Churchill Downs Incorporated Q2 FY2025 earnings call

• Growth plans for Derby Week: Expect step function growth in 2026 based on ticket revenue from pricing and investments, new NBC contract, increased wagering, sponsorships/licensing. Broadcast rights with NBC had record viewership, new 7-year contract provides $10 million adjusted EBITDA increase in 2026, and Oaks race to be in prime time. Wagering on Derby set records. Sponsorship and licensing expected to grow. Capital investments in renovations at Churchill Downs Racetrack. - HRM progress: Virginia's The Rose saw growth, Richmond HRM venue on schedule, Roseshire Gaming Parlor planned opening in October. Kentucky's Marshall Yards HRM facility on track for Q1 2026. New Hampshire acquisition of Casino Salem project, with plans to develop gaming and entertainment destination. Exacta business growth through HRM operations and third-party relationships, with technology enabling optimization and support for expansion.

In the second quarter, Churchill Downs Incorporated delivered all-time record net revenue of $934 million and all-time record adjusted EBITDA of $451 million. The Live and Historical Racing segment had all-time record second quarter revenue and adjusted EBITDA, representing nearly 2/3 of adjusted EBITDA for the quarter. HRM properties in Kentucky had growth, with Northern Kentucky and Louisville venues strong, and Owensboro venue opened in February. Virginia's Northern Virginia, Richmond, and Emporia properties collectively had over $8 million growth, while remaining Virginia properties were down $3 million. Wagering Services and Solutions segment had record second quarter revenue and adjusted EBITDA, with Exacta business contributing. Gaming segment's regional properties had mixed performance, with Terre Haute Casino and Resort impacted by gaming tax rate, and Louisiana HRM machines moved.

• Free cash flow in first half of year was $455 million or $6.29 per share. Maintenance capital projection reduced by $10 million to $80 million to $90 million. Project capital expected to be between $250 million and $290 million in 2025. Board approved new common stock repurchase program of up to $500 million. Bank covenant net leverage expected to be in low 4x range remainder of year and below 4.0x in 2026. Federal tax bill's provisions expected to reduce cash taxes and increase free cash flow, with 2025 impact $50 million to $60 million.

Q: Barry Jonas with Truist asked about pricing at the lower end of the Starting Gate Pavilion.

A: Last year was introduction, word gets out, expect demand and pricing to show up as with new facility areas.

Q: David Katz with Jefferies asked about New Hampshire market.

A: Location on I-93 is major artery, market includes New Hampshire and Massachusetts suburbs, demographics and location are strong, competitive with win property and others in region.

Q: Chad Beynon with Macquarie asked about international attendance and social media.

A: Thoroughbred racing is global, roads to Derby help build international connection, social media also being developed internationally.

Q: Dan Politzer with JPMorgan asked about federal tax bill impact beyond 2025 and capital allocation.

A: 2026 will benefit from 100% bonus depreciation and nearly all interest deductible, impact comparable to 2025. Focus on investing in Derby, HRM venues, and growing dividend, then share repurchases when accretive.

Q: Daniel Guglielmo with Capital One Securities asked about HRM growth runway in Kentucky and Virginia.

A: Substantial runway, metrics look good, teams strong, keep executing.

Q: Jordan Bender with Citizens asked about prediction markets in horse racing.

A: Prediction markets not attractive for pari-mutuel wagering on horse racing, Interstate Horseracing Act is an impediment.

Q: Ben Chaiken with Mizuho asked about M&A pipeline in New Hampshire region.

A: Focused on Salem project, expect to disclose plans when deal closed, region has changes and development.

Q: Joe Stauff with Susquehanna asked about Oaks schedule change.

A: Designed to build Oaks brand, drive wagering, sponsorships, and lead into Derby.

Q: Brandt Montour from Barclays asked about area between First Turn and Skye Terrace.

A: Refining cost estimates and plans, not disrupting 2026 Derby, will explain further at next earnings call.

Q: Shaun Kelley with Bank of America asked about sponsorship relationships.

A: Sponsorships are about win-win partnerships, more sophisticated approach, building intentional relationships.

Q: Jeff Stantial with Stifel asked about The Rose's strategies and margin.

A: Building brand, awareness, and database in Northern Virginia market, not maximizing margins now, investment in building relationships.