Earnings call transcript: Churchill Downs sets record revenue in Q2 2025

Churchill Downs Incorporated reported record net revenue of 934 million dollars for the second quarter of 2025, marking its fifth consecutive quarter of record revenue and adjusted EBITDA. The company also noted a significant free cash flow generation of 455 million dollars in the first half of the year. Despite these achievements, the company’s stock saw a slight dip of 0.36% in premarket trading, settling at 87.68 dollars. According to InvestingPro data, the stock is currently trading near its 52-week low of $85.58, with technical indicators suggesting oversold conditions. The company maintains a solid market capitalization of $6.24 billion.

Key Takeaways

• Churchill Downs achieved record net revenue and adjusted EBITDA for Q2 2025.
• The company generated 455 million dollars in free cash flow in the first half of 2025.
• Stock price experienced a minor decline of 0.36% in premarket trading.
• Expansion projects and strategic initiatives are underway, including international market growth.
• The company expects to benefit from significant tax savings due to a new federal tax bill.

Company Performance

Churchill Downs has continued its trend of strong financial performance, reporting an all-time record net revenue of 934 million dollars for Q2 2025. This marks the fifth consecutive second quarter where the company has achieved record revenue and adjusted EBITDA. The company attributes its success to strategic expansions and innovations, such as the week-long Kentucky Derby celebration and the completion of key projects like the Starting Gate Pavilion. InvestingPro analysis reveals the company maintains a GOOD financial health score, with particularly strong profitability metrics. The company has also demonstrated its commitment to shareholder returns, maintaining dividend payments for an impressive 51 consecutive years.

Financial Highlights

• Revenue: 934 million dollars, a new all-time record.
• Adjusted EBITDA: 451 million dollars, another record for the company.
• Free cash flow: 455 million dollars in the first half of 2025.
• Maintenance capital projection reduced to 80-90 million dollars for 2025.

Outlook & Guidance

Looking ahead, Churchill Downs anticipates continued growth, particularly during Derby Week in 2026. The company expects cash tax savings of 50-60 million dollars from a new federal tax bill and plans a capital spend of 250-290 million dollars in 2025. The company’s bank covenant net leverage is projected to decline below 4.0x by 2026. InvestingPro data shows analyst consensus is strongly bullish, with price targets suggesting significant upside potential. For deeper insights into Churchill Downs’ valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

CEO William C. Carstanjen emphasized the company’s commitment to driving shareholder value, stating, "We work for you. Our job is to drive shareholder value, to drive improvement." CFO Marcia Ann Dall expressed optimism about the company’s growth prospects, stating, "We are well positioned to continue to grow through the remainder of 2025 and into 2026."

Risks and Challenges

• Market saturation in key regions could limit growth potential.
• Economic downturns may affect consumer spending on leisure activities.
• Regulatory changes in gaming laws could impact operations.
• Increased competition in the gaming and entertainment sector.
• Potential delays in ongoing projects might affect projected timelines.

Q&A

During the earnings call, analysts inquired about the company’s expansion into the New Hampshire market, which is seen as a strong growth opportunity. There were also questions about the strategic approach to international market expansion and the optimization of HRM properties. Executives highlighted their focus on building "win-win partnerships" and strategic sponsorships as part of their growth strategy.

Full transcript - Churchill Downs Incorporated (CHDN) Q2 2025:

Andrew, Conference Call Operator: Good day, ladies and gentlemen, and welcome to the Churchill Downs Incorporated 2025 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: At that time.

Andrew, Conference Call Operator: We ask all question and answer participants to please limit themselves to one question. As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Mr. Sam Ullrich, Vice President, Investor Relations.

Sam Ullrich, Vice President, Investor Relations, Churchill Downs Incorporated: Thank you, Andrew. Good morning and welcome to our second quarter 2025 earnings conference call. After the company’s prepared remarks, we will open the call for your questions. The company’s 2025 second quarter business results were released yesterday afternoon. 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 ChurchillDownsIncorporated.com as well as in the website’s Investor section. 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.

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 10-Q and Form 10-K. 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. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in yesterday’s earnings press release. The press release and Form 10-Q are available on our website at ChurchillDownsIncorporated.com and now I’ll turn the call over to our Chief Executive Officer, Mr. William C. Carstanjen.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Thanks, Sam. Good morning everyone. With me today are several members of our team including Bill Mudd, our President and Chief Operating Officer, Marcia Ann Dall, our Chief Financial Officer, and Brad Blackwell, our General Counsel. I will share an update on growth plans for our company, including with respect to the Kentucky Derby and our HRM businesses. 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 first regarding our second quarter results. We delivered all-time record net revenue of $934 million and all-time record adjusted EBITDA of $451 million. This is the fifth consecutive second quarter that we have set records for net revenue and adjusted EBITDA. Now let’s talk about our growth plans for the company, both near term and long term.

First, regarding our plans to grow Derby Week and Churchill Downs Racetrack. Over the last decade, we have expanded the Kentucky Derby into a week-long celebration. In 2024, we delivered 20% growth, $30 million of incremental adjusted EBITDA in one year. Given 2024 was our 150th running of the Derby, it proved to be a strong comparison for us to beat this year, particularly given the weather we then experienced on Derby Day. Yet we achieved nearly the same level of adjusted EBITDA in 2025 for Churchill Downs Racetrack as we did in 2024. We expect to show meaningful growth with the Derby in 2026 and beyond based primarily on five catalysts. The first is ticketing revenue driven by unique premium experiences. Derby Week begins with Opening Night on the Saturday before the Kentucky Derby.

We then have three days of racing and events on Tuesday, Wednesday, and Thursday, each separately themed and promoted before culminating with the Kentucky Oaks on Friday and the Kentucky Derby on the first Saturday of May. This year we had over 370,000 people attend Derby Week. This is comparable to hosting five Super Bowls over the course of one week. Shaping the Kentucky Derby experience to be a week of spectacular racing and events gives us a range of different price points over the various days to attract, develop, and segment our customers, with the finale, the Kentucky Derby itself, where we have proven our ability to design and segment customer experiences at an entirely different level. The demand for the Kentucky Derby and for Derby Week tickets is growing.

We will continue to deliver special customer experiences while selectively and thoughtfully pricing them based on rising customer demand, especially for our premium offerings. We expect that this approach will continue to generate meaningful adjusted EBITDA growth for Derby Week going forward. The second driver of long term growth for Derby Week is our broadcast rights. We have had a long standing successful relationship with NBC. This year that partnership delivered record breaking results. Average viewership for the broadcast reached nearly 18 million, a 6% increase over 2023, and peak viewership climbed to almost 22 million people, up 8% from last year’s record. These are the highest Derby viewership numbers we’ve seen in decades, highlighting not only the strength of our media partnership but also the continued growth in the cultural relevance and reach of the event.

We also had over 285 million social media impressions during Derby Week, a 67% increase from 2023. The interest in Derby Week has simply never been higher. In April of last year, we negotiated a new seven year contract with NBC that begins next year with the 152nd Derby. This will provide a $10 million increase in adjusted EBITDA for 2026. We were thrilled to announce that NBC will for the first time broadcast the Kentucky Oaks race during primetime on national television in 2026. The race will be run during the 8:00 P.M. to 9:00 P.M. hour on Friday night, May 1. Previously, the race had been run between 5:00 and 6:00 P.M. and televised on an affiliated cable network with more limited distribution and viewership. We believe the move to primetime coverage on NBC will serve as a catalyst for increased viewership and wagering.

This enhanced visibility also strengthens the event’s appeal to current and prospective sponsors. Positioning the Oaks in primetime also creates a compelling lead in to the Kentucky Derby, further amplifying awareness and engagement and wagering around our flagship event. The third driver of long term growth is wagering. This year we once again set all time records for wagering on the Derby race, the full Derby Day program, and Derby Week as a whole. Wagering on the Derby race was up 11% over last year’s all time high. Derby Day wagering increased 9% over the previous record, and wagering for Derby Week rose 6% above last year’s benchmark. By continuing to attract the best horses from around the world and benefiting from the Derby’s expanding cultural relevance, we are seeing consistent growth in wagering across the week.

This also helps our TwinSpires horse racing business to attract both serious as well as casual bettors. TwinSpires horse racing set records this year for wagering, new registrations, and active players during Derby Week. Our partnerships with FanDuel and DraftKings also set new Derby Week wagering records. We intend to continue building on these positive trends. The fourth driver of Derby Week growth is sponsorship and licensing. Sponsorships of the Derby grew in 2025, and we expect it will continue to grow as we expand our national and global reach through our on-site attendance, television and online audiences, social media reach, and other growth initiatives. Finally, the fifth driver is selective renovations and expansions through capital investment. Over the last decade, we have made a series of strategic capital investments at Churchill Downs Racetrack aimed at elevating the guest experience during Derby Week and broadening our appeal to new audiences.

These investments have and will deliver best-in-class returns for our investors. We successfully completed the Starting Gate Pavilion and Courtyard project on time and on budget for this year’s Derby. Feedback from our guests in these newly remodeled areas has been overwhelmingly positive, with many noting the significantly elevated experiences. We are confident this project will generate strong returns for our shareholders as our customers experience and then spread the word about the improvements we’ve made to this section of our venue. We are making excellent progress on the renovations of two of our most prestigious and exclusive areas, the Finish Line Suites and The Mansion. We expect both previously announced projects to be completed on time and on budget for Derby Week 2026. We are also deep into planning for our next project, which will be focused on the area between the First Turn Building and the Skye Terrace.

This is an exciting undertaking for us, and we will have more to share with you on our next earnings call, so stay tuned. Strategic investments will remain a key part of our long-term strategy for the Kentucky Derby as we seek to constantly improve our guest experience. In summary, we anticipate that we will generate step function growth for Derby Week in 2026 based on growth in ticket revenue from pricing and from the strategic investments we have made, as well as from the new NBC contract, increased wagering, and growth in sponsorships and licensing. Churchill Downs Racetrack and the Kentucky Derby remain the crown jewel in our portfolio, and we’re excited about the strong foundation these growth catalysts provide for a vibrant and successful future. Next, turning to our HRM progress, first in Virginia, as expected, we have seen continued progress during the second quarter from The Rose.

It’s really encouraging because we are still in the early innings. HRM facilities in new markets like Northern Virginia take time to attract, develop, and retain customers. We saw meaningful growth in the gross gaming revenues each month during the quarter when normalized for calendar differences, and we are continuing to build our customer database in Central Virginia. We are on schedule and on budget with our growth project at the Richmond HRM venue. We expanded our gaming floor in May of this year and expect to complete the remaining phase in just a few weeks. We continue to make great progress in building The Rose Shire Gaming Parlor in Henrico County. We are excited for the planned opening of this upscale entertainment venue in October of this year, and ahead of schedule and on budget.

In Kentucky, we are progressing well on the Marshall Yards HRM facility in Calvert City. This will be an important addition to our portfolio of entertainment properties in the Commonwealth. We are planning to open this venue during the first quarter of 2026 on budget and on time. In New Hampshire, we were thrilled to announce last week the execution of definitive transaction documents to acquire 90% of the Salem Casino project located in The Mall at Rockingham Park in Salem, New Hampshire, close to the Massachusetts border at Exit 2 on Interstate 93. We intend to develop a state-of-the-art gaming and entertainment destination to draw patrons to Salem from across the significant New England market and to support charitable organizations throughout New Hampshire. Currently, there is a temporary facility operating 100 HRMs and 13 table games.

We are targeting to close the transaction in the third quarter, and then we’ll share more details on our future development plans. In the near term, we anticipate continuing to operate our Chasers Poker Room in Salem, and we have retained the rights to the associated HRM license. We will evaluate and pursue viable alternative uses for the second HRM license, which will potentially be an exciting additional opportunity. Turning to Xacta, our Xacta business has grown through the expansion of our HRM operations in Kentucky and Virginia, as well as through our third party relationships in Kentucky, New Hampshire, and Wyoming for our HRM operations. The Xacta technology enables us to better optimize our gaming floor and reduce the technology fees charged to our venues for our third party relationships.

The Xacta technology enables state-of-the-art HRMs with a high level of service from our team to support their ongoing expansion and growth. We will grow our Xacta business in New Hampshire as part of our Salem Casino development. Xacta technology is already supporting the temporary facility. Our technology will also be utilized in a new third party facility in Wichita, Kansas, which is projected to open later this year or early next year. We are excited to support the expansion of HRMs in this new market. We continue to seek the right to implement HRM-based electronic table games. We have developed a new HRM Roulette product with Interblock and look forward to expanding our suite of games with them. We believe this will be a great enhancement to the guest experience and will provide additional support for the horse racing industry in the future.

We are working to gain approval with the appropriate state authorities. In summary, the second quarter delivered another strong performance with record financial results, and we believe the best is still to come. Churchill Downs Racetrack and the Kentucky Derby are truly unique trophy assets with powerful growth catalysts for the future. Beyond that, we see important growth drivers across our HRM properties and jurisdictions and our Wagering Services and Solutions segment. As we are demonstrating with the Salem Project, we continue to identify and execute high quality growth initiatives that strengthen our business and generate strong returns for our investors. Our strategic decision making, disciplined capital allocation, strong balance sheet, and diversified portfolio of high performing assets have positioned us well to drive sustainable, long term growth. With that, I’ll turn the call over to Marcia, and then we will take your questions.

Marcia Ann Dall, Chief Financial Officer, Churchill Downs Incorporated: Marcia, thanks Bill, and good morning everyone. I’ll start with a few insights into our financial results and then provide an update on capital management. First, regarding second quarter financial results. As Bill shared, we delivered all-time record second quarter revenue and adjusted EBITDA. Our Live and Historical Racing segment delivered all-time record second quarter revenue and adjusted EBITDA. This segment represented nearly two-thirds of our adjusted EBITDA for the quarter. The $17 million or 6% growth in adjusted EBITDA compared to the prior year quarter was driven primarily by our HRM growth in Kentucky and Virginia. Churchill Downs racetrack was down $1 million, which is less than 1%, driven by a very high prior year comp as a result of running the 150th Kentucky Derby.

The Derby delivered tremendous growth in 2024, and as Bill discussed, we expect the Derby to deliver step function growth in adjusted EBITDA again in 2026. All of our HRM properties in Kentucky delivered growth in the second quarter compared to the prior year. We had especially strong performance from our Northern Kentucky and Louisville HRM venues, and we also benefited from the opening of the Owensboro, Kentucky HRM venue in February of this year. The consumer trends in these markets were strong for the quarter. In Virginia, our Northern Virginia, Richmond, and Emporia properties collectively delivered over $8 million of growth compared to the prior year.

As expected, our Virginia handle tax rate was higher for the quarter compared to the prior year quarter due to the gaming tax structure and the increase in the number of HRMs we have since we opened The Rose in November of last year. Our handle tax rate will transition from 1.39% to 1.3% effective July 1st of this year. Collectively, our remaining Virginia properties were down $3 million, reflecting a comparison to a strong second quarter in 2024 as well as marginally from competition near a few of our properties that reduced the level of unrated play. It is important to note that rated play at these Virginia properties reflected strong growth across all our metrics. Overall, we generated the combined 52% margin during the quarter for our same store Virginia HRM properties. Our Wagering Services and Solutions segment also delivered record second quarter revenue and adjusted EBITDA.

Adjusted EBITDA grew by nearly $2 million or 4% compared to the prior year quarter. The Xacta business contributed over $3 million of this increase from both third party customers and growth from our Virginia and Kentucky HRM properties. Our TwinSpires horse racing revenue benefited from a record level of wagering on Derby Week. Adjusted EBITDA for TwinSpires was down slightly due to higher legal expenses compared to the prior year quarter and last. Regarding our gaming segment, our wholly owned regional gaming properties performed relatively well in the second quarter. Regarding our Terre Haute Casino and Resort in Indiana, it is important to note that we benefited from the initial gaming tax rate in the second quarter of the prior year.

Due to the tiered structure of Indiana’s gaming tax rates and the state’s fiscal year ending June 30, the gaming tax rate has since normalized at the expected long term rate. Regarding Louisiana, we have moved approximately 500 HRM machines from Louisiana to our HRM properties in Virginia and Kentucky. This will impact the comparability of our Louisiana results to the prior year. Our adjusted EBITDA for eight other wholly owned gaming properties decreased $3.1 million. As a result, the casino margin for these properties was down 1.3 points compared to the same period in 2024. Regional gaming consumer behavior in the second quarter improved overall. For our same store regional gaming properties, we saw increased spend per trip from rated players with the high end of our player database delivering growth while unrated player trends were comparable to the prior quarter.

Turning to capital management, we generated $455 million, or $6.29 per share of free cash flow in the first half of the year, primarily from the strong cash flow generated from our businesses. We spent $31 million on maintenance capital in the first half of the year, and based on a review of our maintenance capital plans for the year, we have reduced our 2025 maintenance capital projection by $10 million to $80 million to $90 million. We spent $133 million on project capital in the first half of the year and continue to expect to spend between $250 million and $290 million in 2025. Turning to share repurchases, we repurchased over $250 million of our stock in the second quarter under our share repurchase program. This week we announced that our board approved a new common stock repurchase program of up to $500 million.

This reflects our strong belief in the future growth of our company. At the end of the second quarter, our bank covenant net leverage was 4.2 times. Based on our capital investments and anticipated share repurchases, we expect our bank covenant net leverage to remain in the low 4x range for the remainder of the year. We then expect our bank covenant net leverage to decline below 4.0x in 2026. As our investments in Virginia and Kentucky continue to deliver meaningful adjusted EBITDA and free cash flow, and given our expected level of share repurchases, we also expect improvement in our free cash flow from favorable cash taxes because of the federal tax bill that was signed on July 4. The new tax provisions include making the 21% business tax rate and 100% bonus depreciation rule permanent. The federal tax bill also reinstates a 30% of EBITDA-based interest deduction limitation.

The additional interest deductions combined with 100% bonus depreciation will reduce our cash taxes and increase our free cash flow this year and in future years. We expect that the impact of lower cash tax payments in 2025 will be $50 to $60 million. Overall, we are pleased with the record results that our team delivered in the second quarter. We are well positioned to continue to grow through the remainder of 2025 and into 2026 and beyond, fueled by the tangible pipeline of growth initiatives that Bill discussed and supported by our strong balance sheet. With that, I’ll turn the call back over to Bill so that he can open the call for questions. Bill.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Thanks, Marcia. Okay, everyone, we’re ready to take your questions.

Andrew, Conference Call Operator: Ladies and gentlemen, to ask a question.

At this time, please press 11.

On your telephone and wait for your.

Name to be announced. To withdraw your question, please press 11. Again.

Our first question comes from the.

Line of Barry Jonas with Truist Securities.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Hey guys, good morning. I really appreciate all the commentary around the setup for growth at the Derby next year. As we think about.

Andrew, Conference Call Operator: As.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: We think about the setup for 152 year over year, maybe talk about your expectations around pricing at the lower end, specifically at the Starting Gate Pavilion. Sure. Thanks for the question, Barry. Last year was the introduction of the Starting Gate Pavilion and it received rave reviews. Consistent with what we often see, the word gets out. People have now had a chance to experience the improvements and there’s a chance for word of mouth to spread and that’ll show up. We expect in demand and pricing for that section. In general, we’re excited about that and expect that to be consistent with what we see when we do introduce new areas of our facility.

Andrew, Conference Call Operator: Thank you.

Our next question comes from the line.

Of David Brian Katz with Jefferies LLC.

Morning.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Thanks for taking my questions, Bill. Appreciate all the commentary around New Hampshire. I’d love to get just a little bigger discussion around how you see that market evolving in terms of the magnitude of investment, the opportunity for returns, what’s the competitive landscape look like? You know, what’s the vision there? Good morning, David. Thanks for the question. First, I’d say that when that deal is closed, we’ll be able to explain a lot more about our plans. Since we’re in this stage where the transaction documents are signed, but we’re going through the various approval processes, there’s some restriction in my ability to talk completely about our plans. I promise as we get the deal closed, we’ll disclose quite a lot about our plans. Let’s talk in general.

When you think about our location in Salem, we’re on exit 2 on I-93, which is a major interstate artery coming out of downtown Boston and running up through the suburbs. When we think about that market in general, while there are lines on the map delineating the New Hampshire border from Massachusetts, that’s all one market. This is an opportunity for us to tap in not only to the New Hampshire suburbs, but also to the Massachusetts suburbs for Boston. We think it’s a very strong market. The demographics, both in terms of the number of people and the wealth, are there. Our location at the Rockingham Park Mall is a great location with a dedicated ingress and egress off the freeway, so it’s easy to reach. It’s a powerful mall that services the Massachusetts suburbs.

We couldn’t be more excited about the location and the ease of access to the facility. For this, it will be an HRM facility. We also have full table games, so we’re very competitive with what you have with the Wynn property in the Boston market and with other facilities in the region. We just think we have the best and brightest spot on the New Hampshire side from which to conduct our business.

Andrew, Conference Call Operator: Thank you.

Our next question comes from the line.

Of Chad C. Beynon with Macquarie.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Hi, good morning. Thanks for taking my question, Bill. I wanted to just circle back on some of the stats and kind of the outlook for the Derby, focusing more on international attendance, which I think we’ve talked about now for a couple years. What is the plan going forward and what’s the focus to grow that? Maybe a sidebar that when you spoke about some of these impressions on social media, I’m guessing most of those were domestically, but does it feel like just kind of the international marketing has improved over the past couple years? Thank you. Yeah, thanks, Chad. One of the advantages of thoroughbred racing is it’s a global game and.

Most.

Large industrialized societies that you go to around the world, you see thoroughbred activity. That’s a huge head start for us as we build the international component of the Kentucky Derby because they’re already familiar with the Derby. They know it’s America’s greatest race and arguably the greatest race in the world. This isn’t a product or a brand that we have to introduce to the market, but it is one we have to develop in these different markets. That’s a multi-year process, and it started with our Road to the Derby, the European and now the European and Middle Eastern Road to the Derby, the Japanese Road to the Derby. These have all been steps to solidify our connection to some of these other markets and to build inroads to not only consumers there, particularly high-end consumers.

That’s really the basket of consumers we’re most focused on internationally, but also to sponsorships and potential sponsors. This is an initiative internally that’s very, very important to us. That’s a real focus for us, and I hope we’ll show real progress as early as 2026. With respect to social media, yes, the stats, we tend to cite our U.S. stats, but we are also building and developing social media inroads internationally as well. As we have stats on those going forward, we’ll certainly share those with you.

Andrew, Conference Call Operator: Thank you.

Our next question comes from the line.

Daniel Brian Politzer with JPMorgan Chase & Co.

Hey, good morning everyone. Thanks for taking my question. I wanted to touch on the federal tax bill. Marcia, it was helpful. You laid out some of the impacts in 2025. I think you said $50 million to $60 million in cash tax savings. This is a bit of a two parter. One, is there, you know, can we just kind of extrapolate that and kind of, you know, for 2026 or the best way to think about it and then, you know, along those lines, in terms of your cash flow and capital allocation, obviously announced the $500 million repurchase, you were active in the second quarter. How are you thinking about returning capital to shareholders from here just given that Derby CapEx is still paused? Thanks.

Marcia Ann Dall, Chief Financial Officer, Churchill Downs Incorporated: Great, Dan, thank you for the question. When we think about the taxable impact for 2026, we will benefit from the fact that we get 100% bonus depreciation again in 2026. We will also benefit from the fact that we believe nearly all, 100%, of our interest will be deductible as well for tax purposes in 2026. Our current estimates, and obviously it could change, is it will be comparable to the number that I shared regarding the 2025 impact of $50 million to $60 million regarding share repurchases. As Bill talked and as we’ve talked in the past, we have a great strategy around capital management. Overall, our real focus is investing in the Derby over the long term. We’re investing very strategically to create great HRM venues, especially in Kentucky and in Virginia and now in New Hampshire. We’re very excited about that opportunity.

We are very thoughtful about strategically buying and selling assets. Over our journey together over the last 10 years, we have a very significant focus on making sure we grow our dividends 7% per year. That’s been a pretty consistent track record for us. After all of that, we think about share repurchases in particular around investing and returning capital to our shareholders when our stock isn’t reflective in the market of what we believe the true long term value is and generally definitely where it’s accretive to EPS and free cash flow. We’re very focused on making all of the right choices to support the long term growth and returns for our shareholders.

Andrew, Conference Call Operator: Thank you.

Our next question comes from the.

Line of Daniel Edward Guglielmo with Capital One Securities.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Hello everyone. Thank you for taking my question. On the HRM side of things, Kentucky had a really strong quarter and Virginia is ramping. Can you just give us a sense of how long the runway is for those two states to continue to grow demand when thinking about those markets? Is a maturity phase even on the horizon? Dan, thanks for the question. I think there’s still a substantial runway that’s for us to prove in the future. Our metrics look really good and there’s a lot of cause for optimism. We’ll keep executing. Our teams are really strong in both those jurisdictions and we have our game plan, we have our processes and we’ll keep firing ahead. When we look at our metrics, we see lots of cause for optimism and evidence that we need to keep doing more of what we’re doing.

Andrew, Conference Call Operator: Thank you.

Our next question comes from the line.

Of Jordan Maxwell Bender with Citizens JMP Securities.

Speaker 3: Morning, everyone. Thanks for taking the question. I want to go in a direction here that maybe isn’t talked about as much with your company. That’s the prediction markets in horse racing. You know, Bill, there are laws out there like the Interstate Horse Racing Act to protect the industry. Curious with the direction that prediction markets are headed, what’s your view around that offering, particularly around how it might impact the Derby? Thank you.

Sam Ullrich, Vice President, Investor Relations, Churchill Downs Incorporated: Sure, Jordan.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Happy to talk about that. That’s a subject that I personally pay a lot of attention to. It’s a fascinating subject. I’m on the Executive Committee of the American Gaming Association, and that’s an audience where we talk about those sorts of things. With respect to the Kentucky Derby and horse racing, we haven’t seen it, and I think the nature of pari-mutuel wagering on horse racing doesn’t make it as an attractive target for prediction market activity. We haven’t really seen it, and it isn’t something that we’re real concerned about. There is also the important element of the Interstate Horse Racing Act, which essentially gives us an intellectual property right and the wagering rights around our product. In essence, you need the approval of the content producer if you want to take wagering or conduct wagering activity on our races or other pari-mutuel horse races.

I think that’s an impediment to that activity happening on that platform. The platform in and of itself is a subject of a lot of discussion in the country, and certainly we watch it. It’s not a risk or a particular concern for what we do with the Kentucky Derby and pari-mutuel wagering on horse racing.

Andrew, Conference Call Operator: Thank you.

Our next question comes from the.

of Benjamin Nicolas Chaiken with Mizuho Securities USA LLC.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Hey, good morning. Thanks for taking my question. Just going back to New Hampshire, you know, understanding the deal is not closed, maybe more holistically in the region.

Does this represent a pipeline of M&A we could see more of?

In the region or just more of.

A one-off for one reason or another?

Thanks, Ben. Appreciate the question. We’re focused on what we think is the best opportunity for our company in the region, which is Salem. We’re going to go out and execute that and establish for our company and for our investors that that’s a smart investment and a profitable one for our company. I do think it’s an area, a state where there’ll be lots of changes and lots of development over the next couple of years. We’ll certainly keep our eye on that and certainly are working hard to build our expertise in that region of the country and in that state so that we understand and can evaluate effectively the market in general.

Andrew, Conference Call Operator: Thank you.

Our next question comes from the line.

Joseph Robert Stauff with Susquehanna Financial Group.

Speaker 7: Thank you. Good morning, Bill. Marcia, I thought the Oaks schedule change was interesting. I know a lot of people coming in certainly for the race get there pretty late on Friday. I’m wondering strategically what the goal of doing that is. Is it to drive attendance? Can you generate incremental, say, ticket sales and attendance? Is it more about what you talked about, the promotional value of the lead-in into Saturday?

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Thanks for the question, Joe. It’s designed to move everything in a positive direction, but within that positive direction, points of emphasis. The opportunity to be on national television is a chance to build the national profile of the Oaks, which is a pretty special race. Certainly it’s the case that a lot of folks come to the Derby and it’s all about the Derby and they don’t have as much an understanding of the historical relevance and of the specialness of the Kentucky Oaks. A chance to build that brand with a national broadcasting platform is really, really important for driving wagering, for driving sponsorship opportunities, for driving sponsorship awareness. Among all our growth catalysts, we think they’ll move in the right direction. We expect them to move in the right direction.

As a particular point of emphasis, we want to drive handle, we want to drive national awareness, we want to drive sponsorship opportunities. We think it’s a great springboard to remind people that the Kentucky Derby is the next day. Come see the Oaks Friday night on NBC and it feeds right into the next day when we have the Kentucky Derby.

Andrew, Conference Call Operator: Thank you.

Our next question comes from the.

Line of Brandt Antoine Montour with Barclays Bank PLC.

Speaker 8: Good morning, everybody. Thanks for taking my question. I was hoping you could talk a little bit more about the plan for the area between the First Turn Building and the Skye Terrace. I don’t know how much you’re going to be able to say, but I guess the question would be, is this sort of going to, is this.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Replacing.

Speaker 8: The three year plan in a way? How is the scope sort of different than what you had been thinking for this area in the old plan? Lastly, do you think, do we think it would be ready for 2027 and would it potentially disrupt 2026 in any way? I know that’s a lot.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: That was a multi-part question, Brandt. Let me make sure I.

Andrew, Conference Call Operator: Pick.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: What you want out of that. Okay, first, we have a lot of opportunity at our facility for capital improvement to grow our event. This space is a clear and obvious one. This is one where there isn’t currently a major structure that we would have to take down. There are seats there, but there isn’t a major structure. We are very, very focused as a team in refining our cost estimates, refining our timing, refining our plans, because when we explain what we’re going to do to the market, we really want it to be locked down and certain and stress tested so that we are sure we will deliver. I expect that we will do that at the next earnings call. We are in the process of doing it now, but as an area of the track, it’s not an area where there’s a significant structure there.

This is what we call affectionately in the company, the gap and the smile. I don’t expect it. It will not be disruptive for the 2026 Derby. We’ll explain 2027, 2028, 2029, etc. in good time. I promise, and it is my expectation that this will be an exciting project for everybody to digest and understand, and there will be a lot to be enthusiastic about when they see it.

Andrew, Conference Call Operator: Thank you.

Our next question comes from the.

Line of Shaun Clisby Kelley with Bank of America.

Speaker 6: Good morning, everyone. Thanks for taking my questions. Bill, you made some interesting points around as you expand or think about expanding Derby Week or the reach thereof around sponsorships. I was just wondering if you could go back and remind us a little bit of how do some of these sponsorship relationships work? How long in duration are they? What’s your ability to kind of uplevel some of that as the reach of the event and maybe the global experience continues to grow? We continue to see pretty significant demand for sort of these luxury, unique experiences. I’m wondering if there’s room for your sponsorship opportunity to keep up with that.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Thanks, Sean. That’s a fascinating topic for me, and I’ve been in the company for 20 years now, 11 as the CEO, and I’ve really seen sponsorships evolve and change over that period of time. At this point in our history with sponsorships, this is now more and more about intentionality. It’s about curating our sponsors to make sure that we select and work with partners that are great fits for us as well as us being great fits for them. As we look internationally and as we look to develop not just internationally, but with our current sponsors, with other categories of sponsors that we haven’t filled, it’s not about putting somebody in that seat. It’s not about just finding somebody. This is about being particularly careful and focused about building relationships that are win wins for both parties.

There’s a level of sophistication and focus for our sponsorship approach that’s really evolved and become more sophisticated over time, and that’s where we are today. This isn’t about just taking phone calls and whoever comes through the front door. This is about building win win partnerships and it’s really encouraging that we’re seeing increased international interest from folks. Those are relationships and partnerships to build and explain over time.

Andrew, Conference Call Operator: Thank you.

Our next question comes from the.

Line of Jeffrey Austin Stantial with Stifel.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Hey, good morning, Marcia. Bill, thanks for taking our question. I wanted to ask on The Rose.

Speaker 8: Specifically, Bill, can you just expand?

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: bit further, more specifically on strategies and.

Speaker 8: Process underway to drive trialing and repeat visitation to keep ramping top line.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Similarly, on the margin side.

Speaker 8: Do you think that that property already?

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Has the right labor and cost structure.

Speaker 8: To sort of ramp into it.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: There still some work to be on optimizing fixed costs?

Andrew, Conference Call Operator: Thanks.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: Thanks for the question. I remain incredibly bullish and excited about The Rose in Northern Virginia. It’s a very large market, and generating awareness and trial is a multi-year process. We’re well underway. It’s about building our brand in that market, driving awareness, driving sampling, and then getting our database built out. It’s progressing really well. Really proud of the team. You’ll see our margins improve when we’re at a stage. You’ll see them improve constantly. We’re not trying to maximize margins on a per quarter basis at this moment. This is about building trial, building awareness, and building database. That’s the investment that you have to make. This is about making an investment in that market so that we can build the relationships with the customers. As wonderful as it is to be in a market like that, with the demographics we see, it’s also a complex market.

There’s a lot going on, there’s a lot of entertainment options. Driving awareness, driving participation, we have the right plan, we have the right team, and you’ll see consistent, we believe you’ll see consistent improvement in gain for an extended period of time going forward.

Andrew, Conference Call Operator: Thank you. I would now like to turn the call back over to CEO William C. Carstanjen for any closing remarks.

William C. Carstanjen, Chief Executive Officer, Churchill Downs Incorporated: I just want to thank everyone for their time today and for their interest and investment in our company. We take your trust in us and your investment with us very, very seriously. We work for you. Our job is to drive shareholder value, to drive improvement, and we take that very, very seriously. This is an exciting time for us. This is an exciting path that we’re on. We’re happy to get after it and looking forward to getting after it. I look forward to talking to you next quarter. Thanks very much, everyone.

Andrew, Conference Call Operator: Ladies and gentlemen, thank you for participating. This does conclude today’s program, and you may now disconnect.

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