Group 1 - The article emphasizes the importance for investors to initiate a portfolio rotation to reduce exposure to large-cap growth stocks, particularly in the tech sector, as 2025 approaches [1] - Gary Alexander, with extensive experience in covering technology companies and advising startups, provides insights into current industry themes [1] Group 2 - The article does not contain any additional relevant content regarding companies or industries [2][3]

Investors in Churchill Downs Incorporated (CHDN) need to pay close attention to the stock based on moves in the options market lately. That is because he Dec. 19, 2025 $55 Call had some of the highest implied volatility of all equity options today.What is Implied Volatility?Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It c ...

Core Points - A class-action lawsuit has been filed by Hagens Berman against horse betting entities, alleging that they are colluding with the assistance of AI to disadvantage everyday bettors [1] Group 1 - The lawsuit claims that the use of AI by these betting entities is illegal and creates an unfair advantage [1] - The action is aimed at protecting the interests of regular bettors who may be harmed by this alleged collusion [1]

Financial Data and Key Metrics Changes - The company achieved record net revenue and record adjusted EBITDA for the third quarter of 2025, with the live and historical racing segment also reaching record levels [5][22] - The live and historical racing segment grew revenue by 21% and adjusted EBITDA by 25% compared to the prior year quarter, marking the 21st consecutive quarter of record growth for this segment [22] - Free cash flow generated was $166 million, or $2.34 per share, representing a 13% increase from the prior year quarter [25][26] Business Line Data and Key Metrics Changes - The regional gaming properties performed well, with adjusted EBITDA increasing over $3 million, and margins up 1.1 points compared to the prior year quarter [25] - The Rose gaming venue in Virginia showed significant growth, with gaming revenues increasing and a strong customer database being built [14][15] - The Exacta business benefited from the growth of HRM operations in Kentucky and Virginia, contributing to record adjusted EBITDA for the Wagering Services and Solutions segment [24] Market Data and Key Metrics Changes - The company is expanding its international reach with the addition of three new points races in Dubai and Saudi Arabia, enhancing the quality of the international pathway to the Kentucky Derby [10] - Virginia has proven to be a strong investment environment, with 4,875 HRMs deployed and continued growth in gaming revenue [15][16] Company Strategy and Development Direction - The company is focused on five key growth catalysts for the Kentucky Derby, including ticketing revenue, broadcast rights, wagering, sponsorships, and selective renovations [7][11] - A significant investment of $280 to $300 million is planned for the construction of a new venue called Victory Run, aimed at enhancing the guest experience during Derby Week [12][13] - The company is committed to maintaining a disciplined capital management strategy while balancing share repurchases and project investments [27][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of the Kentucky Derby and HRM properties, citing strong customer engagement and market expansion [20][22] - The company anticipates continued improvement in margins and performance as it drives better awareness and customer engagement in its venues [61] - Management acknowledged the challenges posed by illegal gaming machines in Virginia but noted strong enforcement and progress in addressing these issues [70][72] Other Important Information - The Board of Directors approved a 7% increase in dividends, marking the 15th consecutive year of increased dividends per share [27] - The company expects to spend $200 to $240 million on project capital in 2025, with a focus on strategic investments in its flagship assets [26][28] Q&A Session Summary Question: ROI targets for Victory Run - The company targets a 20% unlevered IRR focused on year three for the Victory Run project [32] Question: Prospective opportunity for ETGs - Management sees electronic table games as an important opportunity but is cautious about predictions due to regulatory factors [36][37] Question: Capital allocation and leverage - The company is committed to reducing leverage below 4 times next year while balancing share repurchases and capital investments [40] Question: Benefits of owning properties outright - Owning real estate provides stability and predictability, which management believes is not fully recognized in the market [42][43] Question: M&A environment - There has been a recent pickup in M&A activity, and the company remains flexible in its approach to acquisitions [46][48] Question: Emerging landscape of prediction markets - The company plans to approach prediction market operators to explain the legal framework governing horse racing wagering [66][67] Question: Illegal machines in Virginia - Management reported strong enforcement against illegal machines and believes the situation is under control [70][72]

Financial Data and Key Metrics Changes - The company reported record net revenue and record adjusted EBITDA for the third quarter of 2025, with the live and historical racing segment also achieving record net revenue and adjusted EBITDA, growing revenue by 21% and adjusted EBITDA by 25% compared to the prior year quarter [5][22][20] - Free cash flow generated was $166 million, or $2.34 per share, representing a 13% increase from the prior year quarter [25][26] - The bank covenant net leverage was reported at 4.1x, with expectations to remain at this level by year-end and drop below 4x in 2026 [28] Business Line Data and Key Metrics Changes - The live and historical racing segment achieved its 21st consecutive quarter of record growth in revenue and adjusted EBITDA [22] - The regional gaming properties performed well, with adjusted EBITDA increasing over $3 million, and margins up 1.1 points compared to the prior year quarter [25] - The Exacta business saw growth driven by the expansion of HRM operations in Kentucky and Virginia, as well as third-party relationships [18][24] Market Data and Key Metrics Changes - The company is expanding its HRM entertainment venues, with the eighth venue set to open in Calvert City in Q1 2026, and significant growth in Virginia's gaming revenues [14][15] - The Rose venue in Virginia showed strong growth, with gaming revenues increasing and a strong customer database being built [15][22] - The company completed the acquisition of a 90% interest in the Casino Salem project in New Hampshire, which is expected to enhance its market presence [16] Company Strategy and Development Direction - The company outlined five key growth catalysts for the Kentucky Derby, including ticketing revenue, broadcast rights, wagering, sponsorships, and selective renovations [7][9][11] - A significant investment of $280 million-$300 million is planned for the construction of a new venue called Victory Run, aimed at enhancing customer experience [12][13] - The company is focused on maintaining a disciplined capital allocation strategy while balancing share repurchases and project investments [40][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential of the Kentucky Derby and HRM properties, citing strong customer engagement and market expansion [20][22] - The company is optimistic about the future of electronic table games (ETGs) as a growth opportunity, although regulatory approvals are still pending [36][37] - Management noted that the current economic environment, including government shutdown discussions, has not significantly impacted operations [60] Other Important Information - The Board of Directors approved a 7% increase in dividends, marking the 15th consecutive year of increased dividends per share [27] - The company anticipates a favorable impact on free cash flow due to recent tax revisions, estimating a reduction in cash tax payments of $50 million-$60 million in both 2025 and 2026 [28] Q&A Session Summary Question: ROI targets for Victory Run - The company targets a 20% unlevered IRR focused on year three for the Victory Run project [32] Question: Prospective opportunity for ETGs - Management acknowledged the importance of ETGs and is focused on regulatory approval, viewing it as a significant opportunity [36][37] Question: Capital allocation strategy - The company is committed to reducing leverage below 4x next year while balancing share repurchases and capital investments [40] Question: Benefits of owning properties outright - Owning real estate provides stability and predictability, which management believes is not fully recognized in the market [42][43] Question: M&A environment - Management noted a recent pickup in M&A activity and remains flexible in pursuing opportunities [46][48] Question: The Rose's margin ramp and government shutdown impact - Management is optimistic about The Rose's growth and does not foresee significant impact from the government shutdown discussions [60] Question: Illegal gaming machines in Virginia - Management reported strong enforcement against illegal machines and believes it has not materially affected their business [70][72]

Financial Data and Key Metrics Changes - The company achieved record net revenue and record adjusted EBITDA in Q3 2025, with the Live and Historical Racing segment also reporting record figures [8][28] - The Live and Historical Racing segment grew revenue by 21% and adjusted EBITDA by 25% compared to the prior year quarter, marking the twenty-first consecutive quarter of record growth [29] - Free cash flow generated was $166 million or $2.34 per share, up 13% from the prior year quarter, with a free cash flow yield of approximately 10% [33][34] Business Line Data and Key Metrics Changes - The Wagering Services and Solutions segment delivered record adjusted EBITDA driven by the growth of the Xacta business, benefiting from Kentucky and Virginia properties [32] - Regional gaming properties performed well, with adjusted EBITDA for wholly owned gaming properties increasing over $3 million, excluding the impact of removing HRMs from Louisiana operations [32] Market Data and Key Metrics Changes - The company is expanding its HRM operations in Kentucky and Virginia, with significant growth in gross gaming revenues and customer databases [19][20] - The Virginia market showed strong performance, with GGR per unit per day increasing every month of Q3 2025 [30] Company Strategy and Development Direction - The company plans to invest $280 million to $300 million in a new structure called Victory Run, aimed at enhancing the guest experience during Derby Week [15] - Five key growth catalysts for the Kentucky Derby were identified: ticketing revenue, broadcast rates, wagering, sponsorships, and selective renovations [10][14][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of the Kentucky Derby and HRM properties, emphasizing the importance of strategic investments [26][37] - The company is focused on maintaining a disciplined capital allocation strategy while aiming to reduce leverage below four times by 2026 [35][36] Other Important Information - The company announced a 7% increase in dividends, marking the fifteenth consecutive year of increased dividends per share [35] - The federal tax bill signed on July 4 is expected to improve free cash flow through lower cash tax payments [36] Q&A Session Summary Question: ROI targets for Victory Run - The company targets a 20% unlevered IRR, focusing on achieving this within three years [41] Question: Prospective opportunity for ETGs - Management acknowledged the importance of electronic table games as a growth opportunity but noted the need for regulatory progress [45][47] Question: Capital allocation strategy - The company is committed to balancing share repurchases with capital investments, aiming to reduce leverage while maintaining strategic growth [50][51] Question: Benefits of owning properties outright - Owning real estate provides stability and predictability, which management believes is not fully recognized in the market [53][54] Question: M&A environment - There has been a recent pickup in M&A activity, and the company remains opportunistic in both acquisitions and sales [57][59] Question: Virginia illegal machines enforcement - Management reported strong enforcement against illegal machines but acknowledged ongoing challenges, stating it has not significantly impacted business [90][92]

Financial Data and Key Metrics Changes - The company achieved record net revenue and record adjusted EBITDA for Q3 2025, with the live and historical racing segment also reaching record levels [5][21] - The live and historical racing segment grew revenue by 21% and adjusted EBITDA by 25% compared to the prior year quarter, marking the 21st consecutive quarter of record growth for this segment [21][24] - Free cash flow generated was $166 million, or $2.34 per share, representing a 13% increase from the prior year quarter [25][27] Business Line Data and Key Metrics Changes - The wagering services and solutions segment delivered record adjusted EBITDA driven by the growth of the Exacta business [24] - The regional gaming properties performed well, with adjusted EBITDA increasing over $3 million, and margins up 1.1 points compared to the prior year quarter [24] - Virginia's HRM properties generated a combined 51% margin during the quarter, which is considered best in class [23] Market Data and Key Metrics Changes - The company is expanding its HRM operations in Kentucky and Virginia, with significant growth in customer databases and gaming revenues [14][15] - The Rose venue in Virginia showed meaningful growth in gaming revenues, with increased visitation frequency [15][22] - The company completed the acquisition of a 90% interest in the Casino Salem project in New Hampshire, which is expected to enhance its market presence [16] Company Strategy and Development Direction - The company outlined five key growth catalysts for the Kentucky Derby, including ticketing revenue, broadcast rights, wagering, sponsorships, and selective renovations [6][11] - A significant investment of $280 to $300 million is planned for the construction of a new venue called Victory Run, aimed at enhancing customer experience [12][13] - The company is focused on maintaining a disciplined capital management strategy while balancing share repurchases and project investments [39][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of the Kentucky Derby and HRM properties, citing strong customer engagement and market expansion [19][27] - The company anticipates continued improvement in margins and performance as it drives awareness and customer engagement in its venues [58] - Management acknowledged the challenges posed by illegal gaming machines in Virginia but noted that enforcement has been strong and is not currently a major concern [70] Other Important Information - The Board of Directors approved a 7% increase in dividends, marking the 15th consecutive year of increased dividends per share [26] - The company expects to benefit from favorable cash taxes due to recent federal tax revisions, estimating a reduction in cash tax payments of $50 to $60 million in both 2025 and 2026 [27] Q&A Session Summary Question: ROI targets for Victory Run - The company targets a 20% unlevered IRR focused on year three, emphasizing the time needed to introduce new assets and generate word of mouth [32] Question: Prospective opportunity for ETGs - Management highlighted that electronic table games represent an important opportunity, but emphasized the need for regulatory approval [35][36] Question: Capital allocation and leverage - The company is committed to reducing leverage below 4 times next year while balancing share repurchases and capital investments [39] Question: Benefits of owning properties outright - Owning real estate provides stability and predictability, which management believes is not fully recognized in the market [41][42] Question: M&A environment - Management noted a recent pickup in M&A activity and expressed interest in being opportunistic in acquisitions [44][46] Question: Illegal machines in Virginia - Management acknowledged ongoing enforcement issues but stated that they do not currently pose a significant concern for business operations [70]

Core Insights - Churchill Downs (CHDN) reported $683 million in revenue for Q3 2025, marking an 8.7% year-over-year increase and a surprise of +1.36% over the Zacks Consensus Estimate of $673.83 million [1] - The EPS for the same quarter was $1.09, compared to $0.97 a year ago, resulting in an EPS surprise of +12.37% against the consensus estimate of $0.97 [1] Revenue Breakdown - Gaming revenue was reported at $265.5 million, slightly above the estimated $264.81 million, but reflecting a -1.8% change year-over-year [4] - Net revenue from Wagering Services & Solutions reached $118 million, exceeding the estimated $114.54 million [4] - Revenue from Live and Historical Racing was $305.7 million, surpassing the average estimate of $289.64 million, with a year-over-year increase of +21.1% [4] Adjusted EBITDA Performance - Adjusted EBITDA for All Other segments was reported at -$23.4 million, close to the average estimate of -$23.58 million [4] - Adjusted EBITDA for Wagering Services & Solutions was $46 million, exceeding the estimated $42.71 million [4] - Adjusted EBITDA for Gaming was $123.3 million, above the average estimate of $116.22 million, while Live and Historical Racing's adjusted EBITDA was $116.4 million, also surpassing the estimate of $112.13 million [4] Stock Performance - Over the past month, shares of Churchill Downs have returned -0.2%, in contrast to the Zacks S&P 500 composite's +1.1% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Churchill Downs (CHDN) reported quarterly earnings of $1.09 per share, exceeding the Zacks Consensus Estimate of $0.97 per share, and showing an increase from $0.97 per share a year ago, resulting in an earnings surprise of +12.37% [1] - The company generated revenues of $683 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.36% and increasing from $628.5 million year-over-year [2] - Churchill Downs has outperformed consensus EPS estimates two times over the last four quarters and has topped consensus revenue estimates three times in the same period [2] Earnings Outlook - The sustainability of the stock's price movement will depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - The current consensus EPS estimate for the upcoming quarter is $1.02 on revenues of $655.35 million, while for the current fiscal year, the estimate is $6.00 on revenues of $2.91 billion [7] Industry Context - The Gaming industry, to which Churchill Downs belongs, is currently ranked in the top 25% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5][6]

Financial Performance - Net revenue for Q3 2025 increased by $54.5 million to $683.0 million compared to $628.5 million in Q3 2024, driven primarily by the Live and Historical Racing segment [132]. - Adjusted EBITDA for Q3 2025 was $262.3 million, up $27.0 million from $235.3 million in Q3 2024 [132]. - For the nine months ended September 30, 2025, net revenue increased by $149.9 million to $2,260.0 million compared to $2,110.1 million in the same period of 2024 [132]. - Adjusted EBITDA for the nine months increased by $35.7 million, driven by a $41.9 million increase from the Live and Historical Racing segment [137]. - Live and Historical Racing revenue increased by $53.3 million for the three months ended September 30, 2025, due to significant growth in Virginia and Kentucky HRM venues [142]. - Wagering Services and Solutions revenue increased by $8.5 million for the three months ended September 30, 2025, primarily from TwinSpires Horse Racing and Exacta [142]. Operating Income and Expenses - Operating income decreased by $27.9 million to $98.0 million in Q3 2025, impacted by a $41.2 million increase in impairment expense [135]. - Operating income for the nine months ended September 30, 2025, decreased by $21.9 million to $560.3 million [132]. - The operating income margin for Q3 2025 was 14%, down from 20% in Q3 2024 [132]. - Total operating expenses increased by $82.4 million for the three months ended September 30, 2025, primarily due to new property openings and expansions [144]. Net Income - Net income attributable to Churchill Downs decreased by $27.3 million to $38.1 million in Q3 2025 compared to $65.4 million in Q3 2024 [132]. - Net income attributable to Churchill Downs Incorporated decreased by $27.3 million for the three months ended September 30, 2025, primarily due to a $31.0 million after-tax increase in impairment charges [137]. - For the nine months ended September 30, 2025, net income decreased by $23.4 million, primarily due to a $33.0 million after-tax increase in impairment charges [137]. Segment Performance - The Live and Historical Racing segment contributed an increase of $52.5 million, attributed to the openings of The Rose Gaming Resort and Owensboro Racing and Gaming [135]. - The Wagering Services and Solutions segment saw a $6.7 million increase, primarily from TwinSpires Horse Racing and Exacta [135]. - The Gaming segment experienced a $4.7 million decrease due to the cessation of HRM operations in Louisiana [135]. - Live and Historical Racing Adjusted EBITDA increased by $41.9 million, driven by a $30.9 million increase from Kentucky HRM venues and an $11.8 million increase from Virginia HRM venues [150]. - Wagering Services and Solutions Adjusted EBITDA rose by $7.0 million, primarily due to a $9.9 million increase from Exacta attributable to incremental HRMs in Virginia and New Hampshire [150]. - Gaming Adjusted EBITDA decreased by $12.7 million, with a $7.0 million decrease from wholly owned gaming properties and a $5.7 million decrease from equity investments [150]. Assets and Liabilities - Total assets increased by $178.9 million, primarily due to the acquisition of gaming rights for Casino Salem and increased capital expenditures [154]. - Total liabilities rose by $203.1 million, mainly driven by an increase in the outstanding balance on the Revolver and increases in income taxes payable [154]. - Total debt increased by $194.1 million, reaching $5,132.8 million as of September 30, 2025 [162]. Cash Flow and Investments - Cash flows from operating activities increased by $32.7 million, attributed to a decrease in cash paid for income taxes and interest [161]. - The company expects project capital investments to be approximately $200.0 to $240.0 million in 2025, subject to timing and unforeseen delays [157]. Stock and Debt Management - The common stock repurchase program approved in July 2025 allows for up to $500.0 million in repurchases, with approximately $461.5 million remaining as of September 30, 2025 [158]. - As of September 30, 2025, the Company had a total of $2.0 billion outstanding under its Credit Agreement, which includes a $1.2 billion revolving credit facility, $286.5 million senior secured term loan B-1, and $1.1 billion senior secured term loan A [163][164][176]. - The interest rate margin for the Term Loan B-1 was reduced by 0.25% to SOFR plus 175 basis points as of February 14, 2025 [164]. - The Company had repayments of principal and interest on the Credit Agreement totaling $841.7 million during the nine months ended September 30, 2025 [168]. Future Obligations and Risks - Estimated contractual payments under the Credit Agreement for the next twelve months are $182.3 million, assuming a weighted average borrowing rate of 5.8% [168]. - The Company has $600.0 million in 5.500% senior unsecured notes maturing on April 1, 2027, and $700.0 million in 4.750% senior unsecured notes maturing on January 15, 2028 [169][170]. - Minimum rent payable under operating leases was $56.0 million as of September 30, 2025, with $7.0 million due in the next twelve months [173]. - A one-percentage point increase in the SOFR rate would reduce net income and cash flows from operating activities by $15.0 million [176]. - The Company is required to pay a commitment fee of 0.25% on the unused portion of the Revolver [167]. - The Company has other contractual obligations with commitments of $10.9 million, of which $1.5 million is due within the next twelve months [174].