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Churchill Downs (NASDAQ:CHDN)
Q1 2020 Earnings Call
Apr 30, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, ladies and gentlemen, and welcome to the Churchill Downs, Incorporated 2020 first-quarter earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded. I'd now like to introduce your host for today's conference, Mr. Nick Zangari, vice president, treasury, risk management, and investor relations.

Nick Zangari -- Vice President, Treasury, Risk Management, and Investor Relations

Thank you, Stephanie. Good morning, and welcome to our first-quarter 2020 earnings conference call. After the company's prepared remarks, we will open the call for your questions. The company's 2020 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-K.

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.

Bill Carstanjen -- Chief Executive Officer

Thanks, Nick. Good morning, everyone. With me today are several members of our team, including Bill Mudd, our president and chief operating officer; Marcia Dall, our chief financial officer; and Brad Blackwell, our general counsel. Just nine weeks ago, we shared our 2019 year-end results and our growth plans for 2020 and beyond.

We talked about the exceptional year we had, and we were just as excited as we looked forward. As we've all seen, however, the global pandemic COVID-19 has changed lives throughout the world and inflicted harm on our citizens, our economy and companies throughout America. If there's one point I'd like you to understand today, it's this. When the relevant government authorities permit the reopening of our businesses, Churchill Downs will be prepared to do so, following all the best-in-class policies and protocols to keep our customers, employees and communities as safe as we responsibly can.

Our team is determined to attack the challenges imposed by COVID-19 and manage through them with determination and creativity. As the daily routines of Americans changed over the last month, so did the business landscape for our company. Over a period of several days, we closed all of our gaming properties. We also discontinued racing at Turfway Park and Fair Grounds Racetrack, our only two tracks conducting live racing at the time.

We elected to keep the backstretch of these facilities open in order for the horses and the people who take care of them to have a place to stay. It was the right thing to do. Prior to closing our properties in March, our company had experienced very strong results. While our final first-quarter numbers were significantly affected by the closures of our brick-and-mortar operations, as will be our second quarter, we immediately took the necessary actions to reduce a broad array of expenses and ensure significant liquidity.

With our exceptional balance sheet and careful focus on managing cash expenses, we are strongly positioned to weather this period and will emerge a more efficient and focused company with a strong roster of growth opportunities. Today, I'll update you on several important topics, and then Marcia will walk you through the financials for the first quarter and provide an update on our capital management and liquidity. Then we will be happy to take your questions. I'll begin with an update on the Spring Meet at Churchill Downs Racetrack.

After careful collaboration with the governor of Kentucky, Andy Beshear, and the Kentucky Horse Racing Commission, we've developed a series of comprehensive safety protocols under which we will open the backside of Churchill Downs Racetrack on Monday, May 11, and begin live racing on a spectator-free basis soon thereafter, on a date we expect to announce shortly. We are among a very limited number of businesses to open in the first round in Kentucky, and our team has worked very, very constructively with the governor's office to earn that privilege. Racing with spectators, and, of course, opening Derby City Gaming, will follow as soon as the relevant authorities conclude it is safe to do so. We support their careful and deliberate process and will continue to be active and constructive participants in the development of the appropriate protocols.

As a result of the closure of our gaming properties, we have significantly reduced our maintenance and growth project capital expenditures for 2020. We have eliminated nearly all maintenance expenditures, except for mandatory items, until our properties are reopened. Regarding growth project capital, we have elected to continue investing where it makes sense and stop where the timelines to completion are far out, the bulk of the expense has largely not yet been incurred or, in the case of hotel developments, we need to revisit assumptions regarding the occupancy rates and travel patterns going forward. I will talk about the larger projects one at a time.

Oak Grove HRM facility and hotel. We're going to finish this historical racing machine and hotel facility at Oak Grove with a planned opening of September 1 or as soon thereafter as permitted under state and local protocols. We have put the equine events center, outdoor concert venue and other noncore, still unfinished elements of the build-out on hold for now. We will be incorporating a combination of Ainsworth, Scientific Games and IGT historical racing machines into this facility when it opens.

Turfway Park and the Newport extension. As you saw in our recent press release, we've received the required approvals to build a simulcast and historical racing machine facility in Newport, Kentucky under what is referred to as an extension of the racing license associated with our Turfway Park facility nearby in Florence, Kentucky. This is analogous to our Derby City Gaming property located close to and associated with Churchill Downs Racetrack. We will build the Newport extension in an existing shopping center, and we hope to open in the fourth quarter of 2020.

The revenue generated from this facility will support the purses for future live race meets at Turfway Park. We will open with the simulcast area, a gaming floor with approximately 500 historical racing machines and a bar area. This creates 70 full-time equivalent jobs in the Northern Kentucky area. As a reminder, the Kentucky Horse Racing Commission had recently voted to amend state regulations to allow for Kentucky licensed racetracks to have a second location to conduct simulcasting and historical racing under certain conditions, subject to their approval.

Ultimately, the addition of the historical racing machines at Derby City Gaming, Churchill Downs Racetrack, Turfway Park, its Newport extension, and Oak Grove will significantly increase jobs and tax revenues in the Commonwealth, increase the purse money for the horses that race at our racetracks, attract more money to be wagered on our races because of the increase in the quality of our racing product, and increase the value of thoroughbreds for breeding purposes, which is all good for the Kentucky horse industry, as well as for the commonwealth of Kentucky. While we are proceeding with the Newport extension, we will continue with the initial stages of our main Turfway Park historical racing machine facility. Right now, we are demolishing the existing grandstand and will replace the current artificial racing surface with a new state-of-the-art artificial surface called Tapeta. We have placed a temporary hold on the continued architectural design phase of the new grandstand and historical racing machine facility while we complete this initial work.

We are not surrendering much time from the completion date, and certainly, it makes sense to balance conserving cash with ordinary course growth capital efforts. We can pause on the design work without losing much time, so we have. As the state opens up and we complete the teardown of the existing grandstand and the installation of the new racing surface, we expect we are likely to pursue the next phase with all deliberate speed. Derby City Gaming smoking patio.

We also announced that we will be adding a second outdoor smoking patio on the south side of our existing Derby City Gaming facility that will provide for approximately 200 additional historical racing machines by early fourth quarter of 2020. Our existing smoking patio outperforms the gaming floor, and it is clear we will substantially benefit from more smoking positions. We will be able to incorporate more of the new titles from our two new suppliers of machines, Scientific Games and IGT, through this expansion. We introduced 24 machines from Scientific Games on the Derby City Gaming floor in late February, and we're very pleased with their performance.

Rivers Des Plaines Casino in Illinois. The Rivers Casino is in the process of building a parking garage in connection with the recent authorized gaming expansion, allowing for an additional 800 positions. It's already 90% complete. As you might remember, 130 additional positions were added in the fourth quarter of last year to the existing facility.

We have now paused on the planning and execution of the expansion necessary to accommodate the additional 670 additional positions. We have also paused on the parking garage, but that is a decision we will continue to think about given it is fairly far along and is a prerequisite to the expansion we absorbed at the other 670 positions. Miami Valley Gaming. We previously announced that MVG would be expanding their gaming floor, adding a garage and adding a hotel.

We've put this on hold for now. Churchill Downs Racetrack. We've completed the quarantine barn and medical equine facility. We have also completed the high-end renovation of the six-floor area which is next to and comparable to our exclusive mansion area.

This new space is called the Matt Winn Steakhouse and seats approximately 350 people. We have decided to delay further build-out of the hotel and historical racing machine facility at Churchill Downs Racetrack until we have better visibility into the full impact of the COVID-19 pandemic on the regional economy and until after we have completed these next two derbies, which will now be run in fairly rapid succession this September and then next May. We remain extremely committed to investing in the build-out of Churchill Downs Racetrack. However, we feel it is prudent at this time to pause this investment until we have greater clarity on timing for a return to economic stability.

As this is a project where a lot of cash would be going out the door for construction, with the revenue from opening still 18 months or more away, it really makes sense, from a cash perspective, to hold onto the funds for now. Churchill Downs Racetrack Virtual Derby Party and the 146th Kentucky Derby. We announced last week that we had partnered with NBC to develop and host a day-long at-home Kentucky Derby party on May 2, the original date for the 146th Kentucky Derby, with the goal of raising $2 million for COVID-19 emergency relief efforts. Viewers of NBC's broadcast from 3:00 to 6:00 p.m.

Eastern Standard Time will experience the magic of the Derby while revisiting the 2015 Kentucky Derby that began American Pharaoh's historic Triple Crown run. There will also be lots of other updates and surprises during the telecast. The NBC broadcast will highlight Churchill Downs' first ever virtual horse race, the Kentucky Derby Triple Crown Showdown, a computer-simulated version of the Derby under the TwinSpires, featuring the 13 Triple Crown winners throughout history, with the outcome of the simulated race determined by a random number generator, factoring in odds based upon the relative past performances of each horse. Fans can vote on their favorite horse to win at kentuckyderby.com, enter to win a deluxe derby hospitality experience, and can make a charitable donation to COVID-19 emergency efforts.

The Churchill Downs Foundation will match up to $1 million of charitable donations made by fans related to this event on kentuckyderby.com. Please watch NBC this Saturday and enjoy what I think will be great fun for everyone. Our team continues to plan and prepare for the 146th running of the Kentucky Oaks and the Kentucky Derby on Labor Day weekend, September 4 and 5, as we'd previously announced. This will mark only the second time in the 145-year history of the event that it has not been held on the first Saturday of May.

The other time was at the end of World War II in 1945. NBC has been a great partner throughout the process that led to this change and will be broadcasting the Derby as they normally do every year. Our team relishes the challenge of the September Derby and is deeply committed to holding the very best Kentucky Derby ever and certainly the most unique in any of our lifetimes. September 5 is still four months away.

A lot can happen in our country, and I expect that it will. We will adjust and respond to whatever the circumstances and will work tirelessly with state and local officials to develop any and all necessary protocols and procedures to make our event a safe and responsible spectator event. The Derby has been held every single year since 1875. Most years, it's easy.

This year, we have to work hard with our state and local leaders to make it everything it can be, and we will do that. The impact of the Kentucky Derby extends well beyond the TwinSpires at Churchill Downs. It is an incredibly important time for the city of Louisville and the Commonwealth of Kentucky, culturally, economically and with respect to our time-honored traditions. As I said, we are working extremely closely with federal, state and local authorities, as well as leading experts, to take all necessary steps to protect the health and safety of all who attend and participate in the Derby.

The reopening of our gaming properties. In every state where we have a gaming facility, there are ongoing discussions that will impact when and under what conditions gaming facilities will reopen. We are active participants in those discussions. It is likely that no two states will be exactly the same with respect to timing and operational protocols.

But certainly, all or most states are studying what others are doing, and thus, we are likely to see some commonalities between jurisdictions. We remain optimistic that reopenings are on the horizon, but we do not control this. We only control our participation, preparation and commitment to the reopening process. When the state and local authorities in our various jurisdictions are ready, we will be ready as well.

Before I turn the call over to Marcia, I'd like to share a few brief additional thoughts on our first-quarter earnings. One of the things that makes us unique in the gaming space is the diversification of our businesses. Our TwinSpires business, within the online wagering segment, has grown significantly as more individuals bet online, particularly with so many brick-and-mortar betting outlets closed and, perhaps, with fewer entertainment options in general. Even as the number of racetracks that are actively running races has declined, TwinSpires really capitalized.

This has been even more true as we've progressed through the second quarter. We have been very pleased, especially since the quality and quantity of racing content has declined. We are excited for Churchill Downs Racetrack to open sometime in May, which will provide a further boost to TwinSpires.com. We have always been thoughtful stewards of our shareholders' investment in our company.

We have maintained a capital structure with modest leverage that has provided flexibility to invest in our existing businesses and also to pursue strategic investments to create long-term shareholder value. We are well-positioned to navigate these difficult times we now face as a result of the decisions we've made over the past number of years. We have enhanced the diversification of our earnings in our three core segments and created a pipeline of organic investments and greenfield opportunities that will still exist for our company when cities and states begin to reopen for business. We are built to get through this and succeed over the long term.

We appreciate all of our team members, customers, partners and community and government leaders who are working with us through these challenging times. Together, we will reopen our properties again over the coming months and gratefully welcome back our employees and guests. Marcia?

Marcia Dall -- Chief Financial Officer

Thanks, Bill. And good morning, everyone. Our leadership team has always had a commitment to maintaining a strong balance sheet with relatively low leverage in relation to others in the gaming industry and the capital structure that provides flexibility to support organic growth and enable our business to be nimble through different economic cycles. Our focus on our three core segments, Churchill Downs, online wagering and gaming, has provided strong and consistent growth from diversified earnings streams as an entertainment company.

Our commitment and focus, along with our leadership team's resilience, have enabled us to respond to this unprecedented pandemic crisis with actions that have helped preserve and provide additional financial resources to our company to weather these difficult times. As Bill discussed, as a result of the COVID-19 pandemic, in mid-March, we began to close all of our wholly owned gaming properties and certain horse racing-related operations. Prior to the beginning of the property closures, our adjusted EBITDA results for the first two months of the quarter were tracking significantly ahead of last year's quarterly results and ahead of our expectations. We benefited from a full quarter of our equity investment in Rivers Des Plaines, strong growth quarter over quarter at nearly all of our wholly owned gaming properties and for Miami Valley Gaming, continued growth from Derby City Gaming based on gross revenue per machine per day, and ongoing best-in-class gaming margins and strong quarter over quarter growth and wagering on TwinSpires.

As you can see from our press release and 10-Q, the primary driver of the reduction in adjusted EBITDA for the prior-year quarter is due to the overall impacts of the property closures in March. Bill discussed some of the decisions we made as a result of the property closures. We have aggressively reduced expenses relating to our gaming-related properties. We have furloughed most of our gaming property team members, and we've implemented salary reductions for all remaining salaried employees across our entire company based on a graduated percentage, with the highest-earning salaried employees taking the highest percentage reduction in salary.

We've also eliminated discretionary spending and have worked with our business partners to obtain discounts or other favorable terms to reduce our cash burn while our properties are closed. Our team has approached the reduction in spending from the viewpoint that all spend is variable spend and an opportunity for reduction in light of the sacrifices our gaming property team members are making during these difficult economic times. Based on these expense reductions, we have a monthly burn rate of approximately $16 million, which includes operating and corporate expenses and interest expense. This amount excludes working capital and capital expenditures.

This burn rate can be further reduced should we need to make further reductions. As Bill discussed, we've also significantly reduced our maintenance and project capital. We spent $9 million on maintenance capital in the first quarter, almost all of which had been spent by the end of February. We've eliminated maintenance capital spending, except for mandatory items, long lead time items and capitalized labor related to improvements to our TwinSpires technology platform until our properties are reopened.

We will reevaluate our total year maintenance capital spending projection after our properties have reopened, and we will provide an update on our next earnings call. We spent $39 million on project capital in the first quarter, almost all of which was spent on the Oak Grove facility and the backside projects, six-floor renovation and the initial phase of the First Turn hotel and HRM project at Churchill Downs Racetrack. As Bill discussed, we have paused project capital, except for investment necessary for projects that have near-term adjusted EBITDA growth potential with high returns. These projects are finishing the Oak Grove HRM and hotel facility for September opening; building the Turfway Park extension in Newport, Kentucky that will be ready to open in the fourth quarter; as well as finishing the initial stages of our main Turfway Park facility, adding an additional smoking patio at Derby City Gaming that will be ready to open in early fourth quarter; and finishing the six-floor renovation at Churchill Downs Racetrack in time for the 146th Kentucky Oaks and Derby on September 4 and 5.

We remain committed to building the hotel and HRM facility at Churchill Downs Racetrack, as well as the Turfway Park HRM facility. However, it is prudent at this time to pause these projects until we can have better clarity on the near- and longer-term impact of this crisis on the U.S. and global economy. Based on the current environment, we are planning to spend project capital of $180 million to $220 million in 2020.

We will provide an update on our next earnings call. At the end of March, we had net leverage of 3.4 times, which is net of the $688 million of cash that was outstanding on our revolver. As you can calculate from the numbers I've provided, you can see that even with this significant level of project capital and an ongoing property closure scenario, we have cash liquidity well beyond the next 12 months, with the flexibility to adjust the capital spending as necessary in the coming months. Regarding our credit facility, we obtained an extension and a lower pricing grid from our revolver from our bank partners on March 16.

And we have no long-term debt maturities until the second half of 2024, except for $4 million of annual amortization of our term loan B. We have two maintenance financial covenants in our revolver, and we were in compliance with these covenants at the end of March. We have proactively obtained a waiver for these covenants through the financial covenant reporting period ending June 30, 2021 with modified covenant calculations for the reporting periods ending September 30, 2021 and December 31, 2021. As part of the waiver agreement, we've agreed to a minimal liquidity requirement of $150 million, and we agree to refrain from share repurchases until we are no longer under the waiver agreement, either through compliance with the covenants or by opting out of the waiver agreement.

We've proactively obtained this waiver due to the rescheduling of Derby Week from second-quarter 2020 to third-quarter 2020 and the uncertainty regarding the timing of the reopening of the gaming properties in second quarter. It is important to note that the shift of Derby Week from second quarter to third quarter will impact comparability of our quarterly financials in the second quarter and third quarter of this year, as well as next year. And finally, on our last earnings call, just 60 days ago, I discussed a list of organic projects for which we have good line of sight to the projected economics. When the states that our properties are in reopen for business, we are in the unique position of having a significant number of opportunities to support our long-term growth.

For example, we will still have many opportunities to create unique experiences for our customers to grow Derby Week every year and to add the hotel and HRM facility at Churchill Downs Racetrack at the appropriate time. We will still have the opportunity to expand historical racing machines in Kentucky, at Derby City Gaming, Turfway Park and Oak Grove, with top-tier titles from additional manufacturers, which will help increase personal need for our racetracks, support the horse racing industry in Kentucky and increase jobs and tax revenues in the commonwealth. We will still have the opportunity to expand Rivers Des Plaines and the potential new casino expansion opportunity in Illinois with our Midwest gaming partners. We will still have an industry-leading online wagering platform for horse racing, with brick-and-mortar gaming facilities and market access deals in key states, coupled with an experienced team, leading the expansion of sports betting and iGaming state by state.

We will still have a diverse portfolio of smaller, wholly owned regional gaming assets that collectively have scaled to a level that enables our gaming leadership team to manage these properties efficiently. And most importantly, we have a great team that is dedicated to delivering long-term shareholder value. With that, I'll turn the call back over to Bill so that he can open up the call for questions.

Bill Carstanjen -- Chief Executive Officer

Thank you, Marcia. Stephanie, I think at this point, we're ready for everybody's questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] And your first question is from the line of Dan Politzer with JP Morgan.

Dan Politzer -- J.P. Morgan -- Analyst

Hey, good morning, everyone, and thanks for thanks for all your commentary.

Bill Carstanjen -- Chief Executive Officer

Good morning.

Dan Politzer -- J.P. Morgan -- Analyst

So my first question is on the Derby. It's relatively high level. But obviously, we're in uncharted quarters here in terms of uncertainty. I was hoping you could maybe give some high-level thoughts around just how you're thinking about what the event may look like in September.

And Bill, I know you mentioned there's protocols and procedures in place that you're looking at for safe and responsible spectator event. Are you considering the social distancing of events? Is there any chance you would conduct the race without fans in the stands? Or is there an alternative setup? Just wondering some high-level thoughts here.

Bill Carstanjen -- Chief Executive Officer

Sure. Good morning, Dan. So first, it's still four months away. And I think we see every day new events and changes and new examples of what other people are doing.

Another thing that we pay a lot of attention to is what is the progression of the pandemic. And I've been pleased to see in Kentucky, for example, over the last week on a weekly comparison basis, new hospitalizations have dropped by 75%, from about 80-a-day down to less than 20. And about 4% of the hospital beds in the state are currently occupied by COVID-19 patients. That's about 4%.

So somewhere around 250 people in this state are in the hospital for COVID-19. And so that's just an example of data we track, and it's good to see the general progression of the data in our area. And certainly, if there are material changes in that data, particularly for the worse, then we would have to revisit lots of assumptions and lots of planning. But recently, the data, at least in this area, has looked promising.

But of course, the Derby is a national event, so there's lots of data to track. But generally, what the future looks like over the next four months is going to be a reflection of the policies and procedures and the protocols that have been put in place by the various states and localities, and the effectiveness of those policies. And so far, we see a lot to be happy about. There've been a lot of good decisions that have been made by leaders, including those in this state.

So without being able to address every potential hypothetical, I would say in general that it's fair to expect -- even under the reasonable cases and the best-case scenarios, it's reasonable to expect, over the next four months, and after four months, we're still going to have protocols. We're still going to have differences. There's still going to be social distancing issues, there's still going to be other processes and protocols we're going to expect companies to follow and our customers to follow in order to hold a safe event. And we're committed to working with local authorities and with our customers and team members to make sure that we implement those protocols.

But I think what those protocols will ultimately be, we'll have to see. There are a lot of things yet to come. But we always caution our team members to not overreact to every click-bait article that's out there but just to calmly process through the data and work with the authorities, work with each other, to just make sure we reflect best-in-class practices. So whatever's capable of being done in this country in four months, whatever can be done, whatever is the maximum acceptable processes and protocols, that's where we'll be.

That's what we'll be offering, and that's what we'll do. So I'm fairly optimistic. I'm more than cautiously optimistic. I am optimistic that we'll find a way through this.

But again, I can't sit on calls like this and address every potential hypothetical or give you a crystal ball and say that things will be great in the country. I would say in general a lot of really good decisions have been made by really strong governors that have put the country in a position where they have shown improvement in some of the metrics that will really matter not only now but four months from now. So I think in our state, it was really gratifying to work directly with Governor Beshear on the protocols to open up Churchill Downs Racetrack. If you've seen some of his commentary, he was fairly complimentary of us with respect to the comprehensiveness and the complexity of our processes to keep everybody safe that comes onto our property.

And that's just what you can expect from us going forward. So Dan, you may have a follow-up on that.

Dan Politzer -- J.P. Morgan -- Analyst

Yes.

Bill Carstanjen -- Chief Executive Officer

But when you sit in this chair, you have to -- I have to balance conveying accurate information without sort of drifting down any potential hypothetical that we couldn't even quantify on a call like this.

Dan Politzer -- J.P. Morgan -- Analyst

Considering with the Derby, at least could you maybe give some color on what conversations have been like, sponsors, broadcasters and premium seating customers, given the move to September? And I guess maybe what are some of the segments that may be more impacted than others across your revenue and EBITDA mix?

Bill Carstanjen -- Chief Executive Officer

Sure. Generally, I'd say if you were familiar with our facility, for the listeners that are familiar with our facility out there, you'd know that we're not like a football stadium, perhaps, in the sense that everybody's not sitting shoulder-to-shoulder in a bowl, one after another, in lines of people. Our facility has -- it's well more than 1 million square feet, and it has a variety of different environments. So we have environments that are similar to high-end restaurants in terms of density and decor.

We have a festival type atmosphere in the infield. We also have some stadium seats. But generally, you see a variety of different environments, and so the protocols for each of those will be different. I'd say our customers in general, I've been particularly humbled by the level of commitment to our event.

Our customers remain excited. We offered refunds, and the percentage of folks pursuing refunds certainly was less than I expected. So there's still a great deal of excitement in our community and among our customers, from wherever they come from, in our events. And I think there's an expectation on their part that we'll work through whatever challenges are necessary to offer them the experience as close as possible to what they normally expect.

I'd say that's true generally with our sponsorships, too. And I can only speak in generalities. Generally, when I think about our network partner, NBC, and when I think about our major sponsors, there's just been a real commitment to working with us. None of us have a crystal ball.

This pandemic has been an event that's new to the world, not just to America or to American companies. So everybody, I think, brings a sense of wanting to work together and wanting to see what the art of the possible will be. But I think, Dan, it's important to convey, when we talk about these issues with our teams, we remind them that nobody gives you anything. No one says it's going to be easy.

No one tells you you're entitled to something. We expect to earn everything we get. We expect to earn the right to hold our event. We expect to earn the right to earn our customers' business.

We expect to work hard to make this event happening. We expect to have to work for it. So I'd say our team generally relishes the challenge. Our morale, both among our sponsors and our partners and our team members, is let's get on with it.

We've got four months to figure this out. We've got four months to prepare. Let's do that.

Dan Politzer -- J.P. Morgan -- Analyst

All right. Thanks. That's helpful. And then I guess one last one.

This is probably for Marcia on cash burn. It seems like you've been pretty aggressive in cutting your expenses and your cost across your properties as they're closed. To what extent is this sustainable? And I guess how many of these costs come -- how much of this cost comes back? So asked another way, as we look out a few years down the road, assuming a more normalized environment, should we expect margins to maybe be better than they were in the last couple years? And that's it for me.

Marcia Dall -- Chief Financial Officer

Yes. Again, as Bill just said, Dan, it's really difficult to talk about hypotheticals out a couple years. At this point, we're really just focused on controlling the costs during this period of time. As I talked in my portion of the discussion, we viewed every cost as variable.

That's how the team approaches it on an ongoing basis anyhow during our normal operating environment. And really, we're focused at this point in time on getting our businesses and our properties reopened going forward, so we'll have to see in two years. But the team has always been very focused on margins, as you know, Dan.

Dan Politzer -- J.P. Morgan -- Analyst

Yes. OK. All right, guys. Thanks so much for the color.

I appreciate it.

Bill Carstanjen -- Chief Executive Officer

Thank you, Dan.

Operator

Your next question is on the line of David Katz with Jefferies.

David Katz -- Jefferies -- Analyst

Hi. Good morning, everyone. Thanks for your commentary and candor. I'm sure we'd all agree that we normally work with an incomplete set of facts, but this is a little ridiculous.

What I wanted to ask about was just going back to some of the commentary about capex. I believe that you said maintenance capex is $9 million in 1Q through February, and no maintenance capex planned for the rest of the year. Would it be wise for us to estimate some kind of a bogie that is at some lesser rate through the rest of the year that there ultimately will be some over the next four to six months of this and that? And the second part of the question is really around the growth capex, which I think you said was $180 million to $200 million for the full year, with $39 million spent. How would you have us cadence that through the quarters, please?

Marcia Dall -- Chief Financial Officer

So David, as far as maintenance capital, I actually said that we've eliminated maintenance capital spending except for mandatory items, long lead-time items and capitalized labor related to improvements to our TwinSpires technology platform until our properties are reopened.

David Katz -- Jefferies -- Analyst

All right.

Marcia Dall -- Chief Financial Officer

So we spent $9 million on maintenance capital on first quarter, of which almost all of it was spent before the end of February. And so I do think that if you were running a projection, you should assume some level of spend in second quarter, with properties closed at this point in time related to those items there. I did not provide a number. It really is dependent upon when we reopen the properties, and that's why I said we would give you an update at the next earnings call.

We'd given you a prior projection on our maintenance capital spending through the year. That assumed that we would be open at our properties the entire year, so that's kind of the outer bounds of what it would be if we'd been open the entire year. So that's the extent that we're willing to give guidance at this point in time. And then regarding project capital, David, I actually said 180, $180 million to $220 million.

David Katz -- Jefferies -- Analyst

Yes.

Marcia Dall -- Chief Financial Officer

And so I think your question was really the cadence of that. If you think about it, the majority of the spend is really going to finishing out Oak Grove. And so that to be ready -- and this again is a cash spend, so for that to be ready by the September time frame, you can think about that as that's really a heavy focus on second quarter and then really into third quarter, then maybe some of that coming into the early part of fourth quarter. When you think about the annex for Turfway, the expenses for Turfway, that also is going to be ready for fourth quarter.

So again, I think majority of the spend, and the smoking patio as well for Derby City Gaming, those are all going to be sort of in that second quarter and third quarter of this year. There'll be some that will fall into the fourth quarter but not as much.

David Katz -- Jefferies -- Analyst

Right. And if I can just go back to the growth projects, which -- I appreciate your updates on them. I just want to be clear about the fact that as we sit here today, as best that we're considering these on hold rather than canceled, right? Are we conserving cash, or are we revisiting? I just was hoping for a little more depth on that, please.

Bill Carstanjen -- Chief Executive Officer

Sure, David. This is William Carstanjen again. These projects are on hold. We expect to resume those.

We expect to pick them back up. We expect to return to a growth trajectory for this company that is similar to what we've done over the last number of years. But we have to do so prudently. We don't have a crystal ball, either.

And COVID-19 is something that nobody's seen in several generations, a pandemic like this that's impacted America like this, so this is just about being prudent. I've had the benefit of being around for a long time, and I remember prior difficult economic periods. And it's something we've all sort of engrained here within Churchill, in this senior management team. Cash is really, really important.

And so when the economy took this turn because of the pandemic, we went into a different mode. We want to make sure that we have adequate liquidity. We want to make sure that we manage our projects and our cash flow very, very carefully. We were very proactive very quickly with respect to reducing expenses and with respect to putting projects on hold.

And until we have better certainty and better clarity, that's how we'll run. Because having been through economic ups and downs before, that's how you should do it, in our opinion. So this isn't a subtle commentary that we think these projects will never be viable or something like that at all. It's quite the opposite.

This is just prudent management of cash and candid recognition that we don't have a crystal ball. And we want better clarity on how this pandemic affects the economy, how long it takes to get a vaccine, how long it takes to develop treatment protocols. As we get better clarity, we'll be right back at it. We're generally an aggressive group.

But with that aggression comes a fair amount of prudence and some basic core principles, like always understand your cash position, always understand your expenses and be quick to adjust if you see any weakness in your assumptions.

David Katz -- Jefferies -- Analyst

And one last follow-up if I may, for Marcia, which is have you thought at all about -- I mean, you have normally had a relatively conservative balance sheet, in that kind of threes range. Do you think it's possible that you come out of this with a more conservative stance on it? Does two to three become the new three to four?

Marcia Dall -- Chief Financial Officer

David, I think that it's really, again, a hypothetical question. As everyone will see with the timing of the adjusted EBITDA movement, you will see leverage move up a little bit for our company, at levels that we have historically not run at. And then you will see it come right back down in line. But we've never really, I think, as a company, viewed it as we have to hit a target leverage.

As we've talked in the past, David, it's always about, is it the right acquisition to make for all of the reasons that Bill has talked about in the past around what are the strategic filters that he and Bill and others put deals through? And is it the right organic investment for us to make as a company based on whether it was going to create long-term shareholder value for us? Versus really saying, hey, we got to hit a target leverage number. And really, to create long-term shareholder value, that's really how I think we as a leadership team will always remain focused on.

David Katz -- Jefferies -- Analyst

Got it. Thank you very much.

Operator

Your next question is from the line of Joe Stauff with Susquehanna.

Joe Stauff -- Susquehanna International Group -- Analyst

Good morning, everyone. I had a couple questions regarding your online segment if I could. I guess the three main questions that I had is largely just looking at the growth in uniques that you have. The quarter was strong for online.

Certainly, there seems to be an expectation that that's going to continue. But you posted 11% uniques growth in the quarter. And that's double -- you've been able to grow that business in terms of uniques double digits now for a number of years. And I'm wondering the type of customer that you're acquiring.

Whatever you can share with us on that. So that's number one. Number two is if you can kind of talk about the definitive landscape. It seems to be a two-horse race between you and TVG.

TVG now is kind of ramping their product offering with Sand Duel and what you think that means. And then finally, how you'd use this asset, TwinSpires, given the scale that you have there and what product development plans you have to be able to use this asset to amplify BetAmerica.

Bill Mudd -- President and Chief Operating Officer

That's a great group of questions. I would say, first of all, the TwinSpires growth rate in the first quarter, if you look at kind of -- the first 11 weeks is completely different than the last two weeks of the quarter. The last two weeks of the quarter kind of post, call it, March 16 saw a significant increase in handle, so the first-quarter number really isn't reflective of what we're experiencing in TwinSpires today. As all of the OTVs and tracks are racing live, or dark, for that matter, where customers would go to wager on horse racing, that really has forced an acceleration of the transition of customers going to brick-and-mortar locations to conducting their business online.

And I think that people that have been resistant to transferring and going to online channels have probably learned about it and had good experiences and will probably stay there, to be quite honest, post this crisis. So I think this is going to be one of those industries that has a permanent change in how the industry goes to market. In terms of -- I can't say that we've done -- that I've seen any analytics over the last couple weeks that says what do our customers look like. But anecdotally, I can say that we've picked up a lot of core horse players, but we've also picked up a lot of other players now that are playing thoroughbred racing because of all of the sporting events that have been canceled across the world.

And there's nothing else to have fun with and go wager on, so we've picked up a whole bunch of new ones, new customers. And I don't have that data, but my gut says that it's all over the board. In terms of the competitive landscape with TwinSpires and TVG, we keep an eye on that, obviously. There is a barrier to entry in horse racing that doesn't exist maybe with sports.

And that barrier to entry is you have -- under the federal law, you have to have the consent of the horseman and the racetrack that is conducting the race in order to take wagers on it, so that's a pretty big barrier to entry. And that barrier to entry doesn't exist if you have a gaming license in some of these states. It still exists with respect to horse racing. But if you have a sports wagering license in New Jersey or Pennsylvania or Indiana, you can't take wages on horse racing, even if you have sports racing without the consent of those horsemen.

It has to be a para-mutual format, unless otherwise consented to. So I think that kind of falls into both of your questions with respect to Sand Duel. They would have to go get consent of people to be able to do that. But it also falls into -- I don't want to go too deep into strategy, but certainly having assets like the Kentucky Derby, if you can go wager on the Derby on the same app as you can wager on the Lakers or the Louisville Cardinals or New York Knicks, then that's another offering that other people may not be able to offer.

So I think it puts us in a good position once we get all the technology situated and sorted out, and we got a great team that knows how to market to customers and acquire them at the right price. So hopefully, that answers your question.

Joe Stauff -- Susquehanna International Group -- Analyst

Yes, it does. And just one clarification. I guess over time or maybe when it's reasonable to have a single wallet sort of offering within TwinSpires and then BetAmerica -- look, I know it's probably naturally very sensitive in terms of competitive and so forth, but I know there's a technology obstacle as well. And I'm wondering how long or when that could conceivably get there.

Is it two years, or is it a year, in those ballpark terms? Because I realize it's a little sensitive.

Bill Mudd -- President and Chief Operating Officer

Yes. No problem. Technology takes time. I think it's all a matter of prioritization.

So when you have technology teams and scrum teams that are doing different aspects of the platform you're building, you got to say, do I want to have a single app where somebody in New Jersey, Pennsylvania, Indiana -- as they go through states, can they sign onto one app and get into the system? And that's something I think a lot of online sports wagering companies are struggling with and even going live in states -- would I rather go live in state, or is my priority to get para-mutual wagering on the same platform? So it comes down to prioritization in a lot of cases. I think if we made it the main priority, we could do it a lot faster. But I think a year is kind of a good benchmark, and I may be off by six months on either side. And that all depends.

If 10 more states go live, then we'll probably focus on going live in those states over this with the priority, but I would think a year is probably a fair way to think about it.

Joe Stauff -- Susquehanna International Group -- Analyst

Makes sense. Thanks very much.

Operator

And at this time, there are no further questions.

Bill Carstanjen -- Chief Executive Officer

Well, thanks, everybody. We appreciate your interest in our company and your continued investment with us. We promise to do our absolute best to generate returns for you and do the right thing to grow our business in the midterm and the long term. So thanks very much.

We look forward to talking to you next time. And be well. Stay safe out there. Thank you.

Operator

[Operator signoff]

Duration: 55 minutes

Call participants:

Nick Zangari -- Vice President, Treasury, Risk Management, and Investor Relations

Bill Carstanjen -- Chief Executive Officer

Marcia Dall -- Chief Financial Officer

Dan Politzer -- J.P. Morgan -- Analyst

David Katz -- Jefferies -- Analyst

Joe Stauff -- Susquehanna International Group -- Analyst

Bill Mudd -- President and Chief Operating Officer

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