Good day, ladies and gentlemen, and welcome to the Churchill Downs Incorporated 2020 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Nick Zangari, Vice President, Treasury, Risk Management and Investor Relations.

Thank you, Katrina. Good morning and welcome to our third quarter 2020 earnings conference call. After the company's prepared remarks, we will open the call for your questions. The company's 2020 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 in the section of the company's website titled News, located at churchhilldownsincorporated.com as well as in the website's Investors 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 report 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 today's earnings press release. The press release and Form 10-Q are available on our website at churchhilldownsincorporated.com. And now I'll turn the call over to our Chief Executive Officer, Mr. Bill Carstanjen.

Thanks, Nick. Good morning, everyone. With me today are several members of our team, including Bill Mudd, our President and Chief Operating Officer; Marcia Dall, our Chief Financial Officer; and Brad Blackwell, our General Counsel. We view our overall results for the third quarter very positively, both with respect to our expectations prior to the quarter and last year's results for the comparable period. Our third quarter results were strong, not just because the Kentucky Derby was in it, but because of the strength of all of our businesses. Our focus in the quarter was on operating all of our properties under our strict safety and social distancing protocols against the continued backdrop of the COVID-19 pandemic. Every single one of our brick-and-mortar facilities is impacted by regulatory and operational changes because of COVID. Our team's ongoing challenge is to protect the safety of our customers and our team members while we operate each property as effectively and profitably as we responsibly can. We were successful in doing this in the third quarter and are confident we can build on this record of safety and efficiency going forward. Our balance sheet remains strong as we weather this difficult period in our country with a great portfolio of future growth opportunities. Today, I'll discuss three topics. First, we'll share some more specifics on our third quarter results. Second, we'll provide an update on historical racing machine projects in Kentucky. And last, I will provide some preliminary thoughts on the fourth quarter of 2020 and 2021. Then Marcia will walk through the financials for the third quarter in more detail and provide an update on our capital management and liquidity. After she finishes, we will take your questions. First, some thoughts on our third quarter results starting with our Churchill Downs segment. Back in early May, when the Kentucky Derby is traditionally run each year, live horse racing had not yet resumed in Kentucky because the governor had imposed limitations regarding public gatherings due to the pandemic. We elected to move the Kentucky Derby to Labor Day weekend in September. We had hoped that we would have spectators at this year's Derby, but the pandemic has continued to significantly affect virtually every aspect of life in America, even as we speak today. While running the Kentucky Derby on Labor Day weekend and spectator-free had a significant impact on our financial results this year compared to prior years, it was our best option and allowed us to run the event in a manner our customers could see was responsible and appropriate to protect the safety of fans and team members as well as protect the long-term value of this iconic asset. So, while this was a difficult decision, it was the right one. And now, we look forward to 2021 and beyond. Our financial results for the Derby were significantly impacted by the loss of ticket revenue, fewer sponsorships, and lower wagering on the Derby itself and the races in general during Derby Week. The wagering was approximately half that of last year as a result of several factors. One, rescheduling the event to a non-traditional date confused and lost us many of our casual fans for the year. Two, the lack of on-track wagering locations meant customers did not have available their traditional outlet for participation. Three, there were fewer horses per race because of a variety of factors connected to the change in the time of year and because travel restrictions imposed by some states effectively hindered the racing plans for many elite horses. And four, there were unusually heavy favorites in many of the races this year. In fact, at a level I don't recall seeing in my many years of following Churchill Downs in the Kentucky Derby. We appreciate our partnership with NBC. And although viewership was lower than we always see in the first weekend in May, the Derby race was the most watched sporting event on Labor Day weekend since 2017 and had 20% more viewers than the most watched sporting event on last year's Labor Day weekend. And yet, with all these challenges, our team was able to generate double-digit adjusted EBITDA at nearly 50% margin for Derby Week. Ironically, in many ways, the Kentucky Derby showed its strength as a unique and special asset in the face of all the extraordinary headwinds COVID-19 created this year. It's a great economic engine. Marcia will walk through the derby results in more detail, and I will share some preliminary thoughts on the 2021 Derby in a few minutes. Regarding our Derby City gaming property, we celebrated the two-year anniversary of the opening of the facility in September. And based on its performance to date, we've essentially realized a less than two-year payback. On September 3, we opened a second outdoor smoking patio, this one on the south side of our existing facility. The new 8,000 square foot patio resulted in a net addition of 225 historical racing machines. Turning to our online wagering segment, our TwinSpires business within this segment had very strong quarterly growth and handle over the prior year, driven only partially by Derby Week being rescheduled from the second quarter to the third quarter of this year. Primarily, the growth was driven by handle outside of Derby Week. I note that, even without Derby in the second quarter this year, the second quarter actually grew handle 21%. In the third quarter, the most recent quarter, TwinSpires grew handle approximately 69%. When the second and third quarters are taken together, you get a sense of the strength, growth and future that TwinSpires has. Overall, TwinSpires more than doubled the number of active players in the third quarter compared to the prior year. Excluding Derby Week, we saw a 40% increase in active players and a 10% increase in handle wagered per active player in the third quarter of this year compared to the prior year. While wagering on the Kentucky Derby and other races at Churchill Downs Racetrack during Derby Week was roughly half the total of prior year, TwinSpires handle for the week across all tracks was still up approximately 3% over the prior year's Derby Week, even with the 23% decline of active players for that week. That is a testament to the true organic growth the business is demonstrating. Wagering has remained strong through the month of October. And all of our important metrics continue to reflect a healthy, growing platform. Our online sports and iGaming business outside of TwinSpires remains a drag on the EBITDA of the segment at this time, but it is a big part of the future. I will talk more specifically about this in a few minutes after we are done talking about the third quarter. Regarding the performance of our regional gaming properties, all of our gaming properties are currently open. We are operating at each property safely under strict operational and regulatory protocols. We've included a summary of the current restrictions by property in our press release. Calder Casino was closed for approximately two-thirds of the quarter because it was required to temporarily suspend operations a second time on July 2 due to an order issued by the mayor of Miami-Dade County to close entertainment venues in response to a surge in COVID-19 cases in the county. We worked closely with all the relevant authorities to safely reopen Calder Casino on August 31. We continue to be hampered by severe operating restrictions at Oxford Casino in Maine. I mention Calder because the regulatory restrictions at these two properties were so severe that the teams could not overcome them in any meaningful way through operating adjustments. Fortunately, Calder has now reopened. In general, our wholly owned casino margins continue to benefit from the reduction in marketing and customer incentives like free play, as well as the elimination of a number of amenities, including buffets and valet services, as well as some of the other restaurant and food outlets. We will monitor the competitive dynamics in each of our locations and currently do not see a need to modify our offerings for the foreseeable future. Overall, we were very pleased with the performance of our gaming properties through another difficult quarter. With Newport and Oak Grove now open and ramping up, we see growth in the immediate future. With respect to our Oak Grove expansion in Southwest Kentucky north of Nashville, Tennessee on Interstate 24, we held the grand opening of the HRM facility in mid-September and the 128-room hotel opened on October 15. It has 1,325 HRMs, 1,000 of which are operational right now, with a combination of Ainsworth, Scientific Games, and IGT game titles. There are a few smaller capital investments remaining for the venue, including the equine event center, outdoor concert venue, and RV park that we are finishing and plan to open before the end of the year. We recently purchased the remaining outstanding minority equity interest in our Oak Grove venture for approximately $3 million from the Keeneland Association and we now own 100%. Oak Grove will create approximately 400 full-time equivalent jobs for the Southwestern Kentucky region. We held the grand opening on October 2 of our Newport Racing & Gaming facility in Newport, Kentucky. This is a legal extension under Kentucky law of our Turfway Park racetrack. It opened with 500 HRMs and a simulcast area. We're pleased that this facility will create 70 full-time equivalent jobs in the Northern Kentucky area and will also generate much-needed purse money for Turfway Park's live thoroughbred race meet that begins in December. Regarding the Turfway Park HRM and grandstand project, we have temporarily paused the construction of this facility. In late September, the Kentucky Supreme Court issued a decision concerning the legality of a company called Exactas HRMs under Kentucky law. While we do not have any Exactas HRMs at any of our facilities and therefore are not directly impacted by the Kentucky Supreme Court ruling, we feel it is prudent to refrain from further significant capital investment until the Kentucky legislature has an opportunity to review the decision and the technicalities in the current law during the legislative session starting in early 2021. We appreciate the support of Governor Beshear, the Kentucky Horse Racing Commission, and many legislators on both sides of the aisle who are actively reviewing and discussing this decision. While the Kentucky Supreme Court decision was technically a narrow one, we anticipate that the Kentucky legislature may consider revisions to the relevant statute in the first quarter of 2021. It appears there is a broad recognition that it is important and necessary to address any ambiguity to protect the thousands of jobs created by the horse industry, the purse money that is generated for the benefit of the horsemen and the downstream Kentucky breeding and related farms, and the millions of dollars in annual tax revenues that are generated by HRMs for funding various programs in our state. And last, I will provide some preliminary thoughts on fourth quarter 2020 and next year. Regarding Churchill Downs Racetrack, our simulcast facilities at Churchill Downs opened on October 1, and we are pleased that we are able to run the 24-day fall meet which started last Sunday with spectators. We've already begun preparations for the 147th Kentucky Derby, which will be run on May 1, 2021. We do not anticipate moving off our traditional date of the first Saturday in May. We are starting with the assumption that we will limit the number of reserved seats to 40% to 50% of capacity. And we will delay selling any general admission tickets which do not come with seats until we are closer to the date of the Derby. We do not sell many general admission tickets this far out from the event in any case. If and as the circumstances surrounding the pandemic improve, then we will sell more reserved seats and consider selling general admission tickets. We remain paused on building the hotel and HRM facility at Churchill Downs Racetrack until we are past the pandemic and can again model the future with more certainty. This is just being prudent with our shareholders' capital. We will provide an update on our next earnings call at the end of February. Our Derby City Gaming, Oak Grove, and Newport properties are all in a stage of organic growth. And obviously, this is particularly true for Oak Grove and Newport, which we just opened this quarter. That's very exciting for us. We believe our other properties are well positioned in their local markets, and these markets have been quite resilient so far. We will continue to monitor and adjust as we see the need for changes. We do anticipate that substantially similar patron restrictions and gaming limitations will apply to our casino and HRM properties into next year. Our team has done a very good job of optimizing our cost structure to maintain industry-leading margins through these difficult times and will continue to do so in 2021. Any improvements in macro conditions will be upside. Regarding our sports betting and iGaming business, the TwinSpires business is having another strong year and has consistently delivered for a long time. TwinSpires is a very profitable high-margin platform, with substantial revenue and significant adjusted EBITDA growth that is enabled by its paramutual wagering model, relationship with the Kentucky Derby and Churchill Downs Racetrack, and long-deployed, disciplined customer acquisition approach. We are well positioned to broaden our online offerings to our customers as we enter the larger space for online sports and iGaming. We have direct access to many markets with our brick-and-mortar casinos and a roster of efficient indirect market access deals. Our BetAmerica sports betting and iGaming business will also provide the opportunity to introduce others to wagering on horse racing. Right now, we remain focused on and disciplined in building a profitable sports betting and iGaming business that will be integrated with our horse racing wagering platform over the long term. Long-term success for us will depend on growing in a disciplined manner based on our strengths, which start with our commitment to operating efficiently with careful marketing spend and bottom line profitability. We recently announced new agreements with GAN and Kambi who will be providing the technology and managed trading services for our sports betting and iGaming platforms going forward. We believe they will improve our speed to market and operational capabilities and provide a more substantial foundation for profitable growth in sports betting and iGaming over the long term. When we have our technology where we need it to be, we are confident about what we can do in each market we enter. Our initial technology choices just did not provide us the reliability and confidence we needed to invest in this space, but it's been helpful to watch the strategies of others who have been active to better refine our own approach. Again, we will be disciplined and careful as we move forward. Finally, a few quick updates. Regarding the Rivers Casino Des Plaines gaming floor expansion, the Rivers parking garage expansion is now completed and the team is working on the preliminary design for a revised expansion that will allow Rivers to add 450 to 500 additional gaming positions to the existing casino floor. As we've discussed previously, Rivers has already added 130 of the 800 additional positions allowed under the 2019 Gaming Bill. We have not decided when to start construction, but it could start in early 2021 and be completed by the end of 2021. We will continue to monitor the market and any impact from the pandemic. As you may have seen this week, because of an increase in locally reported COVID cases, Rivers will close from 11 pm to 9 am each day until further notice. This is a regulatory requirement. Regarding the Waukegan Casino proposal, we remain committed to our proposal to build the new Waukegan Casino in partnership with Rush Street Gaming, our partners in Rivers Des Plaines if we are awarded the license by the Illinois Gaming Board. It is unclear when the Illinois Gaming Board will announce their decision regarding awarding the license, but it will not be this week. We will update you as we learn more. Regarding the downtown Chicago casino proposal, Rush Street Gaming and Related Midwest submitted a response to a request for information issued by the City of Chicago. Some of you may have seen recent press about this process. The City of Chicago has not yet put out a request for proposals. Should Rush Street Gaming and Related decide to respond to an RFP when issued, we may decide to be a minority equity partner in the proposed casino along with them with the debt financed at the casino entity level. We anticipate that this will be a lengthy proposal process and we will update you periodically when it makes sense going forward. There is no more to be said publicly at this time about this, but I felt I should mention the topic as there are press reports out there. In summary, we had a strong quarter and are demonstrating we can operate effectively in a difficult environment. We are well positioned to weather the ongoing challenges and are remaining disciplined in our capital investment to ensure that we deliver the best total shareholder returns for our investors over the long term. We remain poised to deploy growth capital and believe there will be good opportunities to do so. Our balance sheet is very strong. To that end, our Board of Directors approved a 7% increase in our annual dividend this past week. This is the 10th straight year of a dividend increase. With that, I'll turn the call over to Marcia and then we'll take your questions when she's done.

Thanks, Bill. And good morning, everyone. As Bill discussed, I will provide some details on our third quarter financial results and then provide an update on our capital management and liquidity. Turning to our third quarter results, we reported third quarter net revenue of $338 million, up $32 million or 10% compared to the prior-year quarter as growth in net revenue from our Churchill Downs and online wagering segments was partially offset by a decline in net revenue from our gaming segment. Third quarter adjusted EBITDA of $122 million was up $34 million or 39% compared to the prior-year quarter as a result of growth from the Churchill Downs and online wagering segments, as well as margin improvements from our gaming segment. The Churchill Downs segment generated $68 million of revenue in the third quarter, up $35 million from the prior-year quarter and $24 million of adjusted EBITDA in the third quarter, up $10 million from the prior-year quarter, driven primarily by Churchill Downs Racetrack. Churchill Downs Racetrack revenue increased $32 million as a result of Derby Week being held in the third quarter instead of the second quarter, which more than offset the impact of lower revenue from the September race meet due to less wagering and no spectators. As a result of significant effort by the team, as Bill mentioned, the margin on Derby Week revenue was nearly 50% despite the shift to no spectators just a few weeks prior to the running of the Derby on Labor Day weekend. Adjusted EBITDA for Churchill Downs Racetrack was up $15 million for the quarter compared to the prior-year quarter as a result of Derby Week more than offsetting the $4 million of lower adjusted EBITDA from the lower net revenue from the September race meet. As Bill mentioned, we're running the fall race meet at Churchill Downs Racetrack that began last Sunday and runs through Thanksgiving Weekend, with extensive safety protocols to enable a limited number of spectators to attend the race meet. Derby City Gaming also increased revenue for the quarter by $3 million or 15% compared to the prior-year quarter and increased adjusted EBITDA by nearly $4 million despite patron restrictions and limitations on HRM capacity, as well as lower marketing spend. The online wagering segment increased net revenue by $56 million or 80% in the quarter compared to the prior-year quarter, primarily driven by TwinSpires growth. Adjusted EBITDA for the online wagering segment more than doubled from $15 million in the third quarter of 2019 to $32 million in 2020. TwinSpires grew handle by $254 million or 69% in the third quarter compared to the prior-year quarter. Nearly three-fourths of the growth in third quarter handle compared to the prior-year quarter was from wagering on TwinSpires excluding Derby Week in 2020 in the same week in September 2019. This continues the trend that began in the second quarter when we saw $100 million of growth in handle compared to the second quarter of 2019 despite not having the derby or fitness run in the quarter. It is important to note that this growth in handle has translated directly and reliably into growth in adjusted EBITDA. Many in the online sports wagering space today have valuations based on their future potential handle growth and potential for 2025 margins that are contingent upon states adopting legislative changes to allow for sports betting and iGaming and elimination of marketing spend. TwinSpires is a very profitable and stable online sports wagering business today, with significant and demonstrated growth, especially in the last two quarters, with nearly 30% margins. As a result, TwinSpires adjusted EBITDA nearly doubled in the quarter compared to the prior-year quarter, and TwinSpires has significant growth potential as the long-term trend towards increased online paramutual wagering has rapidly accelerated. Our more than a decade-long experience with this business tells us that once customers try online wagering, they prefer it, giving us conviction in the long-term persistence of this channel shift. And now, turning to our gaming segment. Net revenue from our gaming properties decreased $44 million or 24%, driven primarily by two factors. First, our Calder property was closed for two of the three months in the quarter; and second, significant restrictions on the number of patrons, gaming limitations, and other restrictions have been imposed on our Oxford and Presque Isle casinos during the quarter. Net revenue from Riverwalk and our Louisiana properties was up during the third quarter of 2020 compared to the prior-year quarter, reflecting effective targeted promotions and higher levels of unrated play. Our gaming segment adjusted EBITDA was up $4 million for the third quarter compared to the prior-year quarter. Adjusted EBITDA from our equity investments in gaming properties was up $9 million compared to the prior-year quarter, with strong performance from Rivers Des Plaines after reopening in early July and from Miami Valley Gaming. Adjusted EBITDA from our wholly-owned gaming properties was down $5 million. Strong growth from our Mississippi and Louisiana properties was more than offset by declines primarily at Calder, Oxford, and Presque Isle due to patron restrictions and gaming capacity limitations. Our wholly-owned casino margin was up 480 basis points compared to the prior-year period as we remain disciplined regarding our competitive offerings in each location. Turning to capital, regarding maintenance capital, we spent $5 million in the third quarter. We anticipate spending $10 million to $15 million on maintenance capital in the fourth quarter at Churchill Downs Racetrack and our casino properties. Regarding project capital, we spent $74 million in the third quarter, of which half was spent on the Oak Grove HRM facility that we opened on September 18 and the Oak Grove hotel that we opened on October 15. The balance of the project capital in the quarter was spent on the Newport Racing & Gaming facility that we opened on October 2, the second Derby City gaming smoking patio that we opened during Derby Week and the Turfway Park racetrack project. During the fourth quarter of 2020, we anticipate project capital spend of $40 million to $50 million related to final invoices and work that has been completed on the projects I just discussed. As Bill mentioned, we have paused on the Turfway Park HRM and grandstand project and are also prudently holding on to other investment in the Churchill Downs hotel and HRM facility. We will provide further updates on our next earnings call at the end of February. Our leadership team has a proven track record of generating strong returns from the capital we invest for our shareholders, as evidenced by the two-year payback on the Derby City Gaming investment. We also have a proven track record of protecting our shareholders' capital when appropriate, by investing prudently in organic growth or acquisitions that fit strategically with our company and knowing when to not invest and when to be patient. Although it may seem difficult to pause on these two capital projects for now, we believe it is clearly the prudent choice for our investors' long-term shareholder return. Regarding our leverage and cash liquidity at the end of September, our net leverage at September 30th was 5.5 times, and we had $622 million of unrestricted cash, with cash liquidity well beyond the next 12 months and we're in compliance with both financial covenants on the revolver at the end of September. We've also had a proven track record of returning capital to our shareholders when it makes sense to do so. While other operators in the gaming industry have eliminated or materially reduced their dividends, we're pleased that our board approved the 7% increase in our annual dividend, the 10th consecutive year of increased dividends for shareholders. With that, I'll turn the call back over to Bill, so that he can open the call for questions. Bill?

Thank you, Marcia. At this point, we're ready to take your questions, everybody. So, please fire away.

First question, we have Daniel Politzer from J.P. Morgan.

The first one on gaming. I know you guys mentioned that there was drag from Calder and Oxford in the quarter due to restrictions. Could you maybe quantify that so we could get a better handle on what kind of the wholly owned segment would have looked like ex those headwinds?

Help us with that question a little bit. Just refine it because you were breaking up on us for a second.

Is there any way you could break out maybe ex Calder and Oxford what the wholly owned gaming segment looked like in the quarter just given those properties? Obviously, we're facing some property-specific headwinds.

I can't give you excluding those two, but I can give you what those two independently kind of have done. Dan, this is Bill Mudd. Calder was closed through August 31. So, they really only operated during the month of September. From a revenue perspective, revenue is down 75% at that location. And actually, we didn't even generate a positive EBITDA for the quarter because of that. So, obviously, that had a big drag. And it continues to operate under constraints. If you look at Oxford, Oxford right now is operating at a capacity of 200 people, which includes employees, and we have to actually quarter that facility into four zones. It's probably the most awkward and odd restrictions with respect to COVID across the nation. But Oxford was down 55% in revenue and down 70% in EBITDA, although it was positive. It continues to operate under those constraints. And we continue to work with the regulatory officials in that state to free up some of that, but I don't see that we have the ability to do that anytime soon.

And then, just moving to TwinSpires, given the inequalities of second quarter and the third quarter with kind of the Triple Crown races all over, how should we think about a normalized TwinSpires margin going forward relative to the 27% that you guys did in 2019?

Well, I think some of the moving around of the Triple Crown events between quarters wasn't helpful because it caused a lot of our casual fans who we often have very high margins on to not be there, just caused confusion and chaos in the markets. So, in my view, things moving around were only headwinds. So, as we move forward, I feel even better about our operating efficiency, and then we just watch the other dynamics in the business, the cost of content, things like that, that can affect our margins over time. But so far, there's nothing to dislike about these headwinds. We performed through them and didn't lose margins.

And then, on the online sports betting and iGaming, it sounds like you guys are getting bruised in technology issues. And now that you're kind of seeing the light at the end of the tunnel, how do you think about this opportunity? And how do you expect to roll out as you kind of hunker down and see what everybody else is doing? Are there partnerships with media groups or leagues or teams that you're considering? I guess, within that, how do you weigh the opportunity of sports betting versus iGaming and maybe the margin structure of those industries?

Dan, you've followed us for a long time. So, you know us pretty well. We're always very focused on margins and focused on costs. And I think that's been part of our secret sauce built over the last number of years, particularly in the online space. So, as we expand into sports wagering and iGaming, when you have a market that offers iGaming in addition to sports wagering, that's a lot more opportunity. And there's a lot to look forward to in terms of better margins. So, each market will be different. I think, generally, when we look at partnerships or marketing partnerships or marketing relationships, whether they be local or national, it's really always a question of cost per customer acquisition – customer acquisition cost. So, it's always weighing that. I think some folks take a leap of faith that big mega partnerships will, over time, lower their cost of acquisition of good customers. And that's a fair bet. A lot of really smart people are taking it. We will always look at things like that. But generally, I think our DNA is to look before we leap and to have some certainty and some data and have done some testing before we do things like that because, ultimately, in gambling, in general, it's not always necessarily hard to get customers. It's hard to get profitable customers. And that's what we always focus on. And that's what we learned over the years in TwinSpires, and we'll take that into the online sports and iGaming markets as more of them open up. Generally, some markets are more exciting than other markets. The level of excitement depends on the products we can offer, the tax rate, the online sports and online casino versus just sports. So, the products we can offer, the tax rates, our connection to that jurisdiction in terms of access to customers already or the ability to reach them cost-effectively, all those things go into our level of excitement and how we view each market in comparison to the others.

Next question, we have Joe Stauff from Susquehanna.

I wanted to drill down a little bit more, I guess, on TwinSpires. Bill, I think you had mentioned in the third quarter in your prepared remarks that users had doubled in TwinSpires. But I was wondering if there are any other kind of KPIs you can share with us, meaning year-to-date, are those all new customers? Are they all uniques? Whatever you can share with us from a KPI perspective.

In my prepared remarks, we talked about a third quarter which I think was really important because we were trying to make the point about the growth in uniques, pulling out the impact of Derby. This year's Derby versus last year's Derby had lowered our uniques with respect to that week because in previous years, last year, in particular, there were more casual fans that we reached than we did this year. No big deal. That'll be back next year. It really just highlights, in my opinion, the strength and impressiveness of the results because the numbers we've been generating have not come with that normal tailwind that we get of reaching a whole bunch of casual fans cost-effectively that deliver high margin, low player reinvestment attributes. So, the performance of the business, whether you blend second and third quarter together or whether you just look at the third quarter in and of itself is really, really impressive because we're missing a natural tailwind we get every year of low-cost, high-margin, low-reinvestment customers. So, I didn't bring to this meeting – and I'm not sure I want to call anybody out and put them on the spot. I didn't bring to this meeting sort of really detailed year KPIs to discuss with everybody because if we did that, it's a discussion in and of itself because at every point, we have to distinguish between the difference in characteristics of Derby last year versus this year. So, in general, we decided as a team, we were going to start with a summary and just focus on third quarter, so that we can just give you accurate, easy to digest. But generally, as I said in the prepared remarks, all of our important metrics, all of them, all of our material metrics, show really surprising strength even after digesting the headwind of holding a Derby where we did not get the casual fans compared to prior years. All the performance this year is facing that headwind that normally is a tailwind for this business and gives it a huge growth ramp up. All the results this year have been achieved with only a headwind from the Derby. And so, for us, that's one of the things I'm most proud of of the team because they didn't moan about it, they didn't worry about it, they just went out and executed, and that's been good to see.

I guess there's certainly a big unknown out there as it relates to the level of growth you've had in TwinSpires and the number of users year-to-date or at least those, say, migrating from a more retail experience. I'm wondering – that's just before, but it certainly is an important sort of input going forward is your thoughts on – once they migrate to online versus the retail experience, the stickiness of that. Would you expect them to circulate back to the retail experience, hopefully, when all this is over? Or would you expect them to, let's say, put most of their handle on the mobile platform kind of going forward?

Yeah, that's a really good question. So, one of the attributes of this business, over time, has been the stickiness of the customers. If we can get trial, we've always found, we do a really, really good job of retaining those customers. And in fact, this business is built not on masses and masses of small customers. What we've been good at is developing people into meaningful customers. Our attributes per paying and playing customer really are fairly extraordinary. So, we've always been good. Once we get the hook in the fish and reeling them in, we've always been very, very good at building our relationship with them. So, the history of this business is one of stickiness. When it comes to this year, clearly, some of the traditional brick-and-mortar outlets, they weren't available because, across the country, COVID restrictions led to the shutdowns of a lot of tracks and OTBs for at least a portion of the time. They'd been reopening for a while and we're demonstrating these results even with them reopening. But I think what you saw there is you saw a decline overall in handle for the industry. So, not our specific results, but handle for the industry as a whole. And that is there's some hardcore folks that didn't transition. Those folks didn't trial even in the face of losing a brick-and-mortar location that they normally go to. So, those folks, you can take off the table. To the extent that some people did, I think it was a nice boost. But again, it wasn't by any means the whole story or any kind of revolutionary development. Clearly, it accelerated some of the channel shift that's been happening. But the story of the channel shift in horse racing is a well-understood one. And that is as it develops, the customers tend to be very sticky to the product and they hang around and continue to bet online. So, it caused some mild acceleration. But I really think the story of TwinSpires this year is way broader than that. And we touched on that a bit a moment ago with the single greatest tailwind we usually get every year, which is the mass of casual fans that we acquire cheaply and don't have to reinvest in at a high level, those fans weren't here this year. So, you've got to watch some of those factors against each other. And so, generally, when it comes to active players, I think as a team, we feel pretty good going forward about the level of active players we have and our ability to grow those and the level of stickiness in the players that have joined.

If I can squeeze one more in. I apologize about hogging the mic here. But I was wondering if you can – of the ADW competitive landscape, obviously, you have one big competitor, call it, two smaller ones in there. And then, there are a few very small operators. I'm wondering, just from a competitive perspective, if you've seen any changes, any notable changes in that landscape year-to-date that could either create more opportunity for you going forward in some way, shape, or form?

I think the ADWs in general have been doing very well, including the most significant competitor out there that's not a racetrack company, a pure-play online gambling company. I think, in general, everybody's done pretty well. And we actually encourage that. The fact is, as we've said on these calls and in other environments for a long time, this is a very good gambling product. It's based on paramutual wagering for us. So, the margins are always something you understand in terms of your net revenues. That's something you can always count on, you always understand what it's going to be. And it's a good product that's always available, and you can build patterns and habits with your customers based on the availability of content and the predictability of content and your ability to reinvest in them sensibly because you have a good feel for what your true net revenues are going to be. So, I think you're seeing some of that beyond just our experience in the space. And I imagine that you'll continue to do that. But I think vis-à-vis each other, I don't think there's been a material change. I think it's a rising tide that's floating all boats, and I think others in the gambling space are starting to understand sort of the attractiveness of this from a business perspective of offering this kind of product.

Next question, we have David Katz from Jefferies.

I don't want to be in any way dismissive of your operating execution on the hard asset side. But we do have quite a few discussions around. And I know you've touched on this, but I wanted to go a little farther on the value that you have and the assets in TwinSpires, what you're building in iGaming and the ability to grow it competitively as iGaming and sports betting more broadly become legal. Bill, how do you – I'd like to hear you talk about how you think about value and capabilities, which I think is a word I've heard you use over the years, within TwinSpires on the back end. And obviously, it's an ability to capture and execute on customers. And do so profitably. On the front end, do you feel like you have the brand, the capabilities? Obviously, you have some market access, that should be helpful. How do you think about the value of pieces along the chain and where you would like to take that in the near term?

Well, first, I'd say that we've talked about these kinds of issues, David, over a long period of time. And so, we've paid attention to online wagering, not only in America, but as it's rolled out in Europe and other parts of the world over an extensive period of time. So, we've seen different models happen. And what we're seeing in America is we're seeing a jurisdiction that really hasn't been driven by technology advancement. It's really been driven – and is opening up because of regulatory change. So, the technology is there. The digital space is well understood outside of gambling. So, it's a catch-up thing. So, what you're seeing here is a rush to get into the business very, very quickly and an assumption that you need to acquire as many customers as you can with as big a brand as you can, as quickly as you can. And I'm not dismissive of those feelings or those thoughts at all. That's just an observation on how the US market is opening versus what we've seen other markets in the world do. So, from our perspective, we don't have – we have some advantages with TwinSpires, in that we have a longstanding online business with great customers in many jurisdictions to be opened up. And that's a big advantage for us. We also are a company that's recognized in the gambling space among the casual consumers. But there are some really powerful brands out there, and so there's some really powerful spending out there. And we have to be cognizant of that and careful of that. Just because somebody else spends the money doesn't mean that we can spend that money or that we see in our modeling a return with that kind of player investment. So, as we address from that generality to the specifics, we have to be careful. We can't just do something that other people are doing because they're doing it. And that may mean that we get left behind in some markets, that may mean that some markets are not good opportunities for us. But there are other markets that will be where we think we do have a beachhead, we do have a foothold, and we think we can run our model and play effectively. So, I also don't accept that once a customer signs up with another site that you can never get that customer. That's not the world we've lived in horse racing or that we've seen in other jurisdictions. So, my point is, we'll play very diligently and carefully and thoughtfully, but we won't go chase every marketing deal or every acquisition opportunity because we just haven't found that to work when we built TwinSpires. And I actually made this remark earlier in this call: acquiring customers, whether it be TwinSpires or brick and mortar, has never really been our biggest challenge. It's always acquiring customers effectively. And that's just how we'll run our business. And others will run different models, and all the power to them. And we'll have to see. But we'll do it the way that we're comfortable to do it. I think also, I guess I could make one more point: we've got great content. We've got great content and great access to horse racing. And as I've said, I think horse racing is a great online gambling product where we're always going to have an advantage because of our company and what a portion of our company does, which is produce horse racing and run the Derby and deep relationships in the industry. So, that's something that we're not afraid to build around. And we think others, as they see the power of what horse racing can do in the online space, we think others might pay attention, which isn't necessarily a good thing because it's an advantage we have now. But I think it's a sustainable advantage over the long term. And that's what's important.

And if I can follow that up, it's very clear, at least so far, what your relationship is with Rush Street from a land-based or hard asset perspective. Is there any vision or any color you can provide around how that relationship rolls into the mobile side of things, sports and iGaming? As new states open up, the degree to which you may play a role with them, or is that confined just to Illinois?

Well, we have a really good relationship with Rush Street and they're really a mature, accomplished, talented people and a talented team. So, I think that's a question that's hard to answer. Certainly, everything in Illinois has been positive, including how we're engaged in the online space in Illinois, which is through the Rivers brand and through their RSI technology platform. Everything has been a positive and, generally, they're great to work with. And I think they are a special group of people, and I wouldn't say more than that for the future, but certainly, we have a very strong partnership with them and we're doing other things in Illinois together, like we discussed, bidding on Waukegan, et cetera. So, never say never, but we don't have anything to talk about at this stage.

I am showing no further questions at this time. I would now like to turn the conference back to Mr. Bill Carstanjen.

Thank you. I'd just like to remark that we always appreciate your interest, your investment in our company, especially during these challenging times. COVID-19 has changed everything about how American business works. And it's something we think about and deal with every day. And we'll keep doing that. We'll keep being responsible shepherds of your capital, and we'll try to make sure we make good, smart, long-term patient decisions that benefit your investment. So, thanks for your interest again, and we'll see you next time. Good luck.

Ladies and gentlemen, this concludes today's conference. Thank you again for your participation and have a wonderful day. You may all disconnect.