Earnings Call Transcript
Churchill Downs Inc (CHDN)
Earnings Call Transcript - CHDN Q4 2022
Operator, Operator
Good day, ladies and gentlemen, and welcome to the Churchill Downs Incorporated 2022 Fourth Quarter and Year-End Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session. 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 and Investor Relations.
Nick Zangari, Vice President, Treasury and Investor Relations
Thank you, Andrew. Good morning, and welcome to our fourth quarter and year-end 2022 earnings conference call. After the company's prepared remarks, we will open the call for your questions. The company's 2022 fourth quarter and year-end 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 report on 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-K are available on our website at churchilldownsincorporated.com. And now I'll turn the call over to our Chief Executive Officer, Mr. Bill Carstanjen.
William Carstanjen, CEO
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. I will share some high-level thoughts on several strategic topics, and then Marcia will walk through our results and provide an update on our capital management strategy. After she finishes, we will take your questions. Over the course of 2022, we accomplished numerous key strategic and operational objectives and positioned the company for growth in 2023 and beyond. We delivered record net revenue of over $1.8 billion and record adjusted EBITDA of $764 million. We have very high expectations for 2023 as well, but first I will touch on a few important highlights regarding 2022. We held a very successful Kentucky Derby setting records for virtually every material metric. We completed the P2E transaction, the largest acquisition in our company's history. We expanded our HRM business into three new states: Virginia, New Hampshire, and Louisiana. We opened Turfway Park, our new HRM entertainment venue in Northern Kentucky. We completed two other strategic acquisitions, Ellis Park in Western Kentucky and Chasers in New Hampshire. We signed an agreement to purchase Exacta Systems. We completed the sale of the excess land at Calder, and we have several significant strategic organic investments in process to accelerate our future growth. Through all of these initiatives, we still maintain one of the strongest balance sheets in the industry. In summary, we had a productive 2022, but our focus is now on executing our growth objectives for 2023, 2024, and beyond. Let's discuss a strategic update since our last earnings call. First, we have made significant progress on our project Churchill Downs Racetrack in preparation for the upcoming 149th Kentucky Derby. Our first turn experience is almost complete. The structure is the size of a typical soccer stadium with more than 7,300 permanent seats located on the first turn of our iconic racetrack. The scope of this complex is stunning, the first time you see it. And it forever changes the personality of this portion of our venue, which historically had been dominated by a series of temporary structures and back house infrastructure. Our guests will experience it for the first time at this year's Derby in early May. Ticket sales have been very strong, but it is not yet sold out. We expect it will be. We have also made significant progress on the Paddock project. This is a transformative project for Churchill Downs Racetrack, the most significant in decades, and will create a variety of new and innovative guest experiences while at the same time, improving the views and ambience for every single guest who enters our historic venue through the front gates. Our goal is to introduce a level of transformation and grandeur that will surpass any facility anywhere in the world. We remain on course to complete this project for the 150th Derby in May 2024. This effort epitomizes a core strategic initiative of our company to invest and grow the scale and profitability of the Kentucky Derby. The 149th Kentucky Derby will be run on May 6 this year, and we will ensure that it is a special event as it always is for everyone despite some construction that will still be underway in the Paddock area. We have a good plan. We aren't concerned about any materially negative impact to this year's Derby. If you haven't yet bought your tickets for this year, we encourage you to do so. The demand is extremely strong. Second, since our last earnings call, we closed the P2E acquisition on November 1, acquiring Colonial Downs Racetrack and its sixth operating HRM venues in Virginia. We also acquired Del Lago Resort and Casino in New York and Hard Rock Hotel and Casino in Sioux City, Iowa. The acquisition also includes two HRM properties under construction in Dumfries and Emporia, Virginia, and up to three additional HRM venues we can pursue in the state. In addition, we assumed P2E's joint venture relationship with Urban One to potentially build a full casino in Richmond, Virginia upon the legislature permitting Richmond to proceed with a referendum. The P2E acquisition expands our company significantly and also provides us with material growth opportunities in the HRM and casino segments beyond the venues currently in operation. HRMs are a key strategic focus over the next five to ten years for our company as we seek to expand our existing footprint. We have developed high-growth, high-margin investments in this segment with excellent returns on capital, and we will seek to build on that track record in Virginia, New Hampshire, Kentucky, and perhaps beyond. In Virginia, we are constructing the Rosie's Emporia HRM venue in the southern portion of the state. This is a 150-unit facility that is on track to be completed in the third quarter of 2023. In addition, we are building a significantly larger HRM facility in Dumfries, which is located in Northern Virginia, around 30 miles south of Washington, D.C., directly off of Interstate 95. This is an extremely important project because of the long-term potential given its proximity to the population in the Washington, D.C. and Northern Virginia area. At the same time, we are identifying additional locations that are candidates for our remaining HRM entertainment venues. After finding suitable locations, we are required to run successful referendums in the relevant localities. We will share more on our Virginia plans in later earnings calls. With respect to every HRM venue under construction or that we subsequently pursue, we will build upon the lessons learned from our successful developments and operations in Kentucky. We expect to continue our positive momentum in Kentucky in 2023 with the completion of the Derby City Gaming floor expansion and new hotel by the end of the second quarter, and with the opening of the Derby City Gaming Downtown HRM entertainment venue later in the fourth quarter of 2023. In Western Kentucky, we are deep into the design phase of our HRM facility in Owensboro and are excited to tap into this new market. We will also be investing modest levels of additional capital into racetrack infrastructure and HRM facility at Ellis Park. As you are aware, we have an additional HRM extension opportunity associated with our Oak Grove license that we will explore deploying and discuss in subsequent earnings calls, if and when we decide to pursue a location. In New Hampshire, we are developing plans to construct a property in Salem that will create a significant number of jobs and will also provide support to many local charities serving surrounding communities. As I've discussed before, New Hampshire has a unique structure for HRMs, in which most of the excise taxes that we pay are contributed directly to charities at our direction. We will provide a more fulsome update on our progress for this project on future earnings calls. We expect this venture to be a significant contributor to our HRM segment, and the planning process is one in which we are heavily engaged, even if we are not ready today to provide more specifics. Since our last earnings call, we announced our entry into a definitive agreement to acquire Exacta Systems, a leading provider of HRM central determinant system technology. Integrating the Exacta business into our company will enable us to ensure that continued investment is made in the Exacta technology to improve its reliability and cost structure as well as the gaming things available on the system. All attributes that are important to the ongoing success of our Virginia and New Hampshire HRM operations and those of Exacta's other customers that we will continue to serve. We expect that acquiring Exacta will greatly improve our operations in Virginia and New Hampshire. It is worth noting that our Kentucky HRM operations are serviced by another central determinant technology provider, and we remain very happy with the performance and quality of that technology and vendor at this time. The closing of the Exacta transaction is dependent on satisfying various closing conditions, including state regulatory approvals, and we do not have a date to announce at this time. Turning to our online operations. In 2022, we pivoted out of the online sports and casino business, and our team did a nice job of carefully planning our exit while maintaining the retail sports operations in our gaming facilities. We also pivoted towards a B2B strategy of integrating permit wagering on horse racing directly into the online sports wagering platforms through our suite of technology and operational capabilities. We remain fully committed to growing our TwinSpires horse racing B2C business while also pursuing our B2B model. We believe that wagering on horse racing will expand in the coming years as millions of sports betting customers are introduced to the sports online. Twinspires.com will continue to be a destination for more serious horseplayers who want a comprehensive pari-mutuel centric experience. And finally, last week, on February 15, we completed the sale of the Arlington Park Racetrack property to the Chicago Bears for $197 million. We deferred the federal taxes related to the gain on the sale using qualifying 1031 exchange transactions. In summary, 2022 was a tremendous year for our company with record financial results. We are well-positioned for ongoing growth in the coming years fueled by our acquisition of the P2E assets and by the organic investments that we are making in our iconic asset, Churchill Downs Racetrack, our HRM projects in numerous states, and our Terre Haute project in Indiana, all of which collectively will drive a material increase in adjusted EBITDA and free cash flow in 2023, 2024, and beyond. Our overarching objective is to pursue what we have demonstrated we are good at: growing the Kentucky Derby, developing greenfield and organic opportunities, as well as executing acquisitions that fit our profile, all of which allow us to grow our company while maintaining one of the best balance sheets in the industry. We have a great group of leaders and team members who have helped deliver these results and are building our business to create the best possible total shareholder return for our investors over the long term. We would like to extend a special welcome to Andrea Carter, who joined our Board of Directors in the fourth quarter. Andrea brings a broad set of experiences to our Board, including deep knowledge of public company compensation and human capital best practices. We are grateful that she has chosen to join our company. With that, I'll turn the call over to Marcia, and then we will take your questions. Marcia?
Marcia Dall, CFO
Thanks, Bill, and good morning, everyone. As Bill shared, we delivered record revenue and record adjusted EBITDA for the year. Excluding 2020, we have delivered record revenue and record adjusted EBITDA from continuing operations every year since 2016. I'll start with a few insights on these financial results and provide some initial thoughts on 2023. I will then provide an update on capital management. First, as Bill discussed, we completed the P2E acquisition on November 1, 2022. The acquisition of six new HRM properties and Colonial Downs Racetrack in Virginia, the Del Lago gaming property in New York and the Hard Rock Iowa gaming property contributed $109 million of net revenue and $48 million of adjusted EBITDA in the fourth quarter. The addition of these properties will clearly create step function growth in our financials in 2023 as we realize the benefits of a full year of this acquisition. In 2023, we will also expect to begin to realize the benefits of the enhancements our team will be making to the HRM properties in Virginia. Over the longer-term, we expect to realize additional benefits to these properties from the acquisition of Exacta. Second, we also continued our HRM expansion in Kentucky at our existing HRM properties and at our new properties. We saw strong growth from our Oak Grove HRM facility as we continue to penetrate the Southwestern Kentucky and Nashville, Tennessee markets. Our team at Derby City Gaming also delivered good growth in 2022 despite some disruption from our gaming floor expansion and hotel build-out. We will have continued growth in 2023 and beyond from these properties. We also expect to layer on growth from the addition of our Turfway Park HRM property that we opened in September, the addition of the Derby City Gaming downtown property in the City of Louisville, and longer-term from our Ellis Park and Owensboro, Kentucky HRM properties, as well as our Chasers HRM and table game facility in Salem, New Hampshire. Third, we celebrated Derby Week on the first Saturday in May with full capacity for the first time since the pandemic, which drove a record level of adjusted EBITDA at very desirable margins for Churchill Downs Racetrack. Based on the addition of the first turn experience and expected growth in sponsorships and other Derby Week economics, we expect 2023 adjusted EBITDA for Churchill Downs Racetrack overall to grow $10 million to $15 million. Fourth, in 2022, we pivoted out of the online sports and casino business, and our team did a nice job of carefully working to quickly exit all of the states we could while maintaining the retail sports operations in our gaming facilities. This strategic decision resulted in an improvement of $40 million year-over-year in our adjusted EBITDA related to our online sports and casino business. Said another way, we ended up with a nominal loss of $1 million of adjusted EBITDA for our combined retail and online sports and casino business in 2022. Looking forward to 2023, we would expect to continue to generate a reasonable return in the high single digits from our retail sports operations with nominal impact from our remaining online sports business. Fifth, regarding our TwinSpires horse racing business, as we expected, a portion of our casual patrons returned to wagering at brick-and-mortar facilities instead of wagering online compared to the prior year. Therefore, our TwinSpires horse racing business generated lower pari-mutuel handle in 2022 and therefore, also lower adjusted EBITDA. Although the final numbers are not available yet for 2022, we estimate that 52% of all wagers on U.S. racing in 2022 were placed online, which is still up significantly from 2019 when approximately 40% of all wagers were online. Despite a slight decline in adjusted EBITDA, we are pleased with the strong margins that this business delivered in 2022 when we compare it to 2019, with adjusted EBITDA up 37% and margins growing by more than a point to 28%. And last, regarding our gaming business. All of our regional gaming properties, except our Mississippi and Pennsylvania properties, grew adjusted EBITDA in 2022 compared to 2021. Our same-store wholly-owned casinos generated an incremental $51 million or 33% growth in adjusted EBITDA compared to 2019. Our 2022 same-store wholly owned casino margins were down two points compared to 2021. However, our margins on the same basis were up nearly seven points compared to 2019. Regarding our equity investments, both Rivers Des Plaines and Miami Valley Gaming delivered record revenue and record adjusted EBITDA for 2022, reflecting the expansions at both of these properties last year. Although the fourth quarter was softer for our regional gaming properties due to weather-related challenges in December, and some lingering economic concerns, we have had a very strong start to the year, especially during the month of January. However, it is difficult to draw any definitive conclusions from these early trends. Overall, we are very pleased with the results that our team has delivered in 2022, and we believe we are very well-positioned to continue to grow in 2023. Turning to capital management. We generated $461 million of free cash flow in 2022, up $41 million over the prior year, primarily as a result of the strong cash flow generated from our businesses. Regarding maintenance capital, we spent $50 million in 2022 and expect to spend $75 million to $95 million in 2023. The increase in maintenance capital for 2023 is driven by the addition of our Virginia, New York, Iowa, and Ellis Park properties, maintenance projects anticipated at Churchill Downs Racetrack in preparation for the 150th Kentucky Derby, and incremental maintenance projects at our regional gaming facilities. Regarding project capital, we spent $373 million in 2022 and expect to spend between $575 million and $675 million in 2023. Regarding share repurchases, we repurchased approximately $147,000 in the fourth quarter at an average share price of approximately $204 per share, reflecting our belief in the long-term value of our shares. At the end of December 2022, our bank covenant leverage was 4.2x. Our leverage increased as a result of the P2E acquisition closing on November 1 of last year. Based on the expected closing of our acquisition of Exacta and our capital investments, we expect our bank covenant net leverage to remain in the 4x range over the coming year. We then expect our bank covenant net leverage to decline in 2024 and 2025 as our ongoing investments in Dumfries, the Terre Haute Casino Resort, and our investments in the Kentucky Derby come online. We received $500 million of total bank commitments to increase our existing Term Loan A that is due in 2027. We intend to close on this financing transaction within the next week. We will use the proceeds to repay outstanding borrowings that we have under our revolving credit facility. We appreciate the continued support from our existing bank group and welcome four new banks to our exclusive bank group. We know that these can be challenging times for these financial institutions given the market uncertainty. We look forward to continuing to work with all of you to access the debt markets in the coming months to further support our continued growth and future investments in high-performing assets. In closing, as Bill said, 2022 was a tremendous year for our company with record financial results. And we expect 2023 and beyond will be even better given our unique portfolio of assets that will generate a significant amount of adjusted EBITDA and free cash flow. Our ongoing commitment to our shareholders is to create long-term shareholder value. With that, I'll turn the call back over to Bill so that he can open the call for questions. Bill?
William Carstanjen, CEO
Thank you, Marcia. Okay, everyone, I think we're ready to take your questions now. So fire away.
Operator, Operator
Thank you. Our first question comes from David Katz with Jefferies.
David Katz, Analyst
Hi, good morning. I wanted to touch on what you both mentioned regarding the significant pipeline you’ve built over the past year, which is expected to generate earnings moving forward. To set the context, what do you see as the likelihood of adding more to the pipeline before the end of 2023? Or are we going to focus on what we currently have for now?
William Carstanjen, CEO
Thanks, David. It's Bill. The pipeline looks pretty good, and we're not going to slow down. We work constantly on managing our balance sheet to make sure that we understand our capital needs, and we work constantly across all our teams. We have excellent teams. We've built and scaled the company well. We have excellent teams in place to digest the projects that are in the harvesting stage. So that process will be ongoing. And while there's no guarantee of the future pipeline or future success, landing targets in the pipeline, we're going to keep at it. We have a good formula, and we're confident in what we're doing. And so we'll keep doing what we're doing. So I don't think that just because you've seen us be really busy that it's an indication that we should stop now and just digest what we have. We can digest while we hunt for sort of things that we'll add to our future.
David Katz, Analyst
Okay. Fair enough. Marcia, could you provide your perspective on leverage? There's a lot of input you have to consider, but the economic visibility seems quite limited. Where would you prefer to settle the leverage, and what strategies could you implement to potentially achieve a level inside 4x if you decide to pursue that?
Marcia Dall, CFO
As we've said, we strive to be in the 3x to 4x leverage range. But as Bill said, I think we have done a very effective job of managing our leverage over time. There have been times where our leverage has dropped into less than 3x, and people have challenged us to be higher in leverage. We said that we would go higher when we had strategic opportunities that made sense. Clearly, the P2E acquisition was one that was a great strategic opportunity for us. And we took our leverage up to 4.2x. And we will be very diligent in managing through that. We use share repurchases as a lever in our management of our leverage as well. But we're always very opportunistic and working very closely. I work very closely with Bill on managing our capital. And we have great support from the banks and great support from the debt market when we have great opportunities that we can deliver on.
David Katz, Analyst
Got you. Okay. Thank you very much.
Operator, Operator
Thank you. Your next question comes from the line of Dan Politzer with Wells Fargo.
Daniel Politzer, Analyst
Hey, good morning everyone. And thanks for taking my questions. First, on Virginia, the HRM margins, I think they were pretty strong, maybe around 48% for the couple of months you've owned these properties. One, is there any seasonality or anything you'd call out there? And two, how do you think about this margin evolving over time given the Exacta acquisition and the new slot products from additional OEMs that you would look to probably install over time in that market?
William Carstanjen, CEO
Good morning, Dan. Thanks for the question. So obviously, in doing the acquisition, we felt a lot of confidence on the sustainability of the business model there, and we thought we'd bring some things to the party over time that would enhance that business and grow it. But beyond that, we're new operators doing it, and I don't want to provide a lot of guidance at this point into specific margins. Although you can see generally, they're very strong and they're very high. And that that's always a focus for us as a company. We are a margin-focused company.
Daniel Politzer, Analyst
Got it. And then on CapEx, I think there was a little bit of a step up, both in terms of the project stuff as well as the maintenance even versus kind of your guidance last quarter for 2023. Were there any specific projects that are being pulled into 2023? Or was it additional projects that you're now looking at, or just really costs? Thanks.
Marcia Dall, CFO
I think, Dan, it's really just timing. It's always difficult, given the size. We have over $1 billion of capital in flight related to the project capital. And so it's just updated estimates around the timing, projected timing of the spend. So overall, the total dollars between '23 and '24 have not really changed. It's just the expected timing of when that cash might go out the door. Obviously, we have the Dumfries project, and the timing around that has moved a little bit as far as when we expect that spending to occur. On the maintenance side, we have included some additional capital related to Ellis Park, for example. We have some additional capital included related to the regional and gaming properties for some refreshes and other things. And I think we've better estimates now related to some maintenance projects we want to do ahead of the 150th Derby that are included in our current outlook. Again, these are always difficult to project exactly when the cash spend will go out, and that's why there's some variation.
Daniel Politzer, Analyst
Understood. Thanks for the color.
William Carstanjen, CEO
Thanks Dan.
Operator, Operator
Thank you. And our next question comes from the line of Chad Beynon with Macquarie.
Chad Beynon, Analyst
Hi, good morning. Thanks for taking my question. I wanted to continue on just kind of a broader question around the CapEx projects. Maybe to make it easier, just kind of focusing on some of the bigger dollar CapEx ones. Has anything really changed in terms of how you're thinking about returns given maybe the stronger-than-expected consumer at this time? Or is that offset by a tight employment market where it might be tough to staff some of these facilities? Thank you.
William Carstanjen, CEO
When we think about these projects, we think in terms of years, not trends we see over a month or two months. So there hasn't been any change, not only there has not been any material change. There's not really been any change in how we perceive these projects and expect these projects to perform over time.
Chad Beynon, Analyst
Thank you. Bill, in your remarks, you mentioned a consistent and stable consumer, although there was some weather impact in the fourth quarter which we may still be experiencing in certain markets. Was there anything else in the data regarding different loyalty tiers or spending per visit that shows any shift compared to what you observed in 2022? It seems like everyone is looking for signs of change, but nothing significant is being found, and it appears that conditions remain strong. Thank you.
William Carstanjen, CEO
I don't think we observed anything significant in the Canary category. Although we closely monitor both monthly and weekly data, we are generally hesitant to draw major conclusions based on short-term data. In any case, there was nothing remarkable to discuss on this call.
Chad Beynon, Analyst
Appreciate it. Thanks, and good luck.
William Carstanjen, CEO
Thanks, Chad.
Operator, Operator
Thank you. And our next question comes from the line of Shaun Kelley with Bank of America. Pardon me. Shaun, please check your mute button.
Shaun Kelley, Analyst
Hi, can you hear me now?
William Carstanjen, CEO
Yes, we can hear you, Shaun.
Shaun Kelley, Analyst
Okay, great. Sorry about that. Bill, I apologize if I missed this in the prepared remarks. As we revisit P2E now that you own everything, this is our first opportunity to examine some of the financial impacts. What insights have you gathered so far in terms of any integration aspects that are taking longer than anticipated, and conversely, are there any opportunities or learnings emerging as you engage with that business that you find exciting as we approach 2023?
William Carstanjen, CEO
We're really excited about the acquisition and the opportunities in Virginia. We believe in the underlying strength of this opportunity, which was evident in the robust results over the last two months. We're confident in our purchase. Regarding the integration planning and execution, there isn’t much to report. Our team is experienced in these situations. Although it’s a large acquisition, we have a lot of experience with such deals. We are proceeding without any issues and are very pleased with what we've seen so far.
Shaun Kelley, Analyst
Thank you. As a follow-up, Marcia briefly mentioned TwinSpires and its performance in 2022. Can you share your thoughts on the growth trajectory for this business in the medium to long term? Is it stable at its current level? Can we expect to see a return to some growth? Additionally, what are your observations regarding the online shift? Has that stabilized, or is it still fluctuating? How does this fit as we approach the end of the year?
William Carstanjen, CEO
Going into COVID in 2020, the online share significantly increased, reaching over 60%. As the pandemic started to recede, we began transitioning towards a new normal split between online and brick-and-mortar channels. Before COVID, the split was around 40%. During the pandemic, it surged to about 60% and then stabilized at approximately 52% during the latter half of 2022. Although we have not yet seen the final industry figures for 2022, we anticipate that online will be around 52%. We believe this figure is stable at present, and we expect growth to resume, reflecting a long-term trend of shifting activity from brick-and-mortar to online. Although we can't predict exactly what will happen, prior to COVID, there was a consistent movement towards online. Disruptions occurred because of the pandemic, but it's reasonable to expect that the trend will settle at a higher level in the 50% to 52% range and potentially begin to grow again. Additionally, our B2C model and initiatives to deliver pari-mutual products directly to sports fans should attract millions of new customers who currently do not engage with horse racing ADW, which should be beneficial. However, the dynamics of market share among providers will need close monitoring as we remain optimistic about the future. Overall, we feel positive about our plans and execution, believing we have the best strategy given the current circumstances.
Shaun Kelley, Analyst
Thank you very much.
Operator, Operator
Thank you. And our next question comes from the line of Joe Stauff with Susquehanna.
Joseph Stauff, Analyst
Good morning Bill, Marcia, and Bill. I wanted to return to the topic of Virginia. Bill, you mentioned that as you identify more locations, you need to conduct local referendums. My question is, since you're planning to add around 1,100 units by the end of this year, what is the outlook for additional growth beyond that? I believe you could potentially increase up to five units, so I'm curious about how to consider the extra capacity in Virginia.
William Carstanjen, CEO
Yes. So the way that the construct works, the way the law works in Virginia is we're allowed to deploy across our various venues up to 5,000 machines. As we acquired P2E, they had about 2,600 deployed. So right now, we have 2,600 deployed, which means we have 2,400 to deploy over time across Dumfries and other venues that we open. So that's the ultimate highest number that we have to stay within. And then depending on the venue location, there are various categories of venue size based on often the locality where the referendum was run. So if you take something like in the Hampton or Richmond market, you can have 700 machines there, and we've deployed the full 700, and we wish we could deploy more. So we've deployed the full 700. Other places like the Emporia facility that we're building, you can only deploy a maximum of 150. Dumfries is the ultimate exception where you can go up to 1,850 there. So those are some of the parameters that we're working within, starting with a total of 5,000 machines as the law is currently written. Hopefully, that helps, Joe, answer your question. I think I answered your question.
Joseph Stauff, Analyst
Thank you. My second follow-up is to ask about a couple of properties that are currently ramping up. Turfway has just launched, but I’d like to know when you expect to reopen the Northern entrance at Derby City Gaming. I understand you plan to launch the hotel and food and beverage services around early June, but I’m curious about the timing for that northern entrance. Additionally, Oak Grove is continuing to ramp up and showed good growth in the fourth quarter. How should we view Oak Grove in terms of its margin profile or revenue growth for 2023?
William Carstanjen, CEO
Sure. Regarding Derby City Gaming, we anticipate that the North entrance will open around May, with the hotel launching in June. We're confident about those timelines. Currently, we're satisfied with the facility's performance, especially considering the ongoing construction, which includes the closed North entrance. The team, led by Bill, has managed this challenge very well. As for Oak Grove, we find it interesting that we haven't yet determined the maturity phase for HRM properties. Our oldest project, Derby City Gaming, is still evolving and not yet at maturity, continuing to grow in its market through increased name recognition and strengthening our understanding of the customer base. Although I can't specify where Oak Grove stands in its maturation process, data suggests it has not yet reached a mature level. We are still in the ramp-up phase. This is particularly relevant for properties like Oak Grove, which aim to attract visitors from further distances, as it isn't located in a densely populated area. It's tapping into nearby communities, including Hartsville and Nashville across the Tennessee border. The numbers from last year indicate that Oak Grove is still experiencing growth as it seeks maturity.
Operator, Operator
Thank you. And our next question comes from the line of Jordan Bender with JMP Securities.
Jordan Bender, Analyst
Great. Thanks for taking my question. Bill, you've done a nice job of capturing the existing HRM market in the several states that offer the product. Can you maybe talk about what you're hearing or any states that could potentially move to legalize HRM?
William Carstanjen, CEO
Certainly, the HRM model in the states that have deployed them, I think they've been win-wins for the companies involved and for the states. So I think other states have seen that, and there are always states at various levels of discussions about introducing that product. But I don't have any expectations to share with you today that you'll see in this legislative cycle that there'll be another state that authorizes it. But certainly, that's something we work on for the future, and I hope in subsequent earnings calls we have something more specific to tell you along those lines.
Jordan Bender, Analyst
Great. And then for my follow-up, Marcia, you talked about the incremental EBITDA towards Churchill Downs, the racetrack. Can you maybe talk about waiting up to the Derby? You talked about some of the ticket sales leading up to dine in a few months. Maybe can you just talk about the pricing that you're starting to see on, I guess, the ticket sales or any of the sponsorships? Thank you.
Marcia Dall, CFO
Yes, we don't share specifics regarding pricing. However, Bill mentioned that the first turn experience is selling very well, and that venue is expected to be outstanding this year. Many of our locations, like the Mansion, are sold out, and the Matt Winn's Steakhouse is nearly sold out as well. The pricing was established a year ago, and we'll be selling tickets for $150 right after we conclude the Derby this year, previously at $149. I believe the pricing is solid. Our pricing strategy is aimed at the long term; as we expand capacity, we intend to optimize prices for each area while ensuring our customers aren't shocked by significant price increases in any given year. When considering the $10 million to $15 million I mentioned this year, it includes the B2B sponsorship related to the San dual deal that will be reflected in the Churchill Downs Racetrack financials, along with other sponsorships our team is pursuing. There are also additional Derby-related economic factors that our team is working on, which will contribute this year. It's a strong mix of financial elements that will come together.
Jordan Bender, Analyst
Great. Thank you.
Operator, Operator
Thank you. And our next question comes from the line of Omer Sander with JPMorgan.
Omer Sander, Analyst
Good morning. Thanks for taking my questions. How do you think about the impact of new casino capacity coming online in Virginia and the potential impact to Rosie's, both to the existing portfolio and your growth projects there?
William Carstanjen, CEO
Well, the new capacity in Virginia, outside of our HRM models, so in terms of the commercial casinos are all in the southern portion of the state. So we'll have to watch their impact on our Hampton property and the Vinton property, in particular. So it's too early to tell. Obviously, when we purchased P2E, we were very aware of the competitive environment there and factor that in and included as part of our analysis of the opportunity that we had in Virginia. But so far, there's only one commercial casino that's opened, and it opened very recently. And so we don't have any real strong data points to share. We'll all see that together when it comes out in publicly available numbers. But it was all part of our planning process. And like I said, across the state, one of our biggest concerns really is optimizing we're capacity constrained. We're only allowed to use 5,000 machines across the state. So it's part of our analysis of where do we best deploy our machines.
Omer Sander, Analyst
Great. Thank you. And then maybe if I could just jump to New Hampshire. How do you think about the opportunity at Chasers and the ramp profile there? Could it resemble some of the Kentucky projects like Derby City and the success you've seen there?
William Carstanjen, CEO
We're really excited about the potential there. While New Hampshire itself is a small state, where Salem is, as it sits on the Massachusetts border. So planning an HRM facility in a densely populated region is a careful process that requires time and thought as you try to make sure you do the right thing for the long term. But the opportunity there is the greater Boston market. That's really where our mindset is in terms of what we design and how we do it. And it's a new kind of project for us, and we're making sure we do it carefully and do it well. In particular, most of the models for us, whether it be Virginia or Kentucky, at this point do not involve table games, but that's a different model in New Hampshire. New Hampshire comes with traditional table games. So the HRMs are additive to the traditional table games, and that's another advantage for that particular HRM market. Thanks, Omer.
Operator, Operator
Thank you. I would now like to hand the call back over to CEO, Bill Carstanjen for any closing remarks.
William Carstanjen, CEO
Thank you all for your time today. We appreciate your interest in our company. We are grateful to have you as our investors, and we will strive to honor your trust and investment. Thank you very much, and we will speak with you again in about eight weeks during our earnings call before the Kentucky Derby. Take care.
Operator, Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.