Earnings Call Transcript - CHDN Q4 2025

Operator, Operator

Good day, ladies and gentlemen, and welcome to the Churchill Downs Incorporated Fourth Quarter and Full Year 2025 Results Conference Call. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Sam Ullrich, Vice President, Investor Relations.

Sam Ullrich, Vice President, Investor Relations

Thank you, Andrew. Good morning, and welcome to our fourth quarter 2025 earnings conference call. After the company's prepared remarks, we will open the call for your questions. The company's 2025 fourth 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-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 C. Carstanjen, Chief Executive Officer

Thanks, Sam. Good morning, everyone. I have several team members with me today, including Bill Mudd, our President and Chief Operating Officer; Marcia Dall, our Chief Financial Officer; and Brad Blackwell, our General Counsel. I will start by reviewing our performance and key achievements for 2025 before discussing our strategic priorities and growth plans. Marcia will provide details on our financial results and capital management strategy afterwards, and then we will take your questions. Let’s begin with a recap of last year. 2025 was another exceptionally strong year for Churchill Downs. We achieved record net revenue and record adjusted EBITDA, surpassing the previous record set in 2024. We also reached record adjusted EBITDA in both our live and historical racing segments and our Wagering Services and Solutions segment. Our regional gaming portfolio performed solidly as well. Importantly, we advanced several key strategic and operational initiatives throughout the year. We hosted another very successful Kentucky Derby after the notable milestone of the 150th Derby in 2024. Despite facing tough comparisons and economic uncertainty early in 2025, including tariff-related volatility during the latter part of our sales cycle, our team performed exceptionally well. We recorded record handle for the Kentucky Derby race, the Derby Day program, and Derby Week overall, along with the highest television ratings in nearly 40 years. While we came just below last year's record earnings level, we anticipate returning to consistent and significant growth across all metrics, including adjusted EBITDA this year. Our guests enjoyed the first year of our newly renovated starting gate Pavilion in Courtyard, which now offers improved seating, enhanced amenities, and a more upscale social environment for around 8,100 guests. 2025 marked the second year of operations for our redesigned Paddock. This project greatly improved the on-track experience and strengthened both the in-person and broadcast presentation of our racing product and overall event. The Paddock and related investments establish a long-term foundation for continued accelerated growth at Churchill Downs Racetrack. Although the Kentucky Derby is the longest continuously run sporting event in the United States, we believe there are still substantial opportunities to further expand its reach and impact. Over the past year, we also grew our HRM footprint. In Kentucky, we opened our Owensboro venue last February, and just yesterday, we celebrated the grand opening of Marshall Yards Racing and Gaming in Calvert City, Kentucky. In Virginia, we expanded our Richmond property and opened Roseshire Gaming Parlor in Henrico County. We also made notable progress growing the Rose in Northern Virginia in its first full year of operations. Additionally, we announced plans to invest between $180 million and $200 million to develop Rockingham Casino in Salem, New Hampshire. We also received regulatory approval in Kentucky to introduce electronic table games based on historical horse racing. In early February of this year, we launched our first roulette electronic table games in our Kentucky HRM facilities. All of this was achieved while maintaining prudent leverage levels and preserving financial flexibility for future growth. We have set the groundwork for many more years of expansion. As we look toward 2026 and beyond, we are increasingly excited about our strategic plans that we believe will generate significant shareholder value in the long run. Our strategy focuses on five key priorities. First, we aim to continue growing the Kentucky Derby. This year, we will unveil the newly renovated Mansion, one of the most prestigious areas at Churchill Downs Racetrack. We will also complete the renovations of the Finish Line Suites, our most exclusive suite offering, which will include new and unique amenities for our guests. Both projects are on schedule and within budget. Looking further ahead, we will finish the Victory Run project in time for the 2028 Kentucky Derby. This new structure, located just past the finish line, will feature premium suites, box seating, and multiple high-end dining options, increasing our net seating capacity in this area by 1,400 people or 22% and enhancing the experience for nearly 8,000 of our guests. For the 2027 Derby, we will offer an interim covered upgraded seating product in the Victory Run section with stadium seating boxes and enhanced amenities. More broadly, we will continue to evaluate long-term investments that will sustain and broaden the Derby's global appeal while enhancing the guest experience. We are also expanding Derby Week itself. In 2025, we welcomed 75,000 guests throughout the week, equivalent to five Super Bowls. This year, we are adding racing on Sunday, April 26, marking the first Sunday racing during Derby Week in over 15 years, expanding our festival of racing to seven live race dates across the eight calendar days. This year, the Kentucky Oaks will be featured in prime time on NBC and Peacock between 8:00 and 9:00 p.m. Eastern Standard Time. The Oaks is already the fourth highest betting race in the United States, behind only the Kentucky Derby itself, the Preakness, and the Belmont Stakes. This national prime-time slot further solidifies the Oaks as a prestigious national event and enhances Derby Week as a multi-day celebration. This is the day we honor high fashion and women's health advocacy, where everyone adds a touch of pink to their outfits and watches Thoroughbred Racing's top 3-year-old fillies compete. On Saturday, May 2, Derby Week will culminate with the 152nd running of the Kentucky Derby. The Derby stands as America’s greatest day of racing by every possible measure and arguably the world's as well. The second focus of our strategic plan is to grow our HRM portfolio. We will continue to expand our HRM venues in Kentucky and Virginia, supporting the funding of racing purses and local agricultural sectors while achieving appealing economic returns. Construction of Rockingham Grand Casino in Salem, New Hampshire will proceed through 2026 and 2027, with an expected opening in mid-2027. This property is located in a highly desirable market, with over 800,000 adults within a 20-mile radius and more than 4.9 million people in the Greater Boston area. As I mentioned earlier, our investment in this facility is projected to be between $180 million and $200 million. We also maintain rights to the Chasers HRM license and will pursue suitable development opportunities for that license in the future. Third, we will enhance Exacta, our HRM technology business within our HRM venues as well as with other third-party HRM properties, both domestically and internationally. Our vertical integration through the acquisition of Exacta in 2024 has significantly bolstered support and margin improvement for our HRM businesses in Kentucky and Virginia. Exacta will also serve as the cornerstone of our technology for the upcoming Rockingham venue in New Hampshire. The recent introduction of roulette electronic table games in Kentucky allows us to leverage this platform further. As we develop additional HRM-based electronic table games, such as Craps and Blackjack, we expect ongoing benefits for our shareholders. Additionally, we are expanding our B2B business both in the U.S. and internationally. In December, a third-party HRM property in Wichita, Kansas began operations, with a significant portion of their gaming floor utilizing our technology. We are also supplying Exacta technology in Alabama and continue to explore opportunities abroad. Fourth, we aim to grow our TwinSpires horse racing business. We see ongoing prospects in our TwinSpires platform on both the B2C and B2B fronts. Wagering on major events like the Kentucky Oaks and the Kentucky Derby has significantly increased in recent years, and we believe the overall market opportunity remains attractive as consumers continue to transition online. Finally, we will focus on disciplined investments across our portfolio. We will continue optimizing operations within our regional gaming assets and selectively investing where returns are favorable. We believe our regional gaming assets will benefit from a favorable trend in 2026 and beyond, as our consumers receive higher tax refunds due to new federal tax laws. Throughout these initiatives, we prioritize sustainable, long-term growth that aligns with our core competencies and disciplined capital allocation. In summary, 2025 was a record year for Churchill Downs. We enter 2026 with strong momentum from our flagship asset, the Kentucky Derby, along with our HRM and technology initiatives. We maintain a solid balance sheet and are dedicated to driving adjusted EBITDA growth, free cash flow, and long-term total shareholder returns through consistent execution. We will continue to pursue disciplined growth with additional opportunities aligned with our long-term strategic plans. We are optimistic about the future based on these principles. Finally, the 152nd Kentucky Derby is now just 65 days away. Demand is robust, and we are ahead of previous years, including the milestone 150th Kentucky Derby. If you have not yet purchased your tickets, I encourage you to do so as we expect to be fully sold out. Now, I'll turn the call over to Marcia, and then we will take your questions.

Marcia Dall, Chief Financial Officer

Thanks, Bill, and good morning, everyone. Our team achieved record fourth quarter net revenue and adjusted EBITDA from our diversified portfolio, continued organic growth, and returns from our recent property investments. As Bill mentioned, 2025 was another record year for our company. Excluding 2020, we've accomplished nine consecutive years of record revenue and adjusted EBITDA, which clearly reflects the strength of our strategy and the consistency of our execution. Today, I'll highlight our financial performance and then discuss capital management. Churchill Downs Racetrack posted record full-year adjusted EBITDA. Our growth is driven by disciplined capital investments, expanded sponsorships, and record wagering activity. Additionally, our team's emphasis on operational efficiency has led to strong top-line growth and maintained high margins from this iconic asset. Looking forward, we expect the Derby to bring in an additional $15 million to $20 million in adjusted EBITDA for 2026. The combination of the new NBC broadcast contract renewal, the expansion of Derby Week race days, robust ticket sales, increased sponsorship interest, and continuous wagering growth sets the stage for another record-setting year. We're very satisfied with the performance of our HRM venues in both Kentucky and Virginia and are confident in their long-term growth potential as we continue to effectively tap into these high-potential markets. In Kentucky, our HRM properties achieved record adjusted EBITDA in 2025, bolstered by the successful opening of Owensboro in February and strong performance across the board. Despite significant weather challenges in January, reported statewide GGR grew at a double-digit rate year-over-year, showing the strength of underlying demand and our competitive positioning. In Virginia, our HRM venues also reached record adjusted EBITDA. The Rose continues to grow as we expand our presence in Northern Virginia. Importantly, the Roads showed sequential growth in GGR per unit each quarter of 2025. We're still in the early phases of this property's growth, and given the favorable demographics and strong local leadership, we foresee substantial potential ahead. Although Virginia faced weather disruptions in January, our same-store HRM properties performed on par with the previous year in terms of GGR, reflecting the resilience of our customer base. In our Wagering Services and Solutions segment, adjusted EBITDA increased by 7% in 2025, primarily due to continued growth in our Exacta business. Our vertical integration strategy is yielding tangible benefits as we expand in existing locations and enter new markets. This segment remains a crucial strategic lever that boosts both growth and operational efficiency across our wider HRM business. In our Gaming segment, our regional gaming properties showed resilience throughout 2025 despite temporary challenges like roadwork and local curfews in Mississippi, as well as minor weather impacts in December. Our full year 2025 same-store wholly owned casino margins, excluding racing, slightly declined by 0.8 points compared to 2024, mainly due to performance in Mississippi. However, overall regional gaming consumer behavior in the fourth quarter remained consistent with recent trends, reinforcing the stability of our core customer base. We also believe the recently enacted federal tax legislation may provide a significant boost to both our regional gaming and HRM businesses. Changes such as the removal of taxes on tips up to $25,000, the elimination of taxes on overtime, improved deductions for individuals 65 and older, and expanded state and local tax deduction limits could increase income for many of our customers in the upcoming months. Our capital allocation strategy still supports disciplined growth with an emphasis on shareholder returns. In 2025, we generated a record $700 million in free cash flow or $9.75 per share, following a record year in 2024. This consistent free cash flow generation reflects the strength and scalability of our portfolio. Maintenance capital was $70 million in 2025, and we plan to invest between $90 million and $110 million in 2026. These investments will include additional HRM-related capital in Kentucky and Virginia, including new ETGs in Kentucky and ongoing enhancements of the iconic Churchill Downs Racetrack. Project capital amounted to $205 million in 2025, and we expect to invest between $180 million and $220 million in 2026. The updated range takes into account the timing of expected spending for our Kentucky Derby capital projects and the Rockingham Grand Casino development in Salem, New Hampshire. We remain confident these investments will yield attractive long-term returns. We are also continuing to return significant capital to our shareholders. In 2025, we repurchased over 4.2 million shares and returned more than $456 million through share repurchases and dividends. The dividend paid in January marked our 15th consecutive year of increases per share, signaling our confidence in the company's future cash flow generation. At the end of December 2025, our bank covenant net leverage was 4.1x. Based on our anticipated EBITDA growth and the timing of new facility openings, we expect our bank covenant net leverage to fall below 4x during 2026. In conclusion, as Bill noted, 2025 was a strong year for our company with record financial results. We entered 2026 with strong momentum, multiple growth drivers, and a unique portfolio of high-quality assets poised for continued expansion. We remain focused on disciplined capital allocation, operational excellence, and delivering sustainable long-term shareholder value. Now, I’ll turn the call back to Bill to take your questions.

William C. Carstanjen, Chief Executive Officer

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

Operator, Operator

And our first question comes from Barry Jonas with Truist.

Barry Jonas, Analyst

I wanted to talk about the Derby. Any more color, Bill, you can give on early pricing and demand trends you're seeing so far for Derby 152 as well as the Derby Week. And I think, Marcia, your comments about $15 million to $20 million are extremely helpful. Just curious like what is the differential between the high and low end and the opportunities to exceed that would be helpful.

William C. Carstanjen, Chief Executive Officer

Thanks, Barry. So the Derby is firing on all cylinders. Certainly, when it comes to ticket sales, we've been pleased. We're in the latter stages of our sales process now. So we just plan on finishing strong and rolling that up as we get to Derby Day itself. But so far, throughout the cycle, it's been very, very encouraging. And you heard Marcia give the $15 million to $20 million number that she gave. So sponsorships look good. Wagering, we won't know until the day of itself. But certainly, if you look at the trends that we've seen, those have been overwhelmingly positive as we head into 2026. So we have good expectations, strong expectations for that. And then I'm personally excited to add the additional day of racing. We have the interest, we have the horse stock, we have the customer base, we have the fan interest and the global interest. So we need to give our fans and our guests more of what they're asking for. So adding the extra day, I'm excited about that as well. So as we head through the end of February, all systems are go. And now it's about clear execution and just giving the team the resources they need to execute their jobs. And so I expect they'll do so.

Operator, Operator

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

David Katz, Analyst

I wanted to focus on Kentucky HRMs, which were kind of a standout in the quarter or noted as a standout growth. Just some more perspective on it. How much of it is being aided by ETGs? Where is that process and how far along it is? And when we look at Kentucky holistically over the long term, how much growth do you think there is still ahead to be had, if you can put some qualitative parameters around that?

William C. Carstanjen, Chief Executive Officer

Happy to do that, David. Thank you. So first, we're just rolling those out as we are into February. So ETGs aren't a part of the story from the prior quarter in any way. I think what you're seeing in Kentucky is the continued evolution of the product and the building of those markets, whether you look at Louisville or Northern Kentucky or Southwestern Kentucky, which services the Clarksville and Nashville markets. The product keeps getting better, the teams keep getting better, and we keep finding avenues to grow. So I think we have more in the hopper there. And certainly, going forward, as we look at the introduction of ETGs as a product, that's going to take place over a period of time. Right now, we're just rolling out, beginning the experiments with Roulette. That's the first product. And so that's something that will add to our offering, add to sort of the holistic experience of what our facilities offer and we'll build on those over the course of this year and the years to come. But I think what you're seeing is a powerful product that keeps improving and a team that keeps getting better and finding ways to harvest the market in Kentucky and surrounding Kentucky.

Operator, Operator

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

Chad Beynon, Analyst

I wanted to ask about wagering growth, I guess, for this year's Derby and then for the future. Prediction markets have cut into some of the other sorts of mobile and digital online wagering. Curious if you've seen anything kind of in your segment thus far and if you think there could be any impact coming.

William C. Carstanjen, Chief Executive Officer

Thanks for the question, Chad. Sure. Happy to address that. So first, I'd say, in general, we see gravitation towards the bigger events. The Derby just getting bigger. The Oaks, I think a lot of people are surprised to realize that's the fourth most bet race in the United States, just getting bigger. So I think there's a flight to quality. I think good content is increasingly important. And that's why as a company, we focus more on that. We focus on building around Derby Day, building our big days, and delivering content to our customers. With respect to the second half of your question, which was prediction markets, we operate under a different legal paradigm than other sports offerings in the United States. Pari-mutuel wagering on horse racing is conducted under the Interstate Horse Racing Act, which is a federal umbrella statute that essentially gives us a series of rights, call them intellectual property rights in our content. So to take wagers across any form, whether it be a sports wagering platform, another horse racing platform such as an ADW or a prediction markets platform, you need our express consent. You can't just do it without that. So we haven't agreed to provide our content to prediction markets. We feel like we have plenty of distribution, and we like the terms of our distribution. So that's our focus for delivering access to our content to the customer base out there. And for the time being, that's how we expect to proceed. And that's what's best for our customers and our constituents, including the horsemen. So fiction markets are not a part of the pari-mutuel wagering on horse racing story nor would I expect it to be any time in the future.

Operator, Operator

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

Jordan Bender, Analyst

Bill, legislative processes are often harder to understand than not. So can you maybe just talk about what you're hearing in Virginia on the ground in terms of the iGaming bill of what might happen or might not happen in the state?

William C. Carstanjen, Chief Executive Officer

Legislative processes happen every year when the states are in session. So every year, we're heavily engaged, and we monitor them and certainly participate to the extent that we can. So iGaming is bad news for Virginia. It's not law. It's something that's been discussed. And there are 2 different bills in the House and the Senate that have gone through. I don't think it's good for the environment in Virginia. We certainly have made that point clear. And I think a lot of legislators and certainly when you see the polling, that's what the people think as well. So I would say that when you look at any legislative process, including the one in Virginia, there's lots of noise and there are lots of back and forth during the throes of it. But we firmly believe that iGaming is a bad construct for Virginia. We think many legislators there believe that as well. We continue to share our views and certainly listen to others. So I think it's important that folks don't react to the ebbs and flows of the legislative process and wait to see what the end of that process is. And we remain confident that the legislature and the Governor of Virginia will get it right in Virginia.

Operator, Operator

Your next question comes from the line of Dan Politzer with JPMorgan.

Daniel Politzer, Analyst

Bill, maybe a high level, we tended to think of Churchill as a sum of the parts story for some time. And I think that you mentioned some of the benefits or aspects of the portfolio where you do have vertical integration and cost synergies there. Can you maybe talk about high level how you think about the parts of the portfolio fitting together? Are there any elements where you feel like that you get inbounds on or that you feel like might not be natural fits over the longer term?

William C. Carstanjen, Chief Executive Officer

Sure, Dan. Thanks for the question. Always great to talk to you again. So we've built a really interesting collection of businesses. And we found ways to link those businesses and improve those businesses by focusing on a couple of key attributes. One is we look for growth margins, growth businesses, and then we focus with great vigor on margins. So as we've built our ADW business, we focused on margins. As we've expanded the track, same. As we got into HRMs, we looked at the technology services required to deliver that product, and we decided to vertically integrate there. So across the portfolio, we constantly evaluate what we can improve, where we see the most opportunity to improve, and how all these businesses can fit together synergistically over time to drive improvements in margins. So I think that question is never answered for good or forever. I think it's constantly an evolving landscape under which we evaluate our businesses, and it's always an exciting part of what we do, do what we do well, grow our businesses, improve our margins and then see where these businesses fit within our company and within our industries as a whole. So that's part of our challenge. That's something we focus on a lot. And I think the answer today could be a different answer than tomorrow. It's a constantly evolving landscape with lots of opportunities for us.

Operator, Operator

And our next question comes from the line of Daniel Guglielmo with Capital One Securities.

Daniel Guglielmo, Analyst

In your remarks, you mentioned Kansas and Alabama as having Exacta customers. Are there additional U.S. states that could add historical racing down the road where you all can use your integrated platform and know-how for medium-term growth?

William C. Carstanjen, Chief Executive Officer

We've been really thrilled with the results we've seen in Virginia, Kentucky, New Hampshire, Kansas, Alabama, and others. When legislators observe the positive impact HRM has had in the states where it has been implemented, it's a compelling story. It creates numerous jobs and significant capital investment, often connecting to key agricultural industries in those states. The challenge and opportunity going forward is to share this message with other states and highlight our track record. Unlike many industries, we have fulfilled our promises and met expectations, so it's important to communicate this to states considering HRM. Several states have shown interest in HRMs, and our team's role is to support this narrative and build relationships in those areas to replicate the successes we've achieved so far.

Operator, Operator

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

Jeffrey Stantial, Analyst

Bill, could you just talk a little bit on sort of what's been executed so far on early implementation of AI into your team's processes? Where have you seen the most success so far? And what's the road map look like here for further implementation in '26?

William C. Carstanjen, Chief Executive Officer

Sure, Jeff. Thanks for the question. I really see AI in two ways regarding how it can assist our company. First, it’s about improving our customers’ experience. In our case, with pari-mutuel wagering, we don't act as the house. Our role is to support our customers, who wager against each other and other pari-mutuel bettors globally. Our goal is to enhance our customers’ abilities. For instance, those with a TwinSpires account will notice a button in the corner that offers an AI-driven analysis of each race, highlighting key attributes and indicators to consider. We've launched this feature at five tracks and aim to expand and enhance its capabilities further. Additionally, we're developing another interactive tool that will allow users to inquire about specific races or horses. These initiatives are significant for our business, and we are motivated to make our customers better. On a broader scale, we are eager to explore how vendors and providers can improve our marketing, cost management, and overall operational efficiency. We fully embrace AI and are committed to discovering how it can benefit us. Our primary focus remains on enhancing customer interaction and enjoyment with our product while also improving our business operations and increasing margins.

Operator, Operator

And our next question comes from the line of Brandt Montour with Barclays.

Brandt Montour, Analyst

I wanted to follow up on the Derby. It's clear you have confidence in your prepared remarks and some of your earlier answers. However, when considering the pacing and what you mentioned this year compared to last year, it would be helpful to have a bit more insight. Last year at this time, you were ahead in pacing, and it seems you are more confident this year. Could you provide more details regarding key performance indicators? Do you have more flexibility as you approach the final months of ticket sales? Is there more potential for pricing or revenue growth in what you have sold so far? Any additional information would be appreciated.

William C. Carstanjen, Chief Executive Officer

Yes, Brandon, thank you for the question. We've always had strong visibility into the Derby, especially at this stage of the process. Last year, we were slightly off our game when the tariffs were first introduced, disrupting our sales for a period. This year, we’re back on track. We are tracking our key performance indicators, monitoring ticket sales weekly, comparing them to previous years and our plans. We’re also analyzing sponsorship and licensing. Overall, we have had great confidence based on our historical performance regarding what to expect. This year feels similar, but unlike last year, where we faced some challenges due to the abrupt emergence of tariffs, we’re experiencing positive effects this year, particularly with benefits from the tax bill. We believe this will serve as a significant advantage for us. Overall, we feel that the macro environment seems to present more favorable conditions than adverse ones for the next 6 to 8 weeks.

Operator, Operator

And our next question comes from the line of Shaun Kelley with Bank of America.

Shaun Kelley, Analyst

I think in the prepared remarks, you talked a little bit about some of the Virginia core trends you were seeing through January. Just wondering if you could elaborate a little bit on what your expectation is for the balance of the year just for the ramp-up at the Rose? And also any thoughts about Northern Virginia casino competition, which has come up a couple of times and I think continues to be around even though I think it requires a referendum.

William C. Carstanjen, Chief Executive Officer

Thanks, Shaun. As Marcia mentioned, the country has experienced some disruptive weather, but our business performed very well in January, and she wanted to highlight that. Virginia, particularly around the Rose, can be compared to some of our other properties in terms of size and scope. We anticipate continued improvement and growth in this area. It is truly one of the most promising markets due to its demographics, population size, wealth, and other characteristics. We have significant work and growth opportunities ahead in Virginia. Regarding the question about another casino or property in Northern Virginia, this is a topic we address every year in the legislature. It is still a long way from becoming a reality. Additionally, Northern Virginia is a large market, and there is a lot for us to explore, especially in the Southern I-95 corridor where we are focusing our efforts. We plan to continue implementing our strategy in that area. Our recent performance shows we understand how to execute this plan effectively by 2025. In general, we are concentrating on product improvements, expansion, and refining our models across Virginia for 2026. I do not expect significant competition in Northern Virginia in the near term, and I can only comment on what is currently happening. This is just legislative noise we manage each year. For now, we need to focus on growing our business because that presents the best opportunity for us.

Operator, Operator

And next question comes from the line of Trey Bowers with Wells Fargo.

Raymond Bowers, Analyst

I wanted to follow up on the significant free cash flow generation you experienced last year. Historically, you have utilized share repurchases during times of dislocation, but given the anticipated substantial free cash flow moving forward, do you foresee a more systematic approach to repurchases? Additionally, how does your current share price influence your capital allocation strategy for new projects?

William C. Carstanjen, Chief Executive Officer

Yes, Trey, thank you. So yes, Marcia alluded to it, we're in a situation of strong cash flow. It's a reflection of how we've built our company and how we run it. And it's also a reflection of the changes in the tax law, which benefit us. So we're stronger than we've ever been. And certainly, it's a very positive outlook as we look forward. What we do with our free cash flow is something we talk about and think about every day, and we're very, very careful about it. You mentioned share repurchases. That's always and has been for a long time, an important element of our capital management and we value that or evaluate that against our other uses for cash. So as we look forward and plan the next number of years for our business, certainly, we will look at share repurchases and balance it against other things we want to spend our money on. And all is for your benefit, it's for the benefit of the shareholders. We're trying to make sure that we do things that generate the highest and best returns for our shareholders, and it's good to have options. So we balance that against leverage, against investment, share repurchases, et cetera. It all goes into the hopper, and we try to make the best decisions that we can. And it's good to have the option and it's good to have the cash to do so.

Operator, Operator

And our next question comes from the line of Joe Stauff with Susquehanna.

Joseph Stauff, Analyst

Bill, just a quick follow-up on electronic table games in Kentucky. Just wondering what the bottleneck is on your ability to increase the availability of those units in Kentucky. And then my larger question is really going back to the Derby. And just thinking about how well you've done strategically about the event side of the business and ticket revenue and upgrading, getting returns on that. But just wondering, in a world clearly where sports rights and sponsorship demand is really skyrocketing, how you think about the opportunities both for media rights and sponsorship. I know you just renewed with NBC, but sponsorships. I mean, I'm sure they're like mega sponsors out of the Middle East and Japan and so forth. Just wondering how to think about that.

William C. Carstanjen, Chief Executive Officer

Thanks for the question, Joe. So first, ETGs. This is a new product. It's a thrill to be involved in something like this, just like I feel the same way I felt as we were developing HRMs. It's a thrill to be a part of something like this, and you need to do it right. So Roulette was the first game we got developed and through the Kentucky regulatory process, and we need to go demonstrate responsible rolling out and growth of that. And as we do that, we're working on other products. And I think as a team, we move as fast as we responsibly can, but it's important to do this right. So this is all good stuff to come. This is about doing this right, doing it in a way where the regulators are comfortable where the customer understands what we're doing, where we create the space on the floor, where we get the volume on the floor correct in terms of units versus other games in demand. So this is the beginning of that process. This is the beginning of a wonderful mountain to climb, and I'm excited to climb and it's going to take us time as we introduce new products and grow out the products as we introduce them. So all good stuff on that. No bottleneck, all just responsible, careful, thoughtful rolling out of something that's new. With respect to the Derby, yes, we've been flattered and very much increasingly focused on international, the Middle East, you may have seen we've introduced 3 new road to the Derby races that are based in the Middle East. So we have a total of 4 now. So lots and lots of interest from other parts of the world, particularly in the Middle East. And that's all good as we build our sponsorship and we build all the different avenues of how we grow the Derby. But certainly, we're privileged to stand on those that came before us. The Derby has a significant international component to its brand, but it's never been harvested. And this is the team that's now charged with harvesting that and growing it. And it starts with selling them the dream, the ability to get their horses to this race to get their participation directly with the rooting interest in this race. So I think you'll see focus and I think you'll see growth and development on that avenue for our company, and that's part of how we drive sponsorships going forward, high-end attendance going forward and other avenues too, licensing, wagering potentially. Those are all payoffs for thoughtfully and successfully growing international participation. I'll now hand the call back over to CEO, Bill Carstanjen, for any closing remarks. Thanks, Andrew. Everyone, thank you for those great questions. Thank you for participating in the call today. We're always happy to have these calls and get a chance to talk about what we do here. We're proud of what we do. And now we're going to go back to our offices, put our heads down and get ready for the next big couple of things to come, including getting ready for the Kentucky Derby. So thanks, and we'll talk to you again soon.

Operator, Operator

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