Churchill Downs, Incorporated

Good day, ladies and gentlemen, and welcome to the Churchill Downs, Incorporated, 2026 second quarter earnings conference call. At this time, all participants are in a 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 Ullrich, Vice President, Investor Relations.

Thank you, Andrew. Good morning and welcome to our second quarter 2026 earnings conference call. After the company's prepared remarks, we will open the call for your questions. The company's 2026 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 churchildownsincorporated.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 related announcements and the risk factors included in our filings with the SEC. Specifically, the most recent reports on Form 10Q and Form 10K. 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 10Q are available on our website at churchilldownsincorporated.com. and now I'll turn the call over to our Chief Executive Officer, Mr. Bill Carstanjen.

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 highlights from our record second quarter performance in Kentucky Derby. I will then provide an update on our major development projects and our strategic plans. Marcia will follow with more detail on our financial results and capital management strategy, and then we will take your questions. First, regarding our second quarter results, we delivered all-time record net revenue of $980 million and all-time record adjusted EBITDA of $477 million. This marks the sixth consecutive record second quarter for both metrics. At the end of April, we began a week-long celebration leading up to the 152nd running of the Kentucky Derby on Saturday, May 2nd. We made several enhancements that expanded the reach and value of our iconic event. We added Sunday racing on April 26th. With this additional day, we welcomed over 386,000 guests for Derby Week. This is the equivalent of nearly six Super Bowls or World Cup games over the course of one week. We continue to reap the benefits of the capital we have deployed to enhance the Derby experience. We are building long-term demand in each of the areas in which we have invested over the past five years, including the starting gate courtyard and pavilion, the first turn, and the paddock. We completed the renovation of the mansion and a significant upgrade to the finish line suites for this year's Derby week. Both premium areas offer exceptional views of the finish line, and the guest feedback has been extremely positive. Our partnership with NBC delivered record broadcast revenue and viewership. Broadcast revenue increased $10 million under our new NBC agreement. Peak viewership exceeded 24 million, 12% above last year's record. For the first time, NBC aired the Kentucky Oaks race in prime time, reaching an average audience of more than 2.4 million viewers. The Friday night broadcast created a strong lead-in to the Kentucky Derby, and expanded awareness, engagement and wagering around our flagship event. Derby Week also generated more than 500 million social media impressions, up 84% from 2025. This year, we once again set all-time records for all sources wagering on Derby Week. The Kentucky Derby race remains, by a massive margin, the highest U.S. horse racing wagering event, while the Kentucky Oaks race is the fourth highest. As expected, sponsorships and licensing for Derby Week also grew in 2026. Together, all of these results demonstrate the continued growth in Derby Week's cultural relevance, reach, and value. Turning to our key development projects, our capital investments in 2026 are primarily focused on the continued development of Churchill Downs Racetrack and our HRM expansion in New Hampshire. Regarding Churchill Downs Racetrack, first, Our $285 million Victory Run project will be completed before the 2028 Kentucky Derby. Located on the first turn, this new hospitality offering will add premium suites, cover box seating, and multiple high-end dining experiences. For the 2027 Kentucky Derby, we intend to have high-end temporary stadium seating, restrooms, and concessions underneath the newly constructed Victory Run roof to materially improve the guest experience until the interiors and other permanent improvements are completed in 2028. This project remains on time and on budget. Second, we are expanding the interior of the Homestretch Club to add amenities and indoor space for the 2027 Kentucky Derby. Third, we are redeveloping the infield areas on both sides of the Winters Pagoda, which is the historic building in the infield near the finish line, for the Kentucky Derby winners received their trophies. As part of this redevelopment, we will be removing the tote boards and using this space to create new customer experiences with exceptional views of the home stretch, the finish line, and the Derby winners trophy presentation. For the 2027 Derby, we will be installing 1,400 temporary seats and we'll also be testing a new cabana offering for approximately 500 guests along the turf course. These new offerings will enable our team to further segment the infield experience and provide a broader set of price points. We are also making underground infrastructure improvements in the first turn area of the infield, which will enable us to create a more level area for a music stage and new bar and lounge concepts. We will continue to evaluate long-term permanent entertainment experiences for these highly desirable areas of the infield. In New Hampshire, Rockingham Grand Casino in Salem remains on track for a mid-2027 opening. We expect this state-of-the-art gaming and entertainment destination to attract guests from across New England. Now I will provide a brief update on our strategic plans. Over the last number of years, we have built and acquired unique growth assets, invested organically in the Kentucky Derby and high return HRM properties, and monetized assets when we believed another owner could create additional value. We believe that our recent share price performance has not reflected the quality, durability and cash generating characteristics of our properties and we certainly recognize that we must constantly analyze and adapt to our market environment and dynamics. After a great deal of internal strategic analysis and discussion, we commenced the strategic review of our wholly owned regional gaming properties within our gaming segment. As part of this review, we assess the strategic importance of each of our wholly owned regional gaming properties to our overall company strategy. As a result, we are exploring various options to sell the following nine gaming properties. Culver Casino in Florida, Terre Haute Casino in Indiana, Hard Rock Casino in Iowa, Oxford Casino in Maine, Ocean Downs in Maryland, Harlow's and Riverwalk Casinos in Mississippi, Del Lago in New York, and Presque Isle in Pennsylvania. We will retain our Fairgrounds related properties in Louisiana because of their long term importance to the horse racing industry. Fairgrounds Racecourse is home to the Louisiana Derby, which is a premier road to the Kentucky Derby race. Fairgrounds also offers one of the very few wintertime turf courses in the eastern half of the United States and plays a key strategic role in the migration of racehorses in the colder months. Based on market feedback, we now believe that a sale of these properties will most likely be individually or in small groups to maximize value for our shareholders. We are working hard to execute this process over the coming months. We have engaged Macquarie Capital to assist us. To be clear, we do not intend to sell our HRM properties in Kentucky, Virginia, or New Hampshire. Our intention is to use any asset sale proceeds to significantly reduce our leverage Reinvest selectively in Churchill Downs Racetrack and in other high return projects and fund the repurchase of shares of our stock. Going forward, we will concentrate on assets with strong cash flow and durable competitive advantages. Three cornerstones will anchor this strategy. The Kentucky Derby, our HRM businesses, and our Twin Spires business. Together these cornerstones support the horse racing ecosystem and provide multiple avenues for profitable growth and long-term shareholder value. The Kentucky Derby is our defining asset and the foundation of our differentiated strategy. As the crown jewel in our portfolio, we are committed to expanding its relevance, reach, and earnings power while preserving the traditions that make it singularly unique. It is a one-of-a-kind luxury live sports and entertainment property that builds on 152 years of tradition, historic Americana, celebration, and shared experiences. We intend to build on that legacy. Our goal is to make Derby Week an even broader national and international event. We see meaningful opportunities to grow global attendance, wagering, viewership, sponsorship, and EBITDA across the full week. Strategic investments will remain a key part of our long-term strategy for growing the Derby. These projects are designed to elevate the guest experience, expand premium inventory, deepen sponsorship opportunities, and generate attractive long-term returns. The second cornerstone of our strategy is HRMs. We will continue to develop and optimize high-quality HRM entertainment venues in Virginia, Kentucky, and New Hampshire, and to pursue opportunities in additional states that authorize HRMs. We will use Xacta technology to improve returns at our properties, expand the platform with other U.S. and international operators, and continue to develop electronic cable games to broaden our product offerings. Our HRM venues play an important role in supporting the horse racing industry in their respective states. They generate purse funding, support the local agricultural industries, support local charities, create jobs, and drive meaningful economic impact in their communities. We also plan to continue to grow and optimize the Virginia HRM footprint. Through our ownership of Colonial Downs, we have the sole right to 10 HRM licenses and 5,000 machines in the Commonwealth. Our portfolio generates strong margins and free cash flow while supporting racing purses, tax revenues, and jobs across the state. We are exploring options to run referendums in the town of Pulaski and in Amherst County, both in the western part of Virginia, that would allow us to further expand our HRM footprint. We believe both jurisdictions are underserved markets with attractive growth potentials. In Kentucky, our eight HRM venues operate approximately 5,300 machines and continue to generate strong growth and significant PERS funding. Since Derby City Gaming opened in 2018, purses at Churchill Downs Racetrack have increased from less than $40 million to more than $100 million. We see further long-term growth through leading gaming content, enhanced entertainment, new products, including electronic table games, and selective expansion. In New Hampshire, as I discussed earlier, we are excited about the opening of Rockingham Grand Casino in mid-2027. We also retain the HRM license associated with Chasers in Salem and will pursue attractive alternative uses for that license. The third cornerstone is Twin Spires. Twin Spires remains focused on expanding interest and participation in horse racing wagering through innovation and broader direct to consumer and business to business distribution. During Derby Week, Twin Spires again set records for wagering, new registrations, first-time depositors, and active players. We intend to build on that momentum. In summary, the second quarter delivered record results and demonstrated the strength of our core businesses. Our Churchill Downs Racetrack and Rockingham Grand Casino projects remain on time and on budget. We are executing a long-term strategy with the Kentucky Derby, HRMs, and Twin Spires, serving as the pillars. and we will seek to sell our wholly owned regional gaming properties to pay down debt, to repurchase shares and to selectively reinvest in our business. Our strategic decision making, disciplined capital allocation, strong balance sheet and portfolio of unique and iconic assets have positioned us well to drive sustainable long-term growth. This is an exciting time for our company and our shareholders. With that, I'll turn the call over to Marcia, and then we will take your questions. Marcia?

Thanks, Bill, and good morning, everyone. I'll review the key drivers of our second quarter financial performance and then discuss capital management. Starting with our second quarter financial results, as Bill noted, we delivered all-time record revenue and adjusted EBITDA. Our live and historical racing segment and our wagering services and solution segment also achieved all-time record results. Momentum in our live and historical racing segment remains strong with adjusted EBITDA increasing 7% compared to the prior year quarter. Adjusted EBITDA for Churchill Downs Racetrack was up $16 million for the quarter, driven by the successful running of the 152nd Kentucky Derby. We continue to expect Derby Week to contribute $15 to $18 million of incremental adjusted EBITDA in 2026 compared to the prior year. Thank you for joining us. Thank you for joining us. Revenues and margins also improve sequentially, reinforcing our confidence that the Rose is still early in its development and has meaningful growth potential ahead. At our central Virginia properties, results continue to reflect near-term competitive pressure. We are responding with targeted marketing and guest engagement initiatives designed to stabilize performance and improve returns over time. Overall, Virginia margins have remained at 46% consistent with the prior year quarter. Turning to our wagering services and solutions segment, adjusted EBITDA increased over 8% driven by growth in Twin Spires Horse Racing and continued expansion of our Xacta platform. Twin Spires adjusted EBITDA also benefited from lower legal expenses in second quarter than in the prior year quarter. and last regarding our gaming segment, adjusted EBITDA increased 5% compared to the prior year quarter. Our wholly owned regional gaming properties performed in line with expectations given the cessation of HRM operations in Louisiana in May of last year. Overall, second quarter same store margins at our wholly owned casinos were centrally flat to the second quarter of last year. Consumer trends have improved from both the prior year quarter and first quarter levels. Higher value rated play remained strong while our lower value unrated segments were consistent with the prior quarter trends. Turning to capital management, in the first half of this year, we generated record free cash flow of $474 million, or $6.70 per share, demonstrating the strength and consistency of our operating model. Our strong free cash flow generation continues to support both reinvestment in high return growth projects and meaningful capital returns to our shareholders. We spent $79 million on project capital in the first half of the year and continue to expect full year spend between 180 and $220 million. We spent $38 million on maintenance capital in the first half of the year and continue to expect full year spend between 90 to $110 million. We remain disciplined in our management of capital Given our commitment to reinvesting selectively in Churchill Downs Racetrack and high return live and historical racing projects to create long term shareholder value, significantly reducing our leverage, maintaining consistent growth in our annual dividend, and repurchasing shares of our stock when our shares are trading below their intrinsic value. We have reduced our leverage over the past 12 months. At the end of June, our bank covenant net leverage was 3.7 times Reflecting continued strong operating cash flow generation from our recent investments. As Bill discussed, our intention is to use any asset sale proceeds to significantly reduce our leverage. We've also returned significant capital to our shareholders over the past 10 years. Since late 2015, we've returned over $2.4 billion to our shareholders through share repurchases and dividends. As of the end of June, we have $430 million remaining under our share repurchase program. We intend to repurchase shares of our stock in the second half of the year given the current market dynamics and the nominal impact that our planned share repurchases will have on our leverage. We expect bank covenant net leverage to remain in the 3.6 to 3.8 times range through the end of the year, and in 2027, Thank you for joining us. Thank you, Marcia. And we're now ready to take your questions. Certainly. To ask a question, please press star 1-1 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.

Hey, guys, good morning. Thank you for the very thorough comments. One or two just asked a little bit more about Virginia. Can you maybe talk a little bit more about the remaining HRM deployment strategy, how you're sort of balancing that with the evolving competitive dynamic in the state, and anything you can share in terms of your goal of increasing the deployment limit in the state? Thank you.

Good morning, Barry. Thanks for the question. The way it works in Virginia is we're entitled 10 licenses, so 10 places where we can deploy machines, and a total of 5,000 machines across the jurisdiction. And by jurisdiction or by county and town, there can be some limitations that apply there where we can deploy the machines even when we're approved for a license. We still think there's lots of opportunity in Virginia, and we wish and are working towards getting more than 5,000 machines over time. But right now, we're working within the 5,000. So in the central part of the state, we've seen the introduction of the Petersburg Casino in January or early February of this year, and that's had some impact in the short period of time since then on our properties such as Richmond and New Kent. and even a little bit of Emporia, that's had some impact on the performance of those properties. But as often is the case, it's disruptive when a new property opens and you adjust, you take the lessons that the market gives you, you learn from those and you adjust your marketing and you adjust your competitive positioning. And we'll continue to do that as we face that additional competition and I think you'll see us performed strongly and make adjustments and make improvements to our efforts there. And across the rest of the state, as I mentioned, you'll see us run two referendums in more of the western portion of the state, near Blacksburg and Lynchburg, and we'll look to use the remaining machines we have and also look to responsibly and sensibly redeploy machines from other facilities where we think we can get a higher return off those machines by moving them around. So in all in all, it's a bit of a chessboard in the state, finding the best places to open up licenses and finding the best place to deploy the machines. And again, over time, I hope we have more licenses and machines to play with in the jurisdiction.

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

Good morning, everybody. I'm pleased to take in my question. So, on the strategic review, Bill and Marcia, and I appreciate there's only so much you probably want to say, but maybe you could just talk about how you see the health of the transaction market right now for these types of assets, you know, maybe key into the dynamics that we're seeing play out at some of your peers. that are looking at high-profile transactions, if that helps or hurts your cause. Thank you.

Sure thing, Brent. Thanks. Hey, these are great assets. First and foremost, these are assets with long histories of good cash flow generation, good returns on capital, and performance. Starting with that premise that we have good assets, certainly it's the case that there's activity in the market in this space in general. We can all see that, and people can take from that what they wish. But we think this is an excellent time for us to go to market. Like I said, in our case, I think we'll be looking at more individual or small bundles of transactions based on different buyers' interests and needs. But first and foremost, the most important thing to highlight is we're selling proven strong assets that ought to fit in other people's portfolios and other people's plans. And from our perspective, we're pleased with the environment and pleased with our plan to take these properties to market.

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

Morning. Thanks for taking my question. Bill, I appreciate all the strategic commentary. When it comes to the Derby, you know, you laid out, I think, you know, pretty detailed list of the avenues through which, you know, the earnings potential there could grow, right? Sponsorship, ticket sales, et cetera. You know, two questions. One is, you know, help us without guidance, of course, you know, maybe rank order where you think the biggest opportunities are, you know, in the medium term. And then second, based on where you sit today, where you have put some capital in and are putting more in, you know, how should we think about the trajectory of earnings growth medium term and whether, you know, there are certain gaining factors we can look to for an inflection, you know, presumably upward in, you know, the earnings power at the journey. Thanks.

Thanks, David. So as I highlighted in my comments and you just hit on too, everything is moving in the right direction with respect to the Derby. So whether you're talking about admissions revenue, broadcast revenue, sponsorship, wagering, all of every metric by which we measure the Derby and evaluate the performance of the business. Every single metric is moving in the right direction and that's a great place to be when you operate a business. You don't always find that in every business at every time. But with the Derby, we found that. That's the environment we're in and we're the beneficiary of the history of the events, the fact that it's cut above the noise that you find in a broad, diverse American public to reach a national presence and a and a place where America stops and pays attention. It's hard to achieve that in America and we've achieved that with the Derby. So with that caveat that everything is moving in the right direction, certainly you see that in terms of step function growth, you see the work we're doing on Victory Run and when that reaches fruition, particularly at Derby 2028, you're going to see the first of the rounds of additional growth that comes from that capital investment. But even with smaller capital investment, even with smaller projects, you'll see growth, you'll see additive revenue, and you'll see momentum. For me, I'm particularly excited about some of the experiments we're running in the infield. You may have noticed when we talked about the infield projects, we're putting in temporary structures, cabanas, temporary seedings around the Winter's Pagoda. We need to do some experimenting there. We need to test some concepts before we want to go with permanent structures there so we can really take some of the lessons we think we've learned from what we've seen in other parts of the world and in other parts of the country, even with other events, to see how they'll work for us. So building out the physical facility, changing the physical facility, innovating around the physical facility is I think the beginning. I think when you talk about broadcast, when you talk about sponsorships, first and foremost, it's what's that event on the ground? What's that event like to participate in? So first and foremost, I think we start with that. And I think there's a lot of momentum on sponsorships. You've seen the new NBC deal and the impact and the contribution of that. And all of these things fit together and they all move generally in the same direction. But first and foremost, it's about delivering a world-class, unique special American event. We think we have that formula and we'll keep innovating around that formula to grow it.

Thank you. Our next question comes from the line of Dan Pollitzer with JP Morgan.

Hey, good morning, everyone. Thanks for the question. It does feel like we're kind of making a strategic pivot here, right? I mean, you guys are selling regionals, you repurchase United Tote, and then you attempt to get more involved with Preakness, right? So it does feel like they're leaning into racing. Can you maybe give us a peek under the hood about how you think about expanding within racing and especially as it relates to maybe being more involved within the Triple Crown?

Well, I Happy to do that, Dan. I think like a lot of segments of American business, there's a flight to quality. And whether you look at our Twin Spires asset or the Derby, you see real opportunity to build around things that work and to enhance those things. So certainly within horse racing... Our focus is on what's best about horse racing, what's most interesting about horse racing, and what's resonating about horse racing with the American consumer and the global consumer. And that's what we focus on. Not every aspect of the horse racing space, not every track out there, but the things that we see work, the things that are delivering growth, that are delivering excitement, that are delivering better television ratings, etc., So, yeah, we do see opportunity in horse racing. I think you see other people do it, too. I didn't mention it in my comments, and I haven't been asked about it, but you see lots of interest out there around leagues and different ways of packaging horse racing. Those are all things of interest to us, as well. Those are all things that we pay attention to, as well. You'll see us focus more on that. You may see more exciting innovations announced from us around that. But we don't shy away from what we think is working. And the top end of horse racing is working. And we've got the formula of building events, building purses, building attendance, building sponsorship. And we think we can expand on that formula.

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

everyone, good morning and thanks for the question. Bill, Kentucky HRMs continue to be a bright spot in a quarter after quarter here with EBITDA moving in a solid direction. Can we get an update on the ETGs that you guys put in and maybe just, you know, if we look back over the last six months, just some of the learnings that have happened in some of these properties and maybe where that leads us or brings us to in the coming years?

Yeah, I think right now in Kentucky it's It's maybe 1% of our machines deployed and 2% of our revenues. So we need to go faster. We need to keep pushing on that, and we will. This is the beginning of a new thing. So for us, we want to introduce more titles. We started with roulette. We're working on other games. And we'll keep pushing on that to not only expand roulette, but to introduce different products and moving lockstep with the market absorbing the new games, the regulatory authorities being comfortable with new games, and otherwise fitting it in with our host of other marketing and other strategies to grow those properties. So it's an important piece. I think you'll find over time it becomes more and more important for our performance, and we're going to move as fast as we can responsibly can while fitting it in with our other strategies and efforts to grow those properties.

Thank you. Our next question comes from the line of Chad Beynon with Macquarie.

Hi, good morning. Thanks for taking my question. Just piling on the, you know, the theme of sports as an asset and kind of focusing this on, you know, your HRM business, Has there been any more, you know, teachings or learnings from other states just really understanding kind of what, you know, Churchill Downs and other constituents do for the industry that could potentially lead to further expansion in the U.S. from an HRM standpoint? Thank you.

Thanks, Chad. Yeah, HRMs has been a, you know, an incredible bright spot for our company, you know, a business model and a series of assets that we just have a high degree of confidence that we can grow and expand and innovate around. So for us there's a lot of opportunities for HRMs within the jurisdictions where they are deployed. We hope to find other jurisdictions both domestically and internationally where we can grow into as well. So with The quality of the product as it continues to improve, just the availability of titles, the business model as a whole where it's often used to fund purses, fund agricultural development, fund horse racing in general. There's a real synchronicity to it that works for a lot of states. delivers the product. It delivers the impact for the state and the governments that approve it. And for us, it's a vertically integrated product offering where we have not only physical sites where we can deploy these, but also the exact technology which is integral for their operation. We just think there's a lot that we can do there. And when we do talk to other states and when we do talk to the states where they are deployed, We do so from the confidence of demonstrating that we've kept our promises in terms of what the impact of this can be for the state, for job creations, for the horse industry, for agriculture, for the tax base, etc. So it's a formula that's worked where these assets have been deployed, where this model's been deployed, and we think there's plenty of opportunity for more of that. So for us, it's one of the pillars, it's one of the cornerstones that we intend to drive growth around over the next number of years.

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

Hi, everyone. Thank you for taking my question. As a follow-up to Dan's question on the clear kind of horse racing focus, do international horse racing fans become more of a priority now? And high level, are there certain countries around the world where you all see the best customer demand dynamics where you would like to grow?

Yeah, so certainly we always found strong international interest in attending the event, but building programs and strategies around recruiting international or driving international attendance has been something that we've been more recently focused on. So we do think that there's enormous international interest in the Kentucky Derby. just enormous, both from an attendance perspective and we also think from a sponsorship perspective. So those are two areas of real focus for us. Interestingly, just about everywhere you go in the world, you find the thoroughbred horse industry. So whether you're talking the Middle East or Europe or Japan or China, you find interest and a history in this sport. and for many of these non-US international fans, the Kentucky Derby represents the pinnacle of the sport, arguably the pinnacle of the sport and certainly the pinnacle of the sport from an American perspective. So there's great interest and our brand is well received and well understood in a lot of these jurisdictions. So the challenge for our team is building the programs to fully harness harness that interest from an attendance perspective, from a sponsorship perspective, and occasionally from a wagering perspective, although the wagering rules around the world are all different in terms of access to wagering for the citizens. So it's a big focus going forward. This is why we've started the European and Middle Eastern road to the Derby, the Japanese road to the Derby. You'll see innovation around those pathways all with the intention of driving earlier awareness and participation and anticipation of the Kentucky Derby and perhaps some of our other races as well.

Thank you. Our next question comes from the line of Jeff Stanchel with Stiefel.

Hey, good morning, Phil. Marcia, thanks for taking our question. I wanted to follow up on David's question from earlier on the Derby and some of the key growth initiatives and really specifically drill down into the midweek strategy. Bill, could you just maybe add some color here and help us think about sort of a long-term strategy and potential financial uplift. What does the visitation revenues look like today up through Oath Day? What are some of the new initiatives that you've either already put in place or are being considered to try to grow that midweek business? And then how should we think about sort of both the direct flow-through impact of driving more midweek visits as well as if there's any sort of indirect benefit from improving the overall guest experience and driving higher loyalty for Derby Day itself?

Sure, Jeff, happy to do that. As I mentioned in my comments, in 2026, we had about 386,000 guests attend Derby Week. So somewhere around 150 of those came on Derby Day. So the substantial majority of our fans are actually coming on other days of the week in totality. So we saw just a great, thrilling response from putting the Oaks on national television for the first time on NBC. We were thrilled with those numbers. So was our broadcast partner, NBC. And essentially every day of the week now, starting with opening day and then the Sunday and then Tuesday, Wednesday, Thursday, Friday, and then the Derby on the following Saturday, every one of those days of the week has its own brand and its own identity and its own contribution to the week as a whole. And we've We continue to develop each of those days around the themes that have proven to work for those days. So what we found is the Derby is a spectacular sort of overwhelming event and one that's a must-see. But for lots of people in the region, locally in the region and increasingly across the country, they pick another day as well to enjoy. And we're encouraging of that. We're thrilled by that. and each day has its own business model now and its own brand that we'll look to develop. So certainly the Derby then followed by the day before with the Oaks, those are the premier, you know, that's the pinnacle, that's the finale. But every day offers a little bit something different, a little bit different price point, a little bit different brand and style and there's something for everybody. And since we don't really ever work towards pushing the derby crowd north of 150, certainly we've been north of 150. Certainly we have been higher than that. But 150,000 is when we think about the level about which we think we can offer the best experience for our customers. So to soak up the rest of the demand and to develop our customers as best we can, we really need to push them to the other days, not just Oaks, but those other days. so you'll see us continue to invest in marketing in brand development each of these days and I think part of the future for the event is driving more of a festival atmosphere there already is one but a festival atmosphere not only at the track but across the community and the region to capture more visitation to capture more participation and to acknowledge that Thank you.

Your next question comes from the line of Sean Kelly with Bank of America.

Hi, good morning, everybody, and thank you for taking my question. For Bill or whoever wants to take it, I just wanted to get some thoughts on, sticking with the Derby theme here, a little bit around just your experience with some of the expanded programming during the Derby week. What I'm specifically wondering is how you think about Maybe the ramp or the seasoning, maybe an easier way to say it is just what you kind of learned from, you know, the Oaks and the move to primetime this year. You know, just how that influenced betting behavior and how you think about, again, maybe optimizing or spreading that event, you know, kind of throughout the course of the broader weekend. You know, appreciating that this was year one. So what did you learn? What do you think you can do, you know, maybe a little bit better? What can you take into next year? for further improvement. Do you think there's a bit of a multi-year opportunity to optimize this? Thanks.

Sure, Sean. So the ability to get the Oaks on primetime television was a really important development for the Oaks and for our company. And as I mentioned, our broadcast partner, NBC, was thrilled with the results and so were we. So I would say two things to building an event. across the United States, which are increasingly important, is awareness and distribution. So awareness, we're building that for the Oaks, but also I'm always focused on that for our team for the Derby itself, too, because the day comes and you don't want people to miss it because they forgot it was on Saturday. Having the Oats on prime time is a great reminder to everybody that the Derby is the next day. So in addition to building the Oats itself, it's also an opportunity to remind everybody to not miss the Derby on the following day. And that goes for everything we're doing with the week of festivities and the week of racing around the Derby and prior to the Derby. So what worked is we're on national television and we're pleased with the results. and we'll continue to build the Oaks which by virtue of doing that also furthers the Derby and you saw that in the wagering, you saw that in the viewership, record viewership for the Derby, record viewership for the Oaks and record viewership across or record wagering across the week for all of our races. Everything can feed into each other, but generally we're looking for awareness and distribution and brand building of each day of the week. But the most important days are the Furby, which is on Thursday, the Oaks, and then, of course, the finale with the Kentucky Derby. So we think a lot of our programs and a lot of our strategies are working extremely well, and we think those show up clearly in our attendance numbers, in our wagering numbers. and our sponsorship numbers and in our viewership numbers.

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

Hey guys, thanks for the question. Two different questions, one and kind of separate. One, just I know it's early days, but curious you guys' thoughts about the newly announced Horse Racing League, any conversations you're having with them, and what that might mean for the Derby and the business going forward. And then two, just around the M&A, curious how you guys are thinking about the JV assets. And then if a buyer was to present itself that would want to just purely buy the properties and leave the opco with you guys, would that be something you'd be willing to do? Thanks.

Okay, let me unpack that. There are different categories of questions within there. So first, on horse racing leagues, there are actually several that are being contemplated that have been announced, and that I believe everyone, every potential league that's out there, I think one of their first calls is always to us, and so I feel like we've had good exposure and a good chance to learn about these leagues as people contemplate them. And We encourage the leads. Again, it's flight to quality. It's around building more awareness, more continuity, and a broader distribution for our sport and for our company. So in general, we're strongly encouraging of the different leads. Obviously, there can't be 10 new leads that appear. There'll be winners and losers in this process, but we encourage that process occurring. And we have our own ideas of what's of interest to our company, what we think will work from the perspective of a lead that would have staying power. So we're sorting out our options, but I think it's fair to say that we're very interested in these concepts, and we'll make a move with respect to one of these concepts or with respect to our own concept when we're ready and when we have confidence that it's an idea that will resonate with the American public. With respect to the M&A process that we highlighted during our earnings comments, prepared remarks, we completed a really comprehensive, thoughtful review of all of our assets, and we're focused on our nine wholly owned assets. That's where we think there's the most opportunity for transactions in the short and midterms. and that's what the team is focused on and where we think it's the best use of our time. So we're not selling any other assets. We're not contemplating or announcing that we're selling other assets. We're focused on the assets that I listed today that we've discussed and decided with our board make the most sense for us to pursue. In terms of opt-go prop-gos, and that sort of structure. No, we're not focused on that. We're going to sell these assets as we announce. There might be other buyers that will participate in a variety of different ways including opco, propco structures for some of them. We encourage whatever makes sense for potential buyers. But for us, we've announced the sale of these assets and that's what the team's been tasked with working on. and there aren't any nuances around it like just selling the real estate. We're not interested in doing that.

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

Good morning, Bill, Marcia. I was wondering, you know, with the Pennsylvania Supreme Court decision recently on gray games, does that adjust your view on either say the opportunity in Pennsylvania or any other say budding states for HRMs. Because now we've seen, you know, three rulings, Kentucky, Virginia, and now Pennsylvania. And I'm wondering, you know, that is probably a pretty good tax incentive for other states to pursue this.

Yeah, a really interesting question, Joe. Just for everyone on the call. In June, the Pennsylvania Supreme Court definitively ruled that the so-called skill games that are deployed in Pennsylvania are illegal gaming devices, and they established a grace period before those machines needed to be removed from operation, and that period ends October 15th. So what you have there is a market that gray game illegal operators came in and cannibalized very quickly. There's a variety of estimates of how many machines of these illegal machines are deployed in Pennsylvania. Numbers running from 70,000 to north of 100,000 of these machines. And now it's clear under Pennsylvania law, as we've seen in other jurisdictions too, Kentucky, Virginia, Now it's been made clear that these machines are illegal. And as a legal gaming operator in jurisdictions like Kentucky and Pennsylvania and Virginia, that's good for our business. We play by the rules. We're licensed. We pay taxes. We contribute to other avenues as the government requires us, whether it be horse racing or otherwise. It's not fair, it's not regulated, and it's not right when folks just come in and open up illegal gaming operations. So this is going to be good for Presque Isle. This will improve whatever happens from this point, whether there is a new, whether the machines are just completely removed from the jurisdiction and not replaced with any distributed gaming, that's good for our facility. If there are, if there's a movement afoot to tax, regulate, and legalize some form of distributed gaming, well then they'll be playing by the rules like we play by the rules, so that will be good for us as well. So all in all, it's a good thing for gaming operators when you have events like we just saw in Pennsylvania with their Supreme Court, and like we've seen in Virginia, and like we've seen previously in Kentucky, and it gives confidence to those of us that operate under regulated I think it's good news ahead for Presque Isle in Pennsylvania Regardless of what happens from here, I think the operations there are likely to show improvement, and we're pleased with that. And we'll keep pursuing what we do, which is regulated, licensed gaming models in jurisdictions where we're welcomed and clearly legalized to operate.

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

Thanks, Andrew. We covered a lot of ground today. I appreciate everyone's time and everyone's interest in our company. And we have a lot to get done between now and the end of the year. And we're going to get right on it. And I look forward to talking to everybody in October when we next speak. So thanks very much. Talk to you all soon. Ladies and gentlemen thank you for participating.

This does conclude today's program and you may now disconnect.