Good day, ladies and gentlemen, and welcome to the Churchill Downs Inc. 2023 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. As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Mr. Phil Forbis, Vice President, Financial Planning and Analysis.

Thank you, Andrew. Good morning, and welcome to our second quarter 2023 earnings conference call. After the company’s prepared remarks, we will open the call for your questions. The company’s 2023 second quarter business results were released yesterday afternoon. A copy of this release announcing results and other financial and statistical information about the period to be presented in this conference call, including information required by Regulation G, is available at the section of the company’s website titled News located at churchilldownsincorporated.com as well as in the website’s 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 reports on Form 10-Q and Form 10-K. Any forward-looking statements that we make are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in yesterday’s earnings press release. The press release and Form 10-Q are available on our website at churchilldownsincorporated.com. And now I’ll turn the call over to our Chief Executive Officer, Mr. Bill Carstanjen.

Thanks, Phil. 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. I will share some high-level thoughts on several strategic topics, and then Marcia will provide insight on our financial results as well as an update on our capital management strategy. After she finishes, we will take your questions. We delivered all-time record net revenues of $769 million, an all-time record adjusted EBITDA of $364 million in the second quarter of this year. We were very pleased with the results for this year’s 149th Kentucky Derby, a crowd of over 150,000 fans watched Mage at 15 to one odds pull off an incredible victory. Strong growth in ticketing and sponsorship revenue, coupled with record wagering generated a sizable increase in adjusted EBITDA, setting a new all-time record for Derby Week. We were thrilled to debut on time and on budget our new first turn experience, which provided one-of-a-kind premium accommodations with exclusive views of the horses and the racetrack from the rail of the historic first turn. Our carefully planned and executed capital projects at Churchill Downs Racetrack over the last several years have delivered a solid foundation for ongoing growth in the coming years. We have kicked off our year-long preparation for the 150th Kentucky Derby next year. We launched ticket sales in several areas in late May and as of June 30th have already executed contracts for approximately 37% of our planned ticket revenue for next year’s Derby, which is significantly ahead of the pace for any previous year. We continue to make excellent progress on the Paddock project, which is a transformative undertaking for our facility. This project has many facets to it. We are adding additional reserve premium seating that will provide a wide variety of new seating and dining experiences for our guests. When this project is done, everyone who enters our racetrack will be treated to spectacular views of the Twin Spires and the landscape which we believe will provide a focal point for a venue that unites everyone who will visit. We announced yesterday that we will be investing approximately $15 million to significantly improve the guest experience in our Jockey Club Suites area overlooking the home stretch of Churchill Downs Racetrack. We have 61 suites in our Jockey Club tower and host approximately 2,500 ticketed customers across the suites, dining areas, and terraces. We expect to have the improvements in this area completed in time for the 150th Derby. We are already planning our next series of development projects for Churchill Downs Racetrack; there are many more opportunities to build out our facility to provide innovative and extraordinary once-in-a-lifetime experiences for new and existing guests. We hope to launch the next phase of our multiyear development plan immediately after the 150th Derby. Our commitment to investing in our flagship asset reflects our belief in our ability to generate consistent adjusted EBITDA growth with nominal levels of risk for years to come. Finally, we will also be adding a new sports bar in our existing simulcast area at Churchill Downs Racetrack in time for the launch of retail sports betting in Kentucky on September 7 of this year. Turning to our HRM entertainment venues, we were pleased to open the new hotel and Steakhouse at Derby City Gaming in Louisville in early June. This, coupled with the gaming floor expansion and the addition of the new sports bar earlier in the year, provides a suite of additional amenities for our guests to enjoy. While it is still early, we are exceeding revenue and profitability projections in the first month since opening. We are on track to open Derby City Gaming Downtown, our sixth Kentucky HRM entertainment venue in the fourth quarter of 2023. This venue is located in the heart of downtown Louisville across the street from the convention center. We announced that our seventh HRM facility will be just outside and to the east of Owensboro, Kentucky. We have identified a greenfield site and believe that this location will enable us to create a premier entertainment destination for all residents of the region. We are now focused on completing the permitting and site planning process. We will provide an update on the project timing and budget on our next earnings call. HRM entertainment venues across Kentucky will benefit from the passage of legislation banning gray games, which became effective on June 30. Gray games are essentially slot machines; however, they are unregulated and do not pay state or local taxes and do not follow responsible gaming protocols, including restrictions regarding minors, anti-money laundering policies and procedures, and a host of other federal and state laws designed to protect consumers and the community. With the ban only taking effect at the very end of last month, it is still unclear how much of an impact it will have on our HRM venues in Kentucky. We certainly believe that it will have a positive effect and will be a benefit to the Commonwealth of Kentucky, its citizens, and the horse industry as well. Our Kentucky HRM venues will also benefit from the legalization of retail and online sports betting. We plan to have live retail sportsbooks at our HRM venues on September 7 and in time for the football season. We will also have a sports bar with sports betting in our Derby City gaming downtown facility when the property opens in the fourth quarter. Retail sports betting at our HRM venues will provide another incentive for new and existing customers to come to our properties. We also monetized a couple of the online sports betting licenses we have in Kentucky with B2B partners, including one with Land. Regarding our expansion in Virginia, our Ross Emporia HRM venue will open later this quarter with 150 HRMs in the southern portion of the state, near the North Carolina border right off Interstate 95. Our Dumfries HRM venue and hotel is being built in Northern Virginia, approximately 30 miles south of Washington, D.C., also directly off Interstate 95. This venue will open with 1,150 HRM machines in Phase 1, and we can go up to 1,800 total machines in Phase II. The construction is ongoing, and we expect the first phase of the project, including the gaming facility, to be opened in the second quarter of 2024. In June, we announced plans to run a parimutuel referendum this November in Manassas Park, which is in Northern Virginia, where we hope to open a venue with 150 to 250 HRMs. The city has really welcomed us, and we are excited to pursue this opportunity. Currently, we have 6 of our allotted 10 HRM facilities open. Emporia will be the seventh; our large-scale Dumfries project will replace our current temporary 150-unit facility and thus will not be additive to our total number of deployed licenses. Manassas Park would be our eighth license, giving us 2 more to deploy in addition to our ability to relocate any existing facility to another location. We also recently announced that the Richmond City Council approved our partnership with Urban One as the city’s preferred casino operator. Over the last week, we obtained the required certificate of approval from the Virginia Lottery, and the circuit court has granted our petition allowing the referendum. As a reminder, we have a 50-50 partnership with Urban One to build a Class II casino, hotel, and event center in the city of Richmond upon approval via citywide referendum. If and when we obtain the right to proceed, we plan to build it in phases. The first phase consists of the casino and parking facilities, and the second phase will include the hotel and the event center. This phased approach will enable us to expedite opening the casino portion of the project and generate cash flow to offset the construction costs of the second phase. This is the most financially prudent approach and provides near-term tax revenues for the city of Richmond to fund a variety of their priorities. We have also made significant progress on our Salem Hampshire HRM site plans, and we’ll be able to share more details on those plans by the end of the third quarter. Although this has taken longer than we would have liked, we remain excited and committed to creating a unique HRM entertainment offering for the Salem area that will also draw guests from the suburbs of Boston. We anticipate closing the Exact transaction no later than the end of the year and potentially sooner if the remaining closing conditions are more quickly achieved. Through our ownership of Exact, our facilities in Virginia will be able to have a broader variety of games on their gaming floors, and we will be able to reduce the cost of providing and operating the machines. This will improve our top line and our margins for Virginia. We will also continue to improve the technology platform and to offer the exact system to third-party HRM operators. HRM venues are a key strategic focus over the next 5 to 10 years for our company. These high-growth, high-margin investments provide an excellent return on capital, and we will remain disciplined as we expand our existing footprint and product offerings. Regarding our TwinSpires segment, we were pleased this quarter to see the beginning of the benefits from our B2B expansion strategy. Our TwinSpires and United Tote businesses are now receiving B2B fees related to providing and settling wagers on horse races for FanDuel and DraftKings. Although we cannot comment on our B2B partners' horse racing results, the Kentucky Derby was a great boost for both our TwinSpires horse racing platform, which saw a record handle and new registrants, and for our B2B partners. We expect to add additional B2B partners over the next 12 months. We are very optimistic that horse racing and our TwinSpires services can be expanded meaningfully to online sports wagering platforms to reach millions of customers and that we will continue to benefit from the growth in incremental fees related to our B2B services over the longer term. Our TwinSpires handle was impacted in the second quarter by the loss of 88 race days as well as over 600 races, many from top tracks primarily related to the extensive wildfires in Canada. TwinSpires was also impacted by the move of the Churchill Downs race meet to Ellis Park in June. So many of our players at Churchill Downs Racetrack single most important track that draws them to our site on any given day. We expect some Canadian wildfire impact on our TwinSpires handle in the third quarter. However, we will return to racing at Churchill Downs Racetrack for our September race meet. Regarding our Gaming segment, we delivered record second quarter revenue and adjusted EBITDA with the addition of the Iowa and New York properties from the P2E acquisition. We did see mild softness across some of our regional gaming properties, particularly in the first half of the quarter. Each regional market has different economic and competitive drivers that can impact the performance of a property on a quarter-to-quarter basis. Overall, despite the inflationary and economic pressures and increased interest rates over the past year, we remain highly confident in the performance of our regional gaming properties, which generate significant free cash flow. With respect to our Terra Hoak Casino and Resort, construction is progressing well with the planned grand opening for the casino and hotel in the second quarter of 2024. In summary, the second quarter was another great quarter for us with all-time record financial results, and the best is still to come. We have delivered strong growth from our investments in the Kentucky Derby, our acquisition of the P2E assets, and our organic investments in HRM and other gaming entertainment venues. And we still have a lot more growth to come from the projects we have discussed today and the others yet to be far enough along to share with you. We expect our growth plans to drive a material increase in adjusted EBITDA and free cash flow in the coming years, while we maintain one of the best balance sheets in the industry. With that, I’ll turn the call over to Marcia, and then we will take your questions.

Thanks, Bill, and good morning, everyone. As Bill shared, we delivered all-time record net revenue and all-time record adjusted EBITDA in the second quarter. Our diversified portfolio of businesses generated a 32% growth in revenue and a 25% growth in adjusted EBITDA on a quarter-over-quarter basis. I’ll start by sharing a few insights on these financial results, then provide an update on capital management. First, regarding Derby Week at Churchill Downs Racetrack. As you saw in the press release that we issued immediately following the Derby, we once again set all-time records for wagering on the Kentucky Derby race, the Kentucky Derby program, and the Kentucky Derby week races. TwinSpires also generated record handle on the Derby Day program and on the Derby race. Derby Week is expected to generate $14 million to $16 million of incremental adjusted EBITDA for 2023. As a reminder, we recognize nearly all of the revenue and costs associated with Derby Week during the second quarter of the year. However, there are some ongoing SG&A-related costs associated with Derby Week that are recognized throughout the year. Also, the impact of Churchill Downs Racetrack from the shift in racing operations to Ellis Park for 3 weeks in June was approximately $4 million. While we are disappointed that we incurred this one-time impact to our financials in the second quarter, we believe it was the best long-term decision for our company. Second, our HRM properties in Kentucky and Virginia made strong contributions to our financial results in the second quarter. Overall, our HRM properties contributed nearly $50 million or two-thirds of our growth in adjusted EBITDA for the second quarter. Our organic investments in our Kentucky HRM properties grew 10% overall on a quarter-over-quarter basis, and we benefited from the addition of the high-margin Virginia HRM properties that were part of the P2E acquisition. Our Virginia properties contributed $44 million of adjusted EBITDA in the second quarter, reflecting a 46% margin collectively for these properties. Our margin was 1 point lower in the second quarter than the first quarter, reflecting some additional racing-related expenses associated with preparing for the Colonial Downs race meet, which kicked off last week. Our margin was also 1 point lower, primarily as a result of slightly lower top-line results and increased marketing spend at our Hampton property. As expected, our Hampton property has seen increased competition from a new casino that opened approximately 6 months ago. We expect to improve margins for our Virginia HRM properties as we enhance the gaming floors and as we realize the benefits from the Exacta acquisition in the future. Third, turning to our TwinSpires segment. TwinSpires handle and adjusted EBITDA were impacted in the second quarter from the shift in racing from Churchill Downs to Ellis Park. TwinSpires has a significant market share of Churchill Downs handle, and it appears that betters did not shift all of their typical wagering during that time to Ellis Park. TwinSpires was also impacted in the quarter by the cancellation of various racetracks of approximately 15% of the thoroughbred race days during June, as well as a number of standardbred races, primarily due to the impact of Canadian wildfires on air quality conditions. We estimate that the combined adjusted EBITDA impact of these two unplanned and unusual events in the quarter was less than $2 million. We also had higher content-related expenses and slightly higher ADW taxes in certain jurisdictions. These unplanned events and higher expenses and taxes were offset by increased adjusted EBITDA associated with our B2B expansion related to our horse racing technology and settlement services and the benefits from our continued pivot out of the direct online sports and casino business. Despite these challenges, it is important to put the TwinSpires quarterly results in perspective. Although TwinSpires adjusted EBITDA was flat on a quarter-over-quarter basis, it was up 15% on a sequential quarter basis. This reflects the overall strength of this business, including the tremendous benefit it receives from the connection to Churchill Downs Racetrack and the Derby, and we believe it will continue to grow as we expand our B2B strategy. We do expect the TwinSpires segment margins to return to more historical levels in the third and fourth quarter of this year, based on our continued B2B and retail sports betting expansion and reduced marketing spend. And fourth, regarding our gaming business, we once again realized significant contributions in the second quarter from the addition of the New York and Iowa properties acquired in the P2E transaction. As Bill discussed, we did see mild top-line softness, which resulted in a collective modest decline in adjusted EBITDA on a quarter-over-quarter basis for our existing regional gaming properties. Our second quarter same-store wholly owned casino margins were down slightly more than one point compared to the same period in 2022. Our margins on a comparable basis are up 3.6 points for the same second quarter compared to the same quarter in 2019, reflecting our retention of approximately half of the margin expansion benefit from the post-COVID peak in 2021. We recorded a $24.5 million non-cash impairment related to the gaming rights intangible for our Presque Isle Casino. This reflects the increasing competitive threat from gray games, the economic environment, including inflationary trends and high interest rates, and the impact of iGaming on retail gaming, along with the impact of operating in a high tax rate environment in the state. Turning to capital management. As a reminder, our Q4,1 stock split was effective May 22, so all of our per share metrics have been updated for this impact. We generated $372 million or $4.87 per share of free cash flow during the first half of the year. This is up $15 million or $0.25 per share over the first half of 2022 and reflects our strong diversified earnings. This increase over the prior year reflects the strong cash flow generated from our businesses that was partially offset by higher interest rates and a $33 million non-recurring tax refund in 2022. Regarding maintenance capital, we spent $30 million in the first half of the year, and we continue to expect to spend $75 million to $95 million in total for the year. Regarding project capital, we spent $282 million in the first half of the year, and we continue to expect to spend between $575 million and $675 million in total for the year. At the end of the second quarter, our Bank Covenant Net Leverage remained at 3.9x. Based on our planned acquisition of Exacta and our capital investments, we continue to expect our bank covenant net leverage to remain in the 4x range through the end of the year. We then expect our bank covenant net leverage to decline in 2024 and 2025. Overall, we are very pleased with the results that our team has delivered for the second quarter. The diversification of our portfolio and our strong balance sheet provides a solid foundation for growth through various economic cycles and operating opportunities. We are very well positioned to execute on our tangible pipeline of growth opportunities for the remainder of 2023 and beyond. With that, I’ll turn the call back over to Bill so that he can open the call for questions.

Thank you, Marcia. At this point, we’re happy to take your questions. So fire away, please.

Our first question comes from David Katz with Jefferies.

Hi, good morning, everyone. Thanks for taking my questions. I wanted to discuss the gaming business, particularly in regional gaming, including HRM. You've provided a lot of detail, but I'm interested in a general sense of the industry. We've seen some numbers that show a slight decline year-over-year. For me, incorporating all of that into our regional gaming numbers has been more complex due to growth. What is your outlook on the underlying economy and demand? Specifically, as we approach July, how do you see things shaping up moving forward?

Thank you for the question, David. When considering our company, it's important to look beyond just quarter-to-quarter results. Our structure and strategy are designed to deliver significant growth in the coming years, thanks to the projects we've developed and the robust pipeline ahead. This remains unchanged. We are currently in an incredibly optimistic period for our company, focused on execution. When I receive specific inquiries about trends in a particular month or quarter, I like to refer back to our broader strategy for growth. This is something that should be evaluated over several years and requires consistency month-to-month, quarter-to-quarter, and year-to-year. Everything we are doing aligns with this vision, and we remain optimistic due to the strength of our pipeline. Regarding the previous quarter, if you examine the overall numbers across the country, you'll notice areas of both strength and weakness. Generally, the second half of the quarter outperformed the first half. Even with the substantial growth attributed to the P2E acquisition—which has been doing exceptionally well—we still achieved organic growth in our core business without that acquisition. These are the key trends and themes to consider when evaluating our company.

And look, I think the important follow-up, if I may, is the growth pipeline, the considerable growth pipeline, since we last spoke on a public call about it 90 days ago is still comfortably intact, correct?

I think starting with the Kentucky Derby, the performance we saw with the first turn project really exceeded our expectations in terms of immediate customer acceptance and the positive feedback we received. If we break it down, we feel very optimistic about all the projects we’re undertaking around the Derby. Additionally, we extend this optimism to the HRMs with the Dumfries project coming on board, Emporia, and all the other projects we have in that region, including Terahode. What’s essential for us at this point is to execute effectively. We need to complete those properties on time and within budget, focusing on implementing the plans we’ve established. Overall, there is a lot of cause for optimism, and these projects remain on track for delivery as discussed previously.

Perfect. Thank you.

Thanks, David.

Thank you. One moment please for our next question. Our next question comes from the line of Dan Politzer with Wells Fargo.

Good morning, everyone, and thank you for taking my questions. I wanted to follow up and delve further into the gaming segment. If I look at the Iowa and New York properties you recently acquired, it appears that revenue remained relatively flat quarter-over-quarter, and EBITDA has decreased. Is there a significant seasonality factor at play, or is there something specific affecting those properties? Additionally, is there anything notable in Louisiana, as that property also showed a decline year-over-year? I ask this in regards to our previous discussion, as we generally have a good understanding of the segment, but it seems there's quite a bit of uncertainty here. Thank you.

I think there are some labor challenges at various properties, which seems to be a common issue across the nation. Additionally, there is mild softness overall in revenue. I don’t want to single out specific properties to discuss, but there is some uncertainty in the market. Ultimately, I believe this will balance out. While our team will respond quickly to weekly data, I typically don't draw significant conclusions from data over just one or two months. In the last quarter, I noticed mixed results; the first half was a bit tougher than the second half. I don’t want to imply that we need to make any substantial adjustments based on our early months of owning that property or what we observed in the last quarter. Everything is fine and will stabilize. I don’t think there are any major shifts we need to consider in those markets, either specifically or generally.

Got it. Thanks. That’s helpful. And then I know it’s a bit early, but as we think about next year’s Derby and maybe the puts and takes between the Paddock, the Jockey Club, maybe possibly more B2B deals, and then just being 150 as you think about pricing. Can you maybe walk through some of the puts and takes here as we try to bridge from this year to next year, and what may be the most incremental drivers of EBITDA growth?

Yes. Next year, we’re implementing significant changes in the on-track experience at Derby. We are introducing new ticketing options and enhancing the existing seating experience. As a result, you can expect a notable increase in ticket revenues. Other areas are performing well too, especially wagering, which has shown strong trends. However, the primary factor driving Kentucky Derby EBITDA over time has been the overall experience rather than just the seating. We prefer to focus on providing diverse experiences for our customers. The upcoming Derby 150 is set to be a major event in the country, as we are unique in having held 150 consecutive events. We are emphasizing the uniqueness and significance of this milestone, along with the capital investments made in our facility, to increase ticketing revenues meaningfully.

Understood. Thanks for the call.

Thank you. Please hold for our next question. Our next question comes from the line of Barry Jonas with Tru Securities.

Hey guys. Good morning. Happy to hear races coming back to Churchill Downs soon, but I wanted to just ask about the suspension. What were the conclusions of the investigation, and what steps have been taken to minimize future risks? Thanks.

Thank you for the call, Barry. We will soon provide more information about the September Meet and the safety protocols that will be put in place. The key point is that the track is very safe. During the time we ran the rest of the race meet at Ellis, we took the opportunity to review all our procedures at the racetrack. We found no immediate cause for the injuries and breakdowns. As we went through our processes to ensure everything is up to standard, we did not identify any significant issues. The approach to this situation is to do everything possible to enhance safety and continually reassess our practices. This unfortunate series of incidents occurred early in our meet. Moving forward, we are committed to making improvements and learning from this experience, although we have not made any major changes to the track's structure or surface. Expert evaluations confirmed that there were no fundamental issues with the track compared to previous years. While this conclusion might not be entirely satisfying, it's part of the nature of our business and sport. We must remain dedicated to making incremental safety enhancements, and we have taken those steps.

Great. I appreciate that color. Just as a follow-up, I wanted to ask about the Richmond casino process. How do you see the valid initiative process differing now versus the last time?

This time, we have the benefit of the data behind the process that was run a couple of years ago that didn’t involve us. So, the task of our team, of our partnership is to evaluate everything about last time to find places where we can drive incremental improvement. The good news about running a referendum a second time is you have a lot of data about how people voted and why they voted that way. And we’ll try to take all that and fold that into our processes this time to drive incremental improvement. It was 51-49 last time. It wasn’t a catastrophic defeat; it was lost in the margins. So, we’ll be fighting to win the confidence and the approval of those voters in the margins that last time didn’t have enough confidence in the project. Thanks, Barry.

Thank you. One moment please for our next question. Our next question comes from the line of Joe Stauff with SIG.

Thank you. Good morning, Bill, Marcia. Bill, I know you had mentioned in your opening comments, but I wanted to ask you about the timing of the benefits associated with the new Kentucky law banning gray market machines. It’s a tough answer in terms of anticipating when that tailwind starts to show up for you guys. So, I wonder if you could maybe talk about that a little bit more, and then I have one follow-up, please.

Sure. The decision of the legislature to pass legislation, which was signed by the governor, banning gray games was a really good thing for the Commonwealth. Gaming is supposed to be a regulated and taxable business, particularly on the regulatory front; it’s important that there are basic protocols and processes in place to protect patrons who choose to participate and to prevent patrons who shouldn’t be participating. So, all in all, this was a very good thing that happened in the Commonwealth of Kentucky. Obviously, when you have unregulated, unlicensed, uncontrolled gaming, you see a lot of proliferation and expansion, and this arrested all of that. This stopped all of that. So as we go forward from this point, and as the opportunity for people to engage in that illegal gray game behavior is no longer there, we’ll see some of that demand shift over to the licensed regulated gaming, which we participate in the HRM business. As to the individual impact of that, it will probably vary by facility and it will be hard to always isolate because at every one of our properties, we’re also doing other things to improve our business. For example, Derby City Gaming. We’ve opened up the hotel, we’re learning how to run that well, we’ve expanded the gaming floor. We also have sports wagering that goes live on September 7, so we have these other good things that are going on in our properties across the state. One more positive factor will be the fact that illegal gaming in Kentucky is no longer permissible. So, I can’t totally isolate it for you at this time as we actually get real data. And as I think you know, we’re a very data-driven company. As we actually get real data into the system, maybe we’ll be able to comment more specifically, but at this time, it’s just kicking off, and we know it’s going to be positive, but it’s hard to quantify.

Got you. And then just a follow-up on the Dumfries comments that you had. Phase 1 in the second quarter, I believe you outlined 1,150 in terms of just the number of units. What is the right way to think about how quickly or you think about adding and getting up to that more maximum number of roughly 1,800 units?

Really good question. I think you can go a couple of different ways, and I think we’ll see how quickly it ramps, we will be talking to the community about the conditions around expansion, which involves opening the event center and the other spaces. We’ll be looking at all of that based on what actually happens when we open. Obviously, while without being able to predict the future, we expect strong demand, particularly on a per machine basis, so give us a little bit of time to get it open. Give us a little bit of time to complete the road infrastructure, give us a little bit of time to talk to the community about our partnership for expansion of the facility. All of that will be in play. And we’ll go from there. We’re obviously interested in ramping up as quickly as we can. We think the demand is going to be there and is going to be there quickly. But all of this has to be done carefully and in conjunction with the community and their expectations on traffic flow and the other amenities in the facility. We’re prepared to move very, very quickly, and we probably will end up doing that, but I don’t want to promise that until we get the place open.

Okay. Thanks a lot, Bill.

Sure.

Thank you. One moment please for our next question. Our next question comes from the line of Chad Beynon with Macquarie.

Morning. Thanks for taking my question. First, with respect to reducing leverage, you obviously have several options, including divesting assets, sale-leasebacks, you have some excess land that could be sold, or you could just grow your way out of leverage, which is kind of how you framed it before given the ramping and opening of properties that you’ve laid out. Given the current status of the environment from a macro standpoint, has anything changed just in terms of how you’re planning on deleveraging? Thanks.

I don’t believe anything has really changed. While I read the same articles and look at the same data many other people do about the economy and understand the natural concerns people might have about the state of the economy over the next year or two and interest rates, et cetera. For us, this is a time of expansion in our company. We have a very strong pipeline of great projects that make sense in any economic environment, so nothing about the current economy makes us want to change our plans for executing our growth strategy, and along with our growth strategy and along with these properties and projects we’ve talked about today, will come a lot of additional EBITDA. And that’s how we’ve been building this company over the last number of years, and that’s how we’re going to continue to build it even through an economic cycle that some people feel is likely to give people headwinds. I don’t think we believe as a senior management team that we’re feeling the headwinds in any material respect. So, we’re going to go continue to do what we’ve been doing, and we feel fortunate and blessed to have the pipeline of opportunities that we have.

Thank you, Bill. And then back to Virginia, the HRMs, you kind of outline the process in Dumfries, and I’m guessing it would be the same with the licenses that you have remaining outside of that. A lot of items are going on in Virginia with new properties opening. We’ve seen North Carolina land-based casino legislation potentially proposed. But in terms of those last licenses, can you kind of help us think about the timeline of when you would greenlight those or pick sites? Is this something that could be several years out or maybe after the Richmond ballot, and some other items in North Carolina that would give you enough confidence to move forward in certain locations?

We plan to move quickly regarding our remaining licenses in Virginia while also considering our underperforming ones, which have generally been solid. You can expect us to act as swiftly as possible. Our approach has two main components. First, we need to identify the best markets in the state for utilizing one of the ten licenses. Second, we will engage with those communities to gain support for running a referendum, which we also need to win. This second phase has several variables, especially with developments in North Carolina impacting Virginia, particularly since they share a southern border. We are not focusing on any additional sites near Virginia's southern border where most Class 3 casinos are located, except for the Richmond license that we are involved with. Instead, we are concentrating on opportunities in the central and upper parts of the state. We have many leads and are actively exploring them. Winning community support and a referendum is crucial, making this process more complex than merely analyzing population and wealth centers. We aim to achieve the ten licenses as quickly as responsibly possible, avoiding wastefulness. Our team's challenge is to maximize each license without rushing into suboptimal locations. You can expect us to be very active in 2023 and 2024, and to the extent we have any remaining licenses, in 2025.

Thanks, Bill. Great quote and great insights. Appreciate it.

Thanks, Chad.

Thank you. One moment please for our next question. Our next question comes from the line of Jordan Bender with JMP Securities.

Great. Thank you for taking my question. Bill, I have a broader question regarding TwinSpires and the horse racing industry. With horse wagering becoming more competitive due to fixed odds and the entry of real money gaming companies, does it make sense for tracks to consolidate in order to have greater control over content distribution, or for platforms to merge to achieve more scale in the industry?

That’s an excellent question, especially in times of change and uncertainty. I believe our company possesses the best online gaming asset available. While others may have differing opinions, our asset has proven its value over time. It generates significant EBITDA and maintains strong, consistent margins, making it a robust asset. As we navigate changes in the online gaming sector, whether related to horse racing or larger trends, we do so from a position of strength, recognizing the value of what we have and the potential for growth. We closely monitor all the trends and themes in the market, but we have a lot of confidence in our business's strength and capabilities. We are developing strategies for its future, yet we remain cautious and attentive to market developments. We don't claim to have a crystal ball to predict the future, but our track record indicates that we are adept at responding effectively to real-time market changes. The upcoming years will likely bring various shifts in the competitive landscape as the online sports wagering market evolves.

Great. And then for my follow-up, I know there’s always a push to get international involvement into the derby. Maybe just an update on what you saw this year coming out of Europe, coming out of Japan, either from a wagering or a participation point of view?

We are just starting our journey into international markets, which is a major focus for us, especially in ticketing and expanding our reach. As we launch various initiatives, we notice some changes, but they come from a very small starting point. That’s the current state of our international profile. While we're seeing progress and positive signs, it's still based on a small foundation. However, we are committed to making this a priority moving forward. We aim to make our content available for wagering and connect with consumers across developed countries, where horse racing is popular, although not universally present. We want to attract customers who are willing to pay for high-end ticket experiences, as this is significant for the economic aspect of events like the Kentucky Derby. We have been effective in this area and want to engage those who already show a willingness to spend on similar events in other countries. While our current base is minimal, the changes aren't substantial at this point. In the next three to five years, we will be more vocal about our efforts and commitment to expanding this part of our business. Thank you. I want to thank all of you who participated in these calls and listen in for your interest in our company, for your commitment to our company. The folks that asked questions today, these were, in particular, really strong, sharp questions. We appreciate them. We’ll try to be good stewards of people’s trust in us and the capital that they’ve given us. So, we’ll talk to you next quarter, but you’re going to see activity over the next 90 days because we’re not slowing down. We’re charging ahead. This is a good time. There’s opportunity in environments like this. And this management team, this group of people, we’ve been together a long time, and we’ve proven through a variety of different environments that we can succeed. So we’re moving forward as a company, even if others out there are showing reticence, not us. So we’ll talk to you in 90 days. Thanks again for your confidence. Talk soon.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating, and you may now disconnect.