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]