Churchill Downs Inc Q1 FY2025 earnings call

• Recorded record first quarter net revenue of $643 million and adjusted EBITDA of $245 million.
• Opened Owensboro HRM venue on time and below budget, with strong initial performance.
• Temporarily paused the $900 million multiyear project at Churchill Downs Racetrack due to economic uncertainty but announced smaller projects for Finish Line Suites and Mansion, costing ~$25-$30 million and expected to be completed by 2026.
• HRM progress: Rose in Virginia showing sequential growth, Richmond and Henrico projects ahead of schedule, Marshall Yards in Kentucky on track to open in 2026.
• Exacta technology improved performance of HRM venues and expanded B2B portfolio, with plans to implement electronic table games by end of 2025.
• Anticipated comparable results for the 151st Kentucky Derby to last year.

The live and historical racing segment delivered record first quarter revenue and adjusted EBITDA, increasing by nearly $28 million or 11% compared to the prior year quarter, driven by new venues like the Rose and Owensboro. Kentucky HRM properties saw adjusted EBITDA growth of $3.1 million or 6% despite challenges, while the Virginia HRM property had mixed results. The wagering services and solutions segment saw adjusted EBITDA growth of nearly $2 million or 4%. Regional gaming properties had mixed performance, with Terre Haute Casino Resort performing well.

• Temporarily paused major project at Churchill Downs Racetrack to wait for macroeconomic calm.
• Expect Kentucky Derby to continue growth with NBC contract and new areas like Starting Gate Pavilion.
• HRM projects to continue with expected growth in Virginia and Kentucky.
• Project capital for 2025 adjusted to $250-$290 million, maintenance capital reduced to $90-$100 million.

• Macro-economic uncertainties and tariffs causing potential cost increases and hesitancy among consumers.
• Weather events impacting HRM venues.
• Volatility in the market affecting lower-tiered play.

Q: Hi, good morning. Thanks for taking my question and all the prepared remarks. Bill, Marcia, just wanted to ask about the a little bit of the softness that you're seeing, I guess, for the quarter and particularly in the last 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, has that been pretty consistent? With that low-end player, I guess, when it started to drop?

A: Sure. Thanks, Chad. So I think what we see across the board is some hesitancy with just the volatility in the macroeconomic environment and the uncertainty over tariffs and things like that. So certainly, 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 much a 360-degree view of their behavior. So we're able to communicate with them, and we're able to incent them to come. So we have a better opportunity to manage that. But certainly, for us, consistent. So far, it's been consistent over the last number of quarters. But I think the theme that we think we see out there is just some hesitancy in the overall market. It's not that we know or have information that they have less money in their wallet. We don't know that for sure. But perhaps just some hesitancy that we're managing through. Of course, we're best able to manage that with the customers who are in our database because we can incent them and communicate with them.

Q: 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? Just want to be clear with the recent macro noise. Are you seeing any impact on international visitation?

A: Sure. Thanks for the question, Barry. 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. So in general, with the Derby, the Derby is a very, very strong event 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. And I'm pleased that this year, we're going to be comparable to that, and I think our growth trajectory will continue from there. In terms of the customers this year, I don't see any real concerns or weaknesses in the upper-tier seats that we have. I think it's pretty strong throughout. I would say over the last eight or nine weeks, I think in the lowest tier, which are not inexpensive tickets, call them, thousand-dollar-plus tickets, we've seen less demand for those than 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.