- Record 2025 Financials: Net revenue and adjusted EBITDA exceeded 2024 records, with free cash flow hitting $700 million, returning $456 million via share repurchases and dividends.
- Kentucky Derby Success: Generated record handle and TV ratings, with 2026 expected to add $15–$20 million incremental adjusted EBITDA from growth initiatives.
- HRM and ETG Expansion: Historical racing machine (HRM) and electronic table games (ETGs) drove record adjusted EBITDA, with $180–$200 million planned for Rockingham Casino investment.
- Strategic Capital Allocation: 2026 capex of $90–$110 million (maintenance) and $180–$220 million (projects), aiming to lower net leverage to below 4x by year-end.
- Exacta Growth and AI Investment: Exacta technology business expansion and AI adoption to enhance customer experience, supporting international Derby Road to the Derby initiatives in the Middle East.
Segment Performance
The company's HRM properties in Kentucky and Virginia delivered record adjusted EBITDA, driven by the continued evolution of the product and market expansion. The Wagering Services and Solutions segment adjusted EBITDA increased 7% in 2025, driven by the growth of the Exacta technology business. The company's success with Exacta is expected to continue, with plans to expand into new markets.
Growth Prospects
The company is optimistic about its growth prospects, driven by the Kentucky Derby, expansion of HRM venues, and growth of the Exacta technology business. The company expects the Derby to generate $15 million to $20 million of incremental adjusted EBITDA in 2026. The introduction of electronic table games (ETGs) is also expected to enhance the offering and drive growth.
Valuation
Using the current valuation metrics, the company's P/E Ratio is 17.21, and the EV/EBITDA is 6.74. The company's ROE is 51.78%, indicating strong profitability. The Free Cash Flow Yield is 9.44%, suggesting that the company is generating significant cash flow. Analysts estimate next year's revenue growth at 3.4%, which is a moderate growth rate. The company's strong financial performance and growth prospects are expected to drive shareholder value.
Capital Allocation
The company generated strong free cash flow in 2025 and returned over $456 million to shareholders through share repurchases and dividends. The management team considers various factors, including the share price, when evaluating capital allocation and new projects. The company may consider a more formulaic approach to share repurchase going forward, indicating a commitment to returning value to shareholders.