Churchill Downs Incorporated Q4 FY2025 earnings call

2025 was a strong year with record net revenue and adjusted EBITDA. Hosted successful Kentucky Derby with record handle and high TV ratings. Guests experienced renovated starting gate pavilion and courtyard. Grew HRM footprint with new venues in Kentucky and Virginia, and announced Rockingham Casino investment. Expanded Xacta technology business. Grew Twin Spires horse racing business. Focused on disciplined investments and regional gaming tailwind from federal tax laws.

2025 was a record year for Churchill Downs. Live and historical racing segment and wagering services and solutions segment delivered record adjusted EBITDA. Regional gaming portfolio had solid performance. Kentucky HRM properties generated record adjusted EBITDA in 2025, supported by Owensboro opening and strong portfolio performance. Virginia HRM venues also delivered record-adjusted EBITDA with sequential growth in GGR per unit. Wagering services and solutions segment adjusted EBITDA increased 7% in 2025 driven by Xacta business growth. Regional gaming properties demonstrated resilience despite temporary headwinds.

Expects to return to consistent and meaningful growth across all metrics including adjusted EBITDA in 2026. Derby to generate $15 to $20 million of incremental adjusted EBITDA in 2026. Bank covenant net leverage expected to decrease below four times during 2026.

Economic uncertainty and tariff-related volatility during sales cycle. Legislative processes in states like Virginia affecting iGaming. Responsible rollout of new products like electronic table games requires careful execution to meet regulatory and customer expectations.

Q: Barry Jonas asked about Derby early pricing and demand trends.

A: Derby firing on all cylinders, ticket sales in latter stages, sponsorships and wagering trends positive.

Q: David Katz asked about Kentucky HRMs and ETGs.

A: ETGs just rolling out, Kentucky HRM product evolving, more growth ahead.

Q: Chad Beynon asked about wagering growth and prediction markets.

A: Gravitation to bigger events, paramutual wager on horse racing has legal framework, prediction markets not part of parimutuel wagering.

Q: Jordan Bender asked about Virginia legislative processes.

A: iGaming bad for Virginia, legislators and public view iGaming negatively, focus on sharing views.

Q: Dan Politzer asked about portfolio parts and synergies.

A: Constantly evaluate businesses for growth and margin improvement, evolving landscape.

Q: Daniel Guglielmo asked about additional U.S. states for HRM.

A: HRM story good for states, need to get message out to other states.

Q: Jeff Stanchel asked about AI implementation.

A: AI helps customers with race analysis tools, also for business marketing and cost management.

Q: Brant Montour asked about Derby KPIs.

A: Back on track with good visibility, tailwinds from tax bill benefits.

Q: Sean Kelly asked about Virginia core trends and Northern Virginia casino competition.

A: Virginia business strong, long runway for Rose, Northern Virginia casino competition is legislative noise.

Q: Trey Bowers asked about free cash flow and share repurchases.

A: Strong cash flow, balance share repurchases with other capital allocations.

Q: Joe Stoff asked about ETGs in Kentucky and Derby sponsorships.

A: Responsible rollout of ETGs, focus on growing Derby's international participation for sponsorships and growth.