Good day, ladies and gentlemen, and welcome to the Charles Hills Towns Incorporated twenty twenty one First Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr.
Nick Zengary, Vice President, Treasury and Investor Relations.
Thank you, Olivia. Good morning, and welcome to our first quarter twenty twenty one earnings conference call. After the company's prepared remarks, we will open the call for your questions. The company's twenty twenty one first 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 report on Form 10 Q and Form 10 ks. 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 Q are available on our website at churchilldownsincorporated.com. And now I'll turn the call over to our Chief Executive Officer, Mr. Bill Carstanjen.
Thanks, Nick. Good morning, everyone. With me today are several members of our team, including Bill Mudd, our President and Chief Operating Officer Marcia Dahl, our Chief Financial Officer and Brad Blackwell, our General Counsel. I will comment on our first quarter performance, our capital investment plans and the upcoming Kentucky Derby. After my comments, Marcia will make her remarks, and then we will open the call for questions.
As most of you have seen, we issued an eight ks earlier this week in which we announced changes to our segments for external financial reporting purposes to reflect the evolution and growth of our company and to provide further clarity for investors to better understand our operating performance. Our continued growth and evolving plans with respect to historical racing machine developments warrant these changes. Turning our attention to the first quarter, we've completed our preparations for the two thousand twenty one Kentucky Derby, which we will conduct with fans in attendance along with appropriate health and safety protocols. I will provide more specifics on these plans in a few minutes. We worked with industry participants and our government representatives across Kentucky to pass new legislation clarifying the legality of historical racing machines in the Commonwealth, paving the way for the further development and growth of our current venues and the green light to move forward on potential additional projects.
We repurchased 1,000,000 shares of our stock. We placed $500,000,000 of debt at very attractive terms, and we delivered double digit revenue and doubled our adjusted EBITDA in the first quarter compared to the prior year. In light of the COVID-nineteen impact that began in March of last year, we also compared our performance in the first quarter of this year to the same period in 2019. Our businesses also delivered double digit revenue growth and double digit adjusted EBITDA growth for the first quarter of twenty twenty one compared to the first quarter of twenty nineteen. Our net revenues for the quarter were up 28% compared to the same period in 2020 and up 22 compared to the same period in 2019.
Adjusted EBITDA was double the same period from last year and nearly 50% higher than the same period in 2019. The keys for us to delivering these results center around our continued long term strategic focus on growth despite the short term disruption of the pandemic, the careful planning around our balance sheet and access to capital, and the quality and focus of our operational leadership teams. More specifically, over the last number of quarters through the first quarter, we sought to protect the long term value of our iconic asset, the Kentucky Derby, which remains the longest running annual sporting event in the history of The United States. We planned aggressively but responsibly for the one Kentucky Derby and will accelerate towards the 2022 event with what we expect will be significantly fewer, if any, COVID related restrictions. We will also further invest growth capital in our facility, which I will discuss a bit later.
We sought to position our core assets, our regional gaming properties, for high margin growth coming out of the pandemic by trimming operational expenses and then adding back cost only when the analytics showed it is accretive to do so. We sought to capture significant profitable growth from the accelerated channel migration with our market leading Twinspires horseracing business and then retain those customers online as brick and mortar restrictions were eased. We continue to make organic investments in new high growth historical racing and gaming entertainment properties. We demonstrated our stability and commitment to our investors by increasing our dividend by 7%. We repurchased a significant block of shares at a discounted price, creating value for our long term shareholders.
We launched our auction process to sell the Arlington Park land so that we can more effectively deploy this currently locked up capital into high growth projects. And finally, we reimagined our capital investment plans, resulting in a new portfolio of organic growth opportunities that will provide profitable growth for the foreseeable future. In short, we didn't want to lose our long term focus because of short term challenges, but we also believe we could excel in the short term despite the pandemic. We believe our results demonstrate real strength in strategy and execution. Let's focus for a moment on our regional gaming properties.
Our regional gaming properties delivered record adjusted EBITDA in the first quarter, which was more than half of the adjusted EBITDA growth in the first quarter for the company compared to the prior year and compared to the first quarter of twenty nineteen. All of our regional gaming properties are now open. Rivers was actually closed most of the month of January, and both Presque Isle and Nemacolin were shut down the first week or so January. Regulatory related COVID restrictions have been meaningfully reduced in all of our locations over the course of the first quarter, although various levels of restrictions still exist for all of our properties, and we will continue to benefit as these restrictions are lifted. The performance of our properties while still under serious although steadily declining restrictions the quarter was an important component of our company's overall strong performance and a source of optimism as we look forward.
Our equity investments in river casino in Rivers Casino and Miami Valley Gaming performed quite well in the quarter compared to the prior period even despite Rivers closure during most of January, reflecting the quality of these teams and their exceptional locations in large markets. As we discussed last quarter, Rivers is investing $87,000,000 to expand the facility, which will be funded from debt at the Rivers entity level. The expansion will accommodate approximately 725 gaming positions based on a combination of new slot games and table games, resulting in the facility utilizing its full 2,000 positions permitted under current law. The target completion is spring of twenty twenty two. Rivers will also pay $24,000,000 in licensing fees for the incremental gaming positions and $10,000,000 for its sports wagering license by the end of the second quarter.
This project is an exciting one for us, and we believe a very efficient deployment of growth capital. Our wholly owned properties also performed well overall despite COVID related regulatory restrictions that severely impacted some of our properties. Marcia will provide more color in a few minutes. The second area of adjusted EBITDA growth in the first quarter came from our TwinSpires horseracing business. Accelerated channel migration throughout the COVID-nineteen crisis shifted wagering on horseracing to the online channel from brick and mortar facilities.
This trend remains a surprisingly strong one. Our horseracing business grew handle by 34 over the first quarter of twenty twenty compared to a 10% increase in wagering on US thoroughbred races in the first quarter of twenty twenty one. Recall that some of our racing was canceled last year in the first quarter, which subsequently returned to the racing calendar this year. We continue to make careful strategic investments in building our TwinSpire sports and casino business. We launched our new GAN and CAMBI platform for sports betting and casino wagering in Michigan and for sports betting in Tennessee.
Our focus is on establishing that our technologies will perform as we scale and then testing our marketing and acquisition strategies to see if they can be deployed efficiently at scale. Our new technology platform has performed very well to date. We transitioned Pennsylvania and Indiana to the new GaN and CAMBI platform earlier this week, expect the launch of mobile product in Colorado by the end of the week of this week and to transition New Jersey later in the second quarter. Note that our new segment reporting incorporates our retail sports betting results within our Twinspire segment to more accurately show our sports betting activities. There are other states that have recently approved new sports betting legislation, including Maryland, where we have a brick and mortar casino.
There are additional states that have either passed legislation or are considering new legislation that may be an opportunity for long term growth in sports betting and online casino wagering. While we appreciate these new possibilities, we remain cautiously optimistic given the long time frame that exists between legislation, when legislation is approved and when the business can become operational, as well as the ongoing industry wide cash losses that are accumulating in all of these states that have already implemented sports betting, which has generally been driven by excessive free play, marketing, and brand spend focused on revenue growth as opposed to profitability. We remain committed to and disciplined in growing profitable businesses that create long term shareholder value. This was our strategy in building our profitable online horse racing business and remains our strategy in building our sports betting and online casino wagering business. As we identify clear path to a reasonable return on marketing spend, long term profitability and margin sustainability, we will invest appropriately.
We believe our and our investor patients our investors' patients will be rewarded in time in this space. Our commitment to being disciplined in growing profitable businesses is reflected in our investment in historical racing and gaming entertainment properties. As a reminder, it has only been a little over three years since our team announced our partnership with Ainsworth to develop new state of the art HRMs. In September 2018, our team opened our first HRM facility, Derby City Gaming, in Louisville, which we built for $65,000,000 The success of Derby City reflects our ability to develop new products through industry partnerships, invest capital prudently, and build customer demand for a unique entertainment venue. The expansion of HRM game titles to include the best themes offered by Scientific Games and IGT has significantly enhanced our customer entertainment experience.
Equally important, Derby City has generated significant purse money for Churchill Downs Racetrack to support the horse racing industry. The increase in purse money has attracted more and better quality horses to our premier Churchill Downs Racetrack and help strengthen the foundation of the entire horse industry in Kentucky. Despite the challenges of the global pandemic, we also completed the construction of our Oak Grove HRM facility and hotel in Oak Grove, Kentucky that opened in September 2020 and our Turfway Park HRM Annex, Newport Racing and Gaming, that opened in October 2020. These three facilities provided a combined $16,000,000 of growth in adjusted EBITDA in the first quarter of twenty twenty one compared to the prior year. Obviously, none of these venues have approached maturity, and they offer us high growth opportunities that we plan to continue to invest in to grow over the long term.
We are making good progress in building our Turfway Park Racing and HRM entertainment venue. Held the groundbreaking ceremony in March, which was celebrated with the governor of Kentucky, other state and local politicians, and members of the Kentucky Horse Racing Commission. We are on track to open the facility in the summer of twenty twenty two. Before discussing our preparation for the one hundred and forty seventh Kentucky Derby, I will update you on our capital investment plans related to Churchill Downs Racetrack and Derby City Gaming. As I mentioned on our last earnings call, while the projects at Churchill Downs Racetrack were paused during the pandemic, we used the time to reevaluate a number of evolving factors, including consumer travel trends, especially hotel occupancy and room rates in our region alternative capital investment opportunities at Churchill Downs Racetrack that would create new experiences for our customers, including new or enhanced reserve seats that would generate more immediate and higher returns with less risk and how to optimize the distribution of HRM facilities in the Louisville market in light of the continued significant growth at Derby City Gaming and the potential foreign annex permissible under Kentucky law within 60 miles of Churchill Downs Racetrack, which includes Downtown Louisville.
Based on this analysis, we have decided to not build a hotel on the first turn of Churchill Downs Racetrack at this time. We may decide to build a hotel at the racetrack in the future, but now is not the right time. We think we have excellent alternative projects that offer better returns on our capital over shorter periods, both at the racetrack and at Derby City Gaming. As a result of this decision, we have developed a multiyear phased set of projects that we believe will create significantly improved experiences for our guests at the Derby and will generate consistent adjusted EBITDA growth in the coming years for this iconic asset. We are developing the final designs, completing the due diligence and obtaining firm construction estimates for these projects.
We anticipate that the first capital investment would be completed by next year's 01/1948 in 2022, the second project by the January in 2023, and the third and most transformative project by the one hundred and fiftieth Derby in 2024. While we haven't gotten firm construction estimates yet, we know these projects are economically viable. We will provide a complete summary of the 100 of the 148 Derby project at our next earnings call as well as provide more information on the project to be completed by Derby one forty nine in 2023. We will also share some of our plans for additional amenities for Derby 150. Please stay tuned.
We are excited about what is to come at Churchill Niles Racetrack over the next three years, but we are not ready to share our detailed plans today. We are also evaluating options to expand Derby City Gaming. We continue to be very pleased with the growth of this entertainment venue and believe that an expansion with additional floor capacity and other amenities will enhance the long term growth of this asset. We are in the design phase and obtaining construction estimates. We expect to share these plans at or before the next earnings call.
Additionally, we are evaluating an opportunity to build the Churchill Downs HRM Annex. Derby City Gaming is demonstrating the strength of our HRM product in the Louisville market, and we believe the market will support a satellite facility that does not materially cannibalize Derby City Gaming. We are excited and confident about all of these projects and view them as likely to deliver strong returns with only modest risk. This is another irony of the pandemic. We stopped our Louisville projects in light of the uncertainty, but we have learned so much with the passage of the subsequent time, and we will emerge with projects that we will monetize better and quicker.
And now I will share some thoughts on the one hundred and forty seventh Kentucky Derby that is just a little over a week away. Our team has worked hard in preparing to welcome spectators back to Churchill Downs for an amazing Derby week. For example, we partnered with Norton Healthcare to offer COVID nineteen vaccinations at our racetrack for the community around the facility, the backside workers, and our team members. There is growing excitement amongst our team members, our community, and our fans with respect to this year's Kentucky Derby. Everyone wants to get back towards normal, and our iconic event is an important step on that road for our state and region.
Derby week will begin with opening night this Saturday evening celebrating Louisville's vibrant arts community with a variety of musicians, dancers, live performances, visual artists, and, of course, horse racing. On Tuesday, April 27, we will celebrate Champions for Change with a special day of racing commemorating black horsemen and thoroughbred racing and as a public commitment to increasing diversity and inclusivity in the sport of horseracing. On that note, we are excited to launch today the Derby Equity and Community Initiative along with our partners at Humana and the Kentucky Derby Festival. The initiative is a combined effort to incorporate more inclusive events into the Derby season with the intention of better ensuring a sense of belonging with respect to Louisville communities that have historically encountered a lack of access to opportunities. The one hundred and forty seventh Kentucky Derby will be held on May 1, the first Saturday in May.
We expect to have sold 40% to 60% of the reserved seating in each seating area depending on our ability in each area to comply with the Kentucky venue limitations. Guests will be asked to wear masks when they are not eating or drinking. In addition, we will have extra resources dedicated to cleaning and sanitizing high touch surfaces throughout the week. All of our reserve seats have been sold as all inclusive to improve our guest experience and to minimize the need for cash handling. We are also selling a limited number of infield only tickets at the traditional pricing levels to provide a more affordable option to attend as well.
NBC Sports Network will provide coverage of the Kentucky Oaks race from twelve to 6PM on Friday, April 30. NBC Sports Network and NBC Proper will provide coverage of the Kentucky Derby from twelve to 07:30PM on Saturday, May 1. We've worked tirelessly to make this year's event very special for our guests, and we look forward to welcoming them back to our historical our historic facility. It's going to be a great and very welcome experience for everybody. With that, I will turn the call over to Marcia.
And when she is finished, we will open the call for questions. Marcia?
Thanks, Bill, and good morning, everyone. As Bill mentioned, I will provide some thoughts on our new segment reporting and our first quarter financial results. Then I will provide an update on our capital management plans. We filed a Form eight ks Tuesday afternoon in which we made two changes to our operating segments for the first quarter of twenty twenty one and going forward. The first change we made was to rename our Churchill Downs segment to our Live and Historical Racing operating segment.
This segment represents racetracks with live racing and historical racing entertainment venues. This operating segment will now include our Churchill Downs Racetrack and its HRM facility, Derby City Gaming, our Oak Grove Racing, Gaming, And hotel venue, which opened in September 2020, our Turfway Park Racing, gaming venue where we are currently building the new HRM facility that Bill discussed, and our Newport racing and gaming venue, which opened in October 2020 and is an annex of Turfway Park. The financial results for Oak Grove, Turfway Park, and Newport were previously included in all other. The second change we made was to rename our online wagering segment as the TwinSpire segment. This is consistent with our branding for horseracing and for sports and online casino wagering.
We're also now including our retail sports betting results from our wholly owned casinos in our sports and casino business within the TwinSpires segment. Our retail sports betting results at our wholly owned casinos were previously included in our gaming segment. This change provides a clearer view of the total profitability of our sports and online casino business. So turning to our financial results, we are very pleased with our first quarter financial results. Our first quarter results are direct reflection of our team's relentless fortitude during the twenty twenty pandemic to position our company for significant organic growth coming out of the pandemic.
Our three business segments combined delivered double digit revenue growth and doubled our adjusted EBITDA in first quarter compared to the prior year quarter. As Bill shared, we also had double digit revenue growth and double digit adjusted EBITDA growth for the first quarter compared to the first quarter of twenty nineteen. Our Live and Historical Racing segment generated $65,000,000 of net revenue in the first quarter, which was more than double the prior year quarter and generated $18,000,000 of adjusted EBITDA compared to $1,000,000 in the prior year quarter. Churchill Downs Racetrack is relatively quiet in the first quarter of each year with no live racing days. Therefore, nearly $36,000,000 of growth in net revenue and the $17,000,000 of growth in adjusted EBITDA for the quarter was from the opening of our Oak Grove and Newport properties and continued strong growth from Derby City Gaming.
We are very pleased with the performance of our Oak Grove and Newport properties since their opening in late two thousand twenty. Derby City Gaming's performance continues to exceed our expectations. The property benefited from the completion of a second outdoor gaming patio, which added 225 HMs in September 2020 and increased operating efficiencies. Our primary competitor also closed for a few days during the quarter due to flooding, which helps bring additional traffic to Derby City Gaming. The TwinFire segment generated $100,000,000 of net revenue, up $31,000,000 from the prior year quarter and generated $22,500,000 of adjusted EBITDA, up $6,500,000 from the prior year quarter.
Our TwinFires horseracing business was $26,000,000 of net revenue increase and generated an incremental $9,900,000 of adjusted EBITDA compared to the prior year quarter. Our horseracing business benefited from a 34% increase in handle compared to the prior year quarter, which in part reflects the impact of the continued shift from brick and mortar wagering to online wagering. Our sports and online casino net revenues increased nearly $5,000,000 during the first quarter, and our operating loss from this business increased $3,400,000 from the prior year quarter as a result of the increased marketing and promotional activities related to our launch in Michigan and Tennessee. And last, our gaming segment's net revenue from only our wholly owned casinos increased $6,600,000 or 4% from the prior year quarter. Our gaming segment's adjusted EBITDA, which includes our wholly owned wholly owned casinos and equity investments in Rivers and MVG increased $34,500,000 or 72%.
Regarding our wholly owned casinos, it's important to note that the temporary closure of our brick and mortar properties beginning in mid March of last year due to COVID nineteen did impact our prior year quarter comparison. In January 2021, Presque Isle and Nemacolin were closed for a brief period of time. All of the gaming properties were operating under state and local restrictions due to COVID nineteen during the first quarter. We have seen a reduction in the restrictions at almost all of our properties. However, there are certain restrictions in place that are still there that limit our full operating potential for our gaming properties.
The margin for our wholly owned gaming properties, excluding Textile Isle and Neiman, colon, increased 15 points compared to the first quarter of twenty twenty. The margin improvement on the same basis for first quarter twenty twenty one compared to the first quarter twenty nineteen was over seven points. Regarding our equity investments in Rivers Casino Des Plaines and MVG, both properties are open and also continue to operate under certain state and local restrictions. As Bill mentioned, Rivers was closed for a few weeks in early January of this year. These two properties generated $10,000,000 of incremental adjusted EBITDA in the first quarter compared to the prior year quarter and also distributed a combined $22,000,000 of cash to Churchill in the first quarter.
Turning to capital management. In the first quarter of twenty twenty one, we spent $5,000,000 on maintenance capital compared to that were primarily related to capitalized improvements to our TwinSpires horseracing technology platform and mandatory items at our gaming properties in Churchill Valley's racetrack. For full year 2021, we continue to anticipate spending $50,000,000 to $60,000,000 of maintenance capital, of which about half is targeted on our gaming properties, primarily driven by our deferral of spending in 2021. We also anticipate spending the majority of the remainder on replacing the turf course at Churchill Downs Racetrack and on continued improvements to our TwinSpires horseracing technology platform. Regarding project capital, for the February, we spent $8,000,000 on project capital, of which more than half was spent on the Oak Grove facility.
The balance of the project capital was spent at Churchill Island's racetrack and site preparation at Turfway Park. For full year 2021, we continue to anticipate spending a hundred and 50 to a hundred and 60 million dollars on project capital of which approximately half is planned for the build out of the Turfway Park HRM facility and the final completion of a few carryover projects related to Oak Grove and Newport as well as some smaller capital projects at our gaming facilities. The balance of the 2,021 project capital is for the capital expansion plans at Churchill Downs Racetrack that Bill discussed. Now regarding our debt and leverage positions, on February 1, we repurchased 1,000,000 shares of our stock from an affiliate of the Duchessois Group. We repurchased the shares for a hundred and $93.94 per share with an aggregate purchase price of a hundred and $93,900,000.
We funded the repurchase with our revolver. We believe that repurchasing large blocks of our shares at attractive prices is beneficial to our long term shareholders and will be accretive to our EPS. In March, we issued a new $300,000,000 Term Loan B and $200,000,000 of senior unsecured notes at very attractive pricing, which we used to pay off our revolver and fund the settlement payment for the Big Fish related legal cases on March 25. We have approximately a hundred and $48,000,000 of excess cash on our balance sheet that we will use for Project Capital and other corporate needs. At the March 2021, we had net letters of 5.3 times, reflecting our increase in debt and the lower level of 2020 adjusted EBITDA as a result of the pandemic.
We were compliant with both of our revolver covenants at the end of the first quarter, even though we have a waiver of these covenants through the second quarter of twenty twenty one reporting period. We anticipate that our net leverage will decrease in second quarter and over the balance of the year and into 2022 as we benefit from the running of the Derby on its traditional date, the May, the continued listing of state and low local restrictions on our gaming and HRM properties, and as we accelerate the growth from our newer HRM properties. I, like Bill, am excited for the hundred and forty seventh running of the Kentucky Oaks in Derby next week. It is truly the most special and magical sporting entertainment event in the world. With that, I'll turn the call back over to Bill so that he can open the call for questions.
Bill?
Thanks, Marsha. Okay, everybody. We're ready to take your questions if you have any for us.
Now first question coming from the line of Brett Andress with KeyBanc Capital. Your line is open.
Good morning. Thanks for taking my questions. Starting off on the Derby, obviously going to be a unique year again. And maybe normally we would debate some of the finer details like weather, field size, things like that. But just how much revenue visibility around the event do you have this year maybe compared to a normal year?
And then the second part of that question is industry handle obviously continues to be strong. In person wagering is going to return to the Derby. Just how do you think about some of the puts and takes around that as it relates to Twin Spires?
Sure. So I'll take your first question. There's a couple of questions within that. I'll take the first one first. Revenue visibility.
Our revenue visibility is really excellent because we know exactly how many seats we're able to sell in different areas. We understand our sponsorship numbers. And we have a pretty good feel for wagering, although there may be some variability on that just because the circumstances are a little bit different this year like they were last year. So so generally, as we go into the Derby, there's a fair amount of of of confidence and understanding of of what we should be able to expect. And we've largely telegraphed some of that in my earnings comments and and and other forums so that so that people know, primarily, that we're not able to have the full contingent of fans that we normally would have because of because of COVID.
With respect to the puts and takes on wagering, you know, the country has opened back up for for fans. You know, there are there are limitations in, different jurisdictions. So as people return to brick and mortar facilities, that's one important place that people wager. And while they couldn't do that as much last year, we weren't necessarily happy about that because not everybody is gonna is gonna migrate to online. So so we're glad that the facilities are back open generally across the the country, even though there are restrictions within those facilities.
And, of course, channel migration to online has been a big theme for us over the last year. So that's an important component for us and an important emphasis for us as well. So so we're we're optimistic about that.
Got it. Okay. And then second, you know, listening to some of your sports betting and online gaming peers, there seems to be a desire, I think, for some of them to get into the horse wagering business. So as we begin to think about the possibility of new entrants, it would be helpful for me if you could maybe just talk through the competitive moats that you see around the TwinSpires business and what new entrants could even mean for the industry.
Well, generally, we like the idea of more fan participation and wagering on horse racing. Generally, we think that's a good thing for our game, know, for our company overall, and for Twin Spires. It's it's a great gambling game, but it's different than other forms of sports wagering from a couple of respects. First, from a legal perspective, it has a separate legal regime. It has a a federal law that sort of governs how horse racing wagering can happen across state lines, and it and it gives the content producer clear intellectual property rights with respect to any wagering activity on on the content provider's content.
So so deals are required with the horse racing providers, you know, the the tracks and their horsemen in order to ever take wagers on their content. So it's a different legal construct, and that's that's an important difference or moat to to the rolling out of this product more broadly. Secondly, wagering on horse racing is pari mutually based. It's not fixed odds based. So the technology is different.
Generally, the platforms you see out there across sports wagering providers, they're not quite set up at this time to take pari mutuel wagering. That's that's a technology challenge that's certainly surmountable, but but it hasn't been undertaken yet. So so there are some there are some tweaks and differences about pari mutuel wagering and horseracing that that are out there that over time might be might be surmounted by some who are willing to do the work and cut the necessary deals in order to do so. And we're never afraid of we're never afraid of that. We'll we'll look to find opportunities within that to better monetize our content and and and further further the economics of TwinSpires as well.
Alright. And then in a in the spirit of things going back to normal here, can can we get your pick for for the derby?
Oh, no. I I never do that because that's incredibly unfair to these poor horse owners out there who would then be cursed with with me having picked them as as my favorite. That I wouldn't do that to people. It wouldn't help anybody. It wouldn't help that poor horse owner, and it would really would really screw over you betters out there who would maybe listen to my advice.
So I'm the last person that that that can give that advice. But it's a really competitive field this year, so So it's actually pretty exciting. For those that know the game, this is going to be a lot of fun this year. I
was just looking for an answer there. All right. Thanks for taking my questions.
Go to TwinSpires.
They've got some tools that can help you out. Thank you. Thanks for those questions.
Our next question coming from the line of Vin Bharat with Bank of America. Your line is now open.
Thanks and good morning guys. Congrats on another great quarter. Starting off, I just wanted to ask a little bit about the return of customers you've seen on the regional casino side and also at the HRM properties in Kentucky. It'd be great to just get some color around customer behavior and demographics of kind of are these rated players you've seen before? Are you seeing any return of the older demographic yet?
Just be great to get a sense of kind of what's driving demand there. Thanks.
So, I'm gonna generalize. Generally, there's been more unrated play than traditionally we've seen. And generally, our older players, the older demographics clearly demonstrated in the data, are the most reluctant to return, but they're starting to return as we believe the vaccination rollout across the country moves along.
Great. That's very helpful. And then I guess thinking about the Derby coming up this week, can you just help us think about some of the margin impacts of the restrictions that you're facing this year? And how we should expect that kind of to actually flow through to P and L?
There are puts and takes when it comes to the margins with respect to Derby. We're doing more cleaning, etcetera, but also food and beverage is packaged with with the tickets. So I I I don't I I suggest that you not worry or focus much about about margins. I think that's not a big driver in trying to predict this year how Derby will will perform economically.
Great. Thank you. That's it for me. And definitely looking forward to the Derby getting back to back to normal in 2022.
Us too. Thanks, Fin.
And our next question coming from the line of Joseph with Susquehanna. Your line is open.
Okay. Thank you. Good morning. Good morning Bill. Good morning Marcia.
First question on the HRMs. You know, Derby City Gaming, you know, record quarter despite, the 60% fire code restriction, as you suggested, Bill, say you're seeing more unrated players. Just trying to ask where you see, say, that incremental demand or any magnitude or measurement of it that you can give us if the fire code restriction were to be removed? Meaning do you have certainly excess demand on the weekends, during weekdays? Any commentary you can give us, I'd be curious.
I would talk about it a little bit more broadly than that. It's just a property that's not close to maturity yet with respect to customer awareness in our market, with respect to customer familiarity with the quality of the product, and with respect to the the evolution of the product itself. You know, we're still working hard to introduce more product, more games, more manufacturers on the floor, more innovation. So so so, generally, there are a lot of factors that are moving in the right direction, but I'd start with the factor of it's it's still new. It's not it's not close to maturity, and that's a really good thing.
If you look at the the size of, say, the Louisville market, and that's to take that market, you know, we we're also down there at Oak Grove pulling out of Nashville and and up in at our Newport facility pulling out of the the Northern Kentucky Cincinnati region. But just looking at Louisville, you get a sense of of the market based on what the activities are on the other side of the river, and that's all fair game for us to go after, their economics and their customers. And then we always, derive confidence from knowing the size the the pro the historical size of the market by looking at their performance. But we think the market's even bigger than that. But that helps give a sense of what our targets are because certainly we exist in competitive markets and we intend to challenge competitors in our space, particularly those that have been around longer than us.
So there there are lot of good factors. You know, we've we've built greenfields before, and and this is this is a great place to be in the evolution of a greenfield because we know we've got so much more to go, but but we've gotta go prove it. So the the noise around the pandemic and fire code restrictions and and capacity constraints on weekends and whatnot, that's relevant. That's important, but I view that as less significant than just generally where we are in the stage of that property.
Makes sense. And on Oak Grove, you do have clearance regulatory clearance to have over 1,300 machines there. And the other piece I wanted to ask is how many of those machines say were available given kind of like the reopening cadence and obviously it's a new property that you have to market. But what is the right way to think about that just in terms of how many of those machines were available and or deployed at that location?
Yes. So there are about thirteen twenty five machines on the floor. And somewhere around the the high nine hundreds are actually turned on. That's primarily driven by COVID related restrictions and sort of proximity of machines to each other. So that's the current state of the of play on on that facility floor.
Now if you ask me about every single floor, I'm not gonna be able to answer that. So please don't ask me for every one of our floors, but that one, you know, that that that that's a facility that Bill Mudd and the team pay a lot of attention to. So because we're so focused on growing it, so I happen to know those numbers off the top of my head. Yes.
Okay. And TwinSpires and as you deploy additional, say, menu options, right, and new products, OSVI Gaming, I would imagine there is a hell of a lot of horse racing customers that you have in Tennessee. And I guess my question primarily is within TwinSpires and say you're offering for OSV in Tennessee and so forth kind of going forward and this applies obviously to other states, where are you in the development of a shared wallet? It seems naturally there could be a real weapon for cross promotion. As you suggested maybe in an earlier answer, there obviously is some software complexity to try to pair the pari mutuel and the fixed odds racing or fixed odds betting calculus together.
But I'm wondering where you are in that.
Yeah, we know how to do it. And it is a priority, and it is something that we think is important. But it's not something we're addressing as a top priority right now. We've been focused on converting to GaN and CAMBI and testing that technology, making sure that works. And that'll be our priority for the near term, as I covered a bit in my script, as we get comfortable making sure that that technology is robust and scalable, and I'm sure it'll be, and then as we test our marketing and and other plans with respect to, you know, traditional sports wagering and online casino.
As soon as we can get around to the common wallet and that kind of exercise, we will. But right now, we just have a lot to do. So we it's not a it's not a circumstance where you can do everything at once. So that's how we prioritize.
Understood. Thanks very much.
Our next question coming from the line of David Katz with Jefferies. Your line is now open.
David Hi, good morning everyone. Thanks for all the information. I wanted to just talk about Illinois in a broad sense. I know that there's a process underway with Arlington and I'd love to get a sense for even a neighborhood of timing with respect to that. And there are sort of other license processes that obviously started pre COVID and whether they've suspended themselves indefinitely or what would you like to see come out of those, whether it's Waukegan or downtown?
Please.
Sure, David. Good to talk to you. So with respect to the Arlington Park land sale, preliminary bids or preliminary bid date has been set. And as those bids come in, in the second quarter, we'll evaluate them and figure out next steps. I think the ultimate conclusion of that process is something I can't responsibly predict for you because we'll have to see the nature of the bids and if the property gets bidded, split up between multiple bidders or if it's a single bidder, etcetera.
So there is a process. The process is underway. The preliminary indications are are due in the second quarter, and we'll take it from there. And, all's good on that front. It's just this is what it takes to to run a complex process to to sell a big piece of land with a lot of value like that one.
With respect to opportunities on the gaming side in in Illinois, my understanding in the Waukegan process, Bill Mudd and I were talking about this this morning, I think the the RFP, window has closed for for, bankers to submit a response to the Waukegan RFP request to to be the banker to help to help the gaming board make their decision. I understand it's a six month window from the time that banker is selected whenever the the banker is selected. So that's all I know in that process. That's not a prediction. That's just telling me what I know.
That process has obviously taken longer than what we might have originally thought when we made our original bid, but we'll have to see. And then with respect to other opportunities in the state, I don't have anything to report. We're monitoring like you are and, you know, having discussions where appropriate, but we're we're all really interested to see what happens with respect to Downtown Chicago, and and we'll pay attention to that to see if if there's opportunities for that and whether there's opportunities to move the racetrack elsewhere in the state as well. But I don't have anything to to to report on that at this time other than we work on it and think about it every day.
Appreciate that. And with respect to Kentucky, I know you made some commentary during your remarks. And I believe I heard correctly that the notion of the all suite hotel is being tabled for the time being. I just want to make sure that I heard that correctly. And I suppose why?
And what is the vision for the Derby and how these properties might even interact with each other across Kentucky, right? I'm sort of looking for a grand vision of Kentucky as a whole, if you can.
Yeah. We'll lay out a more wholesome picture of of projects with Churchill Downs Racetrack and Burby City Gaming at or before our next earnings call. We're still going through some of the some of the pricing and some of the construction. But, ultimately, if we back up and talk about what we had previously been proposing, a large hotel based project at the track, I I don't think it comes as any surprise to people out there. There's a lot more risk in a project like that just because of the disruption of travel and and movement around the country.
So we wanna be thoughtful and careful about that and always make smart decisions. So as as we challenge, as we always do, we've said that on these calls, we always challenge our assumptions. We always revisit and retest every assumption. We think they're just better projects for us to do that are higher return, lower risk, particularly in the current environment. So we've reordered and reimagined what we wanna do and and segmented them, which always helps because we run the derby every May 1.
And and so we always have to be ready to run the derby. So we've segmented them into three different projects for the track. So I think I I think I have to leave it at there. I can't give you a a a big Mhmm. All encompassing vision because you'll get that next time when we price that out, and we can talk specifically on on returns and costs associated with those returns.
But I just ask that the investors, be patient with us. Give us the benefit of the doubt. We've been we've demonstrated we've been good at these investments. We've been thoughtful about these investments for the racetrack, and we've got some really exciting things. And it was back to a point I made in my prepared remarks that this pandemic obviously has been a really terrible thing and disruptive to all our families and and all our communities that we participate in.
But ironically, it gave us time to think and retest and rejigger some of the projects we thought we should do, and it's made us a better company. We'll get a better return. We're more focused on cost and return, and we'll do better with our projects going forward because we've had time to test and learn coming out of this pandemic.
Right. Appreciate that. And one last one, I may. Regarding digital and just the digital strategy, whether that's OSB, iGaming or TwinSpires, look, there's a population of entities out there that are running at certain speeds. Obviously, that bears a cost and a risk profile.
How have you thought about the notion of doing it yourself versus partnering versus using B2B providers, etcetera? And how you're pacing that OSB and iGaming business relative to admittedly what's going on now is an awful lot of enthusiasm.
Yes. It's a really good question, also a really hard question. I think partnerships, we have them with respect to technology. We have a technology partner. We have elected not to go invest in our own technology, and that's consistent with how we started businesses here in the company in the past.
You know, in the beginning, make your cost structure as variable as possible so so you pay by the drink, and and and you can manage costs as you get into the business so you don't overcommit and overspend early on. So our technology partners, we've switched. We're now with GAN and Camby, and, we feel pretty good about that. So we feel that that's very stable, and and we're optimistic about that. When it comes to other sorts of partnerships, marketing partnerships or or equity partnerships, For us, that just comes down to a question of do we think that's gonna lower our cost per customer acquisition?
Does that do we think that that'll save us that that's a cheaper, more effective way to acquire customers than marketing on our own. And so those are always be deals that we look at and revisit. So one of the challenges in the space that people have in the space have have approached differently. And and by the metric of market cap, it's been really beneficial to a couple. But we've we've looked around and looked at different deals and really felt that that doesn't really change at this point our cost per customer acquisition or give us confidence that it'll change our cost per acquisition.
So we haven't pulled the trigger on it on any of that. But over time, we might. But we're always you know, we're we're we're an established company. We have multiple business models. We wanna be very careful about not falling victim to over enthusiasm.
We wanna make sure that we invest in businesses that we're going to drive an acceptable return for our investors. And so we're confident we should be playing in this space. We're being very methodical. We're being very patient. We're being very careful, and be patient with us.
Give us give us a chance. We we're we're being very thoughtful in spending as much time on this as as any of our businesses, but enthusiasm is not a substitute for demonstrated returns. So we want to make sure we see a path to get those before we commit incredibly seriously in some of these jurisdictions.
Understood. Appreciate it. Thanks very much.
Thanks, David.
And we have a follow-up question from Brett Andress from KeyBanc. Your line is open.
Following up on that last Churchill investment question, would the plan still be an HRM operation on the Churchill property and now plus an annex in the surrounding area? I just want to make sure I'm not crossing any wires. And I guess what analysis drove you to the conclusion that, you know, that market can absorb another HRM facility?
We always have the right to to put HRM facilities at the racetrack. But as the crow flies, the racetrack is within five miles of Derby City Gaming, and they're both in that sort of South Southeast portion of the city. So so that's always there. We may pursue that. I'm not discounting that for the future as as events unfold, but we have something in Derby City Gaming that just flat out works.
Just flat out works. And when you find that in business, you should invest in what works. And Derby City Gaming really works for us. So so our our predisposition is to is is to look hard at more investment there. When it comes to the annex, Bill Mudd and his teams, you know, that we have a lot of analytics on where our customers come from, where where do we see ZIP codes in the metropolitan area that we don't draw from that we think maybe go across the river.
We've done a ton of work to figure out where are the strong spots for Derby City Gaming and where are the weak spots, and where do the conventioneers who come to the city go? Do they go across the river? Do they go to Derby City Gaming? Where do the transient folks that come through Louisville go? We've been running all of those questions because we do have that annex, which is independent of putting machines at at the the racetrack itself.
So we have that that annex that we can deploy, and we would look to do that, obviously, to maximize the collective return out of the Louisville market, not over cannibalize and not cannibalize to any material in any material respect what we have going on at Derby City Gaming.
Very helpful. Thank you for the clarification.
Our pleasure.
That's all the time we have for questions today. I'd now like to turn the call back over to mister Bill Garzvanjan for closing remarks.
Thank you to to all of you out there who are interested in our company and who have invested in our company. We're humbled and grateful for it, and we'll do our best to be good stewards of your capital. Please stay tuned. Please tune in for for the derby on May 1. It's it's gonna be a great one, and I I think it's really the first event since since COVID hit in full force of this caliber and of this type with with fans in the seats.
So check it out. We'll do it right. We'll make you proud. Thanks very much, everybody.