Hello and welcome to the Churchill Downs Incorporated fourth quarter and full year 2024 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand has been raised. Please be advised that today's conference is being recorded. It is now my pleasure to introduce VP of Investor Relations, Sam Ullrich. Thank you, Andrew.

Good morning, and welcome to our 2024 fourth quarter earnings conference call. After the company's prepared remarks, we will open the call for your questions. The company's 2024 fourth quarter 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 churchilldownsincorporated.com as well as in the website's investor section. Before we get started, I would like to remind you that some of the statements 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-Ks 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. 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 our growth plans for our company, including with respect to the Kentucky Derby and our HRM businesses in Virginia and Kentucky. And then Marcia will provide insight into our financial results as well as an update on our capital management strategy. After she finishes, we will take your questions. 2024 was another very strong year for Churchill Downs Incorporated. We delivered all-time record net revenue and record adjusted EBITDA, up 11% and 13% respectively over the record results from 2023. All three of our business segments contributed to these excellent results, with each delivering record net revenue and record adjusted EBITDA. We accomplished several key strategic and operational objectives. We delivered the Paddock project, which exceeded everyone's expectations and drove the Kentucky Derby experience and financial results to a level few would have imagined just a handful of years ago. We opened our Terre Haute Casino Resort and The Rose Gaming Resort, two of our largest and most ambitious projects to date, which each have years of growth ahead. We also launched or continued to push forward several other key initiatives like our Owensboro property, which opened last week. All of this while remaining conservatively leveraged to pursue new growth opportunities. Our strategic choices and capital investments over recent years have positioned Churchill Downs Incorporated to further develop our special asset, the Kentucky Derby, and to expand our unique portfolio of HRM and other assets to create long-term best-in-class shareholder value while maintaining one of the strongest balance sheets in the industry. Now I will share an update on our growth plans for Churchill Downs Racetrack and the Kentucky Derby. It is important to note that the Derby is 150 years old and is the longest continuously held sporting event in the United States. Over the decades, it's become so much more than a horse race. The Kentucky Derby is a testament to the enduring spirit of American sportsmanship, celebration, and the lasting power of our traditions. The event is inseparable from the place, Churchill Downs Racetrack, and our opportunity and challenge is to innovate and evolve a historic and unique venue to exceed the ever-changing expectations of our guests who seek to celebrate tradition while enjoying the very best of modern hospitality. We have several guiding principles as we develop Churchill Downs' racetrack that we believe will continue to propel us forward over the next several years. First, create unique once-in-a-lifetime experiences for our guests at Churchill Downs. All that the Derby is starts with our guests' enthusiasm and experience while at the track. That on-site energy is contagious and highly visible, and it truly defines the television experience for those around the world. Second, encourage and reward innovation within our team to create new experiences for our guests at all ticketing price points. Third, remain focused on our time-honored traditions through our celebration of the history of Churchill Downs and the Kentucky Derby. And fourth, minimize the construction impact from expansion and renovation projects on the current year's Derby to ensure that our guests can have their bucket list experience every year. With these principles in mind, we are in the process of finalizing the Starting Gate Courtyard and Pavilion project for this year's Kentucky Derby 2025, and I've also announced our next multi-year series of projects to expand the Kentucky Derby experience and to create step-function growth. Regarding the Starting Gate Courtyard and Pavilion project, this is on course to be completed on time and on budget at the end of April before Derby week. As a reminder, we will convert 10,000 bleacher seats into a mix of approximately 8,500 reserved premium stadium and trackside box seats along the home stretch near the Kentucky Derby starting gate. We are also significantly improving the amenities and hospitality options in and around the Starting Gate Pavilion that will serve guests from other existing seating areas. Yesterday, of course, was a day of huge news. We announced a series of transformational projects that are collectively the largest expansion and renovation undertaken in the 150-year history of our company. This will materially reinvent three key areas of Churchill Downs' racetrack. The changes can be grouped into three projects: the Sky Terrace renovation and expansion, the Conservatory, and the Infield General Admission project. I'll provide a brief overview of each. First, the Sky Terrace. This project is focused on the section of Churchill Downs Racetrack starting just past the finish line where the main front-side structure containing seating areas like the Turf Club and Millionaire's Row ends and runs through to the First Turn Club. We will replace 11,500 existing seats consisting of uncovered box seats and dated dining areas with 13,300 seats providing a variety of premium hospitality experiences. We will demolish the existing Sky Terrace structure, which dates to the 1960s, and replace it with a new five-story building that will meaningfully increase the number of premium seats and experience packages at various price points, both inside the new structure and in the outdoor areas in front of the building and adjacent to the track. We anticipate that some sections of the new Sky Terrace building and surrounding areas will be open in time for the 2027 Derby and that the remaining areas will be finished for the 2028 Derby. In the interim, guests who sit in the existing Sky Terrace sections will be relocated to premium temporary seating structures for the 2026 Derby and to a more limited extent, the 2027 Derby. There is no impact on customers for this year's Derby. The Conservatory project will replace the temporary suites in the infield which line the home stretch of the racetrack. We historically built temporary seating every year that we sold at lower price premium seats. Our plans are to replace the 2,100 temporary seats with new permanent structures providing over 7,000 premium experiences for our guests, including 36 suites. These new venues will line the racetrack directly opposite front-side hospitality areas. This project will be completed in three phases. Phase one includes a new Pagoda Club and Terrace along the first of several structures we call conservatories. The Pagoda Club and Terrace will offer luxury hospitality similar to the Paddock Club and Club SI in the area immediately surrounding and overlooking the Kentucky Derby Winner Circle. This new concept will bring our customers an opportunity to participate in and experience a magical moment as the Kentucky Derby winner receives the garland of roses. The first conservatory will add nine permanent suites, each with a private viewing terrace overlooking the track as well as access to a shared lawn that will allow these guests to watch the races from right up on the rail of the turf course. There will also be separately sold dining on the rooftop conservatory. In addition, phase one will add a large circular lounge on the inside of the first turn that will provide a unique hospitality experience and vantage point as the horses thunder around the first turn. We anticipate that phase one will be done in time for the 2026 Derby. Phases two and three will involve further construction to provide additional premium reserve ticket options. Phase two will be completed by the 2027 Derby, and phase three will be completed by the 2028 Kentucky Derby. The Infield General Admission project will introduce three new permanent buildings in the infield that will provide guests with enhanced amenities. This project will improve the overall experience for all general admissions guests and also create a series of upgraded ticketing opportunities with additional entertainment and rooftop viewing access. The first building will be completed in time for the 2026 Derby, the second one for the 2027 Derby, and the third one for the 2028 Derby. We will be undertaking several infrastructure improvements to support these three transformational projects over the same time frame. As I mentioned on our last earnings call, we will be building a new tunnel to the infield to provide an extraordinary immersive experience for our premium guests to enjoy while traversing back and forth between the front side of the racetrack and their premium infield seating. We anticipate having all three projects as well as the necessary infrastructure improvements completed by Derby 154 in May 2028. When finished, we will have materially and directly improved the Derby experience for approximately 20% of our current guests while adding premium reserve tickets representing an additional 10% to our current inventory. These projects enable us to continue to better segment and improve our guest experiences and to add a very manageable number of additional premium reserve tickets to optimize our revenue growth over the next several years. We think every single guest will feel the energy and excitement created from these innovative and transformational improvements to Churchill Downs. We have a track record of prudently investing capital in the Kentucky Derby to grow our iconic asset and to create significant long-term shareholder value. We believe these investments will lay the foundation for growth over the next decade. Next, regarding our HRM activities in Virginia. The opportunity to deploy HRMs in Virginia came with our acquisition of Colonial Downs Racetrack in late 2022, part of our acquisition of P2E. We have enjoyed rapid growth in our Virginia operations. In 2024, our HRM venues contributed 20% of our nearly $1.2 billion adjusted EBITDA, and that is with our Rose Gaming Resort opening deep in the fourth quarter. In 2025, the investment and growth will continue. We are expanding our Richmond venue. We have added approximately 100 HRMs so far and plan to add an additional 400 incremental games by the end of the second quarter. We also are building the Roshire Gaming Parlor in Henrico County with 175 HRMs and other guest amenities. We expect to open this entertainment venue during the fourth quarter of this year. As you know, we opened The Rose in Northern Virginia in November of last year. We now have 1,800 HRMs in the market. We estimate that the potential customer base around The Rose is very significant and nearly four times larger than several of our other key HRM properties in Virginia and Kentucky. We love our location and this market. As we learned from the development of Derby City Gaming, which we opened in September 2018, and from our other HRM facilities we've built over the last decade, it takes some time in new markets, especially in large media markets, to educate players on what historical horse racing machines are and how comparable they are to the gaming experience offered by class three machines. HRM facilities in new markets like Northern Virginia take time to attract, develop, and retain customers. As we've just opened, we are investing significantly in our marketing across Northern Virginia. As we build our customer database over the next 12 months, we believe we will see a meaningful and sustained increase in our performance. I've been pleased with how our team has come out of the gate as we faced the delayed opening of the property that resulted in us not being able to do much pre-opening marketing, followed by the actual opening right in the throes of the fall of federal elections, which put us into an expensive and very distracted media market. We are now seeing progress every week. The Rose is going to be a fantastic property. In Kentucky, we opened our new Owensboro HRM venue last week on February 12th, on time and below budget. It is located next to Highway 60 just east of Owensboro. We are extremely pleased with the early performance of this property and look forward to its continued growth over the coming year. In January, we began work on the Marshall Yards HRM venue in Calvert City, Kentucky. This will be our eighth HRM venue in the Commonwealth. Its name is inspired by the railroad industry in the areas around Calvert City. Our location sits at the intersection of the two major highways that run through the area, and we are on budget and on track to open this facility during the first quarter of 2026. In summary, 2024 was a great year for us with record financial results. We are confident that we will deliver strong growth in the coming years from our investments, including in our flagship asset, and from our HRM opportunities in places like Virginia and Kentucky. We will also pursue disciplined growth with ancillary or adjacent opportunities aligned with our long-term strategic plans. We have one of the best balance sheets in the industry, with strong assets that we believe will continue to drive adjusted EBITDA and free cash flow. We remain committed to delivering excellent total shareholder return with consistent execution over the long term. Finally, the 151st Kentucky Derby is in 72 days, and we plan an exciting week of racing and festivities for our guests. The addition of the new Paddock area last year and the new Starting Gate Pavilion area this year, as well as all the investments in premium seating we've made in the recent past, has generated a lot of excitement and demand for Derby tickets. We are pacing ahead of Derby ticket revenue for the 151st Derby compared to last year's 150th Derby. If you have not purchased your tickets yet, I would encourage you to do so soon as we anticipate being fully sold out. 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, 2024 was another record year for our company. Excluding 2020, our team has delivered eight years in a row of record revenue and record adjusted EBITDA from continuing operations and successively integrating our strategic acquisitions. Our diversified portfolio of businesses, highlighted by a record Kentucky Derby week, generated 11% growth in net revenue and 13% growth in adjusted EBITDA for 2024. We also delivered record fourth quarter net revenue and record fourth quarter adjusted EBITDA for the overall company and across all three of our operating segments. Today, I'll start with a few insights on these financial results and provide some initial thoughts on 2025. I will then provide an update on capital management. First, regarding 2024 financial results. Growth of our assets in Virginia, including the opening of the Rose Gaming Resort in the fourth quarter, clearly created step-function growth in our financials. Our Virginia HRM venues generated 20% of our nearly $1.2 billion of adjusted EBITDA in 2024. As Bill discussed, it is still early days for the Rose Gaming Resort in Virginia. This is a great property and a great location with tremendous demographics and a leadership team committed to successfully growing this asset to deliver strong long-term shareholder returns. We also generated record adjusted EBITDA from our combined Kentucky HRM properties, driven by the strong performance of our Derby City Gaming, Turfway, and Oak Grove properties. Churchill Downs Racetrack also delivered record adjusted EBITDA as a result of another very successful Derby week while celebrating our 150th anniversary. The addition of the new Paddock experience and increases in ticketing, sponsorships, and pari-mutuel wagering provided a significant lift to our financial results while maintaining the consistently high margins the Churchill Downs Racetrack has generated over the years. We expect Churchill Downs Racetrack to once again deliver strong growth in adjusted EBITDA in 2025, given the addition of the Starting Gate Pavilion and Courtyard project and other economics associated with the 151st Kentucky Derby. We have changed the name of our TwinSpires segment to Wagering Services and Solutions to better reflect the growth of our varied commercial offerings. Within this segment, we grew adjusted EBITDA by nearly $34 million compared to the prior year, primarily from our Exacta business. We continue to realize the benefits of our strategy to vertically integrate Exacta and its HRM system technology that we acquired in August of 2023. Although we benefited from the pivot into B2B for online wagering on horse racing, the TwinSpires horse racing business generated lower handle primarily from less content and due to race day cancellations and shifts in race schedules. Overall, we remain pleased with the strong margins this business generates despite facing industry headwinds in 2024. And last, regarding our gaming segment, overall adjusted EBITDA grew 4%, primarily driven by the strong performance of our new Terre Haute property that opened on April 5th. Our existing regional gaming properties held up relatively well in 2024 despite consumer softness and increased competition across the industry. Our 2024 same-store, wholly-owned casino margins, excluding insurance proceeds and racing, were down 1.4 points compared to 2023, primarily driven by our properties in Maine, Maryland, and Pennsylvania. Regional gaming consumer behavior in the fourth quarter remained consistent with recent quarters. We see strength at the higher end with rated play and weakness at the lower end and with unrated play across our properties. Overall, we are very pleased with the results that our team delivered in 2024. As Bill discussed, we will enjoy the 151st Kentucky Derby in May, and we will continue expanding the Kentucky Derby and layering on a series of new properties that collectively will fuel our growth in 2025 and beyond. Turning to capital management, we generated $688 million or $9.22 per share of free cash flow in 2024, up nearly 33% per share over the prior year. The primary driver of this increase was the strong cash flow generated from our businesses. Regarding maintenance capital, we spent $84 million in 2024 and expect to spend between $100 and $110 million in 2025. The increase in maintenance capital for 2025 is driven primarily by incremental HRM slot capital in Kentucky and Virginia, and maintenance projects at Churchill Downs Racetrack. Regarding project capital, we spent $463 million in 2024 and expect to spend between $350 and $400 million in 2025. This updated 2025 project capital forecast includes the expected cash outlay in 2025 for the recently announced multi-year Kentucky Derby project. The total project capital for these projects is expected to be spent over the next four years as each phase of the project is completed. As a reminder, this 2025 project capital forecast also includes finalization of the Starting Gate Pavilion and Courtyard at Churchill Downs Racetrack, the Owensboro HRM venue that we recently opened in Western Kentucky, the expansion of our Richmond HRM venue in Central Virginia, the ongoing construction of the Marshall Yards HRM venue in Southwestern Kentucky, the Roshire HRM venue in Central Virginia, as well as some other smaller capital projects for other properties. Regarding share repurchases and dividends, we repurchased over 160,000 shares in the fourth quarter under our share repurchase program. We returned over $218 million to our shareholders in 2024 between strategic share repurchases and ongoing dividends. At the end of December 2024, our bank covenant net leverage was 4.0 times. Based on our capital investments and the timing of the opening of our new facilities, we expect our bank covenant net leverage to decrease below the four times range over the coming year. We then expect our bank covenant net leverage to decline in 2026 as our investments in the Derby and our HRM venues in Kentucky and Virginia continue to ramp. In closing, as Bill said, 2024 was a tremendous year for our company with record financial results, and we expect 2025 and beyond will be even better given our unique portfolio of assets and our new projects coming online that will generate a significant amount of adjusted EBITDA and strong free cash flow. As always, we remain committed to creating long-term shareholder value. With that, I'll turn the call back over to Bill so that he can open the call for questions.

Thank you, Marcia. Okay, everyone. We're ready to take your questions.

Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. One moment, please. Our first question comes from the line of Barry Jonas with Truist Securities.

Hey, guys. Good morning. I was wanting to get your thoughts on how we should be thinking about the uplift or the ROI you expect to see from the announced Derby projects. And should we be modeling any construction disruptions in the interim? Thanks.

Thanks, Barry. Good morning. So one of our core principles is to accomplish our major construction projects year to year with respect to the Derby without disrupting the bucket list experience that everybody who comes to Derby expects to get every year. So we think we can manage very effectively to limit or eliminate any material disruption to folks. So we're very confident about doing that, and that goes into how we plan these projects and sequence the different pieces of the construction. With respect to these projects, we believe this is our signature asset, our key asset, and is a part of generating long-term shareholder return, superior shareholder return, and value for our company. So these, in our opinion, are always the best projects, among the best projects that we can do, and they always pay off and meet our hurdles. So you've seen our track record with respect to these in the past. We've been doing major projects like this, not quite of this scale, but of this ilk over the last number of years. It's now just time to take it to a much higher level because I'm confident in our team and their ability to execute these.

Perfect. Thanks so much.

Thank you. Our next question comes from the line of Dan Politzer with Wells Fargo.

Hi. This is Zach Silverberg for Dan. Good morning, and thanks for taking my question. How do you think about the Rose's trajectory and ramp? And can you talk us through the puts and takes to the first few months and how do you envision the property ramping over the next three, six, or twelve months? Thank you.

Good morning, Zach. And I'd say I feel really great about The Rose. This is not our first rodeo. We've built a handful of these projects, a number of these projects, and The Rose is a perfect location in a fantastic market. So very excited about that. So as I mentioned in my remarks, I've had the privilege of being a part of this team, and we've opened class three casinos, we've opened HRMs, we've opened VLT facilities. We've had the privilege of working across a lot of different game types and different projects. HRMs is a fantastic project. It is comparable to class three. It's getting better all the time. It's been a thrill to watch that project develop. So high degree of confidence as the market gets educated. This is not a market that has a lot of gaming. People have to leave this market to get the gaming. A lot of confidence as we educate this market, as we introduce ourselves to this market, and as we get trial in this market, the people will like the product, that they'll like the location, and that you'll start to see a ramp commensurate with the demographics, including population size and wealth. So the hardest part about anything when you do a large construction project like this is always the quarter-to-quarter timing of it. Always feel good about how this looks after a year, how this looks after two years, how this looks after three years. But trying to measure how this looks after one month or how this looks after two months, that's always much harder to do. It can be impacted by weather, which we saw here. We actually opened up the facility right in the middle of a federal election cycle, which was an incredibly distracting time for everybody in that market. So all kinds of little things like that can influence numbers week to week or month to month, but over the long term, it's just simply noise. So I would say, Zach, be patient and watch this property perform because it's going to be there for us, and we don't see anything to the contrary. It all looks strong, and it's starting to ramp appropriately. Just give it some time over the next twelve months to demonstrate that.

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

Hi. Good morning. Thanks for taking my questions. I wanted to, you know, in part follow that up and maybe go just a little farther. I think in the past, Bill and Marcia, we've talked about, you know, in the casino slash HRM, you know, world, we think about kind of five-year paybacks as a target. And so, you know, two-part question. We're still, it sounds like, and I don't want to, you know, put words in, but, you know, The Rose is within that kind of framework of a five-year, you know, payback is a reasonable way for us to think about it. And then second, you know, when we look at Kentucky, you know, should we potentially be looking at those investments in total, right? You know, outside of Churchill Downs Racetrack, but looking at, you know, the various HRM facilities and just piling those up and piling up the capital to put in there, you know, where are we in terms of, you know, getting to that five-year payback and if it still applies there?

Thanks. Thanks, David. Let me unpack that and make sure I cover all those points that you mentioned. So first, it is the case that over time, we've been pretty clear that when it comes to gaming assets, brick-and-mortar assets, we target a five-year payback, a five times payback. I'd say with HRMs, we've generally beaten that. So not in every case, but we've also had some very strong positive examples. So with HRMs, in the market we're in, we've seen competitive moats and strong ecosystems where we thought we could really go hard and really get a return even quicker than five years. But generally, when we look at managing our and comparing our different opportunities to place capital across our different assets, it comes to HRMs and gaming in general, five times. And we've been successful in doing that. When it comes to The Rose, certainly, there weren't any different targets applied when we conceived and executed on The Rose. As I said, I feel really good about that. You don't measure these projects in one month or two months and three months. Measure them over one year, three years, five years, and beyond. And you can see from some of our assets in Kentucky that we still see growth, organic growth beyond that. So The Rose is just in the beginning of that journey. And when you compare to Kentucky, we manage each of those facilities individually. They each have different markets. There are markets that have similarities across Kentucky. Also, we do look at the whole ecosystem of Kentucky as a whole. Because of our relationship with the racing industry and the legislature in Kentucky, and how they envision and view racing and gaming as part of a single positive ecosystem for the state. So we look at it both ways. We want to maximize the performance of each individual facility. We also recognize the support each of those facilities gives the related racetrack as part of a larger ecosystem of Kentucky racing. And I think I covered your major points there, David, if I missed one, remind me.

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

Hi. Good morning. Thanks for taking my question and for all the color. So I wanted to go back to the Derby project. I feel like every year at this point, you and the team are mentioning that pacing is ahead of the prior year period. So I don't think there's been a demand issue for some time, but just wanted to get a better sense of what gives you the confidence that there will be demand for these premium seats. Are you seeing high return guests for those, you know, higher-end offerings? Or do you think there's a piece of the market, the United States or international, that hasn't experienced this and, you know, following these additions, maybe there's additional marketing and items to get people to experience this? Thank you.

Thanks, Chad. And good morning. So the way I look at this is we're really the beneficiary of two trends that are going in the right direction. First, sort of more holistically, there is clearly a recognized and understood shift in consumer behavior where they, in general, particularly in the United States, but even to a large extent internationally, want to attend experiential events. They want to have big experience bucket list experiences. And that's helpful to events like ours because we are a unique American traditional special happening. And so we can take advantage. We're a beneficiary of this larger trend towards special concerts and special big events and travel, etc. And that's a growing healthy space globally. More specifically, with respect to us, all those things you mentioned are true. We do have a high return quotient to our customer base. We have a lot of our seats that are tied up in personal seat licenses. We have lots of demand and waiting lists for different sections and different hospitality experiences, and all of that is good. But we also want to grow our customer base, and that's why when you think about the different roads to the Kentucky Derby, whether it be the Japanese road, the European, the Middle East road, we're working hard on international, and that's all about the future. We don't have to do that to sell tickets now, but we want to do projects like the ones we announced today. We want to do expansion and growth projects for the Kentucky Derby for generations to come. In order to do that, we want to reach further afield and build new pockets of customers. That's healthy for our event. That's part of how we think about what we're doing. And we hope and expect that's a big part of our future. So whether it's developing new markets in the United States or pushing deep internationally, we have a process and a team and a methodology for doing that, or whether we push further internationally, you're going to see us aggressively try to grow new customers, and it's incumbent on our team to create the hospitality experiences to absorb those new customers when we find them. We're not resting on our laurels thinking only about selling the seats we have. We're driving demand to drive ticket prices now but also to drive confidence that future expansion projects are justified and will be supported by new customers that want to come. And so far, it's been very, very satisfying to see the team fire on all cylinders and to see evidence of an expansion in our international customers, an expansion in our customers that come from outside of this region. It's been satisfying to see the team demonstrate improvement on those metrics.

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

Good morning, everyone. A lot of good commentary on the direction of travel for growth capital in the coming years. You know, a lot of this capital is focused on the growth of your areas of the business, like your HRM, and the tracks, which, you know, begs the question, you know, how do you view the regional gaming business in terms of future investment and really just kind of how it fits into the total Churchill Downs Incorporated? Thank you.

Appreciate that question. I don't think of regional gaming as a single industry. I'd say our company, we look at individual markets. We look at individual opportunities. And we assess them based on the dynamics and the trends we see for those properties. So I don't want to give a broad general answer, but I do think in the country, you see pockets of regional gaming where I think there's opportunities, and you see pockets of the United States where it seems maturity has long since been established. So for our company, we're interested in growth. We're interested in building our company, growing our company, improving our margins, improving our adjusted EBITDA. So there's a focus and a bias in our company to pursue opportunities where long term we expect to be able to generate growth, and that's an expectation for all the properties that are in our family, and they get evaluated as such. And we look at that sort of thing constantly because we expect that contribution and that improvement constantly.

Thank you. And our next question comes from the line of Jeff Stantial with Stifel.

Great. Good morning, everyone. Thanks for taking our question. Last month, there were some reports out of California that suggested that the tracks there can make a push for expansion into historical horse racing. I'm curious just to get your thoughts on how viable you think this is legally, if you think you could help accelerate these efforts with your experience in the sector, and if it is ultimately approved, how you might look to participate there, whether through Exacta or M&A.

Yeah. Thanks, Jeff. So we don't have a racetrack in California, so we don't directly participate in producing racing in California. However, one of the things about our company that's been a real plus, and I think we earned it because we thought about it in advance and pursued it carefully, is we got into providing HRM services. So Exacta is a central determinant system. It is, whether it be Exacta or one of the competitors, it is a system. And that for us is a nice business, a lucrative business. It not only serves our own sites but also has a B2B component where we provide those services to other third-party site operators. So if there were opportunities in California, that's most likely how we would have the opportunity to participate. It would be through the provision of Exacta's products and services. As to what's going to happen in California, I don't know and probably shouldn't speak to that because I'm sure that's a question of the business community and the political community. But if the racing community is so fortunate as to have the chance to implement HRMs, we look forward to helping them do so, and we certainly have the capabilities to do so. But whether it be in California or in other jurisdictions in the United States, I believe we're not done with the HRM rollout. I think there's a reasonable opportunity or reasonable probability that we'll see other jurisdictions potentially show interest and legalize the product over the next handful of years.

Thank you. Our next question comes from the line of Joe Stauff with SIG.

Good morning, Bill, Marcia. I was interested in maybe just, you know, reassessing where we're at in terms of, you know, both in Kentucky and Virginia, the gray market gaming enforcement. I guess, overall, I guess, the assumption is in Kentucky, it's further along, maybe sixth inning of the ball game, maybe further, whereas in Virginia, it's earlier. I was wondering if you could possibly refresh us on kind of where, you know, the enforcement and pushing out the gray markets are in those respective markets.

Sure. Happy to do that, Joe. Thanks for the question. So gray games, I'm not sure I'd use the baseball analogy, although I like baseball analogies. But gray games is more of a whack-a-mole thing. The sort of rogue operators that participate in gray games are constantly trying to come up with, you know, absurd tweaks to their games to argue that they've somehow gotten out of the clear illegal space into something that's more gray. The whole name gray games, the whole nomenclature around gray games, I think, is often misunderstood. Most of the time, these games aren't gray. They're black. They're illegal. So in the case of Kentucky and Virginia, there's been a lot of progress. We have a legislature and an executive branch in both states that's very supportive of following the law and enforcing the law. So gray games are not legal in these jurisdictions, but there's legacy issues that the attorney generals and other law enforcement agencies continue to pursue, and we have this phenomenon also of whack-a-mole where they pop up under some new paradigm. So I think we're going to see that continue, but there's been substantial progress that we're very pleased with. And I couldn't tell you what inning we're in. And if we were in the sixth inning now, we may have to go back to the, you know, the third inning. But generally, progress is slow and steady in eliminating these machines. But I don't think there'll be a day where we get on this call and say we don't lose a dollar of revenue to gray games. I don't think we'll have a day like that because sort of the nature of these operators, that sort of bald-faced willingness to flout the law of these operators, I think there'll be a challenge for a while. But you've seen in the numbers in Virginia, substantial progress over 2024. I think you'll see more enforcement, continued enforcement, and a little bit further along in Kentucky. So both have headed in the right direction. I feel good about both. But I don't make any assumptions that we're through with that game.

Thank you. One moment, please. Our next question comes from the line of Shaun Kelley with Bank of America. And our next question comes from the line of Daniel Guglielmo with Capital One Securities.

Hello, everyone. Thank you for taking my question. We look at US hourly earnings data on a regular basis and saw a bit of a reacceleration in wage growth at the end of this year. This led to some investors asking about pricing power again. When thinking about your properties, are there certain levers you can pull to increase prices, or how do you think about that in a potentially higher inflationary environment?

So, Dan, good morning. Nice to have you on the call. You broke up for us just in the beginning. What data were you referencing?

I'm sorry about that. The US hourly earnings data. So saw a bit of a reacceleration in wage growth at the end of the year.

So I'd say that we watch that kind of data, you know, inflation data, wage earning data. I can't say that of all the data points, all the trends going on, I can't say that we can isolate that and note any difference in any of the trends that are otherwise going on across our businesses. Whether it be demonstrating pricing power for the Kentucky Derby or in wagering activities or on TwinSpires, etc. I can't say that there's enough of a trend with the data you cited that it's discernible in the overall trajectories of the businesses we're in. But we'll keep our eye on that and we'll see if it's more noteworthy or demonstrable intelligence from that data going forward.

Thank you. And our next question comes from the line of Ben Chaiken with Mizuho.

Hey. Thanks for taking my question. You gave a lot of color on The Rose, which is extremely helpful. Wonder if we could just kind of, like, dissect it. Stepping back a little bit, specifically in Virginia, you know, presumably, there was some weather in January. You also have the election that you kind of noted in The Rose opening, but maybe if we could think about, like, December, January, February, whatever trends you're seeing today, just get a sense of the underlying trends in Virginia without some of the moving parts or noise.

Yeah. Thanks for the question, Ben. Good morning. So things are moving in the right direction. You know, this is not our first rodeo. We've opened a number of properties, a number of significant properties in our family over the years. So I sit here today very pleased. We have the right team. We have the right processes. I never think about this as a one-month thing or a one-week thing or a two-month thing. The trends are strong. You're going to see growth in that property for an extended period of time. You're going to see things improve. When you open up a property like this, you've got to get the people into your database. You've got to get to know them. You've got to get to learn what they respond to in terms of player incentives. You have just a bunch of work to do, and our team's doing the work. So all good. The trends are moving in the right direction. And I'm pleased as I sit here today. I feel very good about what we're doing there, and I look forward to talking to you all about this next quarter.

Thank you. I would now like to hand the call back over to President and CEO, Bill Carstanjen, for any closing remarks.

Thank you. I thank all of you for your interest in our company, for being shareholders in our company, or for considering being shareholders in our company. We work very hard to do what's right by you, to make good decisions and the tough decisions that drive shareholder value. So thank you for your time today. Thank you for your interest. I look forward to talking to you in eight or nine weeks right before the Derby, Derby 151. So take care. Stay warm out there. I'll talk soon. Thank you.

Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.