Churchill Downs Q3 2026 Earnings Call Transcript

Churchill Downs (NASDAQ:CHDN) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Churchill Downs Incorporated reported record net revenue of $696 million and adjusted EBITDA of $264 million for Q3 2026.

The company is in the process of selling nine regional gaming properties, expecting transactions by year-end, to reduce leverage and initiate a $750 million share repurchase program.

The company’s strategic focus remains on Churchill Downs Racetrack, the Kentucky Derby, HRM businesses, and TwinSpires, with continued investment in high-return growth opportunities.

Plans for the Thoroughbred Championship Series (TCS) are intended to expand horse racing engagement and generate long-term economic value through media rights, sponsorships, and new wagering possibilities.

The Live and Historical Racing segment delivered record revenue and EBITDA growth, particularly in Kentucky, while Virginia faced new competition impacts.

TwinSpires, the largest online horse racing platform, continues to innovate with new wagering products and AI enhancements.

Strong free cash flow of $603 million YTD is supporting shareholder returns and strategic investments.

Debt leverage is expected to decrease below 3.0 times post asset sales, with a new $750 million share repurchase authorization.

The 2027 Kentucky Derby is expected to drive significant growth, with strong ticket sales and new partnerships, including with Visa.

Exciting developments in Virginia and New Hampshire markets are expected to drive future growth in HRM venues.

Full Transcript

OPERATOR

Good day, ladies and gentlemen, and welcome to the Churchill Downs third quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. Later we’ll conduct a question-and-answer session and instructions will be given. At that time, 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 Ulrich, Vice President, Investor Relations.

Sam Ullrich (VP, Investor Relations)

Thank you, Andrew. Good morning and welcome to our third quarter 2026 earnings conference call. After the company’s prepared remarks, we will open the call for your questions. The company’s 2026 third 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. Bill Carstanjian.

Bill Carstanjen (Chief Executive Officer)

Thanks, Sam. Good morning everyone. Joining me today are Bill Mudd, our President and Chief Operating Officer, Marcia Dall, our Chief Financial Officer, and Brad Blackwell, our General Counsel. I will begin with the highlights of our third quarter performance. I will then provide an update on the status of the sale of our regional gaming properties and share some additional insights into our strategic plans going forward. Marcia will follow with more detail on our financial results and capital management strategy, and then we will take your questions.

First, regarding our third quarter results. We delivered record net revenue of $696 million and record adjusted EBITDA of $264 million. We also delivered record adjusted EBITDA for our Wagering Services and Solutions segment and our gaming segment. Turning to the sale of our regional gaming assets. As I discussed on our earnings call last quarter, we’ve been working with Macquarie Capital to sell nine of our wholly owned regional gaming properties. The process is going very well. We expect to announce executed transactions for the properties by year end. While the broader M&A environment may be feeling the effects of increased interest rates and consumer uncertainty, our regional gaming assets have attractive characteristics that distinguish them.

They are generally newer and better maintained than comparable properties and generate strong cash flow with high free cash flow conversion. We intend to use the sales proceeds to significantly reduce leverage, to repurchase shares, and to selectively invest in Churchill Downs Racetrack and other high return growth opportunities. On Tuesday of this week, our Board of Directors authorized a new $750 million share repurchase program, reflecting our confidence in the execution of the asset sales process.

As we look ahead, our company strategy is focused on our three highly valuable platforms: Churchill Downs Racetrack and the Kentucky Derby, our HRM businesses, and our TwinSpires business. Each combines strong cash generation, durable competitive advantages, and attractive opportunities for profitable growth. These three cornerstones form the foundation of a more focused portfolio designed to compound shareholder value over the long term. Churchill Downs Racetrack and the Kentucky Derby. Increasingly, all of Derby Week is the crown jewel of our portfolio. It is a unique global sporting and entertainment event combining tradition, community, competition, and celebration in a way few events can replicate. Our opportunity is to expand the relevance, reach, and earnings power of Derby Week while preserving the traditions that make it so special.

We plan to accomplish this by making smart capital investments, continuing to enhance the guest experience, elevating the quality of racing, introducing innovative wagering opportunities, expanding social media and television viewership, and growing our sponsorship platform. Derby Week is positioned to be a meaningful driver of adjusted EBITDA growth in the near term and for years to come. Regarding the 153rd Derby in early May of next year, demand is very strong. At the end of the third quarter, ticket sales for Derby 153 were well ahead of a comparable pace for Derby 152, demonstrating its enduring appeal and the increasing consumer demand for premier live sports and entertainment experiences. Construction is underway on Victory Run, which will be located just past the finish line between Sky Terrace and the First Turn section of the racetrack.

We are on schedule and on budget to complete this project in time for Derby 2028. Compared to Derby 2026, we will have an interim upgraded seating experience in this area for Derby 2027 with covered stadium seating and enhanced amenities to ensure our guests enjoy a premium experience. When completed for Derby 2028, Victory Run will introduce a spectacular spectrum of private suites, indoor and outdoor dining, and covered box seats. Regarding sponsorship growth, we were pleased to announce a multi-year partnership with Visa as the preferred payment partner of Churchill Downs and the Kentucky Derby. In addition to the sponsorship and hospitality relationship, Visa will also create opportunities for their clients and cardholders to access exclusive Derby Week offers and experiences while making their purchases simple, secure, and seamless. Visa joins a dynamic lineup of signature partners for the Kentucky Derby including Woodford Reserve, Longines, Ford, and SAP.

Sponsors are increasingly recognizing the desirable demographics of our guests, the value of our television viewership and digital audiences, and our extensive social media engagement. The heightened visibility is attracting interest from many of the most well-respected brands, and we remain focused on broadening and strengthening our sponsorship portfolio in the years ahead. The 2027 Kentucky Derby will be the kickoff for the Thoroughbred Championship Series. The TCS will consist of two divisions, the Derby Division for the colts and the Oaks Division for the fillies. The Derby Division will be a six-race series that begins with the Kentucky Derby, includes the Belmont Stakes, a race at Churchill Downs over the Fourth of July weekend, two races at Saratoga Race Course over late July and late August, and finally ends with the Championship at Churchill Downs Racetrack at the end of September.

In partnership with the New York Racing Association, the owner of Belmont Park and Saratoga Race Course, the Derby Division will connect three of the world’s most iconic racetracks into a season-long competition over five months to determine the best three-year-old colt. In addition to national television broadcasts, the Series offers an incremental $5 million in prize money beyond the purses offered for each race, creating a compelling economic incentive for the best horses to compete throughout the Championship Series.

Turning to the Oaks Division for the fillies, we will have four races beginning with the Kentucky Oaks on the Friday before the Kentucky Derby. As you will recall, the Kentucky Oaks was broadcast on NBC in primetime for the first time earlier this year to rave reviews and strong ratings, illustrating there is a national audience for Oaks Day and the competition of the world’s best three-year-old fillies. The second race will be at Belmont Park on July 5, the day before the Belmont Stakes, and then the final two races will be at Saratoga in June and August.

The three highest ranked horses in the Oaks Division will split a $1 million prize pool in addition to the purse money that they otherwise win for each race. Then there is a twist. The winner of the Oaks Division will be invited to participate in the TCS Championship race of the Derby Division in September to compete against the boys for an opportunity to win up to an additional $1 million bonus. We believe the winner of the Oaks Division going against the best of the boys will drive heightened excitement and national interest.

The best filly deserves the chance to take on the colts in what will be an electrifying challenge that is unique in sports today. Horse racing captures significant attention around individual marquee events, particularly the Kentucky Derby. The TCS is designed to connect these moments into a continuous story that unfolds throughout a season. Sports fans naturally follow championships, rivalries, leaderboard standings, and athletes over time, and we believe the TCS format will create that same opportunity for horse racing, giving fans more reasons to stay engaged.

By encouraging the best horses to compete against each other, we believe both dedicated enthusiasts and casual fans will develop stronger emotional connections with the stars of the sport while increasing visibility and demand for the highest level of Thoroughbred racing. A season-long Championship Series leverages the economic flywheel we have established with the Kentucky Derby to create long-term economic value from expanded media rights, new hospitality experiences, sponsorship activation, licensing opportunities, and new wagering possibilities across the series.

The TCS is a strategic and capital efficient platform to modernize how fans engage with horse racing. We believe it has the potential to become an important catalyst for expanding horse racing’s audience both domestically and internationally while further enhancing the value of Churchill Downs Racetrack and the Kentucky Derby. While we do not have any current plans to do so, we will consider adding new venues, races, and even new series over time.

Turning to our HRMs, which are the second cornerstone of our strategy, we see long-term growth through introducing more leading gaming content and new products, including electronic table games, along with selective expansion. We are pleased with our HRM performance across all of our properties in Kentucky and are encouraged with the continued long-term growth potential for these venues. We are also happy with the performance of our roulette electronic table games in Kentucky.

These ETGs are attracting new customers and supporting the reactivation of inactive HRM customers. We are planning to roll out craps ETGs around the end of the year. We are also working to finalize the development of blackjack ETGs in 2027. Ultimately, the greatest contribution to our venues will be realized when we have a suite of ETG offerings. Thus, we are very focused on getting craps and blackjack developed and deployed first in Kentucky, but then also, we hope, in Virginia.

Speaking of Virginia, The Rose in Northern Virginia continues to grow nicely as it further develops the market. It delivered strong growth in rated and unrated play both quarter over quarter as well as sequentially. This also reflects the relative strength of the consumer in this market. We believe The Rose has significant long-term potential for further growth, and we remain very encouraged. In Central Virginia, our venues face competitive pressure from the new casino in Petersburg, which opened this past January.

Importantly, we are seeing evidence that Petersburg is expanding the overall market rather than simply redistributing existing gaming revenue. As the market matures, we believe that the larger addressable market creates opportunities to both attract new customers and rebuild visitation. With respect to customers who are now going to Petersburg, we will continue to adjust our marketing programs and enhance guest services to position our Central Virginia properties to compete effectively in this evolving market.

We received this week final county approval to relocate and expand our Collinsville HRM venue to a new location in Henry County. The new site will be closer to the North Carolina border, approximately 45 to 60 minutes from Winston-Salem and Greensboro. We expect to finalize an agreement in the coming days to acquire the land for a new 150-unit HRM venue. We believe this will be a successful investment that exceeds our return targets with real upside potential, given the opportunity to capture a portion of the North Carolina market.

We will know next week the results of our two referendums in the town of Pulaski and in Amherst County, both in the western part of Virginia. If these referendums pass, we will have the opportunity to further expand our HRM footprint in these underserved markets with a total of two facilities, each with 150 machines. The HRM regulatory structure in Virginia is unique. We have the right to deploy 5,000 HRMs across 10 sites and can move both the sites and machines around the state, subject to certain limitations, to optimize the overall performance.

We currently have approximately 4,700 HRMs deployed across the Commonwealth, and these three expansion opportunities would represent an incremental 415 HRMs. We have the flexibility to reallocate HRMs from other areas, including from Central Virginia, to optimize the value created by our right to have 5,000 HRMs. In New Hampshire, Rockingham Grand Casino is on track to open on time and on budget in mid-2027 at the Mall at Rockingham Park in Salem, New Hampshire. Right at the Massachusetts border, we are creating an exciting entertainment venue to serve this very attractive market that we expect will provide significant growth for us in the coming years. We are really excited about this project and very encouraged by the development of the market over the last year as other venues have opened.

Regarding TwinSpires, our third cornerstone, TwinSpires is the largest online wagering platform for horse racing and a strategically important distribution platform for our broader integrated racing offering. We continue to expand its reach and engagement through product innovation and broader direct-to-consumer and business-to-business distribution. We continue to see wagering growth, EBITDA growth, and opportunities to expand distribution with our B2B partners.

We have introduced new products such as Jackpot 8, where a bettor can win a significant payout for picking the first eight finishers of a race in exact order. EasyBets is another new wagering product where a bettor can wager on either all the odd-numbered horses or even-numbered horses in a race. TwinSpires has also successfully launched several enhancements leveraging AI such as Paddock Pro AI and AI Race Preview to expand bettor engagement, especially among our VIP customers.

TwinSpires will continue to invest and innovate to build on its clear leadership position in horse racing. In summary, we are committed to growing the Kentucky Derby and Churchill Downs Racetrack through thoughtful, disciplined execution. We are also focused on growing our HRM and TwinSpires businesses while continuing to refine our portfolio around unique, high-performing assets that provide multiple catalysts for growth and free cash flow generation. At the same time, we remain committed to exiting the regional gaming business. The combination of the sales proceeds from our regional gaming process and the strong cash flow generated from our ongoing businesses will enable us to pay down debt, repurchase shares, and selectively invest in our businesses.

Our strategic decisions, disciplined capital allocation, and strong balance sheet position us to drive sustainable long-term growth in adjusted EBITDA and free cash flow. And finally, we are pleased to welcome Michael Tucker to the Board of Directors. Mike has over 30 years’ experience successfully investing in sports, entertainment, and leisure companies. Mike’s deep investment experience, strong financial acumen, and extensive knowledge of market dynamics and strategic capital allocation will be invaluable as we continue to evolve and grow.

With that, I’ll turn the call over to Marcia, and then we will take your questions.

Marcia Dall (EVP and Chief Financial Officer)

Marcia, thanks Bill, and good morning everyone. I’ll review the key drivers of our third-quarter financial performance and then discuss capital management, starting with our third-quarter financial results. As Bill noted, we delivered record third-quarter revenue and adjusted EBITDA. Regarding our Live and Historical Racing segment, our Kentucky HRM properties delivered record revenue, with adjusted EBITDA increasing 10% year over year. Our Southwestern and Northern Kentucky HRM venues contributed double-digit growth in adjusted EBITDA compared to the prior-year quarter. Our Louisville HRM venues also had a strong quarter. Growth in Kentucky was driven by strong top-line performance and disciplined cost management. Revenue trends across these markets continue to demonstrate resilient consumer demand.

Turning to Virginia, the year-over-year comparison includes a one-time business interruption insurance recovery in the third quarter of last year related to our Northern Virginia property. Excluding this one-time item, Virginia adjusted EBITDA decreased by $6 million compared to the prior-year quarter. As Bill discussed, our Central Virginia HRM venues were impacted by competition from the temporary casino in Petersburg. Central Virginia was also impacted by approximately $5 million of expense related to a new tax on live racing days that was effective July 1st of this year.

Our Northern and Western Virginia HRM venues continue to deliver solid growth. Since opening, Rosie’s in Northern Virginia has delivered sequential quarterly growth in GGR per machine per day supported by expanding guest awareness, effective marketing, and higher spend per visit. These trends reinforce our confidence in the continued development and opportunity for meaningful growth in this market. Turning to our Gaming segment, adjusted EBITDA increased 4% compared to the prior-year quarter. Our wholly owned regional gaming properties continued to deliver strong performance, with nearly all properties growing as compared to the third quarter of last year. Overall third-quarter same-store margins at our wholly owned casinos were consistent with the prior-year quarter.

Finally, a few comments on overall consumer trends. We saw notable improvement compared to the prior-year quarter as well as sequentially. Higher-value rated play contributed to growth, while our lower-value unrated segments remained resilient and generally consistent with the prior-quarter trends. Turning to capital management, our strong operating performance continues to translate into significant free cash flow. Through the first nine months of the year, we generated free cash flow of $603 million, or $8.59 per share. This strong free cash flow generation provides us with significant flexibility to pay down debt while investing in high-return growth opportunities and returning capital to our shareholders. We spent $57 million in maintenance capital through the first nine months of the year.

We now expect full-year spend of $90 million to $100 million on maintenance capital in 2026. We spent $119 million in project capital through the first nine months of the year. We now expect full-year spend of $160 million to $180 million on project capital in 2026. We expect to spend between $200 million and $250 million on project capital in 2027. We repurchased more than 48 million of our shares during the third quarter and an additional $76 million from October 1 through October 27 of this month.

This week our board authorized a new $750 million share repurchase program. The new authorization reflects our confidence in the execution of the regional gaming asset sales, our strong cash flow outlook, and the long-term value of our company. We also recently announced our board of directors approved a 7% increase in our dividend, which will be paid out on January 5, 2027. This will be the 16th consecutive year of increased dividends per share for our company.

We ended the quarter with bank leverage of 3.8x, supported by strong operating cash flow. Based on our current capital plans, we expect bank leverage to remain around 3.8 to 3.9 times through year-end and decline below 3.0 times following completion of the regional gaming asset sales. With that, I’ll turn the call back over to Bill so that he can open the line for questions. Bill.

Bill Carstanjen (Chief Executive Officer)

Thanks, Marcia. Okay everybody, we’re ready to take your questions.

OPERATOR

Ladies and gentlemen, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment please. Our first question comes from the line of Barry Jonas with Truist.

Barry Jonas (Analyst at Truist)

Hey guys, good morning. Thank you for taking my question. Wanted to ask about TCs. Can you maybe just help frame the expected economic drivers and business mix? I guess what’s a reasonable timeline to ramp and ultimately how big do you think this can get?

OPERATOR

Thank you.

Bill Carstanjen (Chief Executive Officer)

Sure. Thanks, Barry. Appreciate the question. So, couldn’t be more excited about TCs. It’s something that hasn’t existed in horse racing, which has historically been built around specific marquee events that haven’t really been successfully linked together, at least not sufficiently in recent times. So the idea was to take some days that already existed, around which there was at least a lot of internal, within-the-industry excitement, and also add some new days, particularly at Churchill Downs around the 4th of July and then in the September championship, to create entirely new big days.

So how we think about this from a business perspective and from a monetization perspective, you just go back to the Derby flywheel that we talk about. I think you’ll see wagering right away. I think you’ll see significant wagering contributions quickly and right away. These are going to be great races with well-known horses, and what the fans, both casual and serious hardcore fans, like is the very best racing against each other. So forcing or encouraging these horses to back-to-back race against each other is going to be great for wagering.

And we think also we’ll immediately start that portion of a flywheel around admissions revenue, ticketing — that’s a big part of it. And then as we demonstrate that success, we’ll be able to accelerate sponsorship and certainly licensing. So media rights — we’re working on that. That’ll be a work in progress as we figure it out. I’m excited to kick this off, and I think it’ll be big from the very beginning. But remember, we’re just starting this, so we’ve got to ramp it up and we’ve got to prove it and we’ve got to answer a thousand little questions as we deliver a new product to the consumer. Everything focused on reaching beyond that hardcore industry fan to get to those casual fans that we know are out there because they all show up to watch the Derby — last year, 24 million of them.

OPERATOR

Thank you. Our next question comes from the line of Brandt Montour with Barclays.

Brandt Montour (Analyst at Barclays)

Good morning everybody. Thanks for taking my question. So just maybe following on that, maybe more of a near-term Derby question. You know, obviously the earlier part of the Derby week is one of the longer-term tailwinds. What can we kind of expect for next year? What’s sort of on tap programming-wise, either, you know, which day or which events that you can kind of point out for how we can think about incremental growth in 2027?

Bill Carstanjen (Chief Executive Officer)

Yeah, Brandt, thanks for that question. So we saw great success in 2026 with the Derby — media fan engagement through the roof. So we’re building on something that puts us in a great position. As I mentioned in my earnings comments, where we are now 2027 Derby versus 2026, we’re ahead on all the key metrics. And so nothing’s more encouraging than that. As we look towards building the customer proposition for 2027, you’re going to see us focus, as we did in ’26 but even more so, on Derby week. We think we found the formula for each day where each day is unique, each day is special, and each day can have a program built around it. So whether it’s Oaks — like you saw last year, it was on NBC for the first time. They were very pleased with the ratings. We were very excited about the ratings. Again, next year it’s back — that’s a nationally televised event.

So you’ve got Derby on Saturday, Oaks on Friday, Thurby Thursday, 502 Tuesday, Opening Day — every day there is a significant theme around which we rally consumer participation and build. You won’t see us change that formula for 2027. You’ll see us go harder and invest more in building those out.

OPERATOR

Thank you. Our next question comes from the line of David Katz with Jefferies.

David Katz (Analyst at Jefferies)

Good morning. Thanks, everybody. I wanted to just go back to the issue of sponsorship, and, you know, the complexity of the question that I think we’re all, you know, grappling with is, you know, the opportunities to expand sponsorship around the Derby, which, you know, we’ve seen from your announcement on Visa, you know, which is a positive step, but also, you know, that being wrapped into and or combined with TCs. Anything you can do to help us think about that sponsorship opportunity would be really helpful.

Bill Carstanjen (Chief Executive Officer)

Thank you, David. I appreciate that question. Yeah, we were really excited about the Visa deal. That was a nice win for our team and a nice win for our partner at Visa. So, as we look forward now, a big key for us as we push to the next level of sponsorships is really focusing on the TCs. The fact is, we need more content. Our sponsors, our fans, our viewers — they all like what we have with Derby and Derby week. So for us, it’s pushing beyond that to develop more content, to develop more events around which we can build everything, every element of our flywheel, including sponsorships.

So I think you’ll see us focus not just in 2027, but beyond, on how we can incorporate what we’re doing with the TCs to give our sponsors more assets and more properties around which they can drive value. So we’ll be working not only with our own current sponsors and with our folks at Churchill Downs Racetrack, but with our partners at the New York Racing Association, who own Belmont Park outside of Manhattan and then Saratoga, to see what we can do to drive our pipeline — which is already really strong — what we can do to really further monetize that and expand that as we go from a week of greatness with the Derby to five months of assets and properties around which we can build.

OPERATOR

Thank you. Our next question comes from the line of Daniel Pollitzer with J.P. Morgan.

Daniel Pollitzer (Analyst at J.P. Morgan)

Hey, good morning, everyone. Thanks for taking my question. I wanted to talk about Virginia a little bit. I think you’re adding a little bit of new supply there or relocating it, and then I think you have two HRM locations on the referendum in the next couple weeks. So, I mean, can you just talk about how you think about supply and demand in this market and maybe how we should be thinking about underwriting organic EBITDA growth going forward. Thanks.

Bill Carstanjen (Chief Executive Officer)

Sure, Dan. Happy to address that. First, I’ll start with Northern Virginia and The Rose. That’s a six-and-a-half million person market. There are 275,000 people who are driving by our facility every day on I-95. So I was really, really pleased with the trajectory of that property over, really, since it’s opened, but particularly over the last couple of quarters. We’re growing every quarter, quarter over quarter and also sequentially, so more of the same there.

We still have a long way to go to tap that market fully, to develop that market. It’s an immature market that has a lot of opportunity, a lot of upside. So I like what we’re doing in Northern Virginia. When you start thinking about other regions of Virginia, you get to appreciate what a puzzle Virginia is. We have this unique right with our 10 licenses in the jurisdiction and our 5,000 machines to move machines and licenses around based on what we see in the marketplace. So in central Virginia, I like that market, but we have new competition there. Still love our facility, still love their win per day, still love their EBITDA contributions, but there is competition in that market.

Some of that will drive an expansion and growth of that market. But we also have to deal with the competition in the market. So that’s an example of: let’s right-size those properties in that market. Let’s not overreact to new competition. Let’s just right-size our marketing programs, our number of machines, our business proposition in those markets, and then let’s look at the state as a whole to decide where else we can put machines. We always have our expectations of what they’ll do when we put them there, but then we can see how they do. And if they’re better than we think, great. Maybe we invest more, maybe we introduce more supply. If they’re not quite what we think, well, then we move supply around to different parts of the state. So I would just encourage all of you to look at Virginia as a state the same way we do, which is we have the ability to surge supply based on what we see from a demand perspective in different regions of the state.

You’ll see that over the very near term and you’ll see that over the long term. That’s a unique and truly special option we have with how the regulatory and legal infrastructure for gaming for us is designed in the state.

OPERATOR

Thank you. Our next question comes from the line of Sean Kelly with Bank of America.

Sean Kelly (Analyst at Bank of America)

Good morning everyone, and thanks for taking my question. Bill, I know these things are hard to talk about a little bit, but just wondering, and I’m sorry if I missed it, but could we get a small update on the asset sales process and where you sit and maybe just helping level set expectations around either types of buyers or types of interest you’re receiving and, I think more importantly, timing on should we expect multiple things at different periods or maybe something a little bit more lump sum?

Bill Carstanjen (Chief Executive Officer)

Sure. Sean, how are the asset sales going? They’re going great. We’re pleased with the process. We’re planning on executing transactions at year end. Very pleased and very confident about the process and where we are in the process and how the next several weeks are going to go. So, as to the nature of each transaction, I think you might have been referring to, is it one big transaction or a series of smaller transactions? It’s a series of smaller transactions.

Each property has been marketed individually. So it can be the case that there might be some that go to the same buyer and it can be the case that they all go individually. That remains to be seen. But the short answer is full speed ahead. We feel very good about where we are. We expect to execute transactions by the end of the year and the process has been what we hoped and expected it would be.

Sean Kelly (Analyst at Bank of America)

Thank you.

OPERATOR

Thank you. And our next question comes from the line of Chad Bannon with Macquarie Capital.

Chad Bannon (Analyst at Macquarie Capital)

Hi, good morning. Thanks for taking my question, Bill. At the gaming show earlier this month, G2E, there was a lot of buzz around additional content for HRMs from a lot of the equipment suppliers that seemed to be a bigger focus than in years past. So can you talk a little bit more about what this could mean for driving win per days? And then you kind of touched on the ETG segment, kind of where that is and where that total addressable market could be within your portfolio.

Bill Carstanjen (Chief Executive Officer)

Thanks, Chad. So, yeah, I remember when we opened Derby City Gaming in Louisville, we only had a single manufacturer. And so we opened that facility originally with one gaming manufacturer. And if you think about how that compares to Class 3 facilities you see in Las Vegas or even in all the regional casinos throughout most of the country, you realize what a product disadvantage that is. Nevertheless, Derby City Gaming took off like a rocket and we built it ever since.

So the story of HRMs for us has been a story of attracting additional game manufacturers and getting them to do the work with us to convert some of their Class 3 titles to HRMs. That’s an ongoing process. That is a constant, ongoing process. The development of games in the country is really oriented around Class 3. So that’s where they’re first being built and developed. And our task is to work with those manufacturers to get them to convert those titles, which can take some work, to convert those titles to HRM titles as well.

So that’s an ongoing process that we’ve been working on and we’re far from done yet. There’s still plenty of manufacturers and plenty of titles that we want to add so that we can expand our floors and offer the full range of products that people find in Class 3 competitors. And then another key component for us are electronic table games. That’s a process that’s near and dear to my heart. I think it’s an important strategic component of the positioning of these properties both in Kentucky and in Virginia over the long term. So our team, we’ve really worked hard to encourage our team and to encourage potential suppliers to help develop those products. We’ve been successful in roulette. We’ve been very, very pleased with roulette’s performance in Kentucky.

But the true value of electronic table games for our HRM venues really is going to be a story of a suite of products. Not just a single product, not just a single game like roulette, but a suite of games. So that’s why we’ve been focused on craps. We’re very encouraged and excited about craps because we’ve seen it. We think that will be a big win for us in our facilities. But we also need blackjack and we’re working very hard on that. So in our journey, we’re still very much on the early end with electronic table games. But this is where you do the real work. This is where you have to really commit and invest to develop the products. And it’s not only a math and a product exercise, it’s also a regulatory exercise. So we’re hard at work at that. And I think as I talked about a bit in my comments, you’ll see craps into the year. We’re also working hard at blackjack. I’m more excited when we have three products instead of one and then build from there.

I’m more excited the more range of ETGs we can offer our customers. That’s when there’ll be more of a one plus one equals three, not one plus one equals two.

OPERATOR

Thank you. Our next question comes from the line of Jordan Bender with Citizens.

Jordan Bender (Analyst at Citizens)

Morning, everyone. Thanks for the question, Bill. In the past you’ve helped us with milestones and targets for some properties similar to when you opened The Rose. So for Rockingham next year, are there similar milestones, whether win per day or margins, we should be thinking about for that ramp? And then, if I can just sneak in a quick follow-up here — this seems meaningful. Bill, you did say meaningful EBITDA growth in the near term for the Derby. Is there a way to kind of put parameters or expectations around those comments?

Bill Carstanjen (Chief Executive Officer)

Sure, Jordan. Let me unpack that. Rockingham Park, the Rockingham Grand that you’ll see open mid next year. So we’re in the process of building out that facility. It will have around 800 to 850 HRMs and slots. It’ll have 32 table games. It’s located right at the border of New Hampshire and Massachusetts. It’s a conversion of a structure at the mall there, which is a very successful mall. It has its own overpass for ingress and egress. It’ll also have a large event center.

So that market, I would encourage all of you to look at the performance of some of the competitors that have opened in that market over the last couple of years to see their ramp in that New Hampshire–Massachusetts border area. On the New Hampshire side, you’ll see there’s a lot to be really, really encouraged about. So as we build our expectations, I have to say that they’ve become heightened because the performance of some of the other product in the market has done better even than we originally expected it would do.

So we like our site the best. We think we got the site we most wanted when we looked at that market a handful of years ago before it was developed. We like our site the best and we’re very encouraged and we’ll be building our expectations based on the significant performance we’re seeing in that region from other sites. With respect to the Derby, as I mentioned in my earnings comments, hey, we’re seeing stronger numbers at this point than we saw last year for the 2026 Derby. So we’re building on that. Everything is moving in the right direction — sponsorships, admissions, all the elements of the flywheel, which is how we really think about what we’re doing there. So the big move-the-needle in a really significant way will be when we open up Victory Run in 2027.

We’ll be in the process of constructing it. We feel very, very positive about what we’re doing. It’s a better product, even on a temporary basis, in that section than we had in 2026. So we’ll have covered seats there and upgraded amenities. So we feel really good about where that section of the track is, even though it’s under construction. We feel very good about the product offering we’ll have there for 2027. But really the goal is to get that section to 2028, where we’ll open what we call Victory Run, which is an integrated, very high-end suite of products including boxes, indoor/outdoor dining, and then large private suites.

OPERATOR

Thank you. And our next question comes from the line of Trey Bowers with Wells Fargo.

Trey Bowers (Analyst at Wells Fargo)

Hey guys, appreciate the question. Just an attempt to try to squeeze a few numbers out of you guys. As we think about just the overall CDRT business, especially with all these exciting new additions, and we look out maybe a few years, any thought of, one, in a post-gaming world, the percent of the business that CDRT could represent? And, two, just in terms of kind of a margin profile — you know, you don’t explicitly break it out, but I think it’s pretty clear that Derby is a very high margin business.

Will these incremental races also represent really high margin flow-through? Any sense on either of those would be great. Thank you.

Bill Carstanjen (Chief Executive Officer)

Trey, thanks for the question. So first, Churchill Downs Racetrack in the Kentucky Derby is the crown jewel of our company. It’s the single most unique, most special asset in our company. And I’d put it up against any other asset in the United States or the world in terms of its uniqueness and potential. It’s a fabulous asset. It’s a culturally significant traditional extravaganza. And our job is to grow it and make it a great business, which I think our team has done a really good job of doing.

So going forward, we need to continue on the themes that we’re on. We’ll get Victory Run done. But there are other projects. There are other things, small projects, larger projects. There are other things to drive growth. The general interest in the asset or in the event is just growing on its own. People just want the word of mouth. People just want to be there. They want to be in the sections that we’ve built, the newer sections. They want to be at the paddock.

So our goal and our expectation is we’re going to continue to compound growth with the processes that we’re following now. So it’s going to be more of the same, but bigger and better. So the other thing you referenced in your question is yeah, it’s very high margins. And you know, certainly as we sell regional gaming assets, the percentage of our company that’s the Kentucky Derby and Churchill Downs Racetrack grows as a percentage. And certainly that’s true. And from a margin perspective, you know, we have a good thing going. We know why it works. I think very high margins are a component of the business model and one we’ll continue to emphasize and improve on.

And I think the TCS Thoroughbred Championship Series, that’s a part of that. We’ve made these investments in this asset called Churchill Downs Racetrack. And we want more opportunities to show that asset off, to show that property off, to utilize that property. And so part of the secret sauce I think that we’re developing for and that we’re using, that we’ve learned from the Derby is how do we use that asset, how do we use our site for other big events, other big things?

And that’s part of the heart behind what we’re doing with the Thoroughbred Championship Series.

OPERATOR

Thank you. Our next question comes from the line of Jeff Spanchel with Stifel.

Jeff Spanchel (Analyst at Stifel)

Hey, good morning everyone. Thanks for taking our question. I wanted to ask on a point you made earlier in the prepared remarks, Bill, which is that ticket sales for 3, 153 are pacing, I think you said specifically well ahead of this time last year. Can you just remind us how much of your premium ticket capacity is typically sold by this point in the selling cycle? And I’m curious if there are any notable call outs that you’re seeing worth mentioning just in terms of specific sections that might be selling out more quickly or where you’ve seen better pricing than maybe you expected.

Bill Carstanjen (Chief Executive Officer)

Yeah, that’s a really interesting question. I’m going to answer it and then dig down into it to explain the answer. So around now about 25% of our premium ticket inventory is sold. Even more than that, I’d say. But the important thing is the process and the timing for which we move different ticketing is sort of a trade secret. We’re not trying to move it all up front. We’re trying to yield, we’re trying to yield our seating. And so we follow a plan and a process that we found over time that does that for us.

Many sections, they’re tied up on multi-year PSLs. That’s stronger than it’s ever been. But when it comes to the unallocated tickets, the hold and open for the public for next year that we look to sell and don’t hold under long-term contracts, that part, all parts are way ahead of where they were last year. But that part we’re just throttling back because we want to make sure we keep sufficient inventory for later in the season because the demand so far has been so strong.

OPERATOR

Thank you. Our next question comes from the line of Peter Supino with Wolfe Research.

Peter Supino (Analyst at Wolfe Research)

Hi, good morning. I wanted to see if you could shed any more light on the margin structure of the racing segment and how you think about incremental returns on capital in that business. Thank you.

Bill Carstanjen (Chief Executive Officer)

Peter, you broke up on me for one second. Would you mind repeating that question? I’m sorry, it was on my end, not yours. We were shuffling papers and you broke up for a second. Would you repeat that?

Peter Supino (Analyst at Wolfe Research)

Yes. I just wondered if you’d talk at all about the margin structure, the profitability of the Kentucky Derby business and the incremental returns on capital that you expect to receive to earn on investments in that segment.

Bill Carstanjen (Chief Executive Officer)

Sure. So generally, because we’ve seen such ability to drive pricing power over time, when we do a project at Churchill Downs Racetrack, we’re willing to accept a little longer payback time frame than on other assets we develop in the company, say a gaming property. So generally we’ve been willing to be a little more patient on the payback period than other investments we make in the company. But the fact is, and most times, and this is a great thing to say as a business executive and having worked across a series of different investments within the company, it’s a great place to be.

Generally what we do around Churchill Downs and the Derby outperforms our expectations. And that’s been true over virtually every year that I’ve been around here. So generally we try to be a little more patient because you’re introducing, when you do these projects, you’re often introducing very unique things and a very unique sale proposition to the customer. And you have to be patient for the customer to understand what that sales proposition is and for word of mouth to develop and to build a book of demand around each new section as you develop. But generally it’s gone better than we could hope that generally outperformed expectations.

I’d say this, as we developed new sections on the Capex front, they’re not changing, they’re not getting longer, they’ve been consistent over time. So the beauty of our business model, the admissions-based model, people pay for an experience, they pay for all of the events that they experience, not just this thing called a seat that they purchased. They’ve paid for this general experience. And that’s why projects like the paddock, that’s why we can drive such margins because everything we do sort of drives the overall experience.

It’s not just the seat they pay for. And when we think about what we do at the track, we think about how the consumer’s experience is affected by not just by a new seat or a new section, but their entire experience within the facility. And I think that’s an important driver for Victory Run because that’s an area of our facility that has historically been underinvested in and yet it’s an area that people often pass through. Not everybody, but many people at the facility will spend some portion of their day passing through that.

So that acceleration, I think of that area being turned into something beautiful and consistent with the highest end areas of our track with the paddock area. I think that’ll fuel all levels of the… all elements of the flywheel.

OPERATOR

Thank you. Our next question comes from the line of Daniel Guglielmo with Capital One Securities.

Daniel Guglielmo (Analyst at Capital One Securities)

Hi everyone. Thank you for taking my question. As a follow up to that last question, can you just dig in a little bit more about how you kind of measure success there on the racing lean into with the series and the partnership. You mentioned wagering, admissions, partnerships. But is there anything more qualitative as the strategy takes form and then you kind of hinted at it, but is there a specific time horizon that you are focused on for these kind of both investments but also kind of strategy shifts that you’re looking at.

Bill Carstanjen (Chief Executive Officer)

Yeah, yeah. That’s a fun question for me to talk about and it’s not one we often get to in these calls. But that qualitative element actually takes a lot of discipline because you don’t always monetize social media impressions. You don’t always directly monetize, within a television contract, increasing ratings. But you still have to work very hard to drive those things because those are some of the most impressive statistics about what we have with the Kentucky Derby.

If you look at our television numbers, which have been just growing sequentially every year, 24 million people at the peak watched the Kentucky Derby last year, I think we averaged, which is another metric, something like 19 or 20. Those are extraordinary numbers. And you put those up against the World Series. You put those up against the NBA, you put those up against the Masters, football, college, pro. Those are really, really incredible numbers.

And that takes work to build a television experience with our NBC partners that is good every year to build and deliver those kind of ratings. So we spent a lot of time thinking about the storytelling around our event. We spend a lot of time on social media and those are also numbers that we put up against anybody, our increasing social media impressions. All of those metrics we track very, very closely and they all are driving forward at a really great rate. And those eventually feed into the other metrics of wagering or sponsorship or higher television deals, et cetera. But you have to do the work on those every single year because you have to show a pattern.

You have to show constant progress on that. Like I said, it’s almost fun for me to talk about it, because that’s work that we do. And we spent a lot of time measuring that we think you have to do to make a great event. But it doesn’t necessarily show up that year in some new financial metric. But it’s part of the long-term secret sauce and story that you have to put together to drive all of these elements of the flywheel of how we monetize the Kentucky Derby, the wagering, the admissions, the television contracts, the sponsorships, the licensing.

And again, what I’m most excited about, I’m always excited about continuing that for the Derby, but what I’m most excited about is we want to take all that and put it into the Thoroughbred Championship Series. We want these more events. We want a longer period of time, five months of content instead of one week of content. We want that longer period of time to use these skills to build that TCS series into something that can be comparable to the Derby over time.

OPERATOR

Thank you. Our next question comes from the line of Joe Stoff with Susquehanna.

Joe (Analyst)

Good morning, Bill. Marsha. Bill, on the Thoroughbred Championship Series, I was wondering if you can say, discuss the buy-in, right, for the owners and the trainers. You know, we all saw a very prominent owner in the context of buying your stock; obviously that’s a favorable reference point, but where is that process? And then two of the six races—you know, we’re all familiar with kind of the Derby and Belmont and Travers—but the smaller ones, and one of them was obviously new, but the smaller ones, Matt Winn and Jim Dandy. Can you just reference how much betting handle those do at current, at least historically?

Bill Carstanjen (Chief Executive Officer)

Absolutely, Joe. I have to unpack that question. There was a lot. There were a couple things going on there. So let me make sure I capture all the elements of that. So first, what’s been the support and the buy-in from owners and trainers into the Thoroughbred Championship Series? I think it’s been exceptional. I think it’s very high. I think the industry wants leadership. I think they want a league. I think they want something to shoot for and to build towards. So I think they’re very excited to have more opportunity and for there to be a heightened significance on these races. So that’s been really encouraging.

And I wouldn’t shy away from the fact that we’re also doing some economic incenting. You mentioned the Jim Dandy and the Matt Winn. We’re taking the purses of those races up, so they’ll be at least a million dollars. So every one of these races on the colts division side will be at least a million dollars. And on top of that we have the $5 million bonus structure based on how you perform across that series. So that’s a big number in our industry.

Five million dollars to shoot for is extra prize money as part of the $22 million overall that resides in the purse structure of the series. That’s a big deal. There’s a big economic incentive and of course we want—what you can find in horse racing sometimes is the big horses duck each other. There’s enough opportunity out there that these horses sometimes don’t want to keep racing. Here the prestige and the money, the purse money, the attention, the telecast, it’s all going to be focused on these races.

And all of that’s going to drive these horse owners to take their horses and enter them into these races to compete for this. They all show up for the Derby. Why do they do that? It’s the prestige of the Derby. That’s what matters. That’s what people outside of the industry talk about. Well, this is designed to pull that prestige, to amplify that prestige, so that these owners feel that about these other races and take the risk and go after the reward of continuing to compete against each other to see who’s truly the best over a five-month series.

Another component of your question was some of these races are big deals and some of them are not as familiar to the public. They’re all big races within the industry. These are all very well-regarded, important, high-purse races. But certainly within that you have the Derby. That’s the biggest of them all, both from a purse structure and from a prestige structure. Then you have the Belmont Stakes, which is a legendary, historically important race.

It continues to be an incredibly prestigious and important race. The Travers also is very prestigious. They also often call it the Midsummer Derby, but that isn’t as known outside of the core industry. And that continues for the Matt Winn and the Jim Dandy. They are big wagering races. Those are big wagering days. Part of the flywheel’s already there, but we need to bring some of that prestige that comes from the other races and comes from the whole concept of the Thoroughbred Championship Series.

We need to bring that and infuse those races with that prestige and those purse dollars to elevate them. And by connecting them into one common thing, one common purpose, an ultimate higher purpose, we’ll grow all of them and will make all of them even more significant.

OPERATOR

Thank you. And I’m showing no further questions. So with that, I’ll hand the call back over to CEO Bill Carstanjen for any closing remarks.

Bill Carstanjen (Chief Executive Officer)

Thanks, Andrew. First, everyone, thank you for joining. Thank you for