'd say I just want to emphasize this is a pause we want them.
Speaker Change: Macro economic environment to calm down a little bit because when it comes to cost on things like construction.
Speaker Change: Items, a lot of those things either come from China or the price in the market for those items are influenced by the supply of those items that come from China. So we need some of that to calm down before we can.
Undertake something like a $900 million project the project Im convinced will still make great sense.
Speaker Change: But whenever we do a project we do it from the perspective of trying to get it to a single variable equation as much as we can with that single variable being.
Speaker Change: How many tickets are we going to sell it and at what price point and over what period of time, we don't like to have the additional variable of what is this thing going to cost us to build that we like to manage and treat that as a as a certainty and not a variable right now we can't do that on a major project because of the macro environment.
Speaker Change: So.
Speaker Change: So Churchill Downs I expect he will pause this year wafer the macro stuff to settle down and then it's full speed ahead.
Speaker Change: With whatever relevant smart changes makes sense based on events that we can't predict.
Speaker Change: I think across the company.
Speaker Change: We're seeing organic growth in many of our Kentucky.
Speaker Change: Properties, it's a shame there is hesitancy with the consumer right now in general, but we're growing through that.
Speaker Change: That's being absorbed and we're still growing in many of our properties. So Kentucky shows a lot of strength. The Roes has a lot of strength to come we have the Richmond project that Henrico project. The continued expansion of the rose plus we.
Speaker Change: We think we have our 5000 unit limit, which we're not at yet worried about 4450 or so we'll look to we'll look to push to that 5000 and then beyond.
Speaker Change: We have the support of the legislature.
Speaker Change: I think new Hampshire is still something we're looking very hard in and that we believe we just had a bunch of technical problems, we need to solve.
Speaker Change: I like that so essentially.
Speaker Change: There are lots of ways, we will be growing this company I think all three segments that we have will show growth and we have plenty of opportunities there and it's really just managing cost and.
Speaker Change: Keeping a close eye on our balance sheet and keeping a close eye on the macro environment to sequence, what we want to do first.
Speaker Change: Because.
Speaker Change: While we all support and want to pursue maximum growth and generally do.
Speaker Change: In an environment, where there is uncertainty, particularly on cost side, we want to be smart about how we do it so that our balance sheet remains what what we think it should be and what and what the market thinks we should be too.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Jeff substantial with Stifel.
Bill Maher: Hey, good morning, Bill Maher, Thanks for taking the question.
Bill Maher: I wanted to ask on on trends in Virginia for you.
Your existing assets, so excluding Dumfries now that you anniversary the removal of the skill games and have a bit of a cleaner read on call it normalized growth cures.
Bill Maher: Curious just how you think about the overall maturity of those assets or in other words, what inning of the ramp cycle that you think you might be in obviously, it's an iterative process and any near more mature HR and facilities are still growing but just curious how you think about the opportunity is still remaining to drive awareness and trial in front of those assets.
Bill Maher: Yes, I think it was a really how do I feel about Virginia.
Bill Maher: I feel great about it it's still very early in our history in Virginia and in the.
Bill Maher: The maturity of these assets in Virginia, So I feel great on Virginia. This was a noisy quarter we had.
Bill Maher: Some severe weather events. We also have this tax fluctuation and then we have had also some some softness which I hope you appreciate I am very candid about I see that generally across the American economy will handle it better than most so we had some noise in Virginia.
Bill Maher: Also some new competition, that's been ramping up in the very south that effects, our vinton facility.
Bill Maher: In particular, so we've had some noise in Virginia this quarter.
Bill Maher: But be patient on that this is a great market and this is a great product that we have in our great development opportunity for our company. So I'm very very bullish on Virginia, and I think our team is doing an excellent job with respect to what is within their control and what's not in our control we plan around.
Bill Maher: To the best that we can but lots of strength there.
Bill Maher: And I'm actually quite pleased with how that team performed and how those assets perform through that quarter.
Bill Maher: Thank you.
Speaker Change: Our next question comes from the line of Joe Stauff with Susquehanna.
Bill Maher: Yes.
Speaker Change: Thanks, Good morning, Bill Marcia.
Bill Maher: Bill I wanted to ask.
Bill Maher: <unk>.
Bill Maher: Yes.
Bill Maher: We're always trying to kind of figure out different certainly parts of the consumer segment, you talked about the lower end.
Bill Maher: You did say on your best customers are not using those words, but you are rated customers.
Bill Maher: It's easier to manage is there is there a way that I can ask with respect to.
Bill Maher: Is the higher end say flattish and growing.
Bill Maher: The more mid.
Bill Maher: Mid grade sort of rated players is that still growing can you give us some commentary on that.
Bill Maher: Sure happy to.
Bill Maher: Take a market like northern Virginia with the Roes, we opened that in early November of 2024. So we havent had an opportunity yet to build out that market to identify those customers and get them into the database and get an extended period of time, where we can evaluate.
Bill Maher: Their behavior and that's true of a lot of our markets, particularly on the HRS side, we haven't had them open for five or 10 years, we haven't had a chance to fully build out the data.
Bill Maher: On each of these.
Bill Maher: On the customers in each of these facilities and so.
Bill Maher: The more time, we have to do that.
Bill Maher: We know whether they are at their ceiling or not and in general we don't know that we're generally these are not mature properties on the ASRM side, and we haven't had time to fully develop them and so that's a great thing as a company because it has lots of growth to come.
Bill Maher: <unk>.
Bill Maher: And so generally I view that more as an opportunity than than a hindrance, but certainly the more you can talk to your customers. If there is an economic downturn or some hesitancy in the market.
Bill Maher: The better off that you are because you have tools that allows you to.
Bill Maher: <unk> customers and keep them engaged and Thats one of the values of the casino space in general or the gaming space in general for those that are in your player databases, you know a lot about their behavior and their spend their frequency et cetera, and you know what they respond to in terms of.
Bill Maher: Incentives to make extra trips or to invest more so.
Bill Maher: I think in general that's a better area for us to manage but.
Bill Maher: I would say also that.
Speaker Change: Yes, I reached the C suite I was in.
Bill Maher: The president and COO.
Bill Maher: COO role back in 2009, and this business holds up well in economic tumultuous times, we're not there yet this doesn't look like 2009. This is not what it was like at that time.
Bill Maher: I went through those experiences with gaming assets.
Bill Maher: So, but we're prepared for that and we will respond well to that and it starts with working with and in setting the customers that we know a lot about so in our more mature properties. We have a 360 degree view of them and we've known them for a long time and in our less mature properties.
Bill Maher: We have the data that we have but I think the roses. A nice example of one where we haven't had time to build that yet we're in the process of doing that and the more time we have.
Bill Maher: <unk>.
Bill Maher: The better the better we will continue to perform.
Bill Maher: Thank you.
Speaker Change: And our next question comes from the line of Ben Chaiken with Mizuho.
Ben Chaiken: Hey, Thanks for taking my question and apologies if I missed it.
Ben Chaiken: We'll just see how youre thinking about capital allocation, specifically buybacks given you're essentially just.
Freed up 900 million on the balance sheet I guess does that allow you to be more aggressive on repurchases essentially.
Ben Chaiken: Thanks.
Ben Chaiken: Sure I mean.
Ben Chaiken: It can every time.
Ben Chaiken: It's always.
Ben Chaiken: A question of where best to place our capital.
Ben Chaiken: Sometimes that stock buybacks always a component is healthy.
Ben Chaiken: We always are deciding where best to place our capital.
Ben Chaiken: Where we think we can get the best return for our shareholders and certainly one tool of that is share buyback and we've been taking advantage of that I wouldn't comment on whether we're going to change what we're doing on that front, we're evaluating the current market like everybody else.
Ben Chaiken: Maybe there is an opportunity relatively in the near future near future where asset values go down and we see something we like.
Ben Chaiken: Theres lots of theoretical as of of what we can do but it's part of.
Ben Chaiken: My job marches job Bill months job, it's part of our jobs to decide where best to invest our company's capital.
Ben Chaiken: This is an interesting time to make those decisions and some of the dynamics have changed.
Ben Chaiken: But I can't say I see a sea change right now that demand significantly different behavior.
Ben Chaiken: We're early we're early and we're not sure. If this is a hiccup R. R.
Ben Chaiken: Something more permanent with our economy don't think it is but we don't know for sure. So we'll just we'll keep our powder and use it.
Ben Chaiken: And use it as we see appropriately.
Ben Chaiken: Thank you.
Speaker Change: And our next question comes from the line of Shaun Kelley with Bank of America.
Shaun Kelley: Hi, Good morning, everyone and thank you for taking my question.
Speaker Change: Bill in the prepared remarks, you talked a little bit about.
Speaker Change: Changes you can make at the Derby for next year as you just kind of think about.
Speaker Change: Understanding the customer and what's kind of going on there a little bit in terms of that sounded a little maybe too late to make bigger pivots are changes. This year I was just wondering if you could discuss a little bit more kind of theoretically what some of those changes might look like is that just a difference in how you kind of tear products or pricing or is there some other element to that and does it.
Speaker Change: And then filter into how you kind of allocate capital there. Thanks.
Speaker Change: The Derby is a 151 years old so.
Speaker Change: I don't ever think it makes sense to make major material changes without lots of data, but the thing about the Derby is we do have lots of data. So what we what we do every year. After the Derby is we get together with <unk> team and we really go through what we think we learned and and we adjust accordingly, we constantly survey our.
Speaker Change: Our customers, we look at not only their behavior, but what they say about our hospitality about our amenities and we adjust from from there. So I don't know that.
Speaker Change: I don't think for a second there's been some sort of material change in what our customers are going to want or expect from us going forward with the Derby, but certainly we will be monitoring that and we can adjust one thing they told us over the last number of years that that there was a.
Speaker Change: Segment, they want at even a higher hospitality experience they want it even more stratification from from other areas. So that's something we've responded to and worked hard to meet that.
Speaker Change: Things like the Paddock club in the Si club and.
Speaker Change: Now the projects, we're doing refinishing, the finish lines suites and updating dimension those are some of our highest and best customers and they tell us they want more they want higher end they want.
Speaker Change: And even a greater high end experience and so we respond to that.
Speaker Change: With respect to the group as a whole customer group as a whole there's so many segments and so much stratification within that group and we're trying to meet an address and evaluate all of that and.
Speaker Change: And we've been pretty good at that I think what all council the team for this year is.
Speaker Change: Let's just make sure that.
Speaker Change: We aren't hearing trends versus.
Speaker Change: One one year things versus long year trends I think this is this is an interesting year.
Speaker Change: Year, because there has been turmoil in the macroeconomic environment.
Speaker Change: So we'll just evaluate all the data that comes in after this year's Derby in and maybe it will lead to <unk>.
Speaker Change: Further stratification.
Speaker Change: Different segment classes, and maybe it wont, but thats our job to evaluate what we think our customers want.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Brent <unk> with Barclays.
Speaker Change: Good morning, everybody. Thanks for taking my question Bill and Marcia.
Speaker Change: I'll just stay on topic here, so on the Derby comparability this year versus last year.
Speaker Change: Im just trying to kind of think about the puts and takes you have the starting gate Pavilion. You said you had strong pricing there that's a good guy you've got.
Speaker Change: Presumed momentum you would think from the new <unk>.
Speaker Change: Netflix series that that just hit.
Speaker Change: But then of course, you are comping up against the big $1 50, how much of that.
Speaker Change: How much of it is just general conservatism that youre trying to.
Speaker Change: Convey here due to the macro hesitancy and how much of it is there some comparability issue with the $1 50, we should think about or anything else I am missing in that equation.
Speaker Change: What I'm trying to do is just be.
Speaker Change: Which is be very candid there've been some macroeconomic uncertainties.
Speaker Change: And sort of the macro environment and I don't want to get on a phone call and not tell you that those arent.
Speaker Change: Those are real all businesses are looking at that and trying to evaluate how how they might impact their business from our perspective I didn't see it.
Speaker Change: A particular long term impact on the Kentucky Derby I don't suspect that it has.
Speaker Change: I am not particularly concerned about it but I don't want to get on the phone and not acknowledged this macro environment. That's going on so I think we've seen a trend over the last eight or nine weeks.
Speaker Change: Correlates perfectly with some of these trade war disputes and tariffs we've seen a difference in.
Speaker Change: <unk>.
Speaker Change: The lower and ticket sales for Derby.
Speaker Change: That's a fact, we've seen a difference but the demand is so strong for the event that.
Speaker Change: That it's not going to show up when you see the crowds or anything like that but but there has been a change in.
Speaker Change: And I acknowledge that but I don't think youll see it affect our performance in any material way for the event and as we build through to the 2026 Derby I feel great I feel great about what comes for 2026.
Speaker Change: But I think it's important on calls like this and having been through 2009 and having been through Covid to just be very candid.
Speaker Change: And to let you know that whatever we see out there we adjust we planned for we work through and I think our results reflect that.
Speaker Change: Thank you.
Speaker Change: I am showing no further questions at this time, so with that I'll now hand, the call back over to CEO Bill <unk> for any closing remarks.
Speaker Change: Thank you and as always we appreciate your interest in our company and your investment in our company and we'll be good stewards of your capital.
Speaker Change: And we look forward to a week from this Saturday for the 150, <unk> Derby and we hope as many of you as possible join us in person or watch on television and more good things to come thanks, everybody.
Speaker Change: Ladies and gentlemen, thank you for participating this does conclude today's program and you may now disconnect.
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