Churchill Downs Incorporated (NASDAQ:CHDN) Q3 2023 Earnings Call Transcript

So, for Derby 150, we have two significant projects. We have of course, the paddock project that will impact the experience of all guests that come to the property, it really will absolutely transform the physical appearance of the front side of the racetrack. And then we have the renovation of the jockey club suites, which will impact directly the customer experience of a large group of customers that sit in those suites. So, I feel very confident that we’re going to deliver the economics associated with that. But I don’t want to take anything for granted around execution. Bill Mudd and his team, they are laser focused on making sure we hit our timelines, and that we think through all the wrinkles and intricacies of the experiences these customers are going to have.

Because if we do that well, if we do that as we intend to do it, that is the foundation to keep our momentum going with additional significant capital projects.

Chad Beynon: That’s great. Thank you. And then just on HRM medium term, Marcia, you talked about the healthy growth there, obviously your position. With respect to states or licenses within states that you don’t currently own and operate, are there still opportunities to expand HRMs beyond what you’ve laid out in the near term? Is this something that could be part of the back half of the decade in terms of growth in that arena? Thank you.

Bill Carstanjen: Well, Marcia, if you don’t mind, I could take that one. So yeah, there are states that are considering HRMs. It’s part of the expanded gaming discussion in a number of states. And previously, we didn’t always focus on all those states because we didn’t see a brick and mortar operator opportunity for ourselves. Now we look at states from more than one perspective, not just as being a direct brick and mortar operator, but also as being a technology and services provider. So, I think it’s not in dispute that you’ll see a number of states continue to discuss potentially passing HRMs. There are also current opportunities in states that have passed it for us to further expand the footprint of Exacta. So that’s a new tool.

That’s a new part of our toolkit that we’re really happy to have because we follow the development of HRMs everywhere in the United States they were considered. But this gives us incentive to invest and focus politically on states where we might have more than one type of way of participating in successful legislation. But even before we get to successful legislation in additional states, there are pockets of growth opportunities in states for us that have already passed HRMs and we’ll be focused on that too.

Chad Beynon: Great. Thank you very much.

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

Jordan Bender: Great. Thanks for taking my question. I want to stick with kind of the last question as well on HRM side. So, it seems like tables, that could be a pretty big opportunity for the Company. And as we sit here today, do the regulations or the way that the laws are written across the states you guys operate essentially allow you guys to go live with tables as they sit? And then I guess off the back of that, were these facilities or the gaming floors across all these HRM facilities built for tables or would you anticipate maybe incremental investment across these gaming floors to really build out to put in these tables? Thank you.

Bill Carstanjen: Thanks for the question, Jordan. Really two predicates before we get to individual site expansion plans. One is we have to develop the technology and we’re in a partnership with a Company that between the two companies, a lot of capabilities to do that. So, we have to develop and perfect the technology. And then we have to work within the parameters of the states where HRMs are permitted. I don’t want to short change that piece of the puzzle. We would need to work with the regulators in those jurisdictions and make sure everything falls within the framework and parameters of what they’re comfortable with. So those are two significant predicates that need to be addressed before we can really talk expansion plans.