• Net Revenue: Record net revenue, up 11% over 2023.
• Adjusted EBITDA: Record adjusted EBITDA, up 13% over 2023.
• Virginia HRM Venues Contribution: 20% of nearly $1.2 billion adjusted EBITDA in 2024.
• Free Cash Flow: $688 million or $9.22 per share, up nearly 33% per share over the prior year.
• Maintenance Capital Expenditure: $84 million in 2024; expected $100 million to $110 million in 2025.
• Project Capital Expenditure: $463 million in 2024; expected $350 million to $400 million in 2025.
• Share Repurchases and Dividends: Over $218 million returned to shareholders in 2024.
• Bank Covenant Net Leverage: 4.0 times at the end of December 2024.

• Warning! GuruFocus has detected 3 Warning Signs with CHDN.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Churchill Downs Inc (NASDAQ:CHDN) achieved record net revenue and adjusted EBITDA in 2024, with an 11% and 13% increase respectively over 2023.
• The company successfully opened major projects like the Terre Haute casino resort and the Rose gaming resort, which are expected to drive growth in the coming years.
• The Kentucky Derby continues to be a significant asset, with ongoing investments in infrastructure and hospitality expected to enhance the guest experience and drive future revenue.
• CHDN's HRM venues in Virginia contributed significantly to the company's financial performance, accounting for 20% of the nearly $1.2 billion adjusted EBITDA in 2024.
• The company maintains a strong balance sheet, allowing for continued investment in growth opportunities while returning capital to shareholders through share repurchases and dividends.

Negative Points

• The introduction of new projects and expansions, such as the Starting Gate Courtyard and Pavilion, may pose risks of construction disruptions, although the company aims to minimize these impacts.
• The Rose gaming resort in Virginia is still in its early stages, requiring significant marketing investment to educate the market and attract customers.
• CHDN faces challenges from gray market gaming, which continues to impact revenue despite progress in enforcement in states like Kentucky and Virginia.
• The regional gaming market shows signs of maturity in certain areas, which may limit growth opportunities compared to other segments like HRMs and the Kentucky Derby.
• The company is exposed to potential economic headwinds, such as inflation and wage growth, which could impact consumer spending and operational costs.

Q & A Highlights

Q: How should we think about the ROI from the announced Survey projects, and will there be any construction disruptions? A: William Carstanjen, CEO, stated that the company plans major construction projects without disrupting the Kentucky Derby experience. They are confident in managing these projects effectively. The projects are seen as key to generating long-term shareholder value and are expected to meet financial hurdles, as similar projects have done in the past.

Q: How do you view the trajectory and ramp of the Rose gaming resort over the next few months? A: William Carstanjen, CEO, expressed confidence in the Rose's location and market potential. He noted that while initial months can be influenced by factors like weather and elections, the long-term outlook is positive. The market needs time to get educated about HRMs, but the company expects a meaningful ramp-up over the next 12 months.

Q: Is the Rose gaming resort expected to achieve a five-year payback, and how does this compare to Kentucky HRM investments? A: William Carstanjen, CEO, confirmed that the Rose is expected to meet the five-year payback target, similar to other gaming assets. HRMs have generally exceeded this target. Each facility is managed individually, but they also contribute to the larger ecosystem of Kentucky racing.

Q: What gives you confidence in the demand for new premium seats at the Kentucky Derby? A: William Carstanjen, CEO, highlighted two trends: a global shift towards experiential events and a high return rate of guests. The company is also expanding its customer base internationally and within the U.S., ensuring future demand for premium seating.

Q: How do you view the regional gaming business in terms of future investment? A: William Carstanjen, CEO, stated that regional gaming is assessed based on individual market dynamics. The company focuses on growth opportunities that can improve margins and adjusted EBITDA, evaluating each property for its potential to contribute to overall growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.